OUR TOBACCO BUSINESSOur core business is tobacco, which generates nearly 90%
of our consolidated revenue. Our conventional tobacco
products are manufactured in over 30 factories around theworld and are distributed in more than 130 countries. In
addition to conventional tobacco, we have a Reduced-Risk
Product portfolio which includes e-cigarettes and tobacco
vapor products.
In this section, we will cover our approach to sustainability
across our tobacco business.
Having established the foundations of our sustainability
strategy in 2017, in 2018 we identified 11 targets under
4 focus areas which will help us measure our progress.
As the business environment and expectations fromsociety change, we will be improving and adding to thesetargets over time.
TOBACCO BUSINESSTOBAC C O B U S I N ES S S U S TAI NAB I L I TY GOAL S

40

Supply chain

Regulatory environment
and illegal trade

We will reduce environmental andsocial risks, and enable transparent andresponsible practices across our supply
chain.

We will ensure the Company is included inpolicymaking leading to fair and balanced
regulation, and enhance our cooperation
with governments to combat illegal trade.

Products and services

PeopleWe will be a total tobacco company
offering consumers an even greater
choice of products by focusing on quality,
innovation and reduced-risk potential.

We will be the employer of choice byinvesting in people.

41

OUR SUSTAINABILITY STRATEGYOUR TOBACCO BUSINESS VALUE CHAIN

OUR TARGET:
GREENHOUSE GASEMISSIONS

46,500+

7

12

130+

Directly contracted tobacco
leaf growers and tobacco
leaf merchants

Tobacco leaf
threshing factories

Leaf storage
warehouses

countries and regionsof distribution

OUR COMPANY

450+

27,500+

35

70+

500+

Non-tobacco
material suppliers

Suppliers ofother products
and services

Factories

Offices
worldwide

Warehouses

In order to ensure the highest levels of sustainability
and integrity across the supply chain, all of our
suppliers are required to comply with our JT Group
Supplier Standards. We select suppliers based on
quality, service, and cost. This is reflected in our
JT Group Responsible Procurement Policy.

42

Our contracted tobacco leaf growers and merchants
are also subject to the JT Group Principles in Leaf
Tobacco Production and our Agricultural Labor
Practices (ALP) program.

We will replace all wood fromnatural forests used in the
tobacco curing process of ourdirectly contracted growers withrenewable fuel sources by 2030.

OUR TARGET:AGRICULTURAL LABORPRACTICES

We will implement ourAgricultural Labor Practices(ALP) program in all sourcing
countries by 2025.

OUR TARGET:
SUPPLIER SCREENING

We will screen all key suppliers
against environmental, social,and governance criteria by 2023.

TOBACCO BUSINESS

Building sustainablesupply chains

Our factories produce ready-made cigarettes, othertobacco products, and some of our Reduced-Risk
Products. We purchase approximately half of ourtobacco leaf from directly contracted growers, andthe other half from tobacco leaf merchants. We don’t
own any farms, and we don’t employ any growers
directly.

We will reduce
environmental and social
risks, and enable transparent
and responsible practices
across our supply chain

OUR CUSTOMERSAND CONSUMERS

OUR TARGET:FORESTRY

Maintaining a well-managed supply chain is a priority
for our business. All the stakeholders in our supply
chain are equally important and essential to build asustainable business. We work closely with them toreduce negative social and environmental impacts,
based on a shared vision.

OUR COMMITMENT

We will reduce water withdrawal
by 15% and waste by 20%, in
relation to our own operations,
between 2015 and 2030.

OUR WAY OF DOING BUSINESSOUR SUPPLIERS

We will reduce greenhousegas emissions from our own
operations by 35% and from ourdirect leaf supply chain by 40%,
between 2015 and 2030.

OUR TARGET:
WATER AND WASTE

Non-tobacco materials,
other products, andservices
Non-tobacco materials include packaging, filters, andcigarette-related materials. We also have a numberof suppliers for factory machinery and logistics,
including freight. We manage the sourcing of most ofthese centrally. Other products and services, whichflow through our supply chain, include marketingrelated services, facility management, IT, and otherprofessional services, which are sourced globally,
regionally, and locally.
We develop strong partnerships with our key
suppliers in order to achieve mutual long-term
success. Our strategic relationships are built on
shared values and objectives, which allows us to findsustainable solutions together, ensure a stable supply
in a dynamic environment, and be able to adapt toinnovative technologies.
For example, we worked with a number of suppliersof pulp-based products to reduce our paper andboard related waste. We achieved this by optimizing
our product specifications, saving approximately
1,700 tons of waste per year.

43

Tobacco leaf sourcing

SUPPLIER SCREENING
We aim to achieve high standards of integrity
across our business operations and supply
chain. We can only achieve this through close
cooperation with our suppliers.

Tobacco leaf sourcing is a key part of our supply
chain, and a critical component of future businessgrowth. We have been working closely with ourdirectly contracted tobacco leaf growers andmerchants to build security of supply and enhanceleaf provenance. This gives us greater flexibility when
responding to changing market requirements.

In our international tobacco business, prior toentering into a commercial relationship, our
key suppliers*1 undergo a screening process*2
which includes onboarding and qualification.
This process allows us to understand potential
risks related to compliance, human rights,
environment, and health and safety.

For details on how we manage our suppliers in
the Japanese market, please visit our website
www.jt.com/sustainability/our_business/tobacco/value_chain

MEDIUMQUESTIONNAIRE

HIGH

Our suppliers arecontinuously
assessed.
LOW

AUTOMATICALLYCERTIFIED UPONACKNOWLEDGING THE
JTI SUPPLIER
STANDARDS.

AUTOMATICALLYCERTIFIEDUNLESS THE
QUESTIONNAIRE
SCORE IS BELOWTARGET.

MEDIUM

HIGH-RISK SUPPLIERS
ARE ALWAYS SUBJECTTO AN APPROVAL FLOW*.

Our evaluation committee assesses thecase. If the Committee decides tocertify the high-risk supplier, thesupplier is given a year to make
improvements and showcase them in
the next renewal phase.

44

AUTOMATICALLYRENEWED UNLESS WE
HAVE UPDATED OUR
SUPPLIER STANDARDSTHAT THEY HAVE TOACKNOWLEDGE FIRST.

RENEWEDEVERY 3 YEARS.

QUALIFICATION*ESCALATION:

Upon registration,
the risk is
automaticallycalculated by theapplication.

Uncontracted
sources

In 2018, we contracted 46,500 tobacco leaf growers directly in Brazil, Ethiopia, Japan, Malawi, Serbia, Tanzania,
Turkey, the U.S., and Zambia. The number of growers we work with will increase by approximately 65% in 2019,as a result of our acquisition of United Dhaka Tobacco Company Limited in Bangladesh in 2018.
Contracting leaf growers directly allows us to monitor cultivation and labor practices more effectively. We
currently employ 373 Leaf Production Technicians in our international tobacco business*2, who each supports
on average 89 directly contracted growers. They visit every farm between seven and nine times during thecourse of the cropping cycle to ensure the growers understand how to implement best practices. We encourage
open dialogue, which allows continuous improvement on the farms. In our Japanese operations, our 126 Leaf
Production Technicians are each assigned an average of 40 directly contracted growers to observe through site
visits and questionnaire surveys.

TOBACCO BUSINESS

LOW

HIGH

30

SUSTAINABLE AGRICULTURE

Upon the calculation,
the certificationquestionnaire is
automatically triggered
and sent
to the supplier.

REGISTRATION

Contracted
sources

DIRECTLY CONTRACTED
LEAF GROWERS *1 (*E)

THE SUPPLIER SCREENING PROCESS (*E)

MEDIUM

70

53%

Since 2017, we have screened 61% of the key
suppliers in our international tobacco business.
As our supplier screening target shows, we arecommitted to achieving 100% by 2023.

We will screen all
key suppliers against
environmental, social,and governancecriteria by 2023.

LOW

LEAF
MERCHANTS*1(*E)

If there are any risks identified, we offer support
and collaboration on how to mitigate these risks
and make necessary improvements.

OUR TARGET:
SUPPLIER
SCREENING

The supplier isinvited to register
their information
during theonboarding
process.

47%

RENEWALHIGH

RENEWEDANNUALLY.

If the supplier’s
risk increases,
certification withthe higher riskquestionnaire will
be sent
immediately.

As well as securing the long-term supply of quality
tobacco leaf for our business, we also want tocreate shared value. We do this by providing
services that increase grower productivity, while atthe same time always trying to improve our socialand environmental impact. This results in higher
yields and better quality, which in turn drives greater
profitability.
Grower return is based on more than price alone.
By enabling growers to become more productive
and efficient in the way they grow, harvest, andcure tobacco leaf, we ultimately help them to use
resources wisely and responsibly, and increase
profits. For example, we help to cut costs by using
fertilizers and agrochemicals more efficiently. This canlead to cost reductions of up to 20%.
All of our leaf suppliers are expected to follow
Good Agricultural Practices (GAP) as set out by the
Cooperation Centre for Scientific Research Relative
to Tobacco (CORESTA). The concept of GAP is to
produce a quality crop while protecting, sustaining, orenhancing the environment with regard to soil, water,
air, animal, and plant life (see www.coresta.org).

our Minimum Agronomic Standards (MAS). These
growers are contracted to grow tobacco under our
stewardship. In return, they receive both credit forprescribed crop inputs as well as dedicated extension
service provision from one of our Leaf Production
Technicians. This support includes advice andrecommendations throughout the entire crop cycle.
Contracted large-scale commercial growers – notably
in the U.S. – don’t require dedicated extensive service
provision from us. This is why not all of our directly
contracted growers are required to comply with MAS.
These farming practices are not limited to tobacco.
We encourage growers to use seasonal crop rotation
i.e. growing other crops such as groundnuts or maizeon the same land in alternate seasons. This provides
extra income, improved food security, and soil
conservation.
We are always looking to improve our understandingof tobacco farming. Our investment in researchand development involves partnering withleading international academic institutions in thedevelopment of innovative new ways of producing
tobacco. See page 50 for more details.

