IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERSThe JT Group Materiality and sustainability​

Updating the Group materiality​

Phase 3

Our materiality is based on the concept of double materiality, taking into account the significance to and impact on
our stakeholders and the society, and the significance andimpact to the JT Group for sustainable growth. The wholeprocess was conducted in accordance with the advice of an
external consultant.​

Through interviews with internal as well as externalnn

 lotting the matrix: As with our original matrix, we firstP
set out the materiality matrix of our tobacco business,
which was subsequently expanded to include the entire
Group.​
 isualizing individual materiality topics by plotting prioriVties of significance to and impact on our stakeholders on
the vertical axis and, priorities to our Group’s long-termbusiness on the horizontal axis.​

4Read more about the materiality analysis on JT.com.

Updating the JT Group Materiality – the process​​

Highly significant

Since we selected our original materiality topics, external
circumstances and the business environment in which we​
operate have changed. In 2021, we began updating theGroup’s materiality framework by identifying and analyzing
our materiality topics.​

Plotting the matrix and prioritizing​

Significantstakeholders, we have selected and prioritized our materiality topics and updated the materiality matrix accordingly.
We then identified issue groups for the Group materiality
consideration to set out the JT Group Materiality. ​Priority and significance to the JT Group’s stakeholders

We started our materiality assessment in 2013, and in 2015
for the first time through interviews with our external andinternal stakeholders, we completed our original materiality
assessment to cover the entire JT Group.​Significant

The JT Group Materiality was updated through the following four phases.​Highly significant

Priority and significance to the JT Group’s business success

Phase 1

Identifying materiality topics​nIdentifying topics that may have impact on the sustainable growth or sustainability challenges of our Group,
bearing in mind the changes in our external operating
environment and the business challenges.​nIdentifying topics by researching and analyzing a wide
range of information including but not limited to sustainability disclosure standards or frameworks such asSDGs, SASB or GRI, risk factors found through our enterprise risk management process, or materiality coverageof our competitor firms, among others.​

Phase 4

Identifying the issue groups​nS electing priority topics or issues for the JT Group as
well as for our stakeholders for sustainable growth of theGroup and our society. ​Then arranging the topics into five groups with similar
issues or expected effects, namely, preserving our environment, product and services, people, supply chain
management and governance.

Phase 2Stakeholder interviews and desktop searches​
nnn038Integrating internal and external stakeholder opinions
by conducting interviews and surveys, using the topics
identified in the phase 1 process.​ rioritizing the topics for our external and internal stakeP
holders through desktop analysis of information issued
by external rating agencies, global mega-trends or media reports, ensuring there are no gaps and that all relevant topics have been included.​ onducting interviews with a wide range of stakeholders
Cto maintain quality of the materiality assessment, bear-Japan Tobacco Inc. Integrated Report 2022

ing in mind that the priority of materiality topics mayvary depending on the individual stakeholder.

Track record of stakeholder interviews, surveysnPrimarily senior vice presidents of corporate and businessn

Suppliers, customers, NGOs, other external parties: 27 cases

functions of the Group: 119 SVPs or others in similar positionsnnInvestors, banks: 38 cases

Employees and others: Approximately 450 cases

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IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCEFINANCIAL INFORMATION /OTHERSThe JT Group Materiality and sustainability​ s nature, society and people’s lives are intertwined, sustaining our ways of living, and the activities of entities, will depend on the sustainability of the environment and society in which weAexist. The JT Group’s management principle is the 4S model. In pursuing this principle and by realizing the JT Group Purpose, we are contributing to the sustainability of our environment andour society, through our commitment to working on the five groups of material issues identified.
Having discussed these material issues with the Board of Directors, we have set them out as the JT Group Materiality as shown below. ​Based on the JT Group Materiality, the Group sustainability targets and the targets for each business segment will be reviewed accordingly.​
The JT Group Materiality will be examined regularly at Sustainability Advisory Forum and will be updated as necessary.​

The JT Group Materiality​JT Group Purpose​

As nature, society, and people's lives are intertwined, sustaining our ways of living, and the activities of corporate entities,
will depend on the sustainability of the environment and society in which we exist. ​In realizing the JT Group Purpose, we are contributing to that sustainability through our commitment to working on the issues identified in our materiality.​

Fulfilling Moments,Enriching Life​

Value Creation that
Exceeds Consumer
Expectations

Living with the Planet

Our management principle​
The 4S model​

Preserve a harmonious
relationship between ourenvironment, people, and corporate organizations throughinitiatives to improve ourimpact on our environment​

Create diverse products andservices beyond consumer
expectations​

Investing in People andProvide Motivation

Responsible Supply Chain
Management

Invest in people to support
their development with attention to diversity, and enhance
human capital by fostering a
corporate culture that maximizes individuality and abilityof each person​

Create a sustainable supply
chain capable of withstanding
sudden changes in the business environment, by tacklingsocial issues such as respecting human rights or preservation of our environment​

Good Governance
Enhance our governance byimproving our stakeholder
satisfaction and continue tobe a trustworthy corporateentity​

Shareholders

Undertake initiatives to tackleclimate change and conserve
our environment​n 

Promote resource recycling
and develop sustainableproducts with high environmental value​n Consumers

