OURSUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSJT Group Sustainability Report
FY2015OURSUSTAINABILITYJOURNEY

CEO STATEMENT

04

Q&A WITH SENIOR VICEPRESIDENT FOR CSR

06

CORPORATE PROFILE

08

ABOUT THIS REPORT82

OUR TOBACCO
BUSINESS58

14

OUR PEOPLE

OUR WAY OF
DOING BUSINESSIn focus

In focus
30

EMERGINGRESPECTINGPRODUCTSHUMAN RIGHTS

22

70

50

OUR CONTRIBUTIONSTO SOCIETY

46

OUR PHARMACEUTICAL
BUSINESS74

OUR PLANET38

OUR PROCESSEDFOOD BUSINESS

78

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESS

Contents
CEO STATEMENT

04

CORPORATE PROFILE

08

Q&A WITH SENIOR VICEPRESIDENT FOR CSR

06

ABOUT THIS REPORT82

Our Group 12
OUR SUSTAINABILITY JOURNEY

14

OUR WAY OF DOING BUSINESS22

OUR PEOPLE

30

OUR PLANET38

OUR CONTRIBUTIONS TO SOCIETY

46

In focus: Respecting Human Rights 50
Our Businesses 56
SCOPE OF DATA AND INFORMATION PRESENTED IN THIS REPORT
Unless the context indicates otherwise, references in thisreport to ‘we’, ‘us’, ‘our’, and ‘JT Group’ are to Japan Tobacco
Inc. and its consolidated subsidiaries. References to ‘Torii
Pharmaceutical’ are to Torii Pharmaceutical Co., Ltd., ourpharmaceutical subsidiary. References to ‘TableMark’ are to
TableMark Holdings Co., Ltd., our processed food subsidiary,and its consolidated subsidiaries.
This report contains Standard Disclosures from the Global
Reporting Initiative (GRI) G4 Sustainability Reporting
Guidelines.
We report data for the entire JT Group including subsidiaries,
wherever possible. In the middle of 2015 the JT Group
withdrew from the beverage business. As a result, we
excluded this business from reported data for 2015, or statedotherwise where that was not possible or appropriate, suchas cases reported via our Reporting Concerns Mechanism,and data on Code of Conduct training and compliance survey
uptake. In addition, some of the historical data presented inthis report has been restated to reflect the changes in theorganization retrospectively.
In this report we used the following scope notations:2*A = the entire JT Group including subsidiaries(i.e. international tobacco, Japanese domestic tobacco,
pharmaceutical, and processed food businesses)*B = solely Japan Tobacco Inc. (JT)(includes Japanese domestic tobacco and pharmaceuticalbusinesses, and excludes international tobacco business,processed food business, and subsidiaries of all businesses)

OUR TOBACCO BUSINESSIN FOCUS: EMERGING PRODUCTS

58
70

OUR PHARMACEUTICAL BUSINESS74

OUR PROCESSED FOOD BUSINESS

78*C = Japan Tobacco Inc. (JT) and Japanese domestic
Group companies(includes subsidiaries of Japanese domestic businesses,
excludes international tobacco business)*D = Japan Tobacco Inc. (JT) and Japan Tobacco
International (JTI)*E = solely Japan Tobacco International (JTI)(our international tobacco business)Any data without annotated scope in this report covers theentire JT Group including subsidiaries – *A. For data prior
to 2015, scopes *A, *B, *C, and *D include the beveragebusiness, or restatements are indicated. See our Basis ofReporting document for further detail.

3

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSCEO statement
Worldwide economic and geopolitical conditions in 2015
continued to be challenging, but the JT Group delivered
another year of solid profit growth and our focus onsustainability remained. During the year we made significant
progress in a number of areas, in particular on laying evenstronger foundations on which to build our sustainability
strategy. We also carried out our first materiality assessment
across the entire JT Group, which will inform our strategicand operational plans in line with and balancing stakeholder
expectations, as underpinned by our “4S” model.
We worked on a series of overarching policies andframeworks that will guide our sustainability performance inthe future. We launched and published the JT Group SupplierStandards as well as the JT Group Anti-Bribery Policy and
the JT Group HR Management Philosophy. We also began
drafting a JT Group Human Rights Policy in consultation withstakeholders.
Our international tobacco business began work on developing
a supplier life cycle management system for non-leaf
suppliers that will lead to a better understanding of thesustainability risks they face. For tobacco leaf suppliers
we began to put in place measures for a 2016 rollout of
our Agricultural Labor Practices to third-party merchants.
In the area of emerging products, which are assuming
increasing importance within our business strategy, ourglobal team continued to innovate in a way that will produce
new products, such as e-vapors and t-vapors, which fulfill
consumer expectations and fall within regulatory parameters.

of HR practices and employee offerings across the globe.
We still have a considerable way to travel on our sustainability
journey. There are many continuing challenges, not leastin the area of occupational health and safety, where,
tragically, there were two fatalities in 2015. In the field of
tobacco regulation we face some new laws that, if notcarefully considered, have the potential to be ineffective anddisproportionate to our society. We also need to redouble ourefforts on addressing societal issues in tobacco communities
such as child labor, despite having made good progress inthat area over recent years.
I am convinced that the solid building blocks we have put inplace during 2015 leave us in a stronger position to address
such challenges, and will help us make even more significant
strides in the coming years.

Mitsuomi Koizumi
President and Chief Executive Officer
Japan Tobacco Inc.

We also made strides in other areas such as continuing toincrease our focus on talent development. As a result, ourinternational tobacco business now has the highest level ofcertification from the Top Employers Institute, which is given
to organizations that have demonstrated the high standards

4

5

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSRYOKO NAGATA, SENIOR VICE PRESIDENT CSR, JAPAN TOBACCO INC.

“As we make progress, we will make our business practices
more responsible and open up opportunities to capitalize on
our many strengths”

QQ& A

our product stewardship strategy,
and to strengthen the visibility of risks
in our supply chains. Our greatest
challenge continues to be the regulatory
landscape across the globe, which often
limits us from making bigger strides
on the development and marketing of
emerging products. Therefore, we needto continue to make the case for better
regulation that is both proportionate
and effective.
3. The JT Group takes pride in its
employee development programsand believes employees are thecornerstone of its business growth.
Why is this, and what were the key
developments in this area in 2015?
A highly motivated and competentworkforce is key to sustainablebusiness growth. The launch of our JT
Group HR Management Philosophy
in February 2016 will allow us tomake our commitments in this areamuch clearer. Among other things,
the Philosophy sets out our belief
that diversity in the workforce is anaccelerator of innovation. This is an area
I am personally keen to focus on in the
future.

&1. This is your third year as SeniorVice President for Corporate Social
Responsibility (CSR). How would
you describe the sustainability
journey so far under yourleadership?
Although we still have a long way togo, our journey so far has been verymuch about laying the foundations ofsustainability and, as part of our “4S”
model, understanding the expectationsof our stakeholders. As part of thisprocess, we conducted a materiality
assessment for the first time at Grouplevel in 2015. The results gave us
interesting insights into where we need
to focus our efforts. Talking to business
functions about key sustainability
topics such as human rights, talent
6with Ryoko Nagata
SENIOR VICE PRESIDENT | CSR

management, occupational health andsafety, and compliance has increased
awareness of sustainability internally,
and we are now in a position to set our
direction for the future. Without strong
commitment from business functions
on these issues, we would not havebeen able to make the progress that
we have. One of my priorities over the
past three years has been to improve
the way we collect and communicate
sustainability information, and I am
proud of the advances we have made.
One clear result of all the effort wehave put in is that our Sustainability
Report FY2015 has, for the first time,
been compiled in accordance with the‘Core’ level of the GRI G4 Sustainability
Reporting Guidelines.

2. The JT Group has paid more
attention to emerging products overthe past few years. What were the
key achievements in this area in2015 and what are the challenges
that remain?
In 2015 we completed the formation ofa Group function to work on emerging
products, which was a big step forward,
and has allowed us to commit to aclearer strategy and focus. Buying Logic
Technology Development LLC, whichis the third largest manufacturer of
e-cigarettes in North America, further
enhances our ability to innovate in thisfield and to expand our market reach.
I was pleased that we could begin
initiatives to address the disposal of
e-cigarette components in line with

Of course, our pride in our employees
means we have to make sure that any
operational changes – such as ourplanned factory closures in Northern
Ireland, Belgium, Russia, and South
Africa, and the withdrawal from ourbeverage operations in Japan – aremanaged responsibly. With thehelp of trade unions and worker
representatives, we have been able
to make these changes in a fair andresponsible way.
4. There were two reported
fatalities within the JT Group during
2015 – an employee contracted
malaria while on a business trip to
Africa, the complications of which
contributed to his subsequent
death, and a contractor was
electrocuted in Sudan. In addition,
one third-party death occurred in
Tanzania, where a company vehicle
collided with a cyclist. What is
the JT Group doing to address
safety issues in these areas?
It is a matter of deep personal regretthat these deaths have occurred.
Following the malaria fatality in 2015,
we identified and developed a global
pre-travel health assessment processthat will be implemented and rolled
out in 2016-2017. The principle ofthis confidential, online tool is theassessment of individual health statusagainst location health risk. In termsof traffic accidents, we have now
made road safety awareness a priority
throughout the JT Group, especially forsales employees. We will continue tofocus not only on reducing the numberof accidents involving employees
or contractors, but on eliminating
occupational injuries entirely. That will
be a hard task in some of the regionsin which we operate, where safety
culture is weak; but the only acceptable
accident rate is zero, and that is what
we work toward.
5. How did your tobacco leaf
strategy create value both for thebusiness and tobacco farming
communities in 2015?
During 2015 we extended the reachof our various initiatives to cover evenmore countries from which we source
tobacco leaf. We also extended ourAgricultural Labor Practices to nondirectly contracted farmers, which
was an important step that will help
address social and environmental issues
in those farmers’ communities andtherefore improve the sustainability of
our leaf supply. We also implemented
our farmer profit model acrosscountries where we directly source
tobacco – this will allow farmers andtheir local communities to make themost of their agricultural activity. I am
also proud of what we have achieved
through our ARISE program, whichin 2015 has taken approximately 26
children out of child labor every day,provided 32,160 people with education
about child labor, and given 1,859
households an improved income.
6. With the adoption of the Modern
Slavery Act in the U.K. in 2015,
businesses are now under greaterpressure to ensure human rights areupheld in their supply chains. Whatis the JT Group doing to addresshuman rights, and what are the key
insights you’ve gained so far into
this area?
We are now committed to developingan overarching policy on human rights
by seeking input from our stakeholders.
We have begun the process of drawing
up the policy and, when finalized, we
will conduct human rights due diligenceacross the JT Group. I know there isa real need to collaborate with otherstakeholder groups on this, and I am
glad that we are now committed todoing this. The work we have carriedout so far on creating a human rights
policy has highlighted our potential
to make a positive impact on wider
society.
7. There was increased global
interest in environmental, social,and governance investment during
2015. How did the JT Group
respond to this?
We engage with investors who areinterested in our sustainability initiatives
through a number of channels. In 2015
we had one-to-one meetings withanalysts, we talked to investors via ourparticipation in various responsible
investment index evaluation processes,
and we also spoke to investors aspart of our Group-wide materiality
assessment. Although the number ofsuch meetings is still small, investor
interest in sustainability issues has
increased over the past five years, andeach engagement helps us to better
understand what is expected of us.
One of the questions we are frequently
asked is on the management of our
supply chain, especially in termsof leaf procurement. We also
often field questions on productinnovation, corporate governance, andenvironmental management. I anticipate
that we will get further interest in
responsible investment in the coming
years, partly fueled by global regulatory
trends that will require companies toimprove their transparency on nonfinancial performance.
8. What is next on yoursustainability journey?
One of our main tasks is to work on the
integration of key issues in our strategicand operational plans. That will mean
having conversations with various
parts of the business on how to take aleading role in the industry. It will also
require us to address some of the gaps
in our management approach – and thatwork has already begun. As we makeprogress, we will make our businesspractices more responsible and open
up opportunities to capitalize on our
many strengths. We have lots to do, but
I believe we are in a strong position to
make further progress.

7

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSNORTHERNIRELAND

Corporate
profileRUSSIASWEDENPOLANDGERMANYUKRAINE

CANADABELGIUM
SWITZERLANDOUR PROCESSED FOOD
BUSINESSKAZAKHSTANROMANIASERBIA
TURKEYSPAIN
U.S.A.

ANDORRAIRAN
JORDANEGYPT
MYANMAR
REPUBLIC OFSUDANWe are a leading international tobacco company, with offices
and factories in more than 70 countries. Our products are
sold in more than 120 countries, and we own three of the
top ten global cigarette brands by sales volume: Winston,
Mevius, and Camel. Headquartered in Tokyo, Japan
Tobacco Inc. (TSE: 2914) is listed on the Tokyo Stock
Exchange.

SOUTH SUDAN

MALAYSIAJAPANTANZANIAZAMBIABRAZIL

MALAWI

SOUTH
AFRICA

We operate a pharmaceutical business that researches,develops, produces, and sells prescription drugs, focusing
on glucose and lipid metabolism, anti-virus research, andimmune disorders and inflammation. We also have aprocessed food business that manufactures and sells goods
such as frozen noodles, frozen and packed cooked rice, andfrozen baked bread and pastries. Both of these businesses
cater mainly for the Japanese market.

CIGARETTE AND TOBACCO-RELATED FACTORIES*INTERNATIONAL

31

JAPANESE DOMESTIC

7

TOTAL

38

*Includes the factory of Leaf Services West-Japan and the Hiratsuka factory inJapan. The latter completed a planned closure on March 31, 2016.

COUNTRIES IN WHICH WE DIRECTLY SOURCETOBACCO7
All figures as of the end of 2015.

TOTAL EMPLOYEES3%INTERNATIONAL TOBACCO BUSINESSJAPANESE DOMESTIC TOBACCO
BUSINESS

2%

13%
12%

4%

10%

End of FY2013

51,5633%

End of 2015

2%

44,485

52%

12%

21%

10%

21%

End of 2014

51,341

4%50%

PHARMACEUTICAL BUSINESSREVENUE (BILLION YEN)

BEVERAGE BUSINESS*

INTERNATIONAL TOBACCO BUSINESSPROCESSED FOOD BUSINESSOTHERS59%*In the middle of 2015 the JT Group withdrew fromthe beverage business.

FY20132014

2015

1,270.0

1,328.0

1,317.2

JAPANESE DOMESTIC TOBACCO BUSINESS

710.3

687.4

677.3

PHARMACEUTICAL BUSINESS

64.4

65.8

75.6

BEVERAGE BUSINESS*

184.5

-

-

PROCESSED FOOD BUSINESS

156.9

161.2

165.8

OTHER BUSINESS

13.6

16.9

17.0

2,399.8

2,259.2

2,252.9

TOTAL*In the middle of 2015 the JT Group withdrew from the beverage business. For comparability, 2014 figures in the above table do not include thebeverage business.

23%

8

9

OUR
SUSTAINABILITYJOURNEYCORPORATEPROFILEOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESS

Our value chains
OUR SUPPLY CHAINS

We are a global company andeach of our three businesses
has a distinct value chain.
To make a real difference onsustainability we need to focus
on tackling the biggest issues
across these value chains, fromthe starting point where our raw
materials are sourced, throughto the way we manufacture anddistribute our products, to theend point where our products
are sold.
For more detailed informationon our value chains, see pages
59 (tobacco business),
75 (pharmaceutical business),and 79 (processed foodbusiness).

OUR COMPANYOUR CUSTOMERS & CONSUMERS

BUSINESS
DISTRIBUTION
8 LEAFTHRESHING AND
PROCESSING
FACTORIES1

42,000+
DIRECTLYCONTRACTEDFARMERS

4 LEAF
STORAGE
WAREHOUSES

30 FACTORIES

1

500+ WAREHOUSESSALES IN 120+
COUNTRIESMERCHANTS
AND THEIRFARMER BASE

TOBACCOOTHER
SUPPLIERS

PROCESSED
FOOD 2100+
PACKAGING
MATERIAL
SUPPLIERS

BUSINESS
31 FACTORIES(THE TABLEMARK GROUP)

300+ WHOLESALE
TRADINGCOMPANIESRAW
MATERIAL
SUPPLIERS

DISTRIBUTION

50+ SUBCONTRACT
FACTORIESLICENSERS AND
LICENSEESRESEARCH &DEVELOPMENT

PHARMACEUTICAL2
5 PHARMACEUTICALINGREDIENTSSUPPLIERS

1 FACTORY(TORII PHARMACEUTICAL)

MARKETING & SALESPROMOTION (TORIIPHARMACEUTICAL)HOSPITAL
2 WAREHOUSESPARTNERS OF
JOINT RESEARCH(UNIVERSITIES AND MEDICALINSTITUTES)

10

1

We also own and operate four non-tobacco material
processing factories in Japan.

2

The pharmaceutical and processed food businessvalue chains represent JT (*B) and TableMark only andexclude other subsidiaries.

WHOLESALEPARTICIPANTS OF
CLINICAL TRIALS &TRIAL INSTITUTES
3 SUBCONTRACT
FACTORIES11OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUP

Our Group

Our sustainability journey
Material issues covered:Collaborations and partnerships 			18

Our way of doing businessOur management principles
Our management principles, and our approach to sustainability, are governed by our “4S” model, underwhich we balance the interests of four stakeholder groups – consumers, shareholders, employees, andwider society. We aim to fulfill our responsibilities toward each group while also striving to exceed their
expectations.
We take pride in the strong relationships we have built with the four stakeholder groups, and throughour engagement we are able to reflect stakeholder views in our business activities. We believe the “4S”
model is helping us to achieve sustainable growth by continually delivering value to our stakeholders.
THE “4S” MODEL

Material issues covered:23
Corporate governance and transparency		
Tax practices					26Information security				27Anti-competitive behavior				27Anti-bribery and corruption				28Our people
Material issues covered:
Employee development and talent management
Being a responsible employer			Equality and diversity at the workplace		Workplace health and safety			

31
33
34
36

Our planet
Material issues covered:Environment					38Our contributions to society

OUR VISIONOUR MISSION

THE JT GROUP WAY

is to become a company
committed to global growth byproviding diversified value that is
uniquely available from the JT Group.

is to create, develop, and nurture
our unique brands to meet
consumers' needs while
understanding and respecting theenvironment and the diversity ofsocieties and individuals.

• Fulfill the expectations of ourconsumers and behave responsibly• Strive for quality in everything we
do through continuous improvement• Leverage diversity across the
JT Group

Material issues covered:
Contributions to society				46

12

13

OUR
OUR
SUSTAINABILITYSUSTAINABILITYJOURNEYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR SUSTAINABILITY JOURNEY

Laying the foundations

OUR GROUP

In the past years we have concentrated on analyzing stakeholder perspectives so that we can better
understand the sustainability opportunities and challenges we face.

Oursustainability
journey

Although we have been tacklingsustainability issues in our business fora number of years, we recognize there ismuch more for us to do, and that many
challenges lie ahead. In recent years, and inparticular during 2015, we have focusedon identifying all material issues for the
JT Group. This gives us a clearer viewof the challenges we face, and shows us
how we can respond to them in a morestructured and targeted manner.
A good understanding of our material
issues also helps us develop relevant policies,
plans, and targets to better monitor the
progress we are making on sustainability.
To implement these, we need to work closelywith our stakeholders and collaborate withother organizations.

2015 highlights

2015 was a pivotal year in this process, as we completed a Group-wide materiality assessment. We now
have a good foundation to build our Group-wide strategic sustainability plans. Once these plans are
finalized, we can move on, in a more concerted way, to monitoring and reporting on performance.
We also achieved our commitment to ensure that our sustainability reporting meets the Global Reporting
Initiative’s (GRI) G4 ‘Core’ Guidelines.
1. ENGAGINGSTAKEHOLDERS
While continuing to work withstakeholders on a day-to-day basis,in 2015 we engaged in dialogue with
17 Group-wide external stakeholders
and 15 members of top management.
We also visited 16 countries to speak
to more than 100 managers about the
specific challenges that exist within
the market in which they operate. This
exercise gave us a wealth of informationthat we are using to develop our plans.
It will also help us to ensure thatwhatever is decided at corporate level
will actually work in the diverse markets
that we serve.

2. PRIORITIZING ISSUES
Through stakeholder engagement, weclarified which issues are the mostimportant both to the JT Group andour external stakeholders. See page
21 for the outcomes of our materiality
assessment.

3. IMPLEMENTING PLANS

GROUP-LEVEL
MATERIALITY ASSESSMENT.

Completed our first

Engaged our business to ensure we

GRI G4 ’CORE’

met
Guidelines within our sustainability
reporting.