In addition to GAP, the majority of our directly
contracted growers are also required to comply with

Key suppliers are defined as suppliers with a planned annual spend greater than 500,000 U.S. dollars, suppliers who either purchase or handle* 1 Japan Tobacco International tobacco products, leaf merchants, suppliers representing Japan Tobacco International before government, and contract
manufacturing, and licensees.

* 1 Percentage rates are based on planned volume.

* 2 Formally known as Supplier Lifecycle Management.

* 2 This number excludes Bangladesh as it was recently acquired and Ethiopia as it operates on a different model.

45

CASE STUDYAGRICUTURAL LABOR PRACTICES
Our Agricultural Labor Practices (ALP) are based on
the International Labor Organization’s conventions
and recommendations. The program consists of threepillars: tackling child labor, respect for the rights ofworkers, and ensuring workplace health and safety.
Whether we source tobacco directly or throughtobacco leaf merchants, all of our suppliers have acontractual obligation to implement our Agricultural
Labor Practices (ALP). ALP drives a continual cycleof improvement and dialogue, a concept deeply
rooted in our business. By speaking to growers about
their experiences and the issues they face, we canconstantly make improvements on the ground andanticipate future challenges. Read more on ALP in
our booklet published on jti.com.

Our activities in JapanTOTAL NUMBER OF ALP OBSERVATIONS (*E) (%)

JT FARM

7

6

In order to share effective tobacco cultivation
practices with growers, in 2018 we establishedthe ‘JT Farm’ in Japan. The farm functions as adevelopment center, where we try out new techniquesand methods before introducing them to growers.

10

10

25

2016

9

2018

2017

ENHANCED CURING AND BALING

We are implementing a new curing process for burleytobacco, which can reduce working hours by 15%.
This method also helps to prevent the contaminationof non-tobacco related materials during green leaf
baling.

69

81

83

Of the program’s three pillars, the rights of workers is the most challenging to observe. We have therefore spent a
considerable amount of time training our own Leaf Production Technicians and raising awareness among our leaf
merchants, which has led to a steady increase in observations in this area over the last few years.* This enables
us and our leaf merchants to better identify and prioritize ALP improvement measures.

We previously made a commitment to implement
ALP in all sourcing countries by 2019. We are pleased
to share that in 2018, we observed 96% of ourdirectly contracted growers and 96% of our tobacco
leaf merchants reported against ALP.

Rights of workers

Child labor

Workplace health & safety* Combined data, observations of directly contracted growers and leaf merchants.

OUR PROGRESS AGAINSTTHE TARGETIN 201690%

IN 201796%

IN 2018

Of our directly contracted growers
were observed against ALP

31%

IN 201673%

IN 201796%

IN 2018

Of our leaf merchants reported against ALP

We were able to achieve almost 100% coverage ina relatively short period of time due to a successful
pilot program in our international tobacco businessthat ran between 2013 and 2016. Our learning
shaped our current approach and enabled effective
implementation with both our directly contracted
growers and tobacco leaf merchants.
We have now broadened the target to include newacquisitions in countries such as Bangladesh andEthiopia.

46

Working in collaboration with internal and external
stakeholders has been key to the progress andsuccess of the ALP program.

96 %OF OUR DIRECTLYCONTRACTED GROWERSWERE OBSERVEDAGAINST ALPOUR TARGET:AGRICULTURALLABOR PRACTICES

We will implement
our Agricultural
Labor Practices (ALP)
program in all sourcing
countries by 2025.

Our relationships with directly contracted growers
have continued to produce tangible results due toface-to-face training and regular farm visits. Througha series of global and local meetings in 2018, we
spoke to merchants about the strategic direction of
the program. This helped to identify additional areasof interest, such as special training on the ground,and a need for innovative mechanisms to manage
labor risks. We also engaged with government
agencies in the countries where we operate, in orderto address fair and safe labor conditions at a local
level.

Our international tobacco business is an active
member of the Sustainable Tobacco Program (STP).
This industry-wide platform enables businesses
to share best practices on labor standards, safe
workplaces, and sustainable tobacco agriculture.
Throughout 2018, we exchanged ideas with other
STP members to further develop and improve theprogram.

TOBACCO BUSINESS21%

ENGAGEMENT IN 2018

In 2018, we became part of the Guidance for
Responsible Agricultural Supply Chains pilot project.
This initiative is run by the Organization for Economic
Co-operation and Development in conjunction with
the Food and Agriculture Organization of the United
Nations. By participating in this project, we havebeen able to share our own experiences, broaden our
understanding, and benchmark against others.

CASE STUDY

Grower Clubs in Zambia
ALP IMPLEMENTATION IN JAPANWe have a long-standing relationship with growers
in Japan. Following a 2017 pilot study, the ALP
program was fully implemented in 2018. We carriedout farm visits and questionnaire surveys to address
labor issues on tobacco farms. Based on ourfindings and observations, we will continue to make
improvements.

In Zambia, we have an established network of approximately 465 Grower
Clubs. Each Club is formed of 10 to 20 growers and led by a Chairman.
The aim of the Clubs is to bring growers closer together and create more
effective dialogue. The Clubs allow continuous communication andengagement on a variety of topics such as Farmer Finance, Agricultural
Labor Practices, Minimum Agronomic Standards, and other best practices.
In 2018, we trained over 452 Chairmen, in partnership with thegovernment and the banking sector. As a result, all of our contracted
growers in Zambia, for instance, now have bank accounts.
47

ARISE
Our flagship program, ARISE – Achieving Reductionof Child Labor in Support of Education – has beencommitted to tackling child labor in our tobacco
growing communities since 2011.
In 2018, ARISE placed 7,123 children into formal
education, building on the impact of previous years.
The program is forging real sustainable change
by implementing robust solutions to preventchild labor. For more details on the program, seeariseprogram.org.
In preparation for the next phase of the program
starting in 2019, the ARISE team carried out a Social
Return on Investment assessment of the programin 2018. The aim was to better understand the valueof our investments, from the perspective of ourbeneficiaries. The findings helped us to complete acomprehensive review of all the program’s activities,
showing their impact on both the beneficiaries andour business.
The review identified a number of activities that are
particularly valuable in creating a positive impact.
These include, for instance, income generating
activities at a household level.

Although the ARISE program is formally monitored
and evaluated, it currently lacks a system to monitor
the progression of children withdrawn from childlabor over time. The program has incorporated
this learning into the design of the next phase, bydigitizing our approach to child labor monitoring.

OUR CONTRIBUTION TO PREVENTING CHILD LABORCOMMUNITY
MEMBERS EDUCATEDIN CHILD LABORELIMINATION (*E)

Elaine McKay,
Social Programs Director, JT International

This year has also seen a reshaping of the ARISE
program and the contractual framework supportingit. From 2019 onwards, we will continue to workwith our contractual partner Winrock International (aUS based internationally renowned NGO) to deliver
the program. Although the International Labour
Organization (ILO) will no longer be a contractual
partner, we welcome the ILO’s commitment tocontinue engaging with the program on the ground.

CHILDREN OFF
FARMS AND INTOSCHOOLS (*E)

2016

2017

2018

Brazil

34,64031,991

23,848Malawi

11,82010,02812,132

Zambia

1,384

8,166

99,658

Tanzania

879

5,060

55,160Brazil

766

3,185

1,893

Malawi

6,414

7,063

3,087

Zambia

2,562

4,167

1,546

Tanzania

0

680

597

TOBACCO BUSINESSThe assessment has affirmed the great value ARISE
has brought to the communities where we operateover the last eight years. The findings will alsoenable ARISE to become a more scalable and leaner
program in future.

We work collaboratively with growers,
communities, business leaders, andgovernments to create solutions that
address the root causes of child laborwhilst always keeping the child’s right toquality education at the heart of what wedo. Year on year, we help more children
into formal education and create newopportunities for them and their families.

In 2018, we focused on raising awarenessabout child labor in the communities where
we operate, through radio programs and local
events. Therefore, our numbers of community
members educated in child labor elimination
have increased significantly in Zambia andTanzania, in particular. An educated community
will also enable us to increase the number ofchildren taken off farms and into schools in the
coming years.

In the next phase of ARISE, we are committed toscaling up the ARISE program together with Winrock,and during 2019, we will embark on new andinnovative partnerships that will allow us to digitize
our approach to child labor monitoring in our directly
contracted sourcing origins, where ARISE is currently
active.

GROWER SUPPORT PROGRAMSOur Grower Support Programs are investments that address social needs in our tobacco growing communities.

ACHIEVEMENTS THIS YEAR (*E)

48

90

2,000

489

800

2,500

water systems
installed in
Malawi, Tanzania,
and Zambia

solar panels
provided to
growers in
Malawichildren benefited
from access toquality education
through school
construction in
Tanzania

adults received
literacy training
in Zambia

growers benefited
from improved
healthcare
facilities inMalawi, Tanzania,
and Zambia

49Promoting forestry on small-scale farms
OUR APPROACH

MATOPE BARNS

Responsibly managing the use of natural resources
within our operations supports the long-term viabilityof our business, and helps protect the environment.
That’s why we have embedded forestry considerations
into internal management processes and strategic
decision-making throughout the organization.