Employees

Develop innovative products
and services and offer variety
of situations to experience
our products​n gggSociety
Developand offer RRP (Reduced-RiskProducts)​
Develop innovative original drugs​
Develop food products in response
to diverse consumer values and interests​
among others​

Establish a fair and safe working environment, provide
each employee with theopportunity for growth andpromote diversity, equity andinclusion ​n 

Establish a structure thatencourages our employees toparticipate in and create with
our societyn 

Engage with the suppliers
through human rights/environmental due diligence​n 

Deliver initiatives that
contribute to resolving social
issues together with oursuppliers​n Construct and implement aframework for transparent,fair, prompt, and decisivedecision-making​n 

Engage proactively withdiverse stakeholders​n 

Research, explore and create
seeds for future businesscentered on the concept of“enriching life”​

n 040Japan Tobacco Inc. Integrated Report 2022

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IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESFINANCIAL INFORMATION /OTHERSGOVERNANCE

The JT Group Materiality and sustainability

Setting out the JT Group Materiality: Stakeholder comments​
Through the process of updating our materiality matrix
and identifying the JT Group Materiality, we engaged withSustainability Advisory Foruma variety of stakeholders in order to gather their views andopinions. Here are some in their own words:“We provide advice and proposals to a wide range of companies facing sustainability issues. Materiality is the starting point ofprioritizing your sustainability issues and a vital process which could influence on mid- to long-term sustainability initiatives of afirm. Our role was to provide feedback to the JT Group post its materiality selection. By looking at the process that the Group hastaken in selecting its materiality, we learned that not only was the firm concerned with its own business issues, but it also took
into consideration issues that our society is currently facing, checking them one by one. The stakeholder interview was thoroughly conducted with high awareness for the challenges to the JT Group in identifying its materiality.”
External stakeholder

Since 2020, we have held regular Sustainability Advisory
Forums to discuss the Group’s sustainability issues. With ourChief Sustainability Officer acting as Chairman, the forum is
attended by heads of the JT Group’s businesses and corporate functions. In 2022, two forums were held. We discussed
and shared information about sustainability issues such as
updating the Group’s materiality, checking the progress ofand revisiting our Group Environment Plan 2030 including
our work on climate change, progress on enterprise risk
management, integrated reporting, and assistance forUkraine, among others. Discussions at the forum are appropriately reported to the CEO and Board of Directors.

“Agricultural Labor Practices (ALP) is one of key programs for our leaf supply chain management and integral part of our Leaf
Supply Chain Due Diligence process. The ALP program started in 2012, by launching ALP guidance, with minimum expectation vs.
Child Labor Elimination, Improving Rights of Workers and Health and Safety conditions on a farm level. JTI extended the implementation of the ALP program from own operations to third party suppliers in 2015. The program has evolved through continuous learning and engagement with all the stakeholders (growers, International Labour Organization, OECD, own operations,n Progress of our sustainability initiatives in 2022​

third-party suppliers etc.). ALP today is a part of the broader Leaf Supply Chain Due Diligence process. We continue to deliver
against JT Group ALP target ‘we will implement ALP in all sourcing countries by 2025’. A significant progress made is full ALP implementation in newly acquired businesses in Bangladesh and Ethiopia. Supply chain management was a very high material issue
in our original materiality assessment. JTI’s latest materiality assessment emphasized the need to further strengthen the efforts
against mapped challenges in our leaf supply chain.“Progress of the JT Group Environment Plan 2030 or KPI progress by each business segment are reported to the Board ofDirectors every year. ​Focus areas, aspirational goals, targets and progress of each business for 2022 are shown below.​

Targets and progress by business segment

Leaf supply chain due diligence director, tobacco business, JT InternationalTobacco“In the processed food business, we strive to pursue the JT Group Purpose of ‘Fulfilling Moments, Enriching Life’ through foodexperiences. To support the Group Purpose, we have set our Business Purpose “Bringing joy to meals and fun to the table.” ThisBusiness Purpose will be the cornerstone in working through the challenges faced by our society in relation to food. We want

Pharmaceutical
Processed food

4JT.com

Focus areas, aspirational goals, targets and progress, related SDGs

4JT.com
4JT.comto make this journey together with all our stakeholders, be it our colleagues or our consumers, while pursuing to provide valuethat only our firm can deliver. The five topics of materiality identified will act as an important guide as we strive to accelerate ourinitiatives.“
Team leader, Sustainability, food business planning division, processed food business, JT Inc.

“In updating our materiality, I gave a great deal of thought to the relationship between the environment, society, people's lives,and corporate activities. For the pursuit of sustainability, I strongly felt the need to work jointly, not only within the JT Group but
also with all the stakeholders. Setting the materiality is the beginning of our journey. We will continue to engage with various
stakeholders and accelerate our efforts together. Moreover, we will monitor the progress of the initiatives in place, and by capturing changes in the social and business environment, I hope that ‘our’ materiality can be updated jointly and flexibly with our
stakeholders in the coming future.”

Hisashi Hamada, Materiality project leader, sustainability management division, JT Inc.

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