14

CSR TASK FORCE

in
Joined a
Switzerland to provide input into government plans todevelop binding rules on CSR.

Hosted our first

HUMAN RIGHTSROUNDTABLE

with external experts as part of ourGroup Policy development.

Became a

MEMBER OF LBG

andstarted implementing its measurement
model on community investment
programs.

We now have a robust foundation onwhich to build our strategic plans, andwill focus on developing these in 2016.
During 2015 we had a particular focus
on human rights. Since the acquisitionof our tobacco procurement operationsin 2009, we have been working toward
improving labor and social conditions in
our tobacco farming communities (seepages 60-63). However, we also needto ensure that we respect human rights
across our entire value chain. In 2015
we began to work on creating a Groupwide human rights policy that will
formalize our commitment to identifying
and addressing human rights issues inall areas of our business.

OUR SUSTAINABILITY JOURNEYCOMMUNICATINGENGAGINGSTAKEHOLDERSMONITORINGPERFORMANCEPRIORITIZINGISSUES

IMPLEMENTINGPLANS

As an initial step in our policy
development, in September 2015 wehosted a roundtable with a range ofexternal stakeholders to seek feedbackon our current practices, and on how
we can devise an effective human rights
approach in the future. In 2016 we willcontinue seeking stakeholder feedback
to the Policy through various means,including hosting a dialogue between JT
top management and external humanrights experts.
Outside of human rights, the CSR
Division began to engage with key
business functions on strategic
issues such as talent management,compliance, and health and safety.
We also completed the formation of a
global team on emerging products.

4. MONITORINGPERFORMANCE
In 2015 we began gathering baseline
data on all key material issues,complementing data that has alreadybeen gathered for some time on areas
such as environment, occupational
health and safety, HR, and compliance.
This will provide more insights, helping
us to better monitor our performanceon material issues and showing us what
progress we are making against ourmanagement plans.

5. COMMUNICATING
This is the third report we havepublished using the GRI G4 Guidelines
and the first to be in accordance with
‘Core’ level. In 2015 we revamped the
CSR section of www.jt.com to provide
further, and clearer, information forusers. We also participated in a numberof external platforms on topics such as
child labor and business ethics.
15

OUR

OUR GROUPOURSUSTAINABILITYSUSTAINABILITYJOURNEYOUR SUSTAINABILITY JOURNEY
JOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR SUSTAINABILITY JOURNEY

Stakeholder engagement
Under our “4S” model we talk to stakeholders across the JT Group on a daily basis, but also engage
with them in special forums. Building on the engagement program conducted by our international
tobacco business with 60 external stakeholders in 2014, we carried out 17 further interviews in 2015 at
Group level, using the results to shape our future sustainability strategy and to develop this report.

OUR STAKEHOLDERS ACROSS OUR VALUE CHAINOUR SUPPLY CHAINOUR COMPANYOUR CUSTOMERS & CONSUMERS

SUPPLIERS

GOVERNMENTS AND REGULATORSSOCIETY
COMMUNITIESSUPPLIERS

GOVERNMENTS AND
REGULATORSIn Japan we work with the Tobacco
Growers Association of Japan tohelp us talk to farmers about quality
management and contract compliance.
We also employ around 100 farming
experts who visit farmers during thecrop season to discuss these issues. In
2015 we held workshops for farmers
in Japan to explain how their contracts
now incorporate the JT Group Principles
in Leaf Tobacco Production.

We seek an open dialogue withgovernments and regulators so that
we can get across our point of view on
regulations that affect our business andsociety.
When consulted by governments,
we are respectful of each country’s
decision-making process, offer
alternative solutions that meet the
principles of better regulation, andprovide credible evidence substantiating
our position.

In our international tobacco business,
we regularly visit farmers to offer
advice and to support them in
improving toward our standards andrequirements. Farming experts build
and maintain strong relationships withdirectly contracted farmers to help
them improve tobacco production andincrease their profitability.

We believe that open and honest
engagement results in better and more
informed regulation and is in the bestinterests of all parties. Unfortunately,
there has been an increasing risk inrecent years by governments andregulators to restrict the input of thetobacco industry into discussions
about regulation – or even to exclude
it altogether. This is not a sensible orequitable approach and ignores thebenefits of full stakeholder participation.
We will continue to argue strongly
against any moves to do so.

Our tobacco businesses hold an annual
Partnership Day for suppliers of nontobacco materials, such as cigarette
papers, acetate tow for filters, andpackaging, at which we discuss how
we can enhance our partnerships
and collaborate more efficiently. This
has resulted in increased awarenessof sustainability issues among our
suppliers.

Areas on which we engage
governments and regulators include
illicit trade, youth access to tobacco
products, and the health risks ofsmoking. For details on how we have
responded to such concerns, see pages
64-73.

Issues of importance for us to work with
suppliers on are labor practices, bribery
and corruption, health and safety, andillegal trade. For details on how we have
responded to these concerns, see pages
54-55, 59-63, and 68-69.

COMMUNITIESWe engage with various stakeholders
throughout our value chain, including

employees, retailers, consumers, andpublic sector specialists. Our holistic
partnership approach ensures that ourcommunity investment programs are
tailored to the needs of local people,
and that contributions made provide
demonstrable outputs addressing
social and environmental challenges incommunities where we operate.

NON-GOVERNMENTAL
ORGANIZATIONS (NGOS)
We work with a number of NGOs invarious countries - including with theInternational Labour Organisation (ILO)
and Winrock International, a U.S.A.based organization specializing in
agriculture - on our ARISE program
aimed at eradicating child labor in
tobacco. We also foster partnerships
with NGOs that implement social
programs in the communities where
we buy tobacco, as well as others that
support us in delivering our community
investment programs.

RETAILERS

We communicate with retailers in a
number of ways, covering a range of
topics from preventing youth accessto cigarettes to dealing with litter
associated with tobacco products.
Our retail engagement programs
include seminars for retailers that lookat the problems of youth smoking,and provide advice on how to copewith conflict situations that arise whenrefusing to sell cigarettes to minors.
For details on how we have responded
to concerns about youth access totobacco products, see page 67.

16

at regular and ad hoc meetings withinstitutional investors. During 2015 we
dealt with a number of requests frominvestors wanting to talk about issues

RETAILERSSHAREHOLDERSEMPLOYEESCONSUMERSEMPLOYEESThe key channel for communicatingwith employees is in their everyday
work, including through performanceappraisals and face-to-face meetings
with line managers. But we also gather
staff opinions via the intranet andthrough our Employee Engagement
Survey (EES). Additionally, employees
can report concerns about potential
violations of our Codes of Conduct
through our Reporting Concern
Mechanism (RCM).

In our Japanese domestic tobacco
business, the 2015 EES scores
exceeded the Japanese company
standard score in all categories, but
revealed that employees had someconcerns about the way workloads andresponsibilities are allocated.
In our international tobacco business,scores in our 2015 EES improved in
ten out of 12 categories. Compared tothe prior survey, our employees were
somewhat more critical with regards tothe pace of change and the vision of theGroup for the future.
Key issues for employees, identified
through discussions with stakeholders
in 2015, include leadershipdevelopment, equality and diversity,
health and well-being programs, andsafety at the workplace.
For further details on how we have
responded to some of these issues, seepages 30-37.

CONSUMERSSHAREHOLDERS
One of the main forums forengagement with shareholders is our
General Meeting of Shareholders, but
we also discuss sustainability issues

NGOs

including tobacco product innovation,
supply chain management, andcorporate governance.

We communicate with consumers on adaily basis through our sales force andcall centers, and often make productimprovements based on consumer
comments. We also receive feedback
via our websites.

The key areas of interest of our tobacco
business consumers are the health risksof smoking, responsible marketing,product innovation, illegal trade, andthe environmental impact of products.
In our processed food business, key
consumer concerns are food safety,

high quality, and the provision of valueadded foods. For details on how wehave responded to these concerns, seepages 64-69, and 80-81.

17

OUR

OUR GROUPOURSUSTAINABILITYSUSTAINABILITYJOURNEYOUR SUSTAINABILITY JOURNEY
JOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR SUSTAINABILITY JOURNEY

Collaborations, memberships,
and endorsements

LAWS AND REGULATIONSCollaborating with others helps us to address our sustainability challenges. It also fosters innovation andbridges any differences in opinion there may be between us and our stakeholders.

PRODUCT SAFETY
AND PRODUCTRESPONSIBILITYCORPORATEGOVERNANCE AND
TRANSPARENCY

In Japan we have formed Youth
Smoking Prevention Councils withrepresentatives of local government,
police, the Tobacco Retailers
Association, and other tobaccocompanies.

We are a member of the U.K.-based
Institute of Business Ethics and CEB
Compliance & Ethics LeadershipCouncil. We are also a member ofthe Business Ethics Research Centerin Japan, which helps corporations
consider ethical issues in the workplace.

RESPECTING HUMAN RIGHTS
We are a member of the Industrial
Federation for Human Rights, Tokyo.
Members of our human resources
department participate in discussions
and training sessions on human rights
held by the federation. The JT Group is amember of the Eliminating Child Labourin Tobacco Growing (ECLT) Foundation,and in 2014 signed the ECLTFoundation’s Pledge of Commitment
and Minimum Requirements on
combating child labor. Our international
tobacco business is also a memberof the UN’s Child Labour Platform, amulti-sector, multi-stakeholder forum forsharing experiences and lessons learnedin eliminating child labor. We support
Human Rights Watch in its efforts toimprove legislation and bring higher
standards of protection to farm workers
in the U.S.A. We are also a member of
the U.S.A.-based Farm Labor Practices
Group, a multi-stakeholder organizationthat focuses on improving conditions
for farm workers in the U.S.A.

Our international tobacco business isa member of BusinessEurope, a groupthat campaigns on issues affecting
businesses in Europe. We sit on
multiple working groups, including
one on the European Union’s Tobacco
Products Directive and another on plain
packaging of tobacco products.

In 2015 our international tobacco
business became a full member of theInternational Chamber of Commerce(ICC). We now sit on two of ICC’s policy
commissions – one on intellectual
property and another on marketing andadvertising. Through ICC we exchange
ideas with other businesses that may be
faced with similar regulatory challenges.

RESPONSIBLE
MARKETING

WORKPLACEHEALTH AND
SAFETYENVIRONMENTThe JT Group has been reporting its
Group-wide greenhouse gas (GHG)
emissions and climate change
information to CDP since 2012, andwater information to CDP since 2015.
In 2015 our international tobacco
business invited 30 suppliers to disclose
information through the CDP supply
chain initiative.

EMPLOYEEDEVELOPMENT
AND TALENTMANAGEMENT
Our international tobacco business
now has the highest level certificationfrom the Top Employers Institute. The
Global Top Employer status is given
to organizations that demonstrate thehigh standards of HR practices andemployee offerings across the globe.

Our Japanese domestic tobacco
business is a key member of the
Tobacco Institute of Japan and complies
with the institute’s self-regulatory
marketing standard.

Our international tobacco business isa member of the European Council on
Health and Safety and the Networkof Employers for Traffic Safety(NETS). During 2015 our international
tobacco business received the NETS
Road Safety Achievement Award inrecognition of ‘advancing road safety.’

OTHER SUSTAINABILITY-RELATED MEMBERSHIPSIn 2015 our international tobacco
business became a member of a
CSR task force in Switzerland led
jointly by two business federations,
Economiesuisse and SwissHoldings.
Our role on the task force is to18

represent members of Groupement desEntreprises Multinationales (GEM), a
Geneva-based association that brings
together more than 85 multinationals
to present their views to governments
and authorities on topics such as tax,

business development, sustainability,and employment. The task force aims
to have an input into Swiss government
proposals to develop action plans andbinding rules on CSR.

19

OUR

OUR GROUPOURSUSTAINABILITYSUSTAINABILITYJOURNEYOUR SUSTAINABILITY JOURNEY
JOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR SUSTAINABILITY JOURNEY

Sustainability governanceOur material issues

Our sustainability performance is discussed regularly by a group of Board members and Executive
Officers, along with the CEO and the Senior Vice President for CSR, assisted by our CSR Division.
However, businesses and corporate functions have ultimate responsibility for planning and implementing
their own sustainability initiatives.

In 2015 we carried out our first materiality assessment covering the entire JT Group, building on thework done by our international tobacco business in 2014. The process began by conducting a media andpeer review, which generated 31 sustainability topics of relevance. These were then calibrated throughdiscussions with operational managers in the business.
We then carried out interviews with 15 of the top executives of the JT Group, including our CEO,followed by talks with 17 external stakeholders who included suppliers, investors, trade unions, NGOs,
and industry organizations. Finally, we held a workshop with our 15 top executives to validate themateriality assessment results.

SUSTAINABILITY GOVERNANCE

This process allowed us to arrive at a final list of 22 material issues, which stakeholders ranked as
medium and high level of importance to the JT Group and our external stakeholders – see matrix below.

CSR DIVISION
This unit develops an understanding of global CSR
trends, conducts gap analyses on approach andperformance, makes recommendations to the Top
Management Committee, and helps different parts ofthe business incorporate sustainability practices into
their day-to-day activities. It is also responsible forsustainability reporting and communications.

BUSINESSES ANDCORPORATE FUNCTIONSWith help from the CSR Division when necessary,each business and corporate function plans andconducts sustainability-related initiatives based on its
own strategies and priorities.

HIGH

JT GROUP MATERIALITY MATRIXMEDIUM

Consisting of Executive Officers, including our CEO and
Senior Vice President for CSR, this body regularly
discusses Group-wide sustainability issues.

In future we will regularly carry out a materiality assessment with stakeholders. This will help us tomonitor any changes in materiality and to update the list if necessary.

IMPORTANCE TO EXTERNAL STAKEHOLDERSTOP MANAGEMENT COMMITTEE

Corporate governanceand transparency

Laws andregulations

Product safety andproduct responsibility

Supply chain
management

Product innovation andintellectual property

Respecting
human rights

Responsible
marketing

Litigation

Anti-bribery andcorruption

Illegal trade

Equality anddiversity in theworkplace

Environmental
impacts ofproducts

Information security

Anti-competitive
behavior

Being a responsible
employer

Workplacehealth and safety

Collaborations
and partnerships

Employeedevelopment andtalent management

Environment

Contributions tosociety

Political andregulatory decisionmaking processes

Tax practices

+

HIGH

MEDIUM

IMPORTANCE TO THE JT GROUPVALUE CHAIN BOUNDARIES
SUPPLY CHAIN

20OUR COMPANYOUR CUSTOMERSAND CONSUMERS

21

OUR

OUR GROUPSUSTAINABILITYJOURNEYOUR SUSTAINABILITY JOURNEY

OUR WAY OF
OUR WAY OF
DOING BUSINESSDOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR
OUR SUSTAINABILITYWAY OF DOING BUSINESSJOURNEY

Corporate governance andtransparency

OUR GROUP

Our wayof doing
business

The JT Board of Directors holds ultimate responsibility for administration and supervision of ouractivities, and is supported by a governance structure that includes bodies such as the JT Group
Compliance Committee and the Compensation Advisory Panel. In 2015 our Board of Directors consistedof eight Directors, two of whom were independent. Five members of the Board also served as Executive
Officers and three were non-executive, including the JT Group Chairman. The separate Audit &Supervisory Board consisted of four members, two of whom were independent. Results of audit and risk
management exercises are reported regularly to the Board. Our Annual Report provides further details
on our governance structures.
In February 2016 we established the JT Corporate Governance Policy to take account of Japan’s
Corporate Governance Code. As part of the rules of the Tokyo Stock Exchange, listed companies mustcomply with the new Code, which came into force in June 2015, or explain why they have not done so.

All operations and employees within the JT Group mustcomply with the high standards of integrity laid down in
our Codes of Conduct, which underpin how we do business.
Our Codes also outline our responsibilities to stakeholders,which include preventing bribery and corruption, avoiding
discrimination, respecting human rights, environmental
protection, data privacy, and fair competition.
Employees are trained on our Codes, and there arecommunication channels for them to report concerns about
potential breaches or violations.

2015 highlights
2015

2015

3.9%

99.7%

of reported concerns were related tobribery and corruption.

of employees trained on the
JT Group Code of Conduct.

2014

2014

1.7%

99.5%

(*c)

(*c)

RISK MANAGEMENT
Our approach to addressing key
financial and business risks is detailed
in our Annual Report. These risks arereported to, and discussed with, theBoard of Directors at least every threemonths. Internal audits are conductedby a division independent fromthe business and other operational
functions, reporting directly to the
President of JT. We also have crisis
management and disaster control
systems in place. Identification andmitigation of sustainability risks isincorporated into our Group risk
management approach. Key Groupwide sustainability risks include
instability in the procurement of key
materials, pressure from illegal trade,and natural disasters.

JT GROUP
ANTI-BRIBERYPOLICY was made publicTheon our website in 2015.

In 2015 we launched

JT GROUPSUPPLIER
STANDARDS that set

out the behavior we expect fromall suppliers, globally.
22

23

OUR

OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF DOING BUSINESSOUR WAY OF
OUR WAY OF
DOING BUSINESSDOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR WAY OF DOING BUSINESSCODE OF CONDUCTREPORTING CONCERNSThe JT Group Code of Conduct
outlines our responsibilities toward
consumers, shareholders, employees,
and society, and defines ourlegal and ethical obligations. Ourinternational tobacco business andour pharmaceutical subsidiary havetheir own Codes of Conduct, based on
the JT Group Code but reflecting theirrespective operational circumstances.
We view these Codes as essential toachieving our business goals while
acting with integrity and in compliancewith the law. They cover key material
issues in our business (see page 21).
They also reflect the high standards of
ethical behavior we aspire to in all ourbusiness dealings, and which we expectfrom all our business partners.
Copies of our Codes of Conduct areprovided to all employees, while
shareholders and other interested
parties can access them via our
websites.1 Annual training on the Codes
is given to employees, supported byinternal communications campaigns
where senior executives reinforce ourcompany’s strong commitment to theprinciples and values laid out within theCodes.

If an employee is concerned about apotential violation of our Codes, he or
she can contact their line manager,
human resources lead, a member of theCompliance team, or use our RCM.

All the Codes are reviewed and updated
as necessary, and the latest revision of
the JT Group Code took place in 2015.
It now features a refreshed section
highlighting our “4S” model, andnew sections on fair and appropriate
accounting, respect for diversity, andprohibition of bribery.

We follow up on all reports across
the JT Group and, where necessary,launch investigations that may lead tocorrective action. In 2015 we received
408 reports across the JT Group, up
from 402 in 2014.

Compliance training for employeeson the JT Group Code of Conduct isprovided face-to-face, online, or on
the job. During 2015, 99.7% (*C) of
employees who are required to adhere
to the JT Group Code of Conduct
participated in compliance training.
1

Visit www.jt.com and www.jti.com to access ourCodes of Conduct.

Employees are informed on how to use
the RCM through various channels,
including a leaflet distributed to all
employees that explains how to use
the RCM and a JT Group intranet
Compliance site that has links to theRCM. In 2015 we issued a DVD of casestudies illustrating different sectionsof the Code of Conduct and explaining
RCM procedures.
All new employees and anyone who has
been newly promoted to a managerial
position in JT and Japanese domestic
Group companies (*C) receive face-toface training on compliance including

the RCM. In our international tobacco
business, new employees are given a
copy of the Code of Conduct in whichclear reference is made to the RCM
process. In addition, in certain locations/entities, employees receive an induction
program that incorporates complianceissues including the RCM. In all of the
JT Group, RCM contact persons go
through regular refresher training toensure they have the skills to respond to
RCM reports in an appropriate manner.
Aside from employees, customers,
distributors, and suppliers are alsoable to report violations of our Codesof Conduct via our Reporting Concern
for Business Partners website. In
addition, in our international tobacco
business, business partners may
contact Corporate Compliance directly
through jti.com, and our suppliers may
contact Corporate Compliance throughan e-mail link onebehavior@jti.com as
published in our Supplier Standards
brochure.

COMPLIANCE WITH THE CODE OF CONDUCTBREAKDOWN OF REPORTED CASESEMPLOYEESRESPONDED
TO THE 2015
COMPLIANCESURVEY

3.9%

19.9%

94.0%

(*C)

In our Japanese domestic tobacco,
pharmaceutical and processed foodbusinesses, each division assesses
the risk of employees failing to comply
with our Codes, and submits plansto address those risks. An annualcompliance survey feeds into eachdivision’s action plans for addressing
compliance risks, and each divisionmust hold an employee meeting atleast once a year. Approximately 24,500
employees (94.0%,(*C)) responded tothe compliance survey. As a resultof the survey, we are looking intostrengthening our various initiatives
that will reduce long working hours.
The survey also showed that we needto do more to publicize our Reporting
24

Concern Mechanism (RCM), whichallows employees and business
partners to report possible breachesof our Codes. We will therefore
provide additional material for line
managers about RCM and will devise
a new campaign targeted at overseas
subsidiaries in our processed foodbusiness.
We reported the outcomes of the 2015
survey to Executive Officers, who wereencouraged to deliver compliancerelated messages to employees and toparticipate in employee meetings.
We encourage employees to speak up
about potential violations of our Codesof Conduct, and we make it clear thatanyone who reports concerns will beprotected from any form of retaliation.
This is fundamental to building a fairenvironment where we address any
wrongdoing with integrity. In 2015
our international tobacco businessproduced a video as part of its annual
communication campaign on the Codeof Conduct that featured messages
from its CEO and senior executives,
aimed at reassuring employees of thecompany’s commitment to supporting
those who speak up about misconduct.