An innovative development of the ADET centers are
Matope (mud) barns, a more fuel-efficient type ofcuring barn.

We have been working closely with our growers to
improve tobacco yield and quality. Reducing intensity
in use of soil, water, and wood generates increased
returns for growers and a reduction in environmental
impact – all of which makes our business moresustainable.

OUR TARGET:FORESTRY

We will replace all woodfrom natural forests
used in the tobacco
curing process of ourdirectly contracted
growers with renewable
fuel sources by 2030.

In countries where tobacco production depends onwood for the curing process, we believe it is our
responsibility to ensure this resource is managed
and used efficiently while also contributing toenvironmental conservation.

AGRONOMY DEVELOPMENT AND
EXTENSION TRAINING

These innovative centers enable us to study, test,
innovate, and calibrate our ideas, before taking
them to growers as recommended best practices.
The ultimate goal is to ensure tobacco farming
remains viable and profitable for our tobacco
growers, while respecting and complying with therelevant environmental requirements and regulations.
In our ADET centers, we focus on forestry research
to improve wood production and efficiency intobacco curing, as well as on forest conservation
and rehabilitation. We identify the forestry challenges
along with applicable solutions to minimize our
impact on the environment at small-scale farm level.
Since 2013, we have been organizing ADETs days, towhich growers from around the country are invited
to participate. Last year, more than 1,100 growers
attended the day, the theme being “Preparing thesoil for a new future”. The growers learnt about
technological innovation in tobacco production, as
well as in soil and environment conservation.
Another fundamental part of these model farms is
capacity building. There is a robust and continuous
cycle of training and engagement of our Leaf
Production Technicians, who pass on their knowledgeof best agricultural practices and innovation to thegrowers. Read more on page 45.
50

Professor Dr. Jorge A. Farias,
Federal University of Santa Maria, Brazil

OUR MINIMUM FORESTRY STANDARDS

Through our ADET centers, we have developed our
Minimum Forestry Standards – a set of forestry
specifications and guidelines that our growers must
follow. We have established these standards inall the countries where our growers use wood for
tobacco curing, either as a source of curing fuel orfor live barn structures: Brazil (2012) and Malawi,
Tanzania, and Zambia (2014). As a result, growers
in those countries are able to establish and manage
better quality woodlots. This approach brings us
closer to achieving sustainability in wood supply.
It also reduces our environmental impact by helping
to avoid deforestation and improve the conservation
prospects for natural woodland.

This is an important development, as the emissions
associated with curing tobacco leaf represent thelargest single source of Scope 3 emissions for ourbusiness. Read about how we reduce emissions in
our own operations on the next page.

TOBACCO BUSINESSWe have model tobacco farms in Brazil and Zambia,
also known as Agronomy Development andExtension Training (ADET) centers. This is where
we carry out applied agricultural and environment
related research and development related to soil
management, mechanization, production cost
efficiencies, and cultural practices.

For me, as a researcher, JTI’s
commitment to the real quest forsustainability has been very motivating.
Our partnership forms a soundfoundation for developing energy
sustainability strategies for small-scale
tobacco growers. This in turn helps togenerate income, reduce GHG emissions,and increase the productivity of planted
forests, securing a sustainable supply ofwood for tobacco production.

Using Matope barns can lower wood consumption
by 75% and reduce carbon emissions by 12%. At thesame time, cured leaf yields are 17% higher, while
the quality of leaf also improves and grower returns
rise by approximately 400 U.S. dollars per hectare.
Growers in Zambia installed over 1,300 Matope barnunits in 2018.

CASE STUDY

Contributing to forest
rehabilitation in Brazil
JTI has partnered with the Wildlife Research andEnvironmental Education Society to restore over 300
hectares of permanent protection areas in Brazil withfunding from the National Bank for Socio-Economic
Development. These areas include land owned by
tobacco growers and part of the Irati National Forest.
The restoration work started in 2018. In Irati National Forest,
35 hectares of pine trees were replaced by native species to help
restore the natural landscape. The project also involved thetraining of 33 local college students in ecological restoration.
We defined priority areas in strategic river basins, based on
factors such as soil, rain, and proximity to other projects, tocreate green corridors (strips of land with sufficient habitat
to support wildlife) connecting different regions. One of
the first sites we selected was the Taquaral river basin in
Parana State. We introduced the project through a seriesof mobilization meetings, attended by 200 local growers.
The partnership provides growers with technical assistanceand support, before and after the restoration work
begins. We are committed to protecting and restoring
natural forests, and supporting local communities.

51

CASE STUDIESReducing our environmental
impact in manufacturing
Sustainability is deeply embedded within our manufacturing
operations. At our factories around the world, we work tominimize our environmental impact by focusing on energy
efficiency, GHG emission reduction, water efficiency, andwaste reduction.

1
GHG EMISSIONS EFFORTS IN JAPANRUSSIA

JT is certified as an Eco Rail mark company
by the Ministry of Land, Infrastructure,
Transport, and Tourism in Japan. This
group of companies is reducing GHG
emissions through techniques such asmodal shift – changing from trucking tocontainer transportation via rail and sea– and improving truck-loading ratios.

SWEDENIn recent years, we have made a concerted effort towards
increasing the proportion of our energy that comes fromrenewable sources, and this has been reflected in our
expenditure. Since 2016, we have invested nearly 13 million
U.S. dollars in renewable energy.
We are further reducing water usage and improving
recycling, enhancing our management of wastewater, andaddressing water-related risks to our operations.
TURKEYIn terms of waste, our focus is on improving yield, reducing
waste disposal, and decreasing secondary packaging.
Read about our approach to environmental management on
page 26.

IRAN
EGYPT

JORDAN3

HARNESSING RENEWABLE ENERGYGREEN ENERGYVARGARDA, SWEDEN

SOLAR STEAM GENERATIONAMMAN, JORDANSOLAR ELECTRICITY GENERATIONBATANGAS, PHILIPPINESThe program minimizes
CO2 emissions and energy
consumption at the factoryby combining green energy
alternatives with a range of costeffective energy-saving projects.
The factory is connected to a
nearby bio-steam facility, whichheats the factory by burning CO2
neutral woodchips. The factoryalso uses a steam-to-hot-water
conversion system to heat theoffices, helping it to achieve aremarkable 67% reduction in CO2emissions.

Awarded the “Environmental
Stewardship Award” by the
Ministry of Environment in
Jordan and the World Bank, thisis the first tobacco factory in theworld to use direct solar steam
generation.

In the largest self-consumption
rooftop solar system in South-East
Asia, 17,040 solar panels convert
the sun’s energy into usable
electricity. The use of solar energy
helps prevent approximately
4,000 tons of GHG emissions a
year.

To further reduce energy
consumption, the team also plansto rebuild the ventilation system,
improve the heating and coolingsystem, install a better control
system, and improve insulation.

52

A rooftop-mounted collector,
steam storage, and a steam-driven
absorption chiller provide the sitewith energy and building heating
and cooling. The system covers
85% of the plant’s annual steam
consumption, and helps reduce
its CO2 emissions by 12% or 500
tons a year.

We will reduce greenhousegas emissions from ourown operations by 35%
and from our direct leaf
supply chain by 40%,
between 2015 and 2030.

OUR TARGET:
WATER AND WASTE

JAPAN

We will reduce water
withdrawal by 15%
and waste by 20%,in relation to our own
operations, between
2015 and 2030.
TOBACCO BUSINESS2The JT Kansai factory received twoawards from Kyoto City and Kyoto
Prefecture government for its excellent
emission reduction initiatives. The factoryis proactively tackling the reduction of
GHG emissions through initiatives suchas high efficiency freezer installationand eco-friendly compressor use.

OUR TARGET:
GREENHOUSE GASEMISSIONSPHILIPPINES

WATER

WASTE

We continue to identify ways to reducewater usage in our factories.

Many of our factories reuse large tobacco
packing cases and wooden pallets. This
reduces the amount of waste generated.

›› Better irrigation processes and timing in

Jordan and Iran have reduced water demandfor irrigation by around 40% (around19,000 m3 annually).

›› Thanks to improved technology, our Turkey

factory is now able to reuse the majority of thewastewater from its water filtration process.
›› Our factory in Egypt reduced water

consumption by over 30% through improved
container washing, a mixer project upgrade,and boiler feed water reuse.
›› By reusing recovered water (condensate) for

its manufacturing process, our Yelets factoryin Russia reduced water consumption by 5%(26,400 m3 per year).

Our factory in Iran has boosted its recycling
rate from 48% to 93% by changing its
waste management method for tobacco
dust and acetate tow. Tobacco dust is used
now as agricultural organic fertilizer, andthe acetate tow as the raw material for a
specific type of packaging production.

Our Environment Program for Markets,
which will be launched in 2019, aims to help
our office and warehouse locations to raiseawareness of our environmental impact, andto develop programs to reduce this impact
by sharing guidance and best practices.

The factory’s ultimate ambition is
to be 100% carbon neutral.

53

Exceeding
expectations withproducts and services
As alternatives to traditional combustible products,
e-cigarettes (E-Vapor) and tobacco vapor products(T-Vapor) are gaining popularity with consumers
around the world. Our industry is changing, but ourcommitment to consumer choice remains.
We are always listening and reacting to the changing
tastes of adult smokers and vapers around theworld. We develop, test, and bring to market new
and innovative forms of Reduced-Risk Products thathave the potential to reduce the risks associatedwith smoking and offer real benefits to consumers,society, and our business.
Between 2018-2020, we are investing 100 billion
Yen in Reduced-Risk Products, to further develop
our supply chain and expand our research anddevelopment capabilities.

A consumer-centric
approach

OUR COMMITMENT

We will be a total tobacco company,
offering consumers an even greater
choice of products by focusing on quality,
innovation, and reduced risk potential.

For products to have the potential to reduce therisks associated with smoking, consumers must firstunderstand and appreciate their value. We therefore
take a consumer-centric approach towards researchand development, and focus on four major factorsthat motivate consumers to consider Reduced-Risk
Products:›› The potential for a product to reduce the risks
associated with smoking›› Affordability and value for money›› Social considerations – seeking products with low
smell, so as not to disturb others›› The convenience of being able to use a product ina wide variety of locations and occasions.

OUR TARGETHARM REDUCTION EQUATION

Ian Jones PhD,
Principal Scientist Vice President, R&D, JT International*

HARM REDUCTION

Cancer Research U.K., 2017

JT Science is a valuable online resource forboth scientists and non-scientists alike. Our
mission is to inform, educate, and collaborate
with all those interested in learning about thescience behind Reduced-Risk Products – fromconsumers to scientists and the regulatorycommunity. With JT Science, we strive foran open, balanced, and fair platform where
factual scientific data and assessments areshared in a transparent way. The results ofour studies that scientifically evaluate our
Reduced-Risk Products are publicly available
on www.jt-science.com.

OUR CONSUMER-CENTRIC STRATEGY BENEFITSFOUR KEY STAKEHOLDERSRELEVANT & DIVERSEPRODUCT OFFERINGCONSUMERS$SHAREHOLDERS

54=

PRODUCT ACCEPTANCE

Evidence so far showsthat e-cigarettes aresafer than smoking.

JT SCIENCE: AN ONLINERESOURCE FOR ALL

Science is at the very heart of our
Reduced-Risk Products business. ThroughJT Science, we aim to widen our audience,
addressing people’s natural inquisitivenessabout science in a clear, concise, and easy tonavigate manner.

X

TOBACCO BUSINESS

We welcome further studies into the effects of longterm use of e-cigarettes.

The success of any harm reduction intervention isdependent on two factors: its potential to reduce
the risks associated with a particular activity andthe number of people who adopt the intervention.
After all, while non-combusted tobacco products ande-cigarettes drastically reduce the exposure to known
harmful constituents in tobacco, and therefore havethe potential to lower the health risks of smoking,their potential value is lost when consumers do not
accept these alternative propositions.

We will lead in providing the widest
range of consumer choice in the
Reduced-Risk Product category.

PRODUCT RISK-REDUCTION

Recent third-party* reports from the U.K. and the
U.S. on the relative safety of e-cigarettes state that,based on available evidence, the current generation of
e-cigarettes are less harmful than smoking.

This approach to our Reduced-Risk Product researchand development is reflected in the Harm Reduction
Equation, and helps us to concentrate on exceeding
the expectations of all of our key stakeholders:consumers, shareholders, employees, and the wider
society.

- E-cigarettes, Seventh Report of Session 2017–19. House of Commons Science and Technology Committee. 2018. HC 505- Evidence review of e-cigarettes and heated tobacco products 2018. Public Health England. 2018
- American Cancer Society Position Statement on Electronic Cigarettes, February 15, 2018

POTENTIAL FOR
HARM REDUCTION

SOCIETY

ENHANCED RETURNSIN THE LONG TERM

NEW PROFESSIONALHORIZONSEMPLOYEES

Disclaimer: This section is intended only to explain the business operations of the JT Group, not to promote sales of tobacco or nicotine delivery products
or encourage smoking among consumers

55

Empowering consumer choice

Reduced-Risk Products
Supply chain

We are committed to providing adult consumers with a relevant and diverse product offering, and tocommunicating the benefits and reduced-risk potential of each product so that consumers can make an informed
choice.
At the end of 2018, our Reduced-Risk Product portfolio was present in 13 countries with a choice of tobacco
vapor products (T-Vapor) and e-cigarettes (E-Vapor).

WHAT IS T-VAPOR?

WHAT IS E-VAPOR?

T-Vapor products contain tobacco that is heated(though not burnt) to create an inhalable vapor.
Consumers particularly enjoy the wider social
freedoms that they bring compared to conventional
products. Our T-Vapor category currently consistsof Heated Tobacco and Tobacco-Infused Vapor
products:

Also known as electronic cigarettes, E-Vapor
products heat a liquid that usually contains nicotine,
but no tobacco. They create an inhalable vapour byelectrical heating of a liquid (known as an e-liquid)contained within the device or a replaceable
cartridge. Consumers are particularly drawn to thewide range of different devices and flavors available.
They offer optimum levels of social consideration,
convenience, and affordability.

Heated Tobacco delivers the satisfaction of atobacco experience;
Tobacco-Infused Vapor addresses consumer
needs of social consideration and convenience,
whilst continuing to deliver a true tobacco taste
experience.

Our portfolio in Reduced-Risk
Products is true to our philosophyof providing consumers with choiceand quality. We are proud of ourwide range of products, both ine-cigarettes and tobacco vapor.

We have established a dedicated supply chain for
our Reduced-Risk Products, building strong supplierpartnerships that support business expansion andmeet the demands of our increasingly sophisticatedportfolio. In addition to our in-house production
capabilities, we source from manufacturers acrossAsia and Europe. Out of seven supplier factories, fivefactories are ISO 14001 certified.
In 2018, we opened a new e-liquids production
facility in Gostkow, Poland as an extension of ourexisting European Flavor House. Most of our e-liquids
that contain nicotine, and tobacco capsules, are now
produced in-house.

Daniel Torras,
Senior Vice President, Reduced-Risk Products, JT International

OUR REDUCED-RISK PRODUCTS SUPPLY CHAINTOBACCO BUSINESS

U.K.

CHINA

JAPAN

VIETNAMINDONESIA

Logic Power(Cig-a-like)

E-VAPORPOLANDTOBACCO-INFUSED VAPOR

T-VAPORHEATED TOBACCOOUR PRODUCT PORTFOLIO (as of January 2019)

Logic LQD

(Open tank system)

Logic Pro

(Closed tank system)

Logic Compact(Closed tank system)

Ploom

Logic

Device Manufacturing & Assembly (China)

Device Manufacturing & Assembly (China)

Cartridges (China, Vietnam)

Liquids (Japan, U.K., Poland)

Capsules & Sticks (Japan, Indonesia, Poland)

56

Disclaimer: This section is intended only to explain the business operations of the JT Group, not to promote sales of tobacco or nicotine delivery products
or encourage smoking among consumers

57

T-Vapor Brand Focus:
Ploom TECH
Ploom TECH is our Tobacco-Infused Vapor
proposition that offers consumers a clear taste, withless smell and high usability. The product is currently
available in four markets.
Ploom TECH has been specially developed for
consumers who enjoy tobacco but want to do so in amore considerate and convenient way.
Our scientific assessments to date reinforce the riskreduction potential of Ploom TECH. The data*1 showthat compared with smoking, Ploom TECH offers amore than 99% reduction in the key constituents ofemissions that have been linked to health concerns.*2
The data*3 also shows that Ploom TECH use has
minimal impact on indoor air quality, which explains
why an increasing number of restaurants in Japan
have allowed the exclusive use of Ploom TECH (seebelow).
Details on this research can be found on our website:www.jti.co.jp/investors/library/presentation/2018_
London/pdf/20180605_4.pdf

As of March 2019 in Japan, we offer
premium tobacco capsules in ten
flavors from the JT Group’s leading
tobacco brands, Mevius and Pianissimo
following the launch of a new white
Ploom TECH device.

HOW WE ASSESS THE REDUCED-RISK
POTENTIAL OF PLOOM TECH

When it comes to the assessment of
reduced-risk potential, we take a tiered
approach by:›› Characterizing the key constituents ofthe emissions›› Examining exposure and uptake ofemissions, i.e. what is absorbed into
the body

A BETTER UNDERSTANDING OF
JAPANESE CONSUMERS
Growth in the T-Vapor category has been mainly
driven by Japan, which in 2017 accounted for over
90% of global T-Vapor sales by volume. By increasing
our share in the Tobacco Vapor category, we will
strengthen our position as the leading tobaccocompany in Japan.
In order to maximize product acceptance, in
accordance with the principle of the Harm Reduction
Equation (see page 55), we have carried out
numerous studies in Japan to identify consumer
motivations and needs. In one study of over 3,000
consumers, we learned that Japanese consumers are
motivated primarily by externally-driven needs, suchas social consideration and convenience.
They want an alternative to cigarettes that does not
disturb others with the smell of smoke, and is easy to
use in a wider range of settings.
A subsequent study of over 4,300 Japanese
consumers demonstrates that Ploom TECH deliverson these needs better than competing products,
and was rated significantly higher in terms of having
no smoke smell – a hugely important considerationin Japanese culture. With regards to convenience,
consumers rated Ploom TECH considerably higher
than the competition in terms of ease of use, lowmaintenance, and long battery life.