2015

50.5%

1.7%

25.7%

21.6%
2014

50.5%

402

408

0.2%
CASES RELATED TO CORRUPTIONCASES RELATED TO HUMAN RIGHTS

25.9%

CASES RELATED TO ANTICOMPETITIVE BEHAVIORCASES RELATED TO LABORPRACTICES (EXCLUDING HUMAN RIGHTS)
CASES NOT RELATED TO ABOVE
CATEGORIES

25

OUR

OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF DOING BUSINESSOUR WAY OF
OUR WAY OF
DOING BUSINESSDOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

In 2015 we launched JT Group SupplierStandards that set out the behavior

OUR PROCESSED FOOD
BUSINESSOUR GROUP

INFORMATION SECURITY
we expect from suppliers, globally.
These Standards build on the ones wehave been applying in our international
tobacco business and, in conjunction
with our Responsible Procurement
Policy, will help us to work with
suppliers to identify and resolve any
issues that may occur.

The JT Group’s information security
risks lie in the damage or leakage ofthree types of key information:

possible incidents, detect breaches,
and, if necessary, recover data as swiftly
as possible.

1. Information we hold on customers,
consumers, suppliers, andemployees.

We are also considering theimplications of the 2015 U.K. Modern
Slavery Act.

3. Engineering and experimental data,
including results from our research.

We have laid down policies andprocedures, including manuals,
guidelines, and incident response
processes, that help employees reducerisk, protect information, and respondto any attacks. And we regularly update
and enhance our information security
policies and procedures to take accountof the rapidly changing landscape inthis area.

OUR TAX PRACTICES

2. Information on our business strategy.

To prevent confidentiality breaches,
we must deter those who might wantto compromise confidentiality, prevent

Attacks on information security often
occur because of carelessness, so weperiodically conduct training to refresh
information security knowledge definedin policies and procedures. And we
update employees with advice on goodpractice so that we are able to prevent
information security violations.
In addition, we make use of the latest
technology, including monitoring andalert systems, to prevent and detect
information security breaches. We
also carry out periodic reviews of our
information security technologies.

INFORMATION SECURITY

We believe that taxes are bothnecessary and desirable, and we arecommitted to paying levels of taxationthat are not only firmly within theletter and spirit of local laws but are inaccordance with our responsibilities
to all stakeholders in our “4S” model.
We do not engage in aggressive andartificial tax planning or tax avoidance
schemes, and never use legal entities
for tax purposes only.

compliance process in which business
units must issue a detailed report,signed off by the Finance Director, toshow they are meeting their local tax
obligations.

In 2015 we paid a total of 132,027
million Yen in corporate tax across the
JT Group.

One of our key challenges is thattax legislation and practice in someterritories, particularly in emerging
markets, is often less clear than wewould like it to be. This can easilytranslate into differences of opinion withauthorities over the interpretation oftax regulations. We always try to solvethese disagreements through active
engagement.

Our approach to tax is guided byan integrated Global Tax functionthat works across the JT Group toprovide advice on tax issues andensure appropriate payment of taxes.
This function also manages a yearly

OUR PHARMACEUTICAL
BUSINESSOUR WAY OF DOING BUSINESSPROCUREMENT PRACTICES
Tens of thousands of suppliers provide
us with the products, services, andmaterials needed for our tobacco,
pharmaceutical, and processed foodbusinesses. We expect all suppliers to
uphold the high standards of integrity,
quality, and safety that are referred to in
the JT Group Responsible Procurement
Policy.

OUR TOBACCO BUSINESS

We aim to be as transparent as
possible on taxation, and to foster
good relationships with tax authorities
in order to reduce uncertainty or
misunderstanding on both sides.

REGULATORY LANDSCAPE
An important topic for the JT Groupover the next few years will be theOECD’s Base Erosion and Profit Shifting(BEPS) Project, which aims to clamp
down on tax planning strategies that
artificially shift profits to low-tax or
no-tax locations and reduce taxable
base. Because we earn income only incountries where we have substantive
business operations, we are confident
that the JT Group is paying its fair shareof taxes. However, we are still digesting
the latest recommendations of the
BEPS Project in order to understand thepotential implications on the JT Group.

DETERRENCE

PREVENTION

INFORMATIONASSETSRECOVERYDETECTION

ANTI-COMPETITIVE BEHAVIOR
Fair competition is covered by ourCodes of Conduct, which forbid
employees from discussing business
operations with competitors. In ourinternational tobacco business, if an
employee is in a conversation with acompetitor and sensitive commercial
information is discussed, they must end
the conversation, express disagreementwith discussing such topics, leave
immediately, and report the matterto our legal department. We have
employee guidelines on anti-trustand competition law policy, and all
employees in our international tobacco

26

business are required to attend annual
training on anti-competitive behavior.
We have no cases pending for allegedanti-competitive behavior.
In 2015, following an out-of-court
settlement, the Tanzanian Fair
Competition Commission withdrew all
claims against one of our subsidiaries
relating to a complaint of alleged anticompetitive behavior filed in 2008. Bothparties agreed to refrain from pursuing
any future claims against each otherand to keep the terms of the agreement
confidential.

27

OUR

OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF DOING BUSINESSOUR WAY OF
OUR WAY OF
DOING BUSINESSDOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

1,500 employees working in functions
where bribery and corruption is a key
issue were provided with e-learning. We
also held a face-to-face seminar for 27
Compliance Committee members andExecutive Officers, delivered by a legal
expert in the field, which included afocus on anti-bribery practices outsideof Japan. On-site interviews with
employees were also conducted in highrisk functions. Based on the findings ofthese conversations, additional controls,

EMPLOYEES TRAINED ON THE JT GROUP CODE OF
CONDUCT, INCLUDING ANTI-BRIBERY, IN 2015 (*C)

OUR PROCESSED FOOD
BUSINESSOUR GROUP

GIFTS, HOSPITALITY, AND ENTERTAINMENTOur Codes of Conduct set out a zero tolerance approach to corruption in our operations. The JT
Group has an anti-bribery and corruption policy that takes into account legislation such as the Unfair
Competition Prevention Act of Japan, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, andanti-bribery laws in China.

In 2015, 99.7% (*C) of employees
completed Code of Conduct trainingthat included modules on anti-bribery
and corruption. In addition, around

OUR PHARMACEUTICAL
BUSINESSOUR WAY OF DOING BUSINESS

Anti-bribery and corruption
In 2015 this policy was made available
publicly for the first time on our website.
Our top management has issued clear
messages to the employees that bribery
and corruption are unacceptable andthe adherence to the JT Group AntiBribery Policy is mandatory.

OUR TOBACCO BUSINESSEMPLOYEE CATEGORY

including due diligence of third-party
agents, are being implemented as andwhen necessary.
Our international tobacco businesswill deploy their own full anti-bribery
and corruption policy in 2016, which
will be supported by appropriate
communication and training.

NUMBER OF
EMPLOYEES% OFEMPLOYEESMANAGEMENT

2,482

99.9%

NON-MANAGEMENT

10,647

99.6%

TOTAL

13,12999.7%

We do not proactively encourage aculture of exchanging gifts, hospitality,and entertainment (GHE). The giving
and receiving of GHE must always bereasonable, proportionate, transparent,
and in line with local legislation. If not,this may damage our reputation. We
believe the purpose of GHE should be topromote healthy business relationships,
while not to seek preferential treatment
in return. As a rule, approval must besought for all GHE exchanges for any
JT Group company, including thosewith government and public officials.
Based on our Gifts and Entertainment
Guidelines, each department sets
thresholds on the amount of eachexchange.

In our international tobacco business, all
GHE exchanges with non-governmental
third parties above US$250 mustreceive prior approval. For government
and public officials, all requests,
regardless of amount, must be
approved. The number of GHE requests
in 2015 fell to 738 (*E), from 772 in 2014.
Users of the GHE software must takepart in specialized online training
on GHE. In 2015, 927 (*E) employees
underwent such training, comparedwith 304 in 2014.

COMMUNICATION OF GHE POLICIES AND
PROCEDURES TO EMPLOYEES IN 2015 (*E)

EMPLOYEE CATEGORY

GHE REQUESTSIN 2015738

NUMBER OF
EMPLOYEES% OFEMPLOYEES

17

100%

MANAGEMENT (EXCLUDINGEXECUTIVE OFFICERS)

1,019

100%

EMPLOYEES (EXCLUDINGMANAGEMENT AND
EXECUTIVE OFFICERS)

19,05276%

EXECUTIVE OFFICER(*E)

EMPLOYEESUNDERWENT
GHE TRAINING
IN 2015

927

28

(*E)

29

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE
OUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR PEOPLE

Employee development andtalent management

OUR GROUP

A highly motivated and competent workforce is key to sustainable business growth. We therefore needto create and maintain a work environment that motivates people and nurtures excellent performers.

Our people

We continuously review and redesign our HR strategies and programs so that we can match theaspirations of our employees with the needs of our business, and so that we can prepare our workforce
for future challenges. While we believe that on-the-job learning is central to the development of ouremployees, we also invest in training, and each of our companies runs its own employee development
and training programs.

Our employees are critical to the success of our business, andare a key stakeholder group in our “4S” model. To provide
global guidance across the JT Group, we defined the following
JT Group HR Management Philosophy:

ATTRACTING TALENT
Across the JT Group we have a clear
idea of what ‘talent’ means for us: mostof all we value positive attitudes andbehaviors, and we search for people
who exhibit our values.

“In order to contribute to the Company’s sustainable growth,and with the recognition that highly skilled, talented anddiverse people are the foundation of its success, JT GroupManagement strives for the highest level of employee
satisfaction with a long-term view.

Our international tobacco businesshas a global internship program, called
JUMP, which aims to attract highpotential students to join the company
and help them gain experience andrealize their potential. In addition,
there are several regional graduate
programs in place, focusing on highprofile graduates with the potential to
become future leaders. This has been aparticular focus in Japan.

1. Treat all employees fairly and respectfully
2. Ensure transparency of rules and standards
3. Provide all JT Group employees with growth opportunities”

To attract the best, we offer goodcareer development opportunities,
various training, and highly competitive
salaries and benefits. In 2015 ourinternational tobacco business outlined
a new Employer Value Proposition:2015 highlights
2015

2014

2

5

(*D)

2014

5 8
alleged cases of
workplace discrimination.
30

11.4%
CERTIFIED EXCELLENCE IN EMPLOYEE CONDITIONS

2015

98.4%

(*D)

of management positions
were filled by internal hires.

We made 3,848 hires in 2015 acrossthe globe – by leveraging modern waysof talent attraction, including social
media such as LinkedIn, Glassdoor, andFacebook. The number of followers on
LinkedIn more than doubled in 2015,
from 30,000 to more than 70,000,
making ours the fastest-growing
LinkedIn company profile in the tobacco
sector.

NEW HIRES BY
GENDER, 2015of management positions
were held by women.

fatalities

2015

2015

a set of key attributes that makes us
unique as an employer. These are
Long-term Success, Care and Respect,and our commitment to Invest in
People. Along with this Employer Value
Proposition, key qualities that makepeople successful in the company havebeen streamlined, and targeted talentprofiles have been shaped. From 2016
we will make sure the new ‘Employer
Value Proposition’ is spread globallyand is an integral part of the DNA of thecompany.

For 2015 our international tobacco
business was once again certified as
Global Top Employer for our consistenthigh-quality work environment as oneof only eight employers worldwide.
We were recognized by the Top
Employers Institute in 35 countries
around the world, and we were thenumber one employer in Asia Pacificand number two in Europe.

FEMALE

2,584

1,264

MALE

31

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OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE
OUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR PEOPLE

OUR PEOPLE

Being a responsible employer

DEVELOPING AND RETAINING TALENT
We aim to offer a work environmentthat allows employees to express
their potential and provides themwith the most effective development
opportunities.
Our development programs takeaccount of employees’ needs andfuture career opportunities, as well as
requirements of the business. These
programs include training, assignments,
international experience, special
projects, coaching, and mentoring.
We have a global training catalog thatcovers key competences required
to be a successful JT Group leader,such as effective communication andstrategic thinking. Partnering witheight business schools and executive
education institutes, we also provide
top-class development opportunities. In
2015 about 250 employees took part in
executive education programs.
We also run the JT/JTI TalentPartnership Program that allows
people to move between our Japanese
domestic and international tobacco
businesses. As of December 31, 2015,
205 employees took part in theseexchanges. Partly as a result, half of ourmanagers in the corporate and tobacco
business headquarters in Tokyo haveinternational experience.
As part of the Program, we run an
Exchange Academy that helps young
employees learn and network together,
turning them into better future global
leaders.
Performance appraisals are an
important way of developing employee
potential. In 2015, 76% of ourworkforce had appraisals that checkedon their performance and maderecommendations for improvement.

We regard good communication as a vital part of our commitment to being a responsible employer.
Across our businesses we have an open dialogue with employees, making use of everything from noticeboards and face-to-face meetings to web-based channels and electronic communications. All suchengagement takes place whether or not a trade union is in place.

WORKING WITH TRADE UNIONS

Employees set their own targets, with
progress confirmed periodically and aformal evaluation at the end of the fiscal
year. Each stage is performed withline managers; in this way we can help
employees meet both their personal
objectives and those of the business.
We believe employees should haveownership of and manage their careerdevelopment, and in JT, for example,
we provide training at specific points ofeach employee’s working life.
Developing talent not only helps
retain employees, but it also helps our
succession planning by filling open
management positions with internal
candidates whenever possible 98.4% (*D) in 2015.
Providing competitive compensationis also key to attracting and retaining
talent. As part of the JT Group HR
Management Philosophy, we commit
to treat all employees fairly andrespectfully, and based on this eachof our businesses designs its own
compensation policy. For example,
our international tobacco businessstrategically positions its compensationlevels at 75th percentile versus premiercompanies with which we compete fortalent. In 2015 it expanded its employee
share purchase plan offer to 11 newcountries, following the pilot programthat was introduced in Switzerland one
year earlier.
Across our businesses, according togeographical location, we offer benefits
such as healthcare, defined contribution
pension plans, life and disability
insurance, and parental or nursing
care leave. In JT we have a parental
scheme that provides for up to two
years of leave for all employees – above
the Japanese legal requirement of 18
months.
We run our Employee Engagement
Survey to understand what is importantfor our employees, how to better
engage with them, and identify areas
where we need to do better. The
2015 Employee Engagement Survey
in our international tobacco businessshowed improved scores in 10 out of 12
categories compared with 2012, when
the survey was last carried out. The
one area in which scores declined by
1% was on organizational direction andchange, where employees had someconcerns about the pace of change and
the Group’s vision for the future.

MAKING THE MOST OF OUR TALENT PARTNERSHIP PROGRAM
Shigetaro Suzuki joined JT in 1997 as atobacco sales representative in Tokyo,
rising to become a brand manager
for Caster cigarettes in 2002. As partof our Talent Partnership Program, heparticipated in our Exchange Academy
in 2007 to gain international experience,then from 2008 to 2010 he undertook
an assignment in the U.S.A. as aportfolio development and performance
manager in our international tobacco
business.

32

OUR GROUP

Shigetaro’s two-year spell in New
Jersey allowed him to work on pricing
strategy and portfolio development,
as well as on brand management for
our Mild Seven cigarettes brand. After
his assignment, he returned to Japan,
where he took his newly learned skills
into our Tobacco Business Planning
Division as an emerging productmanager. In 2012 he moved to the Mild
Seven brand group, where, as seniorbrand manager, he led its rebranding
under the new name of Mevius.

“The Talent Partnership Program was agreat way to develop my international
career.” says Shigetaro, who now works
as a brand manager for Mevius andSobranie in Geneva. “It allowed me to
get to know so many people, functions,and ways of doing international
business. I also learned lots of new
skills along the way, especially in thearea of marketing. And on a personallevel it helped me to improve myEnglish, to get a better understandingof different cultures, and to enhance mypresentation skills.”

We aim for open and constructive
relations with trade unions and works
councils, and are supportive of freedomof association and the right to collective
bargaining. Even in territories where
there are no legal requirements,
we view freedom of associationand the fostering of good relations
with employee representatives as aminimum.
Fifty-six companies have a union in
our Group and 92.3%(*C) of eligible
employees are covered by collective
bargaining agreements. Trade unions
or local works councils represent our
workforce in 23 countries.
Our European Works Council, which
consists of employees and managers,
operates as an employee informationand consultation body and meetsseveral times a year. The council has
been at the heart of discussions with
employees over planned closuresof our factories in Wervik, Belgium,
and Lisnafillan, Northern Ireland,announced in 2014. The closures arescheduled to take place between 2016
and 2018, affecting around 1,100 jobs.
In February 2015 we decided to cease
the manufacture and sale of JT brandbeverages and this was completed
by the end of September 2015.
Following discussions with tradeunions, affected employees – with the
exception of those in our beveragevending operation subsidiary, which
was acquired by another company –could remain within the JT Group if they
wished. This offer was taken up by 119
people.
In July 2015 we announced that
our Moscow factory will closein mid-2016, affecting 573 jobs.
Following discussions with employee
representatives, staff members
who lose their jobs will receive
compensation significantly above that
required by Russian legislation.
In October 2015 we announced that wewere considering closing our Wadevillefactory in South Africa. Eighty-four
employees will potentially be affectedby this decision. We consulted with
employee and union representatives
in accordance with South African
employment law to discuss allalternative solutions to best support theworkforce.
In general, employees affected byclosures are given as much notice aspossible, which exceeds minimum
notice periods required by law, sothat meaningful discussions with staff
representatives can take place andarrangements can be made to help
people move internally or find jobs
elsewhere.

NON DISCRIMINATIONREPORTED CASES OFDISCRIMINATION
IN 2015

5

Our Codes of Conduct guide the way
we deal with discrimination in theworkplace.
We are determined to foster work
environments that are free from all
forms of unfair discrimination. We do
not allow age, gender, disability, ethnic
origin, marital status, nationality, race,
religion, beliefs, or sexual orientation
to influence decisions about the career
progression of employees, nor to bea factor in areas such as recruitment,compensation and benefits, or
succession planning.
Despite this, there may be incidents ofalleged workplace discrimination thatneed addressing. In 2015 five suchalleged incidents were reported by
employees. We reviewed all cases, ofwhich three required corrective action
and were closed in 2015, and theother two were closed in 2016 with nocorrective action required.

LOCAL LABOR PRACTICESThe hiring of local talent contributes
to the economies of countries andregions in which we operate, and isa part of our corporate responsibility
to those communities. While we haveno Group-wide policy on the hiring of

local employees, and our approach is torecruit and assign ‘the right person in
the right position at the right time’, weare mindful of our responsibilities in thisarea.

All our businesses conform with legally
set local minimum wage levels, and inmany cases are well above these levels
due to our policy of offering pay andbenefits that are highly competitive. This
also applies to part-time employees.

33

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OUR WAY OF
DOING BUSINESSOUR GROUPSUSTAINABILITYJOURNEYOUR PEOPLE
OUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR PEOPLE

OUR PEOPLE

Equality and diversity
at the workplace

GENERATIONAL DIVERSITY AND WORK–LIFE BALANCE

Having a diverse workforce provides us with different perspectives and outlooks that feed positively into
our business, suggesting new ways of doing things and making us more competitive in the marketplace.
In 2015 we employed people from more than 100 countries. Beyond national diversity we value diversityof opinion, allow people to express their own personalities, and create a work environment that fosters
equality, creativity, and innovation. Our commitment to equal opportunity and anti-discrimination isreflected in our Codes of Conduct and in the JT Group HR Management Philosophy.

managers to discuss ways to create anenvironment that encourages work–lifebalance for all employees.
Female representation withinmanagement in JT increased from 2.6%
at the end of 2014 to 4.0% at the end of
2015, against our aim of reaching 10%
by 2023.

We adopt a gender-neutral approach torecruitment and to create workplaces
that are attractive to, and supportiveof, women. We are also committed toraising awareness among employeesof the importance of gender diversity to
the health of our business. While 27.3%
of our employees are women, only
11.4% of our management (excluding
Executive Officers) is female. We havetherefore set targets to increase this
proportion.