›› Investigating the effect (the impact of
this uptake on the body)
PLOOM TECH ATTRIBUTESSOCIAL CONSIDERATIONNO SMOKE SMELLCONVENIENCEEASY TO USE

MINIMAL MAINTENANCETOBACCO BUSINESS›› Looking at the impact on thesurrounding environment (indoor air
quality studies)

CONTINUOUS USE

CASE STUDY“No Smoking, Ploom TECH only”
in over 3,700 restaurants
As part of our commitment towards accommodating the desires of both smokers and non-smokers,
we continue to provide businesses with information on Ploom TECH to help them satisfy theircustomer needs and decide whether to allow the use of Ploom TECH on their premises.
As of February 2019, many businesses across Japan, including over 3,700 restaurants, have chosen a policy of “No Smoking,
Ploom TECH only.” This is the result of the unique ability of Ploom TECH to deliver on the no smoke-smell promise.
Following this success, similar efforts are underway to support companies across Japan in introducing “No Smoking, Ploom TECH
Only” rooms in their workplaces. We are also building partnerships with car rental companies to benefit Ploom TECH customers.
We feel that this step towards a society that is more inclusive of those who choose to enjoy tobacco will lead to a greater
understanding of the benefits of vaping products. The increased adoption and acceptance of Ploom TECH will benefit
users and society as a whole, as well as Japanese businesses that wish to accommodate the needs of their customers.

Chemical analysis and in vitro toxicological evaluation of aerosol from a novel tobacco vapor product: A comparison with cigarette smoke. Takahashi et* 1 al. Regulatory Toxicology and Pharmacology. 2018. 92:94-103
It does not imply that the health risk associated with the use of the product is relatively small compared with that of cigarettes. It compares the amounts* 2 of nine constituents, the WHO recommend to reduce as a priority, which are contained in one puff of cigarette smoke and one puff of a tobacco vapor of
Ploom TECH. Standard test cigarette (3R4F) was selected as the test cigarette product.
58* 3 Indoor air quality (IAQ) evaluation of a Novel Tobacco Vapor (NTV) product. Regulatory Toxicology and Pharmacology. 2018. 92:278-294.

Disclaimer: This section is intended only to explain the business operations of the JT Group, not to promote sales of tobacco or nicotine delivery products
or encourage smoking among consumers

59

BUILDING ON THE SUCCESS OF THE PLOOM BRAND
We are committed to continually improve our product offering. In line with this, we have developed two
innovative new products in 2018, launched in January 2019 through the dedicated online store and Ploom shops
in Japan. Our national expansion plans are on track and we will achieve full national coverage by the end of 2019.
Thanks to their different heating temperatures, the new products offer consumers different experiences.
Ploom TECH+ (Plus)

Ploom SThis new tobacco-infused, low-temperature heatingproduct leverages the unique features of Ploom
TECH, such as less smell and high usability. It allows
consumers to enjoy a powerful rich tobacco vapor,while producing less than 1% of the odor*1 andproviding a reduction of over 99%*2 in the levels of
measured potentially harmful constituents comparedto cigarette smoke.

We have entered the Heated Tobacco category
with Ploom S, a high-temperature heating productthat offers a superior tobacco taste. Compared tocigarettes, it produces less than 5% of the odor*1 andprovides a reduction of over 90%*2 in the levels of
measured potentially harmful constituents.

The launch of these products will be boosted by the strong support of the JT Group in Japan, with both devices
co-branded with Mevius, the country’s #1 cigarette brand and benefitting from our leading in-market salesforce
capabilities – a critical advantage. Please see page 56 to learn how these new products fit into our Reduced-Risk
Product portfolio.

TOBACCO BUSINESSRECYCLING SCHEMES FOR PLOOM TECH
We encourage consumers to dispose of empty
capsules and cartridges from their devices in a
responsible manner.
In Japan, we introduced a recycling program whererecycling boxes were sent out to almost 270,000
people so that they could return their empties forrecycling conveniently and free of charge.
The program was a significant extension of a similarpilot conducted in 2017, where 16,000 recyclingboxes were distributed.
In addition, we sent recycling boxes to shops selling
Ploom TECH, thus providing consumers with theoption to return the items in person.
The 2018 program was a success, with 1,375,487
empty capsules and 329,394 empty cartridges
returned for recycling.
Following positive feedback from consumers, we willcontinue to investigate a more holistic approach torecycling and waste management.
We have already begun a similar program in
Switzerland and hope to roll out further programs
across our Ploom TECH markets in 2019.
Results of the research based on the three-point comparative odor intensity indication method by six people who have passed the olfactory test. Cigarette* 1 smoke and Ploom TECH+ and Ploom S tobacco vapor, which contains constituents derived from tobacco leaves, were diluted with odorless air in thebags, and the odor of each bag was statistically quantified as the “dilution factor of just no odor”.

60

It does not imply that the health risk associated with the use of the product is relatively small compared with that of cigarettes. It compares the amounts* 2 of nine constituents, the WHO recommend to reduce as a priority, which are contained in one puff of cigarette smoke and one puff of a tobacco vapor of
Ploom TECH+ and Ploom S. Standard test cigarette (3R4F) was selected as the test cigarette product.

Disclaimer: This section is intended only to explain the business operations of the JT Group, not to promote sales of tobacco or nicotine delivery products
or encourage smoking among consumers

61

E-Vapor Brand Focus: Logic
With 4 E-Vapor devices and 15 rich flavors, products
under the Logic brand ensure consumers can enjoya superior and flavorsome vaping experience. Logic
products are currently sold in 11 countries and we
aim to expand this to 20 markets by the end of
2020. All products are developed in line with strict
international quality standards*.

RESPONSIBLE RECYCLING AND DISPOSAL SCHEMES FOR LOGIC
Launched in the U.K. in 2018, Logic Compact is thelatest device in our lineup. By providing high levelsof convenience in terms of both portability and easeof use, we expect that this new device will help us
to deliver the benefits of vaping products to an evenwider audience of adult smokers and vapers.

We take our responsibility for the environment very
seriously and provide consumers with advice andsupport to help them conveniently and safely recycle

or dispose of Logic products at the end of their usefullife. This is tailored to local requirements, and moredetails can be found on Logic websites.

HOW WE MANAGE LOGIC WASTE

DIRECTLY WITH CONSUMERS

THROUGH OUR PARTNERS

In the U.K. and Germany, we provide consumers
with a convenient way to return any old Logic tip,battery, or charger to us for safe disposal.

In the U.S. and France, we partner with waste
management specialists who help consumers
to easily and safely recycle or dispose of device
components.

logicvapes.co.uk/econo-weeelogicvapes.us/social-responsibility

TOBACCO BUSINESSLATEST REGULATORY DEVELOPMENTS
ON E-CIGARETTES IN 2018
It is in the public interest for regulation to be evidence-based, proportionate, and effective. We support
the principles of Better Regulation (see page 65), which argue for measures that preserve consumer
choice and market freedom. Regulation of Reduced-Risk Products is fast-moving and we monitor
developments closely. The following are just a few examples of some key regulatory developments
around the world in 2018.
CanadaAn important recent
development in North
American regulation is thelegalization in Canada ofe-cigarettes containing
nicotine.
The new Tobacco and Vaping
Products Act establishes more
liberal provisions regulating
the commercialization andpromotion of e-cigarettes.
In 2019, it is expected thatprovisions for manufacturers
to make reduced-risk claims
will be included in the Act.

*
62

Global standards: IEC 60335-1, IEC 60950-1. – EU standards: EN 55014-1, EN 55014-2, EN 60335-1, EN 60950-1, EN 62133, Directive
2006/66/EC on Batteries and Accumulators, Regulations (EC) No. 1907/2006. – US standards: FCC, CFR 47 Part 15 Subpart B (Federal
Communications Commission. Code of Federal Regulations, Volume 47, Part 15, Subpart B), Electromagnetic compatibility, UL 1642 Standard for
Lithium Batteries (CEC).

Switzerland
On April 24, 2018, theFederal Administrative Court
ruled that the 2015 ban on
retail of nicotine liquids for
e-cigarettes was illegal.
This ruling is based on the“Cassis-de-Dijon” principle,
whereby all goods permitted
for retail in the EU, should
also be allowed to be sold in
Switzerland.

U.K.
On August 17, 2018, theU.K. House of Commons’
Science and Technology
Select Committee publishedits report on e-cigarettes andnovel tobacco products towidespread media coverage.
The report is highly supportiveof liberalizing the regulationof e-cigarettes due to clear
evidence that they aresubstantially less harmful thanconventional cigarettes.

Disclaimer: This section is intended only to explain the business operations of the JT Group, not to promote sales of tobacco or nicotine delivery products
or encourage smoking among consumers

63

Optimizing theregulatory environment

OUR TOBACCO PRINCIPLESOPENNESS ABOUT THE RISKS OF SMOKING

1

Championing better regulation
for informed choice
We value and support the freedom for adults to makeinformed choices, and we play our part by ensuring
all consumers understand the associated risks when
deciding to smoke or not. That is why we are astransparent about our positions on smoking andhealth as possible. It is also why, no matter what wedo, we adhere to the five core principles that define
our attitude to smoking (see opposite page). We also
work in a highly regulated operating environment,
and monitor developments and prepare for changes
in regulation well in advance. This is done in linewith our tobacco principles, so that we go above andbeyond our obligations.

2
OUR COMMITMENT

We will ensure the Company isincluded in policymaking leading
to fair and balanced regulationand enhance our cooperation withgovernments to combat illegal trade.

PLAIN PACKAGINGPRODUCT DISPLAY BANS

We believe products that do not involve
combustion and do not produce tobaccosmoke are products with the potential toreduce the risks associated with smoking.
We are committed to developing andbringing to market Reduced-Risk Productsthat meet consumer expectations. We will
help adult consumers to make informed
choices by providing factual informationacquired through scientific assessment
about the products they may wish to use.

Minors should not smoke and should not beable to obtain tobacco products. This belief
is central to our Code of Conduct, marketing
practices, and the way we do business.

Smoking carries risks to health, and appropriate andproportionate regulation of the tobacco sector is bothnecessary and right. To meet public policy goals,
whilst respecting the rights of all stakeholders, it isimportant that regulation is evidence-based, practical,
enforceable, and competitively neutral.
To help lawmakers develop Better Regulation, theOECD has endorsed the internationally-recognized‘Guiding Principles for Regulatory Quality and
Performance’, which we support. These can besummarized as:›› Openness
STAKEHOLDER PARTICIPATIONIN REGULATORY PROCESSES›› Proportionality›› Participation›› Effectiveness›› Accountability

INGREDIENTS

5ACCOMMODATION BETWEEN SMOKERS
AND NON-SMOKERS

Many people have concerns about exposure
to environmental tobacco smoke. We
advocate tailored, practical, and effective
solutions, that separate smokers andnon-smokers while accommodating thelegitimate interests of both. Further tothis, we are committed to developing andbringing to market Reduced-Risk Productsthat also have the potential to reduce theimpact of smoking to others.

SUPPORTING ‘BETTER REGULATION’›› Coherence

64

4

TOBACCO BUSINESSOur views on specific regulatory topics can be read
online: www.jti.com/about-us/our-business/our-viewson-regulation.

Smokers want to know what it is they aresmoking, and we provide information about
the ingredients we use.

REDUCED-RISK PRODUCTS

3

OUR TARGETATTRACTIVENESSYOUTH SMOKING PREVENTION

TRANSPARENCY ABOUT OUR PRODUCTS

We will always protect our ability toparticipate in public policy debate withthe aim to achieve balanced regulationthat meets societal concern and supportsbusiness growth.

E-CIGARETTES

Smoking is a cause of serious diseases, andeveryone should be appropriately informed
about the health risks of smoking.

A key aspect of Better Regulation is a transparent
legislative process, one that involves all interested
and affected parties.
With regulation affecting our products and ourindustry, we exercise our right to make our views
known, by engaging openly and transparently withgovernment stakeholders (including regulators), nongovernmental organizations, and all other relevant
stakeholders. We seek to ensure that the regulatoryenvironment encourages innovation, businessgrowth, and freedom of consumer choice so that wemay better serve the needs of consumers, society,and our business.
We engage openly in regulatory process at all stages,
and take part in public consultations by providingarguments supported by evidence and alternative
solutions.
We support public discussions on the topics of good
governance, Better Regulation, and transparency.
We demonstrate our commitment to Reduced-Risk
Products and provide tangible solutions to societal
issues.

65

OUR VIEWS ON REDUCED-RISK
PRODUCT REGULATIONSPOTLIGHT:
BRANDING BAN

The tobacco industry is undergoing a transformation
as Reduced-Risk Products gain popularity in many
countries. We believe that these products offer real
benefits to consumers and society (see page 56), andthat consumers should be free to choose them.

The ability to build and use a brand is essential forbusinesses to thrive and economies to prosper.
Distinctive branded packaging is vital for competition,and enables consumers to identify, obtain information
about, and choose their preferred brands of tobacco
products easily and without confusion. However,branding bans are imposed on the tobacco sector
in certain parts of the world, and these are notbased on, or consistent with, a credible andscientifically rigorous understanding of the behaviorof smokers. These types of restrictions are also
being considered for other consumer products.
Since the implementation of the plain packaging
policy in Australia in 2012, followed by France, theU.K., Ireland, New Zealand, and Norway, no studies
have shown convincing evidence that it reduces thenumber of people choosing to smoke.

Governments and regulators should avoid restrictive
regulation that suppresses innovation and prevents
adult consumers from selecting these products.
We are committed to working with regulatory
authorities, public health bodies, and the scientificcommunity, to create the best possible frameworks
for these products to reach their full potential, and alevel playing field for all manufacturers.

REGULATORY DEVELOPMENTS
IN 2018

No new recommendations or decisions were takenthat directly impact the JT Group and its products at
COP8 and MOP1. Although we continue to be denied
a voice at such events, which we believe is wrong,
we will persist in closely monitoring the evolution of
the FCTC and the Protocol, and share our views withdecision makers wherever possible.

66

Whilst we are prevented from attending events suchas COP8 or MOP1, we do attend other industry
events such as the Global Tobacco and Nicotine
Forum (GTNF), where we are able to engage witha wide variety of stakeholders and make our voiceheard.
We attended GTNF 2018 in London, a key
international conference where commentators
gathered to discuss the future of the tobacco andnicotine industry. The forum attracted over 315
participants from academia and public healthauthorities as well as the tobacco industry. A lively
debate reflected the mixed audience and discussions
focused heavily on the inconsistent regulation of
Reduced-Risk Products.

Consequently, we believe these bans fail to achieve
stated public policy objectives and are, in fact,
excessive and misguided.

In 2018, the WTO Panel on Plain Packaging ruledin favor of Australia. The decision is a major step
backwards for the protection of intellectual property
rights internationally. It sets a precedent that could
encourage governments to ban branding on otherproducts without providing any reliable evidence ofbenefits to the public interest. The Panel decision
has been appealed by the Dominican Republic and
Honduras and the dispute is now before the WTO
Appellate Body, which will deliver a final outcome.

Expert Reports on the impact of these plan packaging
bans can be read here:
www.jti.com/about-us/our-business/key-regulatorysubmissions

Disclaimer: This section is intended only to explain the business operations of the JT Group, not to promote sales of tobacco or nicotine delivery products
or encourage smoking among consumers

TOBACCO BUSINESS

We continue to follow the evolution of the WHO
Framework Convention on Tobacco Control (FCTC).
The Protocol to Eliminate Illicit Trade in Tobacco
Products (the Protocol) came into force on 25
September 2018, and October saw the eighth sessionof the FCTC Conference of the Parties (COP8), as wellas the first session of the Meeting of the Parties to
the Protocol (MOP1).

ENGAGING WITH OURSTAKEHOLDERS

What’s more, plain packaging has serious negative
consequences for society and consumers. It makes
counterfeit products easier to produce, distribute,and sell. This encourages criminality and impacts
government tax revenues. Consumers and retailers
struggle to tell the difference between brands, which
damages competition and affects business. It also
infringes our rights to property, expression, and trade,
without proper justification.

67

IN FOCUSTACKLING THE ILLEGAL TRADE OF OUR PRODUCTS

IN FOCUSTACKLING THE
ILLEGAL TRADE OF
OUR PRODUCTS
Experts estimate that over 10% of all cigarettes sold globally (excluding China) are illicit, withapproximately 45 billion U.S. dollars in global tax revenue lost each year. This illegal trade
fuels human trafficking, organized crime, and terror groups; and undermines legitimate
tobacco businesses. It also causes harm to consumers, as uncontrolled products circumvent
regulations and quality controls.
Tackling illegal trade is a top priority for us, and our Anti-Illicit Trade team is recognized as
the industry leader in combating this problem.

Our approach
Our global Anti-Illicit Trade team investigates theillegal tobacco trade and protects consumers andsociety, as well as our business, from criminal
elements. It is made up of dedicated professionals
with many years of public service in law enforcement,
regulatory bodies, and governments. A key part ofour business, the team works with our markets tosecure our supply chain, and assist law enforcement
to remove illegal tobacco from the marketplace. It
maintains a robust dialogue with governments andlaw enforcement agencies on the threat of illegal
tobacco through public-private partnerships. Our
Anti-Illicit Trade team also supports other areasof our business with research on illegal tobaccoand raises awareness of the problem among ourbusiness partners, consumers, and society in general.
The team protects the JT Group’s business andreputation, supporting our long-term, sustainable
future.

Increasingly, we are examining ways to tackle illegal
trade across our entire value chain. This is resulting ina more transparent and collaborative relationship with
suppliers of items such as tobacco leaf and cigarette
filters. We have regular meetings with these suppliers
and manufacturers to try to help them prevent theirproducts from falling into the hands of criminal
networks. Our Anti-Illicit Trade team also supports ourcompliance and purchasing departments by carryingout due diligence checks to ensure we are entering
into contracts with trustworthy suppliers, and byhelping these departments to implement JTI’s policies
and procedures.
We continue to closely monitor the way in whichorganized crime groups use shipping routes and weare working with various law enforcement agencies
across the world, such as the World Customs
Organization, Interpol, and Europol, to help themtrack containers suspected to be transporting illegal
goods.

OUR COMMITMENT

We will ensure the Company isincluded in policymaking leading
to fair and balanced regulationand enhance our cooperation withgovernments to combat illegal trade.

THE JTI APPROACH TO TACKLING ILLEGAL TRADE

2

3

TOBACCO BUSINESSPROACTIVELY COMBATING ILLEGALTOBACCO GLOBALLYPREVENTING THE DIVERSIONOF OUR PRODUCTS BY CRIMINALS

2

3

OUR TARGET

We will engage in dialogue with law
enforcement agencies, with the goal toexchange intelligence regarding illegal
tobacco products, in order to support the
reduction of illegal tobacco products.