We believe that generational diversity
is as important as gender diversity, as
it ensures that different perspectives
and experiences feed into ourbusiness. We promote a culture thatvalues intergenerational learningand experience sharing. We do notdiscriminate on the basis of employee
age or generation and adopt ways
of working that are appropriate to
all generations represented in our
workforce.

One way of doing this is to ensure
a good work–life balance. To help
achieve this, each of our companies
run their own initiatives that take into
account local regulations, cultures,and work environments.
For example, in JT during 2015 we
expanded childcare and family careprograms that allow employees towork in more flexible ways, and
we enhanced schemes that help

BREAKDOWN OF EMPLOYEES BY GENDER AND AGE GROUPGENDER DIVERSITYIn JT we have a Diversity Development
Department that promotes respect fordiversity of employees and opinions, aswell as equal opportunities for men andwomen. We provide gender diversity
awareness-raising workshops for all
managerial employees, hold seminars
on female empowerment in theworkplace, and have a section on our
intranet site that focuses on promoting
diversity. In 2015 additional gender
diversity workshops were held for all

3.1%

FEMALE

MALE

TOTAL

UNDER 30

2,425

4,597

7,022

30-50

7,268

19,171

26,439OVER 50

1,591

6,265

7,856

In 2015 our international tobacco
business launched a talent development
program aimed at preparing 20
employees for senior leadership roles
with significantly higher accountability
and complexity. Fifty percent of the pilotgroup were women.

EQUAL REMUNERATION FOR WOMEN AND MEN

11.4%

28.8%

65

3,501

37,796

96.9%

88.6%

71.2%

EXECUTIVE OFFICERFEMALEMALE

employees to pay for nursery schools
or care for elderly relatives. In 2015
we also piloted telework and early bird
working schemes in the JT head officeas part of a ‘Work Style Reinvention’program aimed at determining
whether flexible working routines canhave a positive effect on employee
effectiveness. We will continue to run
and assess this program during 2016.

Our international tobacco business isaiming to have 30% female Directors
by 2020, with longer-term aspirations
to have equal representation at Vice
President and Executive Committee
level. At the end of 2015, 27.6% of
Directors were women, up from 27.0%
in 2014.

EMPLOYEES BY POSITION AND GENDER AT THE END OF 201534

OUR GROUPMANAGEMENT (EXCLUDINGEXECUTIVE OFFICERS)FEMALEMALE

We are committed to gender diversity
and equality, and we do not makedecisions about our employees’ payon the basis of diversity characteristics
such as gender. Salary structures inmost of our operations across the JT
Group are set up to take into accountonly a position’s significance andresponsibilities. This system is designed
to ensure equal pay for equal positions,allowing some variability driven only by
merit and performance over time but
not gender.

EMPLOYEES (EXCLUDINGMANAGEMENT AND
EXECUTIVE OFFICERS)FEMALE
MALE

35

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OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE
OUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR PEOPLE

OUR PEOPLE

Workplace health and safety
Providing a safe and healthy workplace environment for our employees is fundamental to our business.
It is also an important way to support sustainable growth, not least because a healthier workforce
contributes more fully to our business.

HELPING BIKERS RIDE SAFER
However, riding a motorcycle can be
dangerous, especially in areas whereroads are bad and weather conditions
are unpredictable. To address thisissue we provide a specially designed
motorcycle risk management program.

Our standards on health and safety usually exceed legal requirements and their scope extends beyond
our employees to cover contractors and visitors in our operations. Well-being programs often also
include family members of employees.

WORKPLACE HEALTH AND SAFETY DATA*FY2011FY2012FY2013

2014

2015

TARGET

1

1

1

2

1

0

NUMBER OF EMPLOYEE LOST-TIME INCIDENTS (LTIs)

N/A

N/A

N/A

113

154

N/A

EMPLOYEE LTI RATE (NUMBER OF LTIs PER 200,000 HOURS
WORKED)

0.31

0.28

0.26

0.32

0.36

N/A

0

0

0

3

1

0

N/A

N/A

N/A

12

17

N/A

% OF CIGARETTE AND TOBACCO-RELATED FACTORIES CERTIFIED TOOHSAS 18001 (*D)

90.0%

89.7%

85.4%

81.0%

78.9%

100%

NUMBER OF VEHICLE ACCIDENTS (*E)

1,757

1,508

1,362

1,341

1,108

N/A

8.4

7.1

6.1

5.9

4.8

N/A

NUMBER OF EMPLOYEE FATALITIESNUMBER OF CONTRACTOR FATALITIES (*E)
NUMBER OF CONTRACTOR LTIs (*E)

VEHICLE ACCIDENT FREQUENCY RATE (ACCIDENT PER MILLIONKILOMETERS) (*E)

For many of our tobacco farming
experts, a motorcycle is the only
vehicle enabling visits to remotetobacco leaf farms. In 2015 more than
500 motorcycles were in use in ourinternational tobacco business.

The program is designed to reducerisks by riding defensively, and also
focuses on the proper maintenanceand inspection of a motorcycle. It
emphasizes the necessity to wear
proper protective equipment, suchas helmet, gloves, and high-visibility
jackets.

EMPLOYEES’ HEALTHIn JT during 2015 we updated our
occupational health and safety policy
and established a dedicated site on
our intranet to enhance awareness ofhealth issues among employees. We
have medical staff of 14 doctors and 36
public health nurses across 11 officelocations in Japan, offering a healthpromotion program for the preventionof diseases and consultations onlifestyle issues. They undertake faceto-face interviews with all full-time
employees based on the result of each
medical examination, providing advice
on exercise and diet.

SAFETY

There is a uniform understanding of
the importance of safety throughout
the JT Group, and we maintain robust
management systems and assessment
procedures that identify workplacerisks. Of our tobacco-related factories,
78.9% are certified to the OHSAS 18001
safety management standard, and ourtarget is 100%.
The highest safety risks across the JT
Group are associated with operating
vehicles for company-related activities,
working at height, and with slips, trips,
and falls.
Working with machinery is alsoa concern, and in 2015, in ourinternational tobacco business, wedeveloped a set of global standards
for safe operations on machines
and equipment, against which each36

production site was surveyed in order toaddress any areas of non-compliance.
We regret to say that in 2015 there
were two occupational fatalities in ourinternational tobacco business. Oneof our employees contracted malaria
while on a business trip to Africa, thecomplications of which contributed tohis subsequent death, and a contractor
was electrocuted in Sudan. In addition,
one third-party death occurred in
Tanzania, where a company vehicle
collided with a cyclist.
Our lost-time incident (LTI) rateincreased in 2015 from 0.32 to 0.36,
partly due to an increased numberof incidents within our tobaccoprocurement operations, and we will
target resources to address theseissues. There was a significant reductionin the vehicle accident frequency rate,from 5.9 (*E) to 4.8 accidents per million
km.

Safety policies, standards, training,
and focused campaigns are all key toinstilling a strong and sustainable safety
culture. In our international tobacco
business in 2015, we:
1. Revised our Global Fleet Safety
Policy, extended our Fleet Safety
Program and road traffic safety
awareness to motorcycle riders,and continued running driver safety
training.
2. Ran training sessions and awarenessworkshops for managers andemployees to help them better
understand all safety risks and theirrole in managing safety.
3. Introduced additional training
programs for our contractors.

GREENWELL MBEWE
AGROFORESTRY TECHNICIAN

Selected motorcycle operators also
undertake specialized train-the-trainer
sessions that enable them to deliver
training to other motorcycle users.

*Unless otherwise specified, 2015 safety data covers the entire JT Group, while previous years cover scope *D.

We aim to create safe workplacesby building upon three interlinked
components: safety culture, safe
workplaces, and safety competence.

“Before this training I didn't know
about cornering; I didn’t know aboutproper braking techniques. With the
new skills I’ve learned I’m going toteach my colleagues what I know,
and at the same time I’m going tokeep practicing what I’ve learned, toimprove myself even further.”In our international tobacco business,in 2015 we finalized a framework thatwill provide us with a more consistent
way to assess employee exposure to
health hazards such as noise and dust.
We ran site-based workshops during
2015 to validate the global applicationof the framework, and data gathering
will begin in 2016. Once results are in,
we will target sites shown to have thegreatest risks and will set targets for
exposure reduction.
In 2015 we developed an ergonomicrisk assessment tool that will provide

our operations with a system forassessment, avoidance, or control ofmusculoskeletal problems, which are
one of the main causes of absence fromwork. We created a bespoke system
to help manage data, communication,and storage of potentially dangerous
substances. We also identified anddeveloped a global pre-travel healthassessment process that will be
implemented and rolled out in 20162017. The principle of this confidential,
online tool is the assessment of
individual health status against location
health risk.

We provide all employees in Japan
with annual mental health checks.
Anyone found to have high stress levels
is offered a consultation with one ofour doctors. We also run seminars for
managers on the prevention of stress.
Employees in Japan who have hadlong periods of sick leave can takeadvantage of a program designed tohelp them get back to work, including
by working shorter hours.

37

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR PLANET

Environmental management

OUR GROUP

The three main drivers behind our commitment to reducing environmental impacts are our responsibility
as a corporate citizen, our business performance, and regulatory requirements.
As a responsible business we recognize that we have an obligation to protect the environment so that
future generations can have the same opportunities that we benefit from today. But by reducing ourenvironmental impacts, we can also reduce costs, conserve resources that we are reliant upon, improve
our overall performance, and enhance our reputation.

Our planet

Protecting the environment is a crucial part of our responsibility
to society, and key to the sustainability of our business. We work to
reduce environmental impacts because it is the right thing to do,but also because it delivers benefits such as cost reductions and anenhanced reputation.
We actively identify opportunities to reduce environmental impacts
across our value chain, from procurement of raw materials to
production, distribution, and sales. We aim to make progressin four areas: greenhouse gas (GHG) emissions reduction,
sustainable water use, waste reduction and recycling, andconserving biodiversity.
One new challenge for us is to identify and manage
environmental issues in our supply chain relating to emerging
products.

2015 highlights
2015

2015

2014

2015

2014

719 756

119 118

9,753 10,234

thousand tons of CO2e in Scope
1 and 2

thousand tons of waste generated

thousand m3 of water withdrawn

2015

38

2014

2014

2015

2014

2015

0.65 0.70

77%

76%

83% 83%

tons of CO2e per million cigarettes
equivalent for tobacco businesswaste recycled2014

ISO 14001-certified cigarette andtobacco-related factories(including Group factories)

Our company standards always
conform with, and often exceed,
relevant regulatory requirements.
Our environmental management
approach is laid out in ourEnvironment Charter, which requiresthat wherever practicable we reduce
our environmental impacts in all thecountries in which we operate,
and across our entire value chain. The
Charter is supported by the JT Group
Long-term Environment Plan 2020,
which sets out our environmental

objectives and targets. Responsibility
for environmental management rests
with our Executive Deputy President
and with the Group Executive bodymonitoring performance.

For our Environment Charter visit: www.jt.com/csr/environ/management/index.html and for historical data on our environmental performance, please visit
www.jt.com/csr/environ/data/index.html.

ENVIRONMENTAL
MANAGEMENTSYSTEM
We have a formal environmental
management system (EMS), based on
the ISO 14001 standard, that ensuresa consistent approach across thebusiness. All our manufacturing sites
are encouraged to obtain ISO 14001
certification, while other facilities, suchas distribution centers, can either seek
certification or customize their own
ISO 14001-based EMS. Smaller sites
and offices can also do this on a more
simplified level, allowing them to takeaccount of the nature and scale oftheir operations. In 2015, 100% of ourJapanese domestic tobacco businessfactories and 77% of our international
tobacco business factories were ISO
14001 certified.
In 2015 ISO 14001 was revised, andwe are in the process of ensuring
our systems align with this revised
ISO 14001:2015 standard. Where we
identify gaps between our EMS and therevised standard, we will address theseto ensure continued compliance.
We are also making sure thatenvironmental impacts, resulting fromour development of emerging products,
are managed in line with the JT Group
expectations and are captured within
our EMS. We are collecting informationin this area relating to carbon emissions,waste management, and raw materials
procurement and use.

JT GROUP LONG-TERM ENVIRONMENT PLAN 2020
We strive to harmonize our corporate activities with theenvironment by focusing on four areas:

MINIMIZE OUR CONTRIBUTION TO
GLOBAL WARMINGTARGET FOR 20% REDUCTION OF GHG
EMISSIONS AND INTENSITY BY 2020

PROTECT WATER RESOURCES
THROUGH SUSTAINABLE USE OF WATERPREVENT WASTE, PROMOTERECYCLING, AND OPTIMIZERESOURCE USE

CONSERVE BIODIVERSITY THROUGHPROMOTING SUSTAINABLE STEWARDSHIPOF THE NATURAL ENVIRONMENT

39

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OUR WAY OF
DOING BUSINESSOUR GROUPSUSTAINABILITYJOURNEYOUR PEOPLE

OUR PLANETOUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR PLANETOUR PLANET

GHG emissions

INITIATIVES TO REDUCE OUR OWN GHG EMISSIONS

Climate change is one of the biggest environmental challenges the world faces today. It can have anegative impact on growing patterns and crop yields, as well as on the production of many of the nontobacco materials found in products and packaging across our supply chain.
Given the close links between climate change, GHG emissions, and energy use, it is in our interest – aswell as part of our corporate responsibility – to reduce fossil fuel energy use and GHG emissions. As we
expand existing operations and develop into new business areas, this is sometimes challenging – forinstance because local energy generation is heavily reliant on fossil fuels.

MANAGING OUR OWN GHG EMISSIONS
Our sites with significant GHG
emissions are required to develop
quantified emission reduction targets
and action plans. This helps us to focus
on GHG performance and to identify
opportunities for improvements.
We have a target of reducing ourabsolute GHG emissions – both thosethat we are directly responsible for(Scope 1) and those resulting from ourconsumption of third party-produced
energy such as electricity (Scope 2) – by
20% between FY2009 and 2020. We
aim to deliver on this target throughefficiency programs, including those
identified by ongoing energy surveys
in our production facilities. We are also
examining ways to replace existingenergy sources with renewable energy,

GHG EMISSIONS IN OURVALUE CHAIN IN 2015

In 2015 we reduced Scope 1 emissions
by 4.5% and Scope 2 by 5.3% over2014. Savings were largely achieved bycontinued site-level implementation ofenergy action plans, which focus mainly
on energy efficiency improvements.

8%
6%

391

719

385

475

419

421

382
697

371

20% REDUCTIONON FY2009
356

500

11%

FY
2009

6,340

The use of compressed air was one
energy-intensive area on which weparticularly focused during 2015.
Through effective capital investment
as well as behavioral and processchanges, factories in our international
tobacco business made significant
reductions in compressed air use.
For example, through a combinationof compressor replacement, system
improvement, and leak elimination, ourTurkey factory reduced its energy use byapproximately 6,560,000 MJ per year,with an associated CO2e reduction ofaround 875 tons per year.

MANAGING GHG EMISSIONS IN OUR VALUE CHAIN
As well as our own emissions, weaddress Scope 3 GHG emissions thatare outside our immediate control.

our main raw material. In 2015 wecollected more detailed life cycle data,
which gives us a clearer picture of howleaf growing, processing, selection,and specification can be used toinfluence and potentially reduce Scope
3 emissions. We are also seeking tobetter understand Scope 3 emissions in
our supply chain for emerging products.

In our international tobacco business
we are working with logistics partners
to look at ways of reducing emissions
associated with transportation ofmaterials and products, and with nontobacco material suppliers on how to
reduce emissions from the productionof materials such as paper andcardboard.

CDP UPDATE
394

519

In our international tobacco businesswe extended our Energy Opportunities
Scheme across all of our factories.
The Scheme, which helps to identify
and implement low-cost ways ofSince 2011 the JT Group has beenusing life cycle assessments tobetter understand and assess carbon
emissions associated with the
production of tobacco leaf, which is

1,000

11%

saving energy, generated over 70
energy saving opportunities during
2015, leading to a reduction of around
27,700,000 MJ of energy over the year
– with an associated carbon reductionof approximately 2,820 tons of CO2e.

which can have a significant impact on
GHG emission levels.

COMBINED SCOPE 1 AND 2 GHG
EMISSIONS (CO2e 1,000 tons)(CO2e 1,000 tons)

In Japan during 2015 we replaced theuse of heavy oil with city gas for aboiler in the production of frozen foods
at our factory in Iipingshang Foods
Corporation, reducing GHG emissions
by about 600 tons per year.

FY
2011

FY
2012

407

400

FY
2013

2014

340

379

2015

The JT Group has been reporting its
Group-wide GHG emissions and climatechange information to CDP since 2012.
In 2015 our disclosure score was 100
out of 100, while our performance score
was B. These scores put us in the top
quartile of CDP reporters worldwide.

2020
TARGETBASE
YEAR

SCOPE 1SCOPE 263%

GHG EMISSIONS INTENSITY FOR TOBACCO
BUSINESS (CO2e tons/million cigarettes equivalent)

4,023
1.00

0.77
SCOPE 1 AND 2
SCOPE 3

0.72

0.72

0.71

0.70

FY
2013

2014

0.65

20% REDUCTIONON FY2009

2015

2020
TARGET

0.50

PURCHASED GOODS AND SERVICES
TRANSPORTATION AND DISTRIBUTIONCAPITAL GOODSOTHERS

FY
2009

FY
2011

FY
2012

REDUCING
SCOPE 3
EMISSIONSIn Japan we have replaced
wrapping paper of bundling
tobacco products with film.
This would reduce GHG
emissions by about 1,200 tons
per year, mainly because thewrap film that we source fromsuppliers needs less energy to
produce.

BASE
YEAR

40

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OUR PLANETOUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR PLANETOUR PLANET

Resource efficiency –water and waste

REDUCING
WATER
CONSUMPTION
In 2015 our CRES Neva factoryin Russia began to use recycled
wastewater in its emissions
scrubbers, which filter out
particulates and odor frommanufacturing operations. Allied
to the installation of additional
filtration devices at its wastewater
treatment plant, this movehelped to reduce overall water
consumption at CRES Neva byalmost 10% per year.

Overconsumption of resources – leading to the creation of waste and excessive use of water – can be acost to business that reduces earnings and shareholder returns. It also has impacts on the environmentand can have a negative effect on the communities within which we operate. It therefore has thepotential to damage both our reputation and our relationships with stakeholders.

MANAGING WATERMANAGING WASTE

In 2015 our international tobacco
business invited 30 suppliers todisclose information relating to water
management through the CDP supply
chain initiative. This data allows us tobuild up a better picture of water use
among our suppliers.

Many of our operations, in particular
those in our processed food business,
are water intensive. Although ourfactories are located in relatively waterrich areas, we nonetheless implement
measures to use water efficiently.
This mitigates water risks both for ourbusiness and for the communities
within which we operate.

We continued the piloting of waterrisk assessments, which we began
in 2014, at more than 10 sites across
the JT Group. We will use feedback
from the pilots to develop a water risk
assessment methodology that will berolled out across our businesses in thefollowing years.

We record and report water withdrawal
and wastewater discharge at oursites and locations, and take into
consideration the framework on water
reporting set out by CDP. Our Longterm Environment Plan 2020 prioritizes
efficient use of water. In 2015 overallwater withdrawal decreased by 4.7%
from 2014.

Our water risk assessment methodology
will take account of physical water
risks such as flood and drought,
which can be exacerbated by climatechange, and will also look at water
quality and availability. Physical water
risks can have impacts at key stagesof tobacco cultivation, as the wrong
quantity of water at the wrong time
can significantly affect crop quality
and yield. They can also impact on ourability to bring materials and products inand out of sites.

Our Long-term Environment Plan
2020 prioritizes waste management
according to the ‘Reduce, Reuse,
Recycle’ waste hierarchy. By taking
steps to reduce waste we conserve
natural resources, reduce ourenvironmental impacts, and cut waste
disposal costs.
We have been recording waste data
since 1995 and have programs aimed
at improving our waste management
practices, particularly in our factories,
where most of our waste is generated.
We recycled 77% of the waste we
generated in 2015, compared with 76%
in 2014.

Waste is also created throughout ourvalue chain, including by producersof raw materials and by consumers
when they dispose of our products. We
work with farmers to help them reduce
their waste, and we have schemes to
educate consumers about the recyclingof e-cigarette components (see page73).
Our total waste generation in 2015
increased by 0.8% over 2014.

WASTE GENERATION (1,000 tons)

WATER WITHDRAWAL (1,000 m3)
15,000

BREAKDOWN OF WASTE GENERATED IN 2015 (%)

200
12,113

11,85911,354145
10,457

10,000

10,2349,753

RECYCLING

16%
127

124

117

118

RECOVERY

119

8%

100

DISPOSAL

119

1,000 tons

FY
2009

42

FY
2011

FY
2012

FY
2013

2014

2015

FY
2009

FY
2011

FY
2012

FY
2013

2014

2015

77%

43

OUR

OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR PLANETOUR PLANET

Biodiversity
Biodiversity plays a key role in the provision of ecosystem services. It reflects on the availability
and quality of natural resources that are fundamental for environmental conservation and also forenhanced agricultural productivity. For instance, our farmers need a healthy and balanced environment
to produce tobacco, which is usually grown in biologically diverse areas. We work with farmers tomaintain this diversity and to help them understand the importance of efficiently managing natural
resources and the environment.

MIOMBOWOODLAND
NATURAL
REGENERATIONPROJECTIn Western Zambia we are starting
to promote the rehabilitation of
degraded Miombo woodlandareas by engaging with national
stakeholders and local communities
in a specific project. We are
pursuing the introduction ofsustainable management practices
and harvesting regimes thatwill contribute to maintain and/or enhance the conservation of
the Miombo woodland in areas
where we have tobacco growing
communities.

MANAGING BIODIVERSITY
Our Long-term Environment Plan 2020
outlines our commitment to assess theimpact of our worldwide operations on
biodiversity. In 2015, in conjunction with
the Society for Wildlife Research andEnvironmental Education in Brazil, wedeveloped an approach to assessing
biodiversity on tobacco farms that weare currently piloting with small-scale
tobacco farmers in the state of Paraná.
Once the results of this pilot have been
analyzed, we will consider extending
the model to other tobacco growing
areas.

Our international tobacco businesshas programs to encourage farmers
to maintain biodiversity through the
adoption of environmentally responsible
farming practices, including soil
conservation and water-use reduction.
Our agronomy experts see biodiversity
as a fundamental aspect of tobacco
production, which they build into a crop
management approach that considers,among other things, the environmental
and ecosystem services provided bybiodiversity (i.e. water quality and soil
condition, pollination, pest control,
climate balance, and wood resources).

They also pay particular attention tocomplying with all environmental laws
on protected areas and natural reserves.
Engagement with farmers on these
topics is crucial to achieving successin managing the environment andconserving biodiversity.
We also work with universities andNGOs to help us with research on thefauna and flora in tobacco growing
areas and to provide advice on
restoration and conservation projects,
for example in Brazil and Zambia.

BIODIVERSITY
INITIATIVES
Our international tobacco business iscarrying out a variety of biodiversity
projects around the world.
In our Agronomy, Development,
Extension, and Training (ADET)
center in Brazil, for example, we arepreserving 68.5 hectares of remnantsof the Atlantic Forest in Santa Cruz,and have been carrying out studies offauna and flora in conjunction with alocal university. We are also looking
at alternative biological pest control
methods in Brazil, and at promoting
a wider diversity of beneficial insects
through organic farming.
44

45

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSOURCONTRIBUTIONSTO SOCIETY
TO SOCIETYOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR CONTRIBUTIONS TO SOCIETY

Refining our approach

OUR GROUP

Our
contributions
to society

It is our choice as a corporate citizen to contribute to the communities in which we operate. We do
this through financial investments, employee volunteering, and the endowment of a charity, the JTIFoundation (www.jtifoundation.org). We are guided in this area by the JT Group Corporate Citizenship
Activity Policy, which focuses on four areas: social welfare, arts and culture, environmental protection,and disaster management.
In 2015 we increased our focus on measuring the impact and value of our contributions to society, andon how to manage our programs more effectively. To help us do this, we became a member of LBG(www.lbg-online.net), the global standard for measuring corporate community investment. As partof a phased approach, in 2015 we initially supplied figures to LBG only for our international tobacco
business, covering contributions made during 2014. But within the next five years we expect to havecaptured the full picture of our global contributions to society.

Photo: K. Miura2015 highlights

46

EXTERNAL
RECOGNITION

2015

2015

8,967

64

million Yen contributed to society,representing 1.6% of our profit
before income taxes.

countries in which we havecommunity investment programs.

2015

In the U.K. we were awarded theCommunityMarkfor
excellence in community investment
by Business in the Community. We
are one of only 36 current holders.

We received national awards for ourcommunity projects in Belarus, where
we support Japanese cultural heritage,
art programs, and programs aiming
to improve adult education, and in
Kyrgyzstan, for our support of the Equal
Opportunities social rehabilitation centerfor people with disabilities. In South
Africa we won awards for our backingof the Building Blocks Foundation,
which improves public sanitation in thecity of Alexandra, and for our supportof the Johannesburg Philharmonic
Orchestra.

47

OUR

OUR GROUPSUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLEOUR CONTRIBUTIONS TO SOCIETYOUR PLANETOUR CONTRIBUTIONSOURCONTRIBUTIONSTO SOCIETY
TO SOCIETYEMPOWERING WOMEN IN TURKEY

OUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSOUR GROUPOUR CONTRIBUTIONS TO SOCIETY

RECOGNITION FOR OUR COMMUNITY WORK IN RUSSIA
In 2015 we were recognized to beproviding the best projects for sociallydisadvantaged groups in Russia – forthe second year running. The Best
Social Projects in Russia award – runby the government of Moscow, theAgency for Strategic Initiatives, and the
Moscow Department for Environmental
Management and Protection – praised
our international tobacco business for

its six-year-long charitable program.
This has enabled 120,000 elderly
people to take part in activities suchas attending the theater, learning
computer skills, and learning first aid.
More than 35,000 people have been
provided with home appliances andgroceries, and 600 have been provided
with accommodation. In 2015 wealso received a special prize from

Russia’s Leaders of Corporate Charity
organization in recognition of the robust
way we evaluate the effectivenessof our social programs. The prize
was awarded by PwC alongside theVedomosti business newspaper and theRussian association of grant-making
organizations, Forum Donorov.

SUPPORTING FLOOD
VICTIMS IN SERBIA
The scale of flooding that swept throughthe Balkans in 2014 was extremely
high, and the damage was so extensivethat clean-up efforts continued for many
months.

As part of our efforts to support equal
opportunities, in 2015 our international
tobacco business developed a programin Turkey to help women set up theirown small businesses.
The initiative, called My Inspiration Is
My Future, is based around a 12-day
training provided by Bogazici University
Life Long Learning Center, with support
from the endorsement of the Turkish
government. The training concentrates
not just on developing businessknowledge but also on building up
interpersonal skills.

A total of 90 women, from economicallydisadvantaged communities in
Gaziantep, Izmir, and Kastamonu, took
part in the first year of the program,and each will be provided with followup support as their new companies
develop.
The program will be expanded to other
cities in Turkey in the following years.
Pelin Pelis, a graduate of the initiative
who subsequently set up a training andactivity center for children, stated that
she would not have been able to do
so without the support she received.

“It gave me inspiration and it helped
me build up the courage to start out
on my own,” she says. “As a result, I
think I’ve set a good example for other
women around me, and some of myfriends have now started to set up theirentrepreneurial projects.” The Women
Entrepreneurs Council of theUnion of Chambers and Commodity
Exchanges of Turkey selected My
Inspiration Is My Future as one of thesix best programs implemented in
Turkey.

In Serbia, the JTI Foundation initially
supported these efforts by providing
dewatering pumps and protective suits
for emergency workers. Then, in thecity of Sabac, it supported a program
implemented by Covekoljublje tohelp 40 farming families restart foodproduction, by providing seeds andgreenhouses. In partnership with
the Belgrade-based NGO Housing
Center and the city of Sabac, the JTIFoundation also helped to rebuild
a soup kitchen that had been badly
damaged by the floods, benefiting
more than 1,000 vulnerable residents
by securing them one hot meal on fivedays of the week.
The Foundation’s programs in Serbia
were all completed by June 2015.

© TANJUG

48

49

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESS

Bruno
DuguayOUR PHARMACEUTICAL
BUSINESS

Klara
Skrivankova

SENIOR VICE PRESIDENTEUROPE PROGRAMME ANDCOMPLIANCE AND CSR

ADVOCACY CO-ORDINATORJT INTERNATIONAL

50“The JT Group often operates
in areas of the world where
human rights may be at risk.
We can make a difference inthese regions by making surethat the highest standards of
behavior are upheld within
our value chain.

rights of our stakeholders, andcan make a positive impact
on the communities within
which we operate. At the sametime we hope to reduce risks
to the company that can occur
through exposure to humanrights violations.

We have made significant
progress on some specific areasof human rights, including
by working to prevent childlabor in tobacco farming
communities. But moregenerally we have aimed tosend out a strong message byrecognizing the importance ofhuman rights in our Codes ofConduct, and, by developing
a human rights policy with
input from external subject
matter experts, that expresses
our commitment to the UN
Guiding Principles on
Business and Human Rightsthat we plan to launch in2016. By taking these steps webelieve we can reduce the riskof infringing on the human

We know, however, that there
is still much to do. While thehuman rights policy will be
an important foundation for
our activities in this area, weknow that only by applying
an appropriate level of due
diligence will we take thenext steps to implementing it
thoroughly.”

OUR PROCESSED FOOD
BUSINESSANTI-SLAVERY INTERNATIONAL

In focus

RESPECTINGHUMAN

RIGHTSABOUTKLARA SKRIVANKOVA
Klara leads the Programme andAdvocacy work of Anti-Slavery
International in Europe. She
specializes in business accountability,
migrant rights, labor rights, antitrafficking responses and addressing
forced labor in supply chains. She has
held various advisory posts at the UN,
EU and the Council of Europe. She
is also a Programme Adviser to theJoseph Rowntree Foundation and a
co-founder of the UK Trafficking Law
and Policy Forum.

“Complex globalized
economy with value chains
stretching across countries
and continents brings with
it human rights challenges.
Under the UN Guiding
Principles on Business andHuman Rights, businesses
have the duty to respect humanrights. When it comes to grave
violations like slavery, the duty
goes beyond. If a risk of slavery
is identified within a supply
chain, businesses need to act
to remedy the situation andprevent it from occurring in
future. The risk here is morethan just human sufferingand brand reputation – nolaw abiding business cancondone serious crimes, suchas forced labor and humantrafficking, within theirbusiness operation.
Modern slavery is one of
the most serious issues thatconcerns global businesses
today. It is estimated that over
21 million people in the world
are affected, with most people
in slavery being in Asia. Whileindustries such as agriculture,
fishing or garment production
are most commonly cited as
those where the risk is thegreatest, no industry or acompany can safely say that
their supply chains are slaveryfree, wherever in the world they
operate. Recent legislation,such as the California
Transparency in Supply
Chains Act, the U.K. Modern
Slavery Act 2015 and theamendment to the US Tariff
Act in February 2016, reflectthat slavery is a serious issue
in supply chains.
Transparency and open
acknowledgement by businesses
that these challenges exist in
their supply chains is becoming
a benchmark of leadership.
First step to achieving thisis working with others toreach greater visibility alongsupply chains and address
the salient human rights
risks to those working withinthese chains or affected by acompany’s operations. Working
with others – including withcivil society organizations –should be fundamental to thebusiness model of any modern,
responsible business. Having
embraced this collaborativemodel of working, tobacco
businesses are on course todemonstrate this leadership.”51

OUR
SUSTAINABILITYJOURNEY

STRENGTHENING OURFOUNDATIONSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSDEVELOPING DUEDILIGENCE

We already focus on addressing human rights
issues in several areas, for instance within ourown workforce and in terms of good labor
practices among our farmers. But to broaden our
understanding of where risks might lie elsewhereacross our Group and in our supply chain, in2015 we interviewed more than 100 executives
in our international tobacco business across 16
countries, asking them about what they perceived
to be the biggest human rights risks and how
our business might prevent and mitigate suchrisks. We carried out a similar exercise in Japan,
where we engaged with 20 different parts of thebusiness to better understand potential humanrights risks.

IMPROVING OUR
SUPPLY CHAIN

In 2015 we began work on drafting a JT Group
Human Rights Policy that will align with the
UN Guiding Principles on Business and Human
Rights. The Policy, which is being developed inconsultation with stakeholders, will formalize anddetail our commitment to respect human rights
within our operations and in our value chain andwill be launched in 2016.

OUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESS

Our work on human rights risks associated withdirectly contracted farmers, who make up 50% of
our tobacco leaf supply chain, has been carried out
primarily through our Agricultural Labor Practices (ALP)
program run by our international tobacco business.
This program provides transparency around the issues
within our supply chain and allows us to better target
our improvement investments in social programs
such as health and safety trainings, Grower Support
Programs (see page 62), and the activities of the ARISE
program (see page 55). In 2015 we began to expand
ALP to the leaf merchants from whom we buy theother 50% of our tobacco leaf supply.
We also built on this work by developing a draft
framework for screening all key non-leaf suppliersin our international tobacco business againstsustainability criteria that include a number of humanrights issues (see page 59). Beyond this initiative,
human rights impacts in the wider supply chain will
be a key element of our due diligence process as it isextended to each country in which we operate.

RESPECTING WORKPLACERIGHTS

IMPLEMENTING OUR AGRICULTURALLABOR PRACTICES
We participate in the Social Responsibility in Tobacco
Production (SRTP) program, an industry initiative thataims to address good agricultural practices and socialand environmental issues associated with growing andprocessing tobacco.

Our Codes of Conduct lay out our responsibilities
toward respecting human rights in the workplace.
We respect the rights of our employees tofreedom of association and collective bargaining,
and we do not tolerate discrimination in any form
(see page 33).

In 2013 we decided that the SRTP program, which
is based on self-assessment by leaf suppliers, does
not in itself provide enough data or transparency.
We therefore created our ALP program, which hascomplemented SRTP and has helped us make progress
towards understanding and addressing human rights
risks associated with our directly contracted farmers.

In 2015 we received 81 alleged cases of humanrights violations in the workplace, six less than2014. We have reviewed and closed 74 ofthem, with 48 requiring the implementationof a remediation plan, such as termination of
employment, written and verbal warnings,
training, and general messages issued in theworkplace to prevent similar cases occurring.
The remaining seven are still in the process ofinvestigation. There were no pending cases from2014.

While we are encouraged by the increasedtransparency we have brought about through ALP, we
recognize that effecting serious change is a long-term
journey – one we remain fully committed to. However,bringing about even a gradual shift in cultural norms,

53

ARISE: OUR CONTRIBUTION TO
PREVENTING CHILD LABORAGRICULTURAL LABOR PRACTICES –HOW WE ARE SETTING THE STANDARD AND IMPLEMENTING IT IN A MEANINGFUL WAY
TAKINGRESPONSIBILITYFOR OUR SUPPLYCHAIN – CREATING
TRANSPARENCYAROUND THE ISSUES

As part of our business strategy we occasionally buyother companies or set up joint ventures, often in
emerging economies. To be able to better assess any
human rights issues related to such arrangements,
in 2015 our international tobacco business began
formalizing a more detailed set of human rights criteria
within the due diligence process for joint ventures andacquisitions, and the resulting criteria will gradually
expand to cover all of our relevant transactions in the
future.

DEVELOPMENT

Community members
educated in child labor
elimination

IMPLEMENTATION% of our farming experts trained on ALP
94%
30%
100%

TOGETHER WITHFARMERS% farmers with ALP observations
7%

1%

In focus

RESPECTING

established across generations, requires a culturally
sensitive and rigorous approach.
Our ALP clearly defines the standards expected ofour directly contracted farmers in terms of preventing
child labor, respecting workers’ rights, and maintaining
adequate health and safety measures. The way wedefine child labor, and our approach to dealing withit, was developed together with the ILO. Our practices
follow ILO Conventions C138, C182, C184, and R190.
All directly contracted farmers have signed up to ALP
clauses in their contracts with us. To make sure that
ALP standards meet local circumstances in which thefarmers operate, we have localized versions in eachcountry from which we directly source tobacco leaf.
One of our main focus areas to date has been on
training our farming experts on ALP so that they
can adequately observe labor practices during farm
visits and provide advice on making the necessary
improvements. We have now managed to train 100%of our farming experts, who have started to observe
7% of our directly contracted farmers in the crop
seasons ending in 2015. Based on these observations
we will be able to develop tailored improvement
programs for farmers in the near future. We also expect
the number of observations to increase over the next
few years and remain on track to achieve our target ofcovering 100% of our farmers by 2019.
In 2015 we asked merchants who supply us withtobacco leaf to begin to implement ALP among
the farmers they source from. We expect this
implementation also to be complete by 2019.

SETTING CLEAREXPECTATIONS FOR
THE COMPANIES WEBUY TOBACCO FROMHUMAN

RIGHTS

5,244

1,074

2014

2014

100%

998

4,199

Making the standard acontractual requirement
for each of our farmers
Making it publicly
available

2015

2015

Localizing thestandard and defining
what its implementationmeans for each country

Investment throughsocial programs

Improvement
measures throughtargeted investment insocial programs

2015

Adapting our approach, ourtraining materials, and ourcontracts to make ALP work forthe merchants from whom we buy
around 50% of our tobacco

2013

2014

Target to have ALP implemented with
100% of our leaf suppliers by 2019

2015

2016

2017

2018

2014

2014

2019

In 2015 ARISE took approximately 26 children outof child labor every day, provided 32,160 people
with education about child labor, and gave 1,859
households an improved income. Results in Malawi
were particularly improved as we extended the reachof ARISE during 2015, and in Zambia we began
to realize the cumulative benefits of entering into
the third year of the program. As more children aretaken out of child labor, the focus tends to switch to

fewer, more stubborn, cases. While progress is being
made through ARISE, the job of changing cultural
perceptions that underpin child labor in remote ruralcommunities is long-term.
ARISE also provides wider support to communities
where child labor may be prevalent, including
through nutrition programs and water irrigation
systems. As a direct result, more than 20,000
children were benefiting from three or more meals
per week by the end of 2015, and irrigation systems
had been established across 80 hectares of land.

OUR ARISE PROGRAM
HAS IMPROVED THE
LIVELIHOODS OF

1,859

HOUSEHOLDS IN BRAZIL,ZAMBIA AND MALAWI IN 2015

2015

3,041
2,697

3,342

PREVENTING CHILD LABOR

The program, which covers Brazil, Malawi,
Zambia, and, from 2015, Tanzania, tackles socialand economic factors that tempt farmers to
employ children. ARISE engages with agriculturalcommunities through the distribution of educational
materials, after-school tutoring, and mentoring or
vocational training for older children. In this way
we aim to improve understanding of the value of
education as well as the prospects and prosperity
it can bring. When children move from working fortheir family into education, ARISE enables parents
or guardians to replace any lost income through our
Family Support Scholarships.

MALAWI

15,3462015

In addition to our work with all directly contracted
farmers through ALP, we have the ARISE program,which aims to address root causes of child labor in
tobacco growing. This was developed in partnershipwith Winrock International (an NGO that specializes
in agricultural development) and the ILO.

Children off
farms and into
schools

BRAZIL

Developing a clear
standard together with
farmers and the ILO

Given that we work with so many suppliers in so manydifferent countries, it is important that we are awareof all the human rights risks in our supply chain. This
allows us to manage our supply chain responsibly.

In 2015 we carried out research on potential
human rights risks related to our stakeholders. The
results of this work will guide the developmentof our human rights due diligence process,which includes the identification, management,
monitoring, and reporting of key issues.

52

OUR WAY OF
DOING BUSINESSZAMBIA

2015

11,570

5,322

2014

2014

10,449

1,817

BRINGING CHILDREN BACK TOSCHOOL BY DRILLING BOREHOLESIN TANZANIAOne of the key aspects of fighting child labor in
the tobacco farming communities is to tackle thecircumstances that prevent children from going toschool, thereby making them more vulnerable tobeing used as workers in the fields. In thesemiarid Tabora Region of Tanzania, some children
are unable to get to school because they spend
many hours of the day collecting water for theirfamilies. Water is scarce in most villages, and wells
can be miles away. To help with this problem, ourinternational tobacco business has drilled sevenboreholes in five Tabora villages, supporting 4,672
households. This will cut down journey times andenable children to get back to their education.
55

OUR
SUSTAINABILITYJOURNEYOUR
BUSINESSESOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Our tobacco businessOur tobacco business manufacturesand sells cigarettes, cigars, cigarillos,
snus, roll your own, pipe and water
pipe tobacco, e-cigarettes, and othertobacco-based products. We sell theseproducts in over 120 countries, and ourmain markets are France, Italy, Japan,
Russia, Spain, Taiwan, Turkey, and theU.K.
At the end of 2015 we had 38 cigaretteand tobacco-related manufacturing
facilities around the world – seven in
Japan and 31 elsewhere. Tobacco leaf
is sourced directly from about 42,000
farmers in seven countries.