KEY WINS IN 2018
WE ADVISED 1,329 LAW
ENFORCEMENT OFFICERS ON
COUNTERFEIT RECOGNITION

With the goal of reducing the
supply of illegal products

OVER 2.7 BILLION ILLEGALCIGARETTES SEIZED

32% DECREASE IN SEIZURESOF OUR GENUINE PRODUCTS

Thanks to intelligence reports
provided by our team to law
enforcement

Resulting from our efforts
to ensure the security of our
supply chain

Our Seizure Investigation
Review Committee
collaborates with market
task forces and customers
to secure our
supply chain

Share investigation
results with law
enforcement andidentify criminals
involved in diverting
our product

Formulate strategy
and prioritize issues

Activate strategy totackle illegal trade

1

4

1

4

Analysis of market
dynamics and risks(e.g. Legitimate Market
Demand program)

Work with our markets
and law enforcement
to investigate andcombat illegal tobaccoand identify further
risks

Analyze authenticity of
seized products andidentify sources ofgenuinediverted productLaw enforcementtakes action against
criminalorganizations(arrests/raids/seizures)

PRODUCT SEIZURES BY LAW ENFORCEMENT

68

69

IN FOCUSTACKLING THE ILLEGAL TRADE OF OUR PRODUCTS

Supporting business performancethrough anti-illicit trade programs
Our global anti-illicit trade programs create theopportunity for public-private partnerships to combat
highly organized criminality. They are also designed
to support our business performance by fulfilling
all legal requirements, securing our supply chain,safeguarding and creating opportunities for volume
and profit growth, while protecting our company’s
reputation.
We measure their effectiveness against the below
KPIs:›› Number of seizures based on information we sharewith law enforcement›› The level of illicit trade in our top markets throughanalysis of empty pack surveys, and the reduction
we help achieve›› Implementation of our compliance programs›› Strengthening partnerships with law enforcement
agencies, especially through training.

STRATEGY, INITIATIVES, AND PERFORMANCEKEY STRATEGIESMaking a positive impact
in the Philippines
In 2017, the JT Group acquired Mighty Corporation, the second largest tobacco company
in the Philippines. The country faced challenges with regards to illegal trade, notably in
relation to locally made counterfeit packs, imported counterfeit products from China,
packs of local brands with reused tax stamps, and illicit whites* with no tax stamps at all.

1

For our acquisition to make a positive impact to the business, we set up several tailor-madeanti-illicit trade projects in late 2017. Working together with JTI Philippines and various
government agencies, our Anti-Illicit Trade team successfully established processes forreporting illegal activity to law enforcement, who in turn took the necessary action against
illegal trade.
Through this new system, in 2018 we were able to pass on information about illegal
factories, storage areas, and even large retail markets where illegal sales were taking place.
The results have been very positive, with the latest available figures suggesting that illegal
trade dropped by around 50% from September 2017 to the end of 2018.

TOBACCO BUSINESSCASE STUDYPROTECT OUR BUSINESSTHROUGH ANTI-ILLICITTRADE OPERATIONS

Focus on priority regions
and markets
Combat counterfeit
and illicit whites

ENSURE ANTI-ILLICITTRADE COMPLIANCE

2

Fulfil legal obligations
Legitimate Market Demand
analyses and seizure
investigations

KEY INITIATIVES

2018 PERFORMANCE

Anti-illicit trade task
forces set up in priority
markets

In 2018, new task forces were
set up in our Russia, Ukraine, andBelarus priority markets.
In 2018, our intelligence led tothe seizure of over 2.7 billion
cigarettes (or equivalent in
tobacco)Efficient and effective responses
to information requests by law
enforcement agencies

We responded to over 500 law
enforcement information
requests in 2018, and are fullycompliant with all of our legal
obligations

Global media
campaigns to
educateconsumers on
the impact ofillegal trade

In 2018, we advised 1,329 law
enforcement officers on
counterfeit recognition›› 110 million illegal cigarettes seized in 2018›› Including 60 million counterfeit JTI cigarettes – an increase of 400% vs 2017›› Over 25 machines used in the production of illegal cigarettes removed from factories(this is crucial to reducing the counterfeiters’ future production capabilities)
Our Anti-Illicit Trade team continues to work with law enforcement to tackle illegal tobacco.

*
70

3

STRENGTHEN OURPARTNERSHIP WITH
CUSTOMERS, GOVERNMENT,AND LAW ENFORCEMENT

Knowledge sharing with law
enforcement
Implement anti-illicit tradeawareness programs

Advise law
enforcement on
counterfeit
recognition‘Illicit whites’ refer to tobacco products manufactured legitimately but without any product flow control measures afterwards, and smuggled andsold in another market.
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IN FOCUSTACKLING THE ILLEGAL TRADE OF OUR PRODUCTS

Protecting our businessIn 2018 our Anti-Illicit Trade team provided 1,328
intelligence reports to law enforcement agencies,
leading to the seizure of more than 2.7 billion
illegal cigarettes. Based on our information, law
enforcement raided more than 39 counterfeit tobacco
factories and storage locations.
As a direct result of our work to tackle illegal trade,and based on seizure statistics, notified seizuresof counterfeit products in the EU have increasedby 82% over the past four years. During the same
period, notified seizures of our own genuine productsin the EU have decreased by 57%, thanks to ourmarkets’ efforts in securing our supply chain, with thesupport of the Anti-Illicit Trade team. This has been
acknowledged by both the EU and the U.K.’s HM
Revenue and Customs, which recognized JTI as anindustry leader in the fight against illicit trade.

A GLOBAL RESPONSE TO ILLICIT TRADE
The Protocol to Eliminate Illicit Trade in Tobacco
Products is the first protocol to the WHO Framework
Convention on Tobacco Control (FCTC). It enteredinto force on September 25, 2018 and has so far been
ratified by 48 Parties.

EU SEIZURES OF TOBACCO PRODUCTSRESULTING FROM JT GROUP EFFORTS TOTACKLE ILLEGAL TRADE ( IN MILLION STICKS )200

This international treaty aims to eliminate all formsof illicit trade of tobacco products, through several
provisions that are binding on its Parties. We support
the Protocol, as it provides a global response to theglobal problem of illicit trade.

165.8
150

One of the main requirements is that the Parties
must implement a Track and Trace regime by 2023
100

(for cigarettes) and by 2028 (for all other tobacco
products). In order for this regime to be effective, we
support the implementation of an architecture basedon “open standards” and interoperability for every
actor in the supply chain, whilst taking into accountexisting systems such as the new EU-wide Track andTrace system.
We also firmly believe that the fight against illicit
trade can only be effective if governments develop
ways to address products that are not covered by theProtocol, such as counterfeits or illicit whites.

102.3
90.9

84.9

50

LEGITIMATE MARKET DEMAND
PROGRAM
Companies worldwide seek to understand thedemand for their products in their markets but there
is a clear distinction between market demand, and“Legitimate” Market Demand (LMD).
JTI must comply with the European Union
Cooperation Agreement signed in 2007. This means
supplying tobacco products only in volumes that
correspond with the legitimate demand of theintended market of retail sale.
With a commitment to doing the right thing, in theright way, our Anti-Illicit Trade Research team hasdeveloped a global methodology to assist JTI’s
markets with a consistent and accurate approachto annual LMD calculations. Our markets performthe LMD exercise in conjunction with their annual
plan. This creates a proactive supply chain control
mechanism to make sure that the planned sales
volumes are in line with LMD.
The components and parameters of the LMD
estimation vary depending on each market’s uniquecharacteristics and JTI’s product portfolio in thatmarket, but the global methodology provides a logicaland defendable standard.
One common factor among these varying
calculations is that our demand estimations comply
with all laws and regulations.

72

31.7
FY 2015
Counterfeit products

19.8
FY 2016

17.1
FY 2017

13.6
FY 2018

Genuine JT Group products

TOBACCO BUSINESS

Ensuring anti-illicit tradecompliance

TRACK AND TRACE
Our Track and Trace program has been an importantelement of our compliance policy for more than adecade. It helps our global efforts to support law
enforcement agencies and has been developed withmany of the biggest technology companies acrossthe world, as part of our obligations within the EU
Cooperation Agreement.
A highly technical and complex process, our Trackand Trace program requires markings on all individual
and aggregated levels of products. It helps us to track
the movements of the products along the supply
chain and supports our supply chain analysis. As aresult, when seizures are brought to our attention,
we can identify the source of diversion of the seizedproducts and implement preventative measures.
In 2019, some JTI markets will be implementing amandatory Track and Trace system. Among thosecountries will be the 28 Member States of theEuropean Union, as per the European Tobacco
Products Directive (TPD2). According to this directive,
products must be tracked to the last economic
operator before the first retail outlet in all Member
States.
We are currently preparing for the important changes
that the new EU Directive entails and are working
with key stakeholders in order to comply in the mosteffective way, while ensuring our EU markets will not
be disrupted.