Our global flagship cigarette brands
include Winston, Camel, Mevius, LD,
Benson & Hedges, Glamour, Silk Cut,and Sobranie, while our Japanese
key brands include Seven Stars andPianissimo.
Total sales volume across our tobacco
business amounted to 503.1 billion
cigarettes in 2015, with a turnover of
1,994.5 billion Yen.

OUR TOBACCO BUSINESSINTERNATIONAL TOBACCO BUSINESS IN 2015
SALES

EMPLOYEES

1,317.2

6,642 16,435

BILLION YEN

FEMALESSALES VOLUMECIGARETTE
AND TOBACCORELATED
FACTORIES

393.9

BILLION CIGARETTES

for sales of our products, including
Riona Tablets (hyperphosphatemia),
Remitch Capsules (anti-pruritus), andTruvada Combination Tablets andStribild Combination Tablets (anti-HIV).
Outside Japan, we license our products
to other pharmaceutical companies
and thus have no sales force. Annual
turnover in 2015 was 75.6 billion Yen.

Our processed food business
Our processed food business focuses
primarily on the Japanese market
and is operated by TableMark groupof companies. Key brands are Sanuki
Udon (frozen noodles and frozen rice),
Takitate Gohan (packed cooked rice),and Bakers Select (frozen baked bread56

and pastries). We produce our goods
in 31 of our own factories and in over
50 subcontracted factories around theworld. Turnover in 2015 was 165.8
billion Yen.

31

SALES

EMPLOYEES

677.3

1,267 8,203

BILLION YEN

FEMALESMALES

SALES VOLUMECIGARETTE
AND TOBACCORELATED
FACTORIES

7BILLION CIGARETTESOur pharmaceutical business conducts
research and development (R&D)
through the Central Pharmaceutical
Research Institute (three sites in Japan)
and our subsidiary, Akros Pharma Inc.
(one site in the U.S.A). We largely focus
on three therapeutic areas: glucose
and lipid metabolism, anti-virus, andimmune disorders and inflammation.
In Japan, our subsidiary Torii
Pharmaceutical Co., Ltd. is responsible

MALES

JAPANESE DOMESTIC TOBACCO BUSINESS IN 2015

109.2

Our pharmaceutical business

OUR PHARMACEUTICAL
BUSINESSPHARMACEUTICAL BUSINESS IN 2015
SALES

EMPLOYEES

75.6

347

1,492

BILLION YEN

FEMALESMALES

PRODUCTION
SITES

1

PROCESSED FOOD BUSINESS IN 2015
SALES

EMPLOYEES

165.8

2,674 3,124

BILLION YEN

FEMALESPRODUCTION
SITES

31

MALES

OUR PROCESSED FOOD
BUSINESSOUR BUSINESSESTHE MATERIAL ISSUES FOROUR TOBACCO BUSINESS ARE:
SUPPLY CHAIN MANAGEMENT

59

PRODUCT SAFETY AND
PRODUCT RESPONSIBILITY

64

LAWS AND REGULATIONS

66

POLITICAL AND REGULATORYDECISION-MAKING PROCESSES66

RESPONSIBLE MARKETING

67

ILLEGAL TRADE

68

PRODUCT INNOVATION ANDINTELLECTUAL PROPERTY

70

THE MATERIAL ISSUES FOR OUR
PHARMACEUTICAL BUSINESS ARE:
PRODUCT SAFETY AND
PRODUCT RESPONSIBILITY

76

PRODUCT INNOVATION ANDINTELLECTUAL PROPERTY76

RESPONSIBLE MARKETING

77

THE MATERIAL ISSUES FOR OUR
PROCESSED FOOD BUSINESS ARE:
SUPPLY CHAIN
MANAGEMENT

79

PRODUCT SAFETY AND
PRODUCT RESPONSIBILITY

80

57

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

OUR
BUSINESSESOUR TOBACCO BUSINESSOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR TOBACCO BUSINESS

Supply chain management

Our
tobaccobusiness

Our tobacco supply chain is large and complex, and we recognize that we need to work with ourpartners within it. All suppliers to our tobacco businesses are expected to uphold the standards set out
in the JT Group Responsible Procurement Policy, the JT Group Principles in Leaf Tobacco Production,and our new JT Group Supplier Standards.

Our tobacco business has two parts. Our Japanese domestic
tobacco business makes and sells tobacco products primarilyin Japan, and owns brands such as Mevius and Seven Stars.
Our international tobacco business makes and sells brands
such as Winston and Camel in certain parts of the world,with the main markets being France, Italy, Russia, Spain,
Taiwan, Turkey, and the U.K. Together, these businesses
manufacture and sell cigarettes, cigars, cigarillos, snus, roll
your own, pipe and water pipe tobacco, e-cigarettes, and othertobacco-based products.

In 2015 our international tobacco
business began work on developing an
IT-based supplier life cycle management
system that will enable assessment of
all our non-leaf suppliers for the firsttime, with different levels of certification
based on supplier risk profiles. We
believe this system, which we expect
to be ready for implementation in 2017,
will lead to a better understanding of
the risks and challenges our suppliers
face, and will allow us to help them toincrease their capacity to uphold ourstandards.

believe this will provide us with a betterrisk management focus while allowing
us to exceed our European Union
requirements in this area.

Directly contracted tobacco farmers– as well as the merchants that webuy processed tobacco from – are a
key component of our supply chain.
In our international tobacco businesswe monitor these farmers through ourAgricultural Labor Practices program(see page 52).

In 2015 the JT Group Principles in Leaf
Tobacco Production, which have beenin place since 2013, were incorporated
into all contracts with tobacco farmers
in Japan. This commits farmers, andthe JT Group, to abide by the Principles
and to take remedial steps if noncompliance is found during visits by oneof our 100 farming experts.

In 2015 we conducted a review of
our Know Your Supplier policy in ourinternational tobacco business andadjusted its scope to focus on logistics
suppliers, including transportation andwarehousing service providers. We

Regulatory landscapes are challenging, and we must respondquickly to new consumer trends and demands.
Our sustainability issues include product safety andresponsibility, responsible marketing, and the need to develop
innovative and reduced-risk products. We must also combat
the illegal trade, work with governments and society, andmanage social and environmental supply chain issues.

2015 highlights

TOBACCO BUSINESS VALUE CHAINOUR SUPPLIERSTOBACCO LEAF

OTHER PRODUCTS AND SERVICESOTHER MATERIALS

ABOUT

ABOUT

ABOUT

42,000
DIRECTLY CONTRACTED FARMERS
AND 12+ MERCHANTS AND THEIR FARMERBASE (EACH PROVIDING APPROXIMATELYHALF OF OUR LEAF)

In 2015 we ran our test purchases program in around3,500 U.K. shops TO CHECK IF ID IS BEINGREQUESTED BY RETAILERS. The program won

Retail Newsagent magazine’s Supplier Initiative of the YearAward.

OUR ANTI-ILLICITTRADE TEAM GAVE
709 TIP-OFFS to law
enforcement agencies(down from 850 in 2014),
leading to the seizureof more than 1 billion
illegal cigarettes.
58

WE LAUNCHED A NEW
BRAND of E-Lites – E-Lites
Curv – in the U.K. and Ireland,bought Logic Technology
Development LLC, the thirdlargest maker of e-cigarettes inNorth America, and acquired
full rights to market Ploom
worldwide.

2015

7%

(*E)

of our directly contracted
farmers are observedon implementing ourAgricultural Labor
Practices.

In Japan we have
responded to more than

16,000
requests for advice andand assistance, and havehelped set up more than

6,000

smoking facilities to create
a better environment forsmokers and non-smokers
since 2004.

29,500450

SUPPLIERS

SUPPLIERS

OUR COMPANY

8 LEAF THRESHING
AND PROCESSING
FACTORIES

4 LEAF STORAGE
WAREHOUSES

30 FACTORIESOFFICESOUR CUSTOMERS& CONSUMERS

BUSINESS
500+ WAREHOUSESDISTRIBUTIONSALES IN 120+
COUNTRIES

59

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Tobacco supply chain
strategy and approach

OUR TOBACCO BUSINESSOUR TOBACCO BUSINESS

t
men
ge
na

Pr
i

ce

Long-term
farmer profitsabg in sustainable
lea
adin
e
fs
:L
up
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o
i
p
is

Social andenvironmental
leadership

Operational
exellence

Securedleaf access

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-t e rc o stPreservationof tobacco
farming

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Our business will not succeed unlessthe farmers who supply us make a profit
and can continue to grow the tobacco
we need. Some factors that feed into
profitability – such as the weather – areoutside of our control. However, we
can influence areas such as cost of
production, yield, quality, and price.
To do this, we take a ‘modular design
approach’ rather than a one size fits all
solution, adapting our methods to local
situations.
We have implemented a farmer profits
model in all countries where we directly
source tobacco leaf outside of Japan.
Under this model, we work with farmers
to ensure they have access to the rightgrowing materials and that they use thebest methods to maximize the quality
and yield of leaf. We also encourage
crop rotation to provide an alternative
income, improve food security, andpromote soil preservation.

MANAGING DIRECT
RELATIONSHIPS WITHFARMERSOur local farming experts build andmaintain strong relationships with
our directly contracted farmers inorder to help them improve tobacco
production techniques and increase
their profitability. Across Brazil, Malawi,
Serbia, Tanzania, and Zambia, in 2015

60

ce

nd

d
mo

ul

a

ly

V

le

d

far

gn

En

st

esi

Be

LEAF STRATEGYng

OUR TOBACCO BUSINESS

Inpu
ts m
a

1. Preservation of tobacco farming
2. Social and environmental leadership
3. Operational excellence
4. Secured leaf accesslo

OUR BUSINESSESOUR PROCESSED FOOD
BUSINESSPRESERVATION OF TOBACCO FARMING

The foundation of our tobacco supply chain strategy is to maintain a supply of quality tobacco leaf overthe long term, thereby creating value both for the JT Group and for tobacco farming communities. Our
vision for sustainable international tobacco procurement is to ‘lead in sustainable leaf supply’ and isunderpinned by four key strategic goals:re

OUR PHARMACEUTICAL
BUSINESSrd

SUSTAINABILITYJOURNEYOUR TOBACCO BUSINESSsOUROUR BUSINESSES

we had 382 farming experts in place.
During 2015 we began to buy tobacco
leaf directly from farmers in Tanzania,
and had 44 farming experts in operation
there.

MODELING SUSTAINABLEFARMER RETURNSIn Brazil, Malawi, Serbia, the U.S.A,
and Zambia, we have a farmer returns
tool that helps us to settle on a pricethat we agree with farmers each year.
The tool – which takes into accountfactors such as local conditions, costs,
risks, and quality of tobacco – also
allows us to check that average prices
paid over multiple crop cycles provide
a sustainable profit for farmers and do
not expose them to wild fluctuations inincome from year to year. The farmer
returns tool will be introduced into
Tanzania in 2016.

SUPPORTING PRODUCTION
COST SAVINGS
We help farmers save money andincrease profits by enabling them tobecome more efficient in the way theygrow, harvest, and cure tobacco leaf –for instance through more efficient useof fertilizers and agrochemicals. We
also buy many input materials in bulk
and pass the savings onto our farmers.

INNOVATION AND BETTERFARMING PRACTICES
Our Agronomy, Development,
Extension, and Training (ADET) centers
in Brazil and Zambia explore ways of
improving quality and productivity intobacco farming. Both carry out trials
on topics such as crop management,
soil fertility, improvements in curingbarn efficiency, production cost savings,
mechanization, and agroforestry. The
results of research are passed on tofarmers, including through training –with the aim of continually working
toward best farming practices. In our
Brazil ADET center during 2015 we set
up a laboratory to examine the DNA
of tobacco plants, which we hope will
help us to better predict which kindof varieties are likely to show the best
growing characteristics. Outside of our
ADET program, our farming experts
also hold training days at farms wherea local farmer has been recognizedfor particular skill and commitment –allowing other farmers to learn fromtheir example. For example, by the endof 2015 we had 189 such ‘model farms’in Zambia, up from 108 in 2014.
We developed comprehensive minimum
agronomic standards in 2010, and sincethen have worked with all our farming
experts to ensure they are adopted.
Supporting materials have been tailoredto the needs of different countries.
61

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR TOBACCO BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

SOCIAL AND ENVIRONMENTAL LEADERSHIPOUR TOBACCO BUSINESSOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR TOBACCO BUSINESSOPERATIONAL EXCELLENCE
We need to make sure our operations
are well equipped to support our supply
chain. To help us do this, we have a setof key performance indicators covering
product quality and yield, cost, capital,and employees’ health and safety. These
indicators give us a real-time overview
of our performance and provide away to manage the unexpected,
allowing us to deliver on our business
commitments. We use custom-madeenterprise resource planning (ERP)
software to help us collect and interprettobacco growing and processing
data that are essential to determining
yields and quality. ERP software also
allows us to monitor health and safety
performance in our leaf threshing andprocessing plants and labor practices
in the fields. This in turn enables us
to ensure an uninterrupted supply of
quality tobacco.

We can contribute to improvements insocial conditions in tobacco farming
communities not just by helping
farmers to maintain profitability inthe long term but by making targetedsocial investments that enhance thequality of life in their communities.
We can also help them improve thenatural environment in which they
live and work, notably by supporting
initiatives that move toward providing asustainable supply of wood.

SOCIALThrough our Agricultural Labor
Practices program (see page 52), we
work to promote the rights and safetyof tobacco farmers and those whowork on their farms. In addition, oursocial programs strive to enhance living
conditions and livelihoods throughour Grower Support Programs, and toeliminate child labor through our ARISE
program (see pages 54-55). In 2015 oursocial programs reached around a thirdof directly contracted farmers in Brazil,
Malawi, Tanzania and Zambia.
Grower Support Programs
Our Grower Support Programs (GSPs)
deliver community projects focusedon school, education, water, andcommunity well-being. In 2015 weran 132 programs benefiting 207
communities: 16 in Brazil, 8 in Malawi,
13 in Tanzania (with a special focus onwater), and 95 in Zambia.

62

In 2015 we carried out impact
assessments of the benefits of GSPs
in Malawi and Zambia. These foundthat the GSPs had significant positive
impacts on local communities,
especially in terms of improved
education and access to water. We
are now developing a formal threeyear framework for monitoring andevaluation of GSPs.

ENVIRONMENTAL –SUSTAINABLE WOOD
Wood is used for tobacco curing inmany regions, both as a fuel and forbuilding barns. A sustainable supply
of wood is therefore key to ensuring
a long-term supply of tobacco leaf.
We work with tobacco farmers to
educate them on the environmental andeconomic value of wood, helping themto use less of it and to replenish forestry
stocks.
We encourage our farmers to establish
woodlots to fulfill their needs of asustainable supply of wood resources.
Through dedicated agroforestry
programs, we also provide inputs,
training, and extension services
to farmers seeking to achieve theestablishment of good-quality woodlots,
which will help them maintain asustainable supply of wood. In 2015,
1.6 million trees were planted in Brazil
and Zambia. In Zambia we developed
and are implementing the Matope
curing barn, a new design that is fourtimes more efficient in terms of wood

consumption compared to conventionalbarns.

SECURED LEAF ACCESS

Barn construction techniques
Wood is often used to build barns forcuring. We encourage farmers to build‘live barns’ by planting trees that growto form the main structure of a curingbarn within three years. This avoids theneed for maintenance and a continuous
supply of wood for construction,
reducing wood consumption by 70%.
New live barns are being planted every
year in Malawi and Zambia, in areas
where we grow Burley tobacco.

By working in close partnership with
our farmers, we put ourselves in abetter position to address the economic,
social, and environmental factorsthat influence the long-term supply of
tobacco leaf. We therefore build up
direct relationships with farmers and,
wherever possible, purchase tobacco
directly from them, rather than fromtraders on auction floors. This helps
secure access to high-quality tobacco
leaf in a responsible manner. We also
form partnerships with NGOs, leaf
merchants, governments, and otherstakeholders to help us responsibly
tackle potential issues in our tobacco
supply chain.

We will achieve 100% cumulative
live barn coverage by 2016 in Eastern
Province of Zambia, meaning that when
the trees planted reach maturity stage,
there will be one operational live barn
per each hectare of tobacco grown.
Reforestation
The JT Group has invested inreforestation and community support
programs in Malawi, Tanzania, andZambia. From 2011 to 2014, in apartnership with Washington State
University and the NGO Total LandCare,we supported the planting andregeneration of nearly 28 million trees.
From 2015 onwards, the focus has beenon reforestation elements (tree planting,natural regeneration, and optimizationof wood usage for domestic
consumption), aiming at minimizing
deforestation impact by improving the
economic use and management of
natural resources.

63

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR TOBACCO BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Smoking and health

OUR TOBACCO BUSINESSOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR TOBACCO BUSINESSGOING FORWARD

People smoke for pleasure, but there are real risks that come with that pleasure. Smoking is a cause ofserious diseases, including lung cancer, coronary heart disease, emphysema, and chronic bronchitis.
These risks distinguish tobacco from most consumer goods and place a particular responsibility uponus, our industry, and public authorities.

Our main priority is always to maintaincompliance with arising tobacco
product regulation on the production,labelling, and packaging.
One of our key global focuses in
the medium term will be on thefurther evolution of the World HealthOrganization’s Framework Convention
on Tobacco Control (FCTC), notablyon the development of the policy
recommendation on product regulationand disclosure, including e-cigarettes.

We will be closely monitoring thedevelopments at the next FCTC
Conference of the Parties in 2016
and beyond, and will continuously
seek opportunities to engage in aconstructive and transparent dialogue
with governments and other relevant
parties, to provide the necessary
expertise, and to offer evidence-based
solutions on tobacco regulation.
In Europe we will be preparing for
implementation of the new EU Tobacco

Products Directive. This will require
planning in some countries (suchas Norway) where the same legal
framework will be enacted.
Our third priority area for planning will
be around tobacco product regulations
adopted by the Eurasian Customs
Union (incorporating Armenia, Belarus,
Kazakhstan, Kyrgyzstan, and Russia)
that will become effective in May 2016.

INNOVATION IN OUR TRADITIONAL PRODUCTS
Innovations in brands, blends, andpackaging are important to the JT
Group, as they underpin growth andprofitability. The driving force behindinnovation in traditional products is to
respond to the evolving demands ofconsumers. We monitor market trends
so we can spot new technologies
and concepts that meet consumer
demand and may give us a competitive
advantage with existing adult smokers.
We also take account of industry

analysis, market data, and changes in
the regulatory landscape to help define
the focus of our product research anddevelopment.

OUR APPROACH
Our tobacco business principles commit
us to being open about the health risksof smoking and transparent about
our products. This is what consumers
demand, and by providing them with
the necessary information, we help
them to make informed decisions onwhether to smoke or not.

A SCIENTIFIC APPROACH
We take a scientific approach tounderstanding the quality, health risks,and development of our products.
To help us do this, we apply global
standards developed by ISO and/or by scientific societies such as theindustry-supported Cooperation Centre
for Scientific Research Relative toTobacco (CORESTA). Where relevant
standards do not exist, we follow
common industry practice that is basedon validated and robust methodology.
We also review emerging science
to ensure all standards we apply are
updated and adapted to new findings
and techniques.

64

We constantly monitor scientificpublications, and other information, on
the health effects of tobacco products,
and look into new issues or claims once
they appear.

ASSESSING THE HEALTH
IMPACTS OF TOBACCOPRODUCTS
Public health authorities in many
countries independently assess thehealth risks associated with tobacco
products by reviewing long-term
epidemiological research published byscientists working in the field.
All ingredients go through toxicologicalassessments with a view to ensuringthat they do not increase the inherent
toxicity of any of our tobacco products.
Regulation in various countries requires
us to submit details of ingredients tothe authorities, sometimes on an annual
basis or occasionally before a productlaunch.

PRODUCT TRANSPARENCY
The JT Group believes everyone should
be informed about the health risks ofsmoking. We explain our positions on
smoking and health on our websites,
and respond to consumer demands toknow about product ingredients. The
number of countries in which the JT
Group provides voluntary disclosureof ingredients has risen from 30 in2010 to 54 in 2015. The scope of
products includes cigarettes, roll yourown tobacco, and snus. We provide
information on a dedicated website
by tobacco product type, brand, andlocation, including materials andingredients such as cigarette papers,
filtration materials, adhesives, inks, andflavorings.

ENVIRONMENTAL TOBACCO SMOKE
Environmental tobacco smoke (ETS),
also known as second-hand smoke, isa mixture of smoke from the burning
end of a cigarette and exhaled smokefrom smokers nearby. Compared tothe smoke that a smoker inhales, ETS
is aged and highly diluted. In poorly
ventilated areas, ETS can irritate eyes,
noses, and throats. It may also worsen
respiratory tract infections, as well asasthma. However, based on scientificevidence, we do not believe it is a

cause of diseases such as lung cancer,
coronary heart disease, emphysema,and chronic bronchitis.
We promote ways of avoiding ETS, suchas properly ventilated smoking facilities
in public spaces, and our international
tobacco business has worked with
airport authorities to develop morethan 205 smoking facilities in 13
international airports. In Japan, where
outdoor smoking is banned by law

in some municipalities, we support
the equipment of smoking facilities
that create a better environment forsmokers and nonsmokers alike. We
have responded to more than 16,000
requests for advice and assistance frommunicipalities and private businesses
on providing such facilities, and havehelped set up more than 6,000 in Japan
since 2004.

65

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR TOBACCO BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Political and regulatory
landscapeDue to the health risks associated with tobacco products, we firmly believe that regulation of thetobacco sector is both necessary and right.
However, we argue that regulation should be framed in a way that does not lead to unintended negative
consequences for business and wider society, including high additional costs, damage to competition,and new barriers to entry into markets.

OUR TOBACCO BUSINESSOUR TOBACCO BUSINESS

Marketing programs have tobe reviewed and approved, andcompliance checks are carried out
internally to ensure we not only meet
regulatory obligations but properly
apply our internal marketing standards.
If our standards are stricter thannational laws and regulations, then wealways follow our standards.

“We support proportionate and evidence-based regulation asa way of addressing society’s concerns about tobacco products.
But we strongly believe that any new laws must be drafted withproper consideration for their potential effects. That is why wewelcome any opportunity to put forward our views on how toachieve better regulation.”

OUR MARKETING
STANDARDSMICHIEL REERINKGLOBAL REGULATORY STRATEGY, VICE PRESIDENT, JT INTERNATIONAL

Our international tobacco businesscomplies with all local laws andregulations affecting tobacco productmarketing, and applies internal
Global Marketing Standards acrossevery country in which we operate.
These cover all aspects of marketing,including print, billboards, electronic
media, promotional events, and brandsponsorship. They also cover healthwarnings on packaging. In 2015 weupdated these internal standards, which
for the first time now include emerging
products.

66

country so far to have implemented
plain packaging. In both cases wepointed out the negative and costly
consequences of plain packaging
measures to society and our business.
We also provided evidence, gleaned
from the implementation of plain
packaging regulations in Australia,
to the consultants for Australia’s
department of health, which is holding
a review of the effectiveness of its
legislation.

The key focus of our regulatory
engagement in 2015 was on plain
packaging of tobacco products. On
this issue we provided a response to a
consultation carried out by Norway’s
Minister of Health and Care Services,and submitted our views to a Senate
inquiry in Australia, which is the only

In the U.K. we welcomed theopportunity to give oral evidence tothe Health and Sport Committee of theScottish Parliament regarding possible
new restrictions relating to e-cigarettes.
We were invited to do so after we
submitted a written response to thecommittee about smoking in public
places.
In the interests of transparency, we
publish our key regulatory submissions
on our website.
We have clear guidelines for politicalengagement in the international
tobacco business and an anti-bribery
and corruption policy embedded within
our Codes of Conduct. We comply
with all requirements pertaining to ourrelationships with governments, forexample with the U.K. Bribery Act andthe EU Transparency Register. We were
one of the first tobacco companies tosign up to the latter and have been incompliance since signing.

OUR TOBACCO BUSINESS

We market our tobacco products to adult smokers in order to maintain brand loyalty and to encourage
smokers of competitor brands to switch to our products. We do not market tobacco products to minors,
nor do we encourage anyone to take up or discourage anyone to quit smoking. We support regulationon the responsible marketing of tobacco products, providing it is evidence-based, practical, effective,
and proportionate – and that it allows us to communicate with adults who use our products. We areopposed to regulatory proposals that would affect our ability to differentiate our products by restricting
the use of brand names, or would reduce our ability to communicate distinctions and attributes ofdifferent products and product types to adult smokers.

It is also important that all possible effects of new regulations are properly understood before
implementation. In Australia, for example, plain packaging has not only failed to achieve thegovernment’s objective of reducing smoking but has led to a number of negative consequences. There
has been downtrading by consumers from premium to value brands and, following the introductionof plain packaging and excise tax increases, illegal trade has increased showing that consumers are
increasingly looking for cheaper alternatives.

We welcome any opportunity forconstructive dialogue with governments
to ensure that regulations are basedon sound evidence, will achieve
their desired effect, and will not
disproportionately affect the R&D,
packaging, and placement of our
products. When we engage withgovernments, we aim to be respectful ofeach country’s decision-making process
and to provide credible evidence that
substantiates our positions.

OUR BUSINESSESOUR PROCESSED FOOD
BUSINESS

Responsible marketing

We are therefore supportive of the promotion of ‘better regulation’ that achieves its aims in a
proportionate manner and is based on full consideration of evidence gathered from all stakeholders,
including those in the tobacco industry.

OUR APPROACH

OUR PHARMACEUTICAL
BUSINESSIn 2015 we began to update a set ofglobal marketing principles, coveringboth international and Japanese
domestic tobacco businesses, which
will be published in 2016.

Our Japanese domestic tobacco
business is a key member of the
Tobacco Institute of Japan and complies
with the institute’s self-regulatory
marketing standard, as well as allnational laws and regulations.

COMPLIANCE
The Code of Conduct in ourinternational tobacco business requires
all employees, agencies, and suppliers
to comply with its Global MarketingStandards.

In 2015 our international tobacco
business launched an internal web
portal, for use by corporate affairs
employees, that contains all documents
relating to marketing compliance andadvice on best practice, including
in relation to our internal marketing
standards.

PREVENTING YOUTHACCESSThe JT Group believes minors should
neither smoke nor be able to obtaintobacco products. We do not market tominors, and we support measures thatprevent them from obtaining tobacco
products, including fines or licensing
restrictions on retailers who sell tominors. We also back the criminalizationof proxy purchasing by adults, andpromote ‘proof of age’ programs.
In our Japanese domestic tobacco
business, we have worked with
the Tobacco Institute of Japan and
the Japanese Vending Machine
Manufacturers Association to ensure
all tobacco vending machines areequipped with an adult identification
system. In Japan we also regularly
discuss issues around youth smoking
prevention with retailers, and with the
Tobacco Retailers Association haveformed a number of Youth Smoking
Prevention Councils in conjunction withrepresentatives of local government,
police, and other tobacco companies.

principles that guide us in this area
remain the same, the task force has
been reassessing the effectiveness ofthese programs, looking at the best
strategic approach, and examining how
this can be delivered globally, regionally,
and on a country-by-country basis.
It has also reviewed the guidelines
applied to our youth access prevention
programs and has re-examined the way
in which the programs are monitored.
Actions arising out of the task force’s
conclusions will be implemented
progressively from 2016 onwards.

WORKING WITHRETAILERS
We support retailers in their efforts
to prevent minors from buying
tobacco, through initiatives such as
the U.K.’s No ID, No Sale! program,which we initiated with other tobacco
manufacturers. In our international
tobacco business we focus activities on
Responsible Retailing programs, which
educate retailers on how to refuse
tobacco sales to minors.
In 2015 we began to introduce a
program of test purchases in shops
across the U.K. to check if ID is being
requested. The program, which is run
by an independent organization, wasestablished after a pilot involving 2,500
retailers that increased the percentage
asking for ID from 48% to 54% between
autumn 2013 and spring 2014. Around3,500 retailers were tested in 2015 andthe program won Retail Newsagent
magazine’s Supplier Initiative of the YearAward. The program will be fully rolled
out across the U.K. by mid-2017.

In 2015 our international tobacco
business set up a task force to review
progress made by our youth accessprevention programs. Although the67

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OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Illegal trade
1. To prevent genuine JT Group
products from being diverted bycriminals into illegal channels.

We work closely with law enforcement
agencies and governments on threemain priorities:

3. To prevent the counterfeiting of ourbrands.

2. To prevent ‘illicit whites’ – cigarettes
produced legally by smaller
manufacturers but destined forthe illegal tobacco market – fromcompeting with our legitimate
brands.

OUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR TOBACCO BUSINESSUSING TECHNOLOGY TO FIGHT CRIMEThe JT Group takes a stand against the illegal trade in tobacco, which undermines legitimate tobacco businesses and their
suppliers, has an adverse impact on society, reduces excise revenue for governments, and fuels terrorism and organized crime.
The illegal tobacco trade is a multifaceted problem, with criminals evolving their tactics to try to stay one step ahead of industry
and regulatory controls and policing.
Euromonitor estimates that morethan 500 billion illegal cigarettes wereconsumed globally in 2014. The main
drivers behind the illegal trade havebeen steep increases in taxes on
tobacco products, large tax differentials
between countries, and the relatively
low risk of prosecution for those
involved.

OUR TOBACCO BUSINESSOUR TOBACCO BUSINESSOur international tobacco business has
signed 46 agreements with government
authorities in 34 countries to counterillegal activity internationally. These
agreements include a 15-year European
Union ‘Cooperation Agreement’ and asimilar deal with the federal government
and provinces of Canada.

We invest heavily in developing
technology to combat illegal trade,including the industry’s ‘Codentify’track and trace system, through which
we mark our products with a unique
identifying code that helps to showwhether they have been diverted fromtheir intended route by criminals.

This technology has helped our AIT
Diversion and Seizure Investigations
unit to develop a backtrack investigation
program that looks at patterns of illegal
diversion across the tobacco industry,
providing insights into weak points inthe system and allowing us to design
preventative measures to address them.

We feed this analysis in to law
enforcement agencies, which use theinformation to stay on top of the latest
trends in criminality.

TRACK & TRACEMANUFACTURINGSERIALIZATION & AGGREGATION

DISTRIBUTION & RETAILTRACKING

WAREHOUSECIGARETTES
STORE

68

DATA

GLOBAL TRACK & TRACECENTRAL REPOSITORY

Our international tobacco business has
a global Anti-Illicit Trade (AIT) team
devoted to fighting illegal tobacco. The
50-strong team, which includes people
with backgrounds in police work, law,customs, and intelligence, cooperates
with governments, law enforcement
authorities, and the wider tobacco
industry.

The AIT team provided more than 709
tip-offs to law enforcement agencies
in 2015, leading to the seizure of over1 billion illegal cigarettes. In Russia,
where illegal trade was a particular
problem, we have helped to reduce
seizures of genuine JT Group products
from 24.7 million cigarettes in 2010 toless than one million in 2015.

Members of the team offer informationand evidence to law enforcement
agencies that leads to arrests andprosecutions. In addition, they provide
assistance with forensic examinations,analyze seizures, identify trends throughstudies such as empty pack surveys,
and help to train law enforcement
officials on counterfeit productrecognition.

We have had consistently positive
feedback from law enforcement
agencies about our efforts, and in 2015
our international tobacco business was
publicly thanked on several occasions
by law enforcement officials for our
support in this area.
Aside from investigative work, the AITteam educates governments and otherstakeholders about the drivers of theillegal tobacco trade, raises awarenessof the impacts of illegal tobacco, andsuggests new ways to stop its flow.
Our international tobacco businessalso runs a legitimate market demand
program under which we carefully
calculate the legitimate demand
for tobacco products in each of ourmarkets and then sell only in amounts
that are commensurate with thesecalculations. This reduces the risk thatsurplus product leaks out into illegal
trade. Additionally, our sales activities
are governed by strict Know Your
Customer and Anti-Money Laundering
programs.

A
CUSTOMS AND AUTHORITIES
TRACE

QU

OUR APPROACH

Track the movement of the products through the
supply chain, from manufacturing, warehousestorage to retail sales

DATA

ERY

“JTI was the mosthelpful tobacco company
who provided more
information to [lawenforcement authorities]
than the other three tobacco
manufacturers combined. ...
The cooperation with JTI isquite remarkable.”

Serialization and aggregation of products throughout the
manufacturing process using Codentify, to embed uniqueinformation

DA
T

November 25, 2015 aninternational law enforcement
agency said:

Customs can trace the products back to their last known location byaccessing the data in the Track &Trace central repository using the AIT
portal or mobile app

Authorities work with the JT Group's AIT teamto prevent smuggling

69

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR TOBACCO BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR TOBACCO BUSINESSIn focus

EMERGING

E-VAPORPRODUCTS

A battery-powered device
that heats a special nicotinecontaining liquid, creating an
inhalable vapor. The e-liquid isavailable in different flavors tomeet consumer preferences.

OUR APPROACH
As a reflection of the increased importance of emerging products
within our business, in 2015 we brought together the JT Group’s
know-how on emerging products into one global, Group-level team.
This team aims to maximize our use of resources in this area and tobring emerging products to market in the best manner possible.
It does this by working across four areas:
1. Strategic insights: examining
consumer expectations and industry
trends in emerging products todevelop a pipeline of innovative
future offers.
2. Commercialization: working with our
research and development teams tocreate new products.
3. Brand development: marketing andbranding of emerging products once
they have been placed on the market.
4. Corporate scientific and regulatory
affairs: making sure products comply
with standards and regulations,and advocating for better regulation
when necessary.
We work on developing emerging
products in three categories: e-vapor(such as e-cigarettes), t-vapor (tobaccobased products such as Ploom), and‘next generation products’ that do
not conform to either of the othertwo categories. We are committed toinnovating in a way that will produce
new products that fulfill consumer
expectations and fall within regulatory
parameters.
We have developed internal standards
for emerging products, including
rigorous chemical studies that examine
not only what goes into a product but
what comes out of it. In addition, we
have a quality control manual that we
use to reinforce our standards with
contract manufacturers. Aside fromrequiring ingredient and materials
disclosures from suppliers, we carryout toxicological risk assessmentsof key materials and assess them forcompliance with applicable regulations.
Our product stewardship also extends
to the later stages of a product’s life
cycle – for instance, in terms of battery
recycling.

70

Commitment to the development of
reduced-risk products
While we continue to develop emerging
products that may reduce healthrisks – such as products that heattobacco and e-cigarettes – we do notcurrently make any health claims.
To determine whether the use of aparticular product is less hazardous
to health than smoking would require
extensive scientific studies, including
obtaining long-term clinical data. We
remain committed, however, to thedevelopment of reduced-risk products,
and will keep our stakeholders informed
as this develops further.

“Emerging products are
becoming an increasingly
significant part of ourbusiness. We have grown
our product portfolio in2015 with the acquisition of
Logic, a major e-cigarettes
company in the U.S.A.,
and with the launch of
our E-Lites Curv brand in
the U.K. and other partsof Europe. The biggest
challenge we face in thisexciting new space is to‘future proof’ our portfolio
as the EU, the U.S.A., andother regions begin to create
and implement regulatory
frameworks for these new
products.”
YASUHIRO NAKAJIMA
VICE PRESIDENT,
EMERGING PRODUCTS
JT INTERNATIONAL

DEVELOPMENTS
IN 2015

In 2015 we acquired full global
intellectual property rights to market
Ploom worldwide.
During 2015 we also bought the U.S.A.based company Logic Technology
Development LLC (Logic), the thirdlargest (by share of value) e-cigarettes
company in North America. This is our
first move into the U.S.A. e-cigarettes
market – the largest in the world andwhere we intend to grow Logic’s market
share.

T-VAPOR

Ploom is a battery-powered device
that directly heats a tobaccocontaining pod, creating an
inhalable vapor. Ploom TECH is abattery-powered device that heatsa non-nicotine-containing e-liquid,creating vapor that is then drawn
through a tobacco-containing
capsule. Both devices provide a
distinct tobacco taste with no ash
or smoke smell.

We have also launched a new brandof E-Lites – E-Lites Curv – in the U.K.
and Ireland. E-Lites Curv, which wasdeveloped in-house, has a new shape,a longer-lasting and quicker-charging
battery, and high-quality e-liquid madeto our own quality control requirements
at a third-party pharmaceutical plant in
Switzerland. In September 2015 it was
judged as the U.K.’s ‘best e-cig’ by theGizmodo website.
The E-Lites Curv launch was supported
in the U.K. with a television advert
designed to raise brand awareness andto persuade existing e-cigarette users
to migrate to our products. The advert
conformed to the U.K.’s Committee ofAdvertising Practice Codes and wasscreened after the 9 p.m. watershedwith appropriate warnings.

Ploom TECH was only launched in March 2016.

Please be reminded that this section is intended to explain the business operations of the JT Group, not to promote sales of tobacco and nicotine delivery products
or to encourage smoking by consumers.

71

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR TOBACCO BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETYOUR TOBACCO BUSINESSOUR TOBACCO BUSINESSOUR PHARMACEUTICAL
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR TOBACCO BUSINESSENVIRONMENTAL
ISSUES
E-cigarettes present challenges
around the disposal of batteries andof cartridges that contain e-liquid.
We have been working with partners
and suppliers in the U.K. to improve
the E-Lites collection program, which
provides consumers with two free
cartridges for every 20 returned and
one free battery for every 10 returned.
More than 1,505 people take part inour rewards scheme, which saw the
return of 5,245 batteries and 408,844
cartridges in 2015.

REGULATORY LANDSCAPE

EMERGING
PRODUCTS
SUPPLY CHAIN

One of our main priorities on emerging
products is to keep up with, andanticipate, consumer expectations. In
addition, we look to monitor the
regulatory landscape, anticipatechanges, and ensure our products
comply with new regulations; butdevelopments are often so fast-movingthat this is extremely challenging.
In particular, we are monitoring
movements in the European Union,
where a forthcoming update of the
Tobacco Products Directive (2014/40/
EU) (TPD II) will cover e-cigarettes and‘novel tobacco products’ for the firsttime. We are concerned that updated
regulations may stray beyond what isstrictly necessary – which is to ensure
product safety – and may severely
impact not only on costs to consumers
but also on the ability of manufacturers
to innovate and bring out new productsin this area.
In the U.S.A. the Food and Drug
Administration is looking at extending
tobacco regulations to covere-cigarettes, with the possibility ofsimilar or more stringent regulatory
limitations than in TPD II. Potential

policy recommendations may comeout of the seventh session of the World
Health Organization’s Framework
Convention on Tobacco Control (FCTC)
Conference of the Parties in 2016,
where electronic nicotine delivery
systems will be on the agenda.
In some markets e-cigarettes arebanned altogether and in others– notably Hong Kong and Macau –there is a debate as to whether bansshould be introduced. We will monitor
developments in these territories andadvocate against such bans.
We believe it is in the common interestsof public authorities that manufacturers
continue to develop emerging products
for adult smokers who wish to try analternative to conventional tobacco
products. There is a legitimate debate
around emerging products and theirpotential to provide a possibly safer
alternative to combustible tobacco,and this debate needs to be balanced,
fair, and based on sound evidence. It
is therefore important that tobaccocompanies are allowed to contribute to
discussions about the development ofregulations and product standards.

A number of bodies have recently
invited us to take part in discussions
about standards, including inFrance, where in 2015 the national
standardization body, Association
Française de Normalisation (AFNOR),
asked our international tobacco
business to provide input to a drafting
committee for the country’s firstnational standard for e-cigarettes.
We were also invited in the U.K. toprovide views to the British Standards
Institution ahead of its publication ofa specification on e-cigarettes. We
provided similar input to authorities
in the UAE, which are developing
a UAE standard on e-cigarettes,
and to the European Committee forStandardization (CEN), which is looking
at drafting a European standard. We
also provided feedback to the European
Commission as part of the consultation
process on the draft Commission
Implementing Decision on technicalstandards for the refill mechanism of
e-cigarettes.

Our supply chain for emerging products
is complex, and involves the shippingof various materials around the world.
One associated risk is to security ofsupply, but there are other important
issues, including potential concerns
around labor practices in China. To
take account of these risks, we aredeveloping business-continuity plansfor our emerging products supply chain,allied to a robust sourcing strategy.

OUR E-CIGARETTES SUPPLY CHAIN
EUROPE

CHINA

JAPAN

LegendDevice manufacturing and assembly72

The collected cartridges are processedby a specialized third company, andmixed materials are disposed througha process that generates power for thegrid and avoids any waste going into
landfill. We will continue to investigate
if there are more efficient methods ofdisposal.

FlavorLiquids

Tobacco73

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

OUR
BUSINESSESOUR TOBACCO BUSINESSOUR PHARMACEUTICALOURPHARMACEUTICAL
BUSINESS
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR PHARMACEUTICAL BUSINESS

Overview
Our pharmaceutical business has a mission to create, through world-class research and development,
innovative drugs that tackle diseases in a safe and secure manner.

Our
pharmaceuticalbusiness

We carry out our research and development in-house, but also work with license and joint research
partners to help us bring drugs to market more quickly.
It is important that we observe rigorous standards across the value chain to ensure the efficacy andsafety of our products, which we must market in a responsible fashion.

PHARMACEUTICAL BUSINESS VALUE CHAIN

Research and development in our pharmaceuticalbusiness is guided by a strong sense of responsibility andethics, including areas such as clinical trials of new
drugs, animal testing, and management of chemical
ingredients.
We are transparent about the way in which we cooperatewith other organizations on drug development, and we
aim to take a responsible approach to how we sell andmarket our pharmaceutical products – functions that are
carried out by our subsidiary, Torii Pharmaceutical.

OUR SUPPLIERS

LICENSE PARTNERSOUR COMPANY

CLINICAL TRIAL PARTICIPANTS
CLINICAL TRIAL INSTITUTIONSRESEARCH &DEVELOPMENT(JT AND TORII PHARMACEUTICAL*)* SUBSIDIARYJOINT RESEARCH PARTNERS

5 SUPPLIERS(BULK DRUG SUBSTANCE)2015 highlights
SALES AND PROMOTIONS(CONDUCTED BY TORIIPHARMACEUTICAL)

1 FACTORY(TORII PHARMACEUTICAL)
3 SUBCONTRACT
FACTORIESWAREHOUSE

2015

30.7

billion Yen
spent on R&D, compared to

28.9

billion Yen

in 2014

2015

2015

30 executives
atWORKSHOPS

Our subsidiary, Torii Pharmaceutical,

We hosted

in Japan to better understand

PATIENTS’ NEEDS.

gained APPROVAL IN JAPANTO MARKET A NEW
DRUG,MITICURE®

2 WAREHOUSES(TORII PHARMACEUTICAL)OUR CUSTOMERS& CONSUMERS
HOSPITALHouse Dust Mite Sublingual Tablets,
for house dust mite allergy.
WHOLESALE
PATIENTS

74

This diagram represents the value chain of products
manufactured and/or developed by JT and sold by
Torii Pharmaceutical.

75

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR PHARMACEUTICAL
BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Approach to
product responsibility
We focus research and development(R&D) mainly on three areas: glucose
and lipid metabolism, anti-virus
research, and immune disorders andinflammation.
During 2015 we spent 30.7 billion Yen
on R&D. During the year our subsidiary,
Torii Pharmaceutical, gained approval
from the Ministry of Health, Labourand Welfare in Japan to market a new
drug, MITICURE® House Dust Mite
Sublingual Tablets, an immunotherapy
tablet treatment for rhinitis brought onby house dust mite allergy.

We have a rigorous system of checks inplace to ensure that drug development
complies with all relevant laws,
regulations, and industry standards.
In-house audits make sure we follow
the procedures as laid out in our own
manuals, and that we control our drug
development and trials safely. We alsocollect data to monitor the efficacy andside effects of drugs.

(BILLION YEN)

30.7

30.5

OUR PHARMACEUTICALOURPHARMACEUTICAL
BUSINESS
BUSINESSOUR BUSINESSESOUR PROCESSED FOOD
BUSINESSOUR PHARMACEUTICAL BUSINESSCOMPLYING WITH PHARMACEUTICAL REGULATIONS AND
STANDARDS

PHARMACEUTICAL R&D EXPENDITURE

30

OUR TOBACCO BUSINESS

30.7

28.9

24.9

20

TRANSPARENCY ON
COOPERATION WITH
INSTITUTIONS
Cooperation with research institutes,
universities, medical institutions,and organizations for patients isessential if we are to realize our
mission. We are transparent about
financial contributions to thesebodies and disclose such payments
online. We follow guidelines in thisarea that have been set out by theJapan Pharmaceutical Manufacturers
Association (JPMA).

MANAGING CHEMICAL SUBSTANCES

10

FY
2011

FY
2012

FY
2013

2014

We comply with all relevant laws
and regulations on the control ofdesignated chemical substances,and our employees are made awareof chemical safety risks. We have asystem for carefully managing theserisks, from the point where we takedelivery of chemicals through to theirstorage, use, and eventual disposal. We
encourage employees who are working
in our laboratories to acquire Class A
hazardous materials engineer licenses,

2015

RESPONSIBLE
RESEARCH AND
DEVELOPMENT
Our pharmaceutical business has
a direct impact on human life, andtherefore our R&D is guided by a strong
sense of responsibility and ethics. Any
divergence from this path could resultin loss of life or damage to health – aswell as diminished trust in the business.
Our research activities are carried out
in an ethical manner and comply withall laws, regulations, and industry
standards.

after which they attend regular lectures
to receive updates on new legislationand learn lessons from serious
accidents that have occurred in othercompanies.
Torii Pharmaceutical separates
chemicals into categories requiring
different levels of management, and has
specific rules and procedures according
to the characteristics and safety risks ofeach category of chemicals.

RESPONSIBLE MARKETING
We are members of the JPMA, andwe comply with its Code of Practice,which promotes high ethical andtransparency standards in the marketingof prescription drugs.
Torii Pharmaceutical also has its own
Code of Practice. This is supported
by training programs that ensure
employees – including our 512 medical
representatives who sell and promotedrugs to healthcare professionals –comply with its requirements.

Torii Pharmaceutical has created a
medical compliance department toenhance the way product information
is managed and to educate employees
on compliance with standards on the
promotion of prescription drugs.
Outside Japan we license drugs to otherpharmaceutical manufacturers and do
not have a sales function.

ETHICAL CONSIDERATIONSTo ensure appropriate conduct and care of laboratory animals
in animal testing, our in-house standards are based on
relevant government legislation. We have established theInstitutional Animal Care and Use Committee that reviews
animal testing and ensures it is conducted in accordancewith the ‘3R’ concept: replacing laboratory animals with otherresearch materials where possible, reducing the number ofanimals used, and refining tests so that animals do not suffer
unnecessary pain. Our animal testing management practices
are certified regularly by an external authority.
We have an Ethics Review Committee that is based on theJapanese Ethical Guidelines for Medical and Health Research
Involving Human Subjects. This committee examines the
ethical justification and scientific validity of research utilizing
human tissue samples.
76

REPLACEMENTWHERE POSSIBLE,OPT FOR TESTMETHODS THAT
DO NOT USE
ANIMALS

3R
REDUCTIONMINIMIZE THE
NUMBER OF
ANIMALS USEDIN TESTING

TAKING A PATIENT-FOCUSED VIEW

REFINEMENTDO NOT LETLABORATORYANIMALS SUFFERUNNECESSARY
PAIN

To develop better medicines we need tounderstand the views and experiencesof people who are affected by someof the conditions that we aim to treat.
Doing so gives us a clearer sense bothof what they require and where weshould be focusing our efforts in drug
development.
Since 2013 we have been runningworkshops and discussion sessions
on how we can continue to adopt
a more ‘patient-focused’ corporate

attitude. We also visited healthprofessionals including doctors, nurses,
and pharmacists to understand what
innovative drugs are truly needed in the
medical field.
We believe this helps us to adopt a
position where future strategy anddevelopment is based more on our
essential mission: we shall create
epoch-making drugs in the shortest
possible time in a safe and securemanner.
77

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

OUR
BUSINESSESOUR TOBACCO BUSINESSOUR BUSINESSESOUR PROCESSED FOODOURPROCESSED FOOD
BUSINESS
BUSINESSOUR PROCESSED FOOD BUSINESSOUR PHARMACEUTICAL
BUSINESS

Overview
Within TableMark’s frozen food business, we work with more than 400 suppliers, which include trading firms and contract factories.
Of these, approximately 100 supply us with packaging materials and approximately 300 wholesalers provide raw materials. We do
not deal directly with raw materials producers such as farmers, as they have relationships only with trading firms or contract factories.

Our processedfood business

The product portfolio of TableMark, ourprocessed food business in Japan, includes
frozen noodles, frozen and packed cooked rice,frozen baked bread, pastries, and seasonings.
Frozen foods account for around three-quartersof our processed food business’s turnover.

Although we do source packaging
materials, within our frozen food supply
chain our main focus is on the raw foodingredients that go into our products.
Therefore, the key issue in our supply
chain is food safety.
TableMark has its own sourcing policy
on food safety. This aims to meet

Most of the key sustainability issues are in our
supply chain, particularly in terms of ensuring
food safety and quality.

consumers’ needs – and preserve
our good reputation – by providing
the highest-quality, safest, and besttasting products. The policy includes
a commitment to annual monitoringof first-tier suppliers, with the scopeof such monitoring depending on
key issues identified at each location.
We expect all ingredients sourced

from suppliers – including second-tiersuppliers such as farmers and fishers– to be produced in accordance withthe policy. While we need to achievea sensible balance between the costof ingredients and the safety, quality,
and reliability of supply, we will neversacrifice safety for the sake of cost.

PROCESSED FOOD BUSINESS VALUE CHAINOUR SUPPLIERS

PACKAGING MATERIALSSUPPLIERS

RAW MATERIALSWHOLESALE
TRADING COMPANIESSUPPLIERS

100+

SUBCONTRACT
FACTORIESSUPPLIERS

300+

50+

2015 highlights
OUR COMPANY

31 FACTORIES(THE TABLEMARK GROUP)

2015

100%
frozen food factories certified
to ISO 22000
2014

100%
78

2015

1,837

people went on tours of our Uonuma
Mizunosato factory as part of efforts
to communicate with consumers.

2015
We launched a rice tray that uses

11%

less plastic while holding the sameamount of rice.

OUR CUSTOMERS& CONSUMERS

BUSINESS

DISTRIBUTIONCUSTOMERS & CONSUMERS

This diagram represents TableMark Co., Ltd. only.

79

OUR
OUR BUSINESSESSUSTAINABILITYJOURNEYOUR PROCESSEDFOOD BUSINESSOUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

Delivering safe, high-quality
products
We have a rigorous quality and processcontrol system focused on four areas:
food safety, food defense, food quality,and food communication. This aims
to guarantee safety in all parts of ourprocessed food business, from thebuying of raw materials to manufacturing
and distribution. A panel of external
advisers guides our approach acrossthese four areas. We regularly review
our procedures to ensure our products
are produced and delivered in the safest
possible manner.

80

FOOD QUALITY
We ensure food quality throughcertification to ISO 22000 or FSSC
22000, but TableMark also has a quality
improvement committee that responds
to consumer opinions. In 2015, forinstance, such feedback led us toprovide more comprehensive thawing
instructions for our frozen baked bread.
Our consumer complaints management
system is compliant with ISO 10002,
the international standard for customer
satisfaction and complaints handling.

FOOD COMMUNICATIONFOODCOMMUNICATIONPROVIDING INFORMATIONABOUT OUR PRODUCTS

FOOD
SAFETY

FOOD
DEFENSEIDENTIFYING AND
ADDRESSING BROAD
FOOD SAFETY RISKSPROTECTING FOOD
FROM RISK OF
CONTAMINATIONAll of our own frozen food factories,
as well as those owned by third-party
frozen food contractor factories, arecertified to the ISO 22000 food safety
management system. Six of our own
factories have also certified to the FSSC
22000 food safety management system.
We inspect the food safety systems ofour contracted partners ourselves.

Unfortunately, there were two voluntary
recall incidents in 2015, which both
involved a small fraction of a plastic
machine part found in our frozen
food product. We have enhanced ourmachine maintenance processes andprocedures so that similar events will
not happen in future.

One way of communicating with
consumers is by allowing them to visit
our Uonuma Mizunosato frozen noodle
and packed cooked rice factory, where
we explain our approach to production.
In 2015, 1,837 people – mainly students– went on tours of this factory. Fiftyone shareholders were also invited forfactory visits for the first time in 2015.
We also place emphasis oncommunicating internally as a way ofbuilding capabilities and understanding.
Since 2008 we have used theexpertise of three independent foodsafety advisers to help us develop
our approach to food safety and tohelp with audits in factories. In 2015
we asked these experts to present
separate lectures to TableMark
employees at which they provided

food safety tips and shared theirthoughts on the importance of foodsafety. Among attendees were quality
control personnel from TableMark, andrepresentatives from subcontractor
companies.
The advisers are Kenji Isshiki, of Japan
Food Research Laboratories, Nobuko
Hiwasa, of Yokohama City Consumers
Association, and Kunio Morita, ofJapan Meat Science and Technology
Laboratories.

We are aware of growing consumer
demand for healthier and more
nutritious food options. We use‘healthier’ ingredients in products
where we can. For example, in 2015 welaunched a packed cooked rice productthat contains higher levels of fiber.

100%
FROZEN FOOD FACTORIESACHIEVED ISO 22000
CERTIFICATIONRESTRICTEDAREAS FOR BOTHEMPLOYEES AND
VISITORS

We always disclose the factory where
food products are made, as well as thecountry of origin of main ingredients.
We record farm origin details and cantrace back our products. We offer
toll-free numbers on product labels
so consumers can request additional
information.

DEVELOPINGNEW PRODUCTSENVIRONMENTAL IMPACTS OF PRODUCTS

FOOD DEFENSE GUIDELINESTIGHT CONTROL OF
FACILITIES, WATER
SOURCES, AND TOXICSUBSTANCESOUR BUSINESSESOUR PROCESSED FOODOURPROCESSED FOOD
BUSINESS
BUSINESSOUR PROCESSED FOOD BUSINESSENSURING CUSTOMERSGET HIGH-QUALITYPRODUCTS THEY
ENJOY

FOOD DEFENSE
Food defense is about protecting
our manufacturing processes
and our products from intentional
contamination. TableMark has robust
food defense guidelines that are
applied throughout the supply chain, tofactories and to distribution centers aswell as contract manufacturers. We use
these guidelines in our annual audits
and provide direction to contractor
factories as necessary.

OUR PHARMACEUTICAL
BUSINESSFOODQUALITY

FOOD SAFETY
Our processed food business has adivision to control food safety, andholds a quarterly meeting to review
food safety initiatives and share bestpractice. We analyze product-specificsafety risks and conduct inspections
and audits in line with these risks.

OUR TOBACCO BUSINESSRESTRICTIONSON PERSONALBELONGINGS IN
FACTORIES

There are ways in which the design,
distribution, and manufacture of
our food products can be adjusted
to reduce environmental impacts,
including by reducing packaging
and by cutting energy used both inmanufacture and in use by consumers.

holding the same amount of rice. We
also produced a new range of ‘naturalthaw’ products that can be defrosted
without the use of a microwave oven –thereby reducing energy consumption
by the consumer.

In 2015, for instance, we developed acompact tray for our packed cookedrice that uses 11% less plastic while

81

OUR
SUSTAINABILITYJOURNEY

OUR WAY OF
DOING BUSINESSOUR PEOPLE

OUR PLANETOUR CONTRIBUTIONSTO SOCIETY

About this report

In October 2014 we announced thedecision to close factories in Wervik,
Belgium, and Lisnafillan, Northern
Ireland, potentially affecting around
1,100 jobs.

Data in this report covers January to December 2015, unless otherwise stated. Historic data indicated with ‘FY’ covers the fiscal year
from April 1 to March 31 for our Japanese domestic operations. In 2014 the JT Group moved its reporting period to the calendar
year ending December 31. Until March 2014, Group companies outside Japan reported their financial performance from January to
December, while in Japan our business took its financial year to be from April 1 to March 31. Data covering the calendar year 2014reflects businesses’ performance spanning from January 1 to December 31, with adjustment in 2014 data for comparability with2015 data.

In February 2015 our Japanese
domestic tobacco business announced
that 1,754 employees had agreed
to take voluntary retirement under aprogram announced in late 2013 duepartly to the closure of some Japanese
domestic tobacco-related factories
between 2015 and 2016. The majorityof these had left the company in March2015.

NOTES ON DATAOTHER PUBLICATIONSThe FY2015 report has been compiled in accordance with the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines‘Core’ level. We defined the content of this document using a materiality assessment that covered the entire JT Group.

Although we report overall JT Groupfigures wherever possible, in someareas this has not been possible. In
such instances we have made it clear
to which part of the business the dataapplies. In the middle of 2015 the JT
Group withdrew from the beveragebusiness, and some of the historical

data presented in this report has been
restated accordingly.
We have shown how we calculate andconsolidate environmental, health andsafety, and HR data in our separate
Basis of Reporting document, which wewill continue to update in the future.
Historical environmental data for theperiod FY2009 through 2014, which
was disclosed in the FY2014 report,
has been restated to align with therequirements of the GHG Protocol.
The Japanese Yen exchange rates
against the U.S. Dollar used in thisreport are the same as used in ourconsolidated financial reporting.

JAPAN TOBACCO INC. (JT)*A *B *C *D*A *B *C *D
CORPORATEFUNCTIONS*A *B *C *D

PROCESSED FOOD

PHARMACEUTICAL

*A *C

*A *C

*A *C

SUBSIDIARIES*A = the entire JT GroupTORIITABLEMARKPHARMACEUTICAL

*A *C

*A *C

TABLEMARKGROUP COMPANIESSUBSIDIARIES*B = solely Japan Tobacco Inc. (JT)*D = Japan Tobacco Inc. (JT) and Japan Tobacco International (JTI)*A *B *C *D
JAPANESEDOMESTICTOBACCOINTERNATIONALTOBACCO*A *C*A *D *E
JAPAN TOBACCO
INTERNATIONALSUBSIDIARIES*C = Japan Tobacco Inc. (JT) and Japanese domestic Group companies*E = solely Japan Tobacco International (JTI)

EXTERNAL VERIFICATION AND ASSURANCE
This report is not externally assured,although some of the data within it has
been externally verified. This includes

Group-wide Scope 1 and 2 GHG dataand some Scope 3 GHG data. In future
we will consider expanding the scope ofassurance of our non-financial data andthe contents of this report.

IN ACCORDANCE WITH GRI G4 ‘CORE’
In 2013 we set a goal of reportingin accordance with the G4 ‘Core’
Guidelines. Having achieved this goal,
we will strive to continuously improve
our reporting in the future.

OUR PHARMACEUTICAL
BUSINESSOUR PROCESSED FOOD
BUSINESSCHANGES IN STRUCTURE, SIZE, OR OWNERSHIP

We report annually on our sustainability activities and performance and have been publishing environmental or CSR reports since1998. Our last report, ‘JT Group Sustainability Report FY2014,’ was published in June 2015.

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OUR TOBACCO BUSINESSOur GRI G4 Content Index (www.
jt.com/csr/report/index.html)
shows the list of Standard Disclosures
for which we have either provided
information in this report or in otherpublic documents, such as our Annual
Report. The identification of specificStandard Disclosures is based onmateriality assessments for the entire
JT Group.

In July 2015 we completed theacquisition Logic Technology
Development LLC, which is a leading
U.S.A. e-cigarettes company. In thesame month we also announced that
we had decided to close our Moscow
factory by mid-2016 due to the serious
contraction of the tobacco market in
Russia.
In September 2015 we announced theacquisition of Natural American Spirit,
which was completed in January 2016.

Websites
Japan Tobacco Inc.:
www.jt.com

Torii Pharmaceutical Co., Ltd.
(pharmaceutical subsidiary):
www.torii.co.jp/en

Japan Tobacco International(international tobacco business):www.jti.com

TableMark Co., Ltd. (processed foodsubsidiary):
www.tablemark.co.jp (in Japanese)

In October 2015 we communicatedthat we were considering closing our
Wadeville factory in South Africa. We
also announced the acquisition of Arian
Tobacco Industry (ATI), a cigarettemanufacturing company in Iran.
During 2015 we withdrew from the
manufacture and sale of beverage
products and sold our beverage vending
machine operations.

Publications
JT Annual Report:
www.jt.com/investors/results/
annual_report/index.html

AWARDS AND RECOGNITION
We are a member of the Dow Jones
Sustainability Asia Pacific Index(www.sustainability-indices.
com) and of the Morningstar Socially
Responsible Investment Index (www.
morningstar.co.jp/sri, in Japanese).

In March 2016 JT was selected as aNadeshiko Brand for demonstrating
outstanding commitment toempowering women in the workplace
among 45 other listed companies on
the Tokyo Stock Exchange.

We have also been awarded witha position on the Japan 500 2015
Climate Disclosure Leadership Index,
run by CDP, a global body that helps
companies measure, manage, anddisclose environmental performance.
This is recognition for the depth
and quality of the climate change
information we have disclosed(www.cdp.net).

We were chosen by the Ministryof Economy, Trade and Industry as
one of its 34 Diversity Management
Selection 100 companies, recognizing
us for creating new value by embracing
diversity in the workplace.

CONTACTS AND FEEDBACK
Japan Tobacco Inc. (Headquarters)
2-1, Toranomon 2-chome
Minato-ku
Tokyo 105-8422
Japanwww.jt.com

FOR MORE INFORMATION OR
TO PROVIDE FEEDBACK ON
THIS REPORT, PLEASE E-MAIL:

JT International SA
8, rue Kazem Radjavi,
1202 Geneva
Switzerland
www.jti.com

jtgcsr@jt.com

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