CASE STUDYTaking the fight to the digital world
The illegal tobacco trade was once largely confined tostreet corners or under the counter, but the digital age has
given rise to a new era, with social media exposing moreconsumers than ever to the risks of illegal tobacco.
Our project to tackle illegal online trade expanded acrossWestern Europe in 2018. It yielded excellent results,
disrupting sales through the takedown of links and social
media posts that advertise JTI products illegally.
In 2018, we took down:›› Over 5,960 posts›› Over 65,300 items
These results represent 710,433 U.S. dollars worth ofpotential product losses to the JT Group, a decreaseof approximately 14% over 2017. We believe that thisdecrease is due to a change in tactics by criminals, who areincreasingly selling products in secretive private groups onsocial media. Our efforts continue to evolve to meet thechanging patterns of this crime.
In addition to successfully taking down these illegal
advertisements, we continue to collaborate with law
enforcement agencies, providing evidence that leads toprosecutions. In October 2018 for example, a JTI Private
Prosecution led to a conviction in the U.K. of an individual
who pleaded guilty to six offences relating to illegal sales
on Facebook.
Drawing upon this continued success, similar projects
have now launched in the Americas and Eastern Europe
regions.
For more information on how we tackle
the illegal tobacco trade online, seewww.jti.com/our-views/new-era-illegal-trade73

Investing in people

Talent development

Our approach
Our sustainability journey is dependent on the skills
and spirit of our people working together with thecommunities in which we operate. We are pleased to
be an employer of choice, and our positive workplaceculture and environment help us to attract and retain
talented individuals. We will continue developing theskills and capabilities of our talented employees andtake further steps to create a diverse and inclusive
culture where everyone can feel comfortable and bethemselves.
We provide a safe and healthy environment for our
employees as we believe our people have the right toa secure workplace.
To make societies cohesive and inclusive, we invest
in the communities in which we operate, and in
the people who live there. Through our community
investment programs, we create positive impacts andgive our employees the chance to volunteer in theirlocal communities and enhance their skills. In order
to assess how effective our management approachis in our tobacco business, we have set targets
for ‘Talent Development’, ‘Workplace Safety’, and‘Community Investment’, and we will be setting atarget for ‘Diversity and Inclusion’.

OUR COMMITMENT

We will be the employer ofchoice by investing in people.

A fast-changing world continues to bring newchallenges to our Talent Management team. The skills
our company will need in the future could be very
different to those we have within our business today.
Employees are fundamental to generating returns
and securing the long-term success of our business.
We aim to ensure that we attract the best candidates
to work for our business, retain our top talent, andoffer current and future employees professional

and personal development opportunities in the best
possible working environment. With this in mind, in2018 we rolled out a new global learning platform
featuring various face-to-face and digital courses,
including leadership and language learning. These
courses are available to 20,000 employees who canchoose programs according to their interests.
We explain our initiatives as a Group on page 36.

CASE STUDY

Spreading the word

OUR TARGET

We will be a certified employer of choice every
year in at least 60 locations by focusing on talentmanagement, rewards, and empowerment.

TOBACCO BUSINESSThe tobacco industry is undergoing a major transformation, and we want to make people aware of the newopportunities that our company offers. In recognition of our need for a stronger employer brand, we launched the‘Join the Idea’ HR campaign in 2018 with the aim of making our company more visible and attracting the right internaland external talent. Our ‘Join the Idea’ campaign was hugely successful, and after its launch, the JTI Facebook pagegained five times more followers than before.
Thanks to this campaign, we have significantly raised the profile of our brand, which is already rated as a first-classemployer in 53 markets. Our intention is that by focusing on talent management, rewards, and empowerment, we will
be recognized as a certified employer of choice every year, in at least 60 locations.

In line with our vision of zero workplace injuries,
we will reduce injury rates by 25% by 2023 and50% by 2030. (Baseline year: 2015).

As the global authority on recognizing
excellence in people practices, we aredelighted to support your ambition tocontinuously improve the HR policies
that affect more than 45,000 employees
worldwide. Over the years, we haveseen great progress with regards to bestin-class Talent practices throughout
the organization. This is proven by theconsistent presence of JTI in the top
regional ratings, and the Company’s
certification as a Global Top Employer
since 2015.
David Plink,
CEO – Top Employers Institute74

APPLYING OUR POLICIES AROUND
THE WORLDAs part of our drive to expand the businessgeographically, we have made acquisitions in newmarkets. In 2017, we acquired tobacco manufacturers inIndonesia and the Philippines, and in 2018 we acquired
additional tobacco companies in Russia and Bangladesh.
These acquisitions considerably increased the size of ourworkforce.
We endeavor to introduce our HR and Health and Safety
policies to our new employees as soon as we can, andmake sure that these are endorsed across the Group.
Please refer to the GRI index at the back of thisReport for detailed information about our workforce
composition.

75

Diversity and inclusion

Workplace safety

We strongly believe that diversity in the workplaceleads to competitive advantage. Greater diversity ofthought and experience leads to enhanced innovationand creativity. In addition, we are convinced that ourpeople prosper in a workplace where differences
are valued. In some respects, we are alreadyhighly diverse – our workforce includes over 100
nationalities in more than 120 countries. However, inorder to further strengthen our organization, we wish
to increase diversity in other areas and within senior
management across our Group.

Howard Parks,
Senior Vice President, Human Resources & Chief Compliance
Officer, JT International76

In our tobacco business, the highest safety risk
relates to driving vehicles and riding motorcycles.

We proactively identify the risk profile of our fleetsin the countries in which we operate. This allows us
to target and tailor our training programs to local
conditions and to ensure our drivers and motorcycle
riders adopt best practices.

CASE STUDYAt this stage, we are still developing targets for global
diversity and inclusion programs. In our international
tobacco business we have engaged external advisorsand spoken to employees across the business toassess the strengths and weaknesses within ourorganization.
The 17 members of the Executive Committee of ourinternational tobacco business are fully committed
to making the organization more diverse andinclusive, and they each have a personal mentor tohelp improve their understanding and engagement.
We have also created a diversity and inclusion
framework to drive change and appointed a thought
leader in Diversity and Inclusion to lead our efforts inthis area.
Read more about our HR philosophy and initiatives
across the Group on page 36.

Reducing incidents by 50%
through our Motorcycle
Safety program
Driving is a critically important area of safety for us, as it can lead to serious
injuries and even fatalities. In countries where safety standards and awareness arelower, and ingrained driver behavior is less risk-averse, the danger from driving ishigher. To address this issue, in 2016 we launched a motorcycle risk management
program in countries where employees drive motorcycles daily, such as Zambia,
Malawi, and Tanzania. We are now planning to implement this program in
our newly acquired operations in markets such as Indonesia and Ethiopia.

TOBACCO BUSINESSThe fair treatment of all employees is a
key element of our focus on diversity andinclusion. I am delighted to announce
that we obtained Gender Pay Equity
certification in our Geneva office, led
by the EQUAL SALARY Foundation.
We still have more to do in our focus
areas, but we are determined to harness
the richness of our talent, ideas,
backgrounds, perspectives and skills, tocreate business value.

We strive to achieve zero injuries and make safety
a priority so that all of our employees return homeunharmed by their work activities.

The motorcycle program is designed to reduce risks by teaching thetechnique of ‘defensive driving’ to reduce accidents, and focusing on theproper maintenance and inspection of vehicles. It emphasizes the need towear proper protective equipment, such as helmets, gloves, and high-visibility
jackets. Moreover, thanks to the Train-the-Trainer sessions, we now have 38
specialized motorcycle trainers who can provide training in their countries.
The program has had a significant impact on safety performance. In 2018,
the number of motorcycle-related injuries in the countries where we
implemented the programs was reduced by 50% compared to 2016 and 2017.

77

CASE STUDY

Making a positive
contribution to societies
As a responsible business, we wish to create apositive social impact in our local communities.
Our local programs are designed to make ourcommunities more inclusive and resilient, while
also providing volunteering opportunities for our
employees to engage with local communities anddevelop a variety of soft skills. We will continue
to make efforts to meet our target to help makecommunities more inclusive and resilient.
We explain our approach on page 24.

Building sustainability
through resilience and relief
OUR COMMITMENT

We will be the employer ofchoice by investing in people.

OUR TARGET*

Between 2015 and 2030 we will invest 600
million U.S. dollars to help make communities
inclusive and resilient, with our employees
contributing 300,000 volunteering hours.
*This is a Group-wide target.

The JTI Foundation is a charity specializing in Disaster
Management. The JT Group contributes 2 million U.S.
dollars* every year, and all funds go towards disaster
relief, disaster recovery, and building resilience indisaster-prone environments. Communities become
truly sustainable when they are not only able torespond to disasters and undertake reconstruction
work, but also when they are resilient to disasters.
In July 2018, a devastating earthquake struck theIndonesian island of Lombok. Many of Lombok’s citizens
were left in urgent need of shelter, sanitation, food, andwater. Through our partners, GEA and Shelterbox, the
JTI Foundation provided disaster relief. Just a few days
after the initial quake, humanitarian relief (blankets
and food) was delivered to 3,200 people and emergency
shelters were distributed to 600 displaced families.

CASE STUDYWhen two massive earthquakes struck Mexico in
September 2017, many families were left without
a home. Together with our partner, Habitat for
Humanity International and its Mexico National
Organization, the JTI Foundation provided
matching funding for 140 low-income families
with new, safer houses or home improvements.
We also offered training to better prepare thecommunity for possible future disasters.

In Egypt, more than 35% of the population lives
below the poverty line, and in rural areas, many
people do not have regular access to clean water.
This situation contributes to a cycle of poverty, as illhealth and the need to access water diverts residents’time and resources away from work and business.
Recognizing that water poverty is part of a wider
problem, we partnered with Resala, one of thecountry’s largest NGOs. With the help and supervisionof Egyptian municipalities and the Egyptian Water
Company, we built the infrastructure required todeliver piped clean water to eight villages. Local
employees participated in the project as volunteers,
and approximately 300 houses have now received
clean piped water, benefitting around 1,800 people.
Our staff were involved in the project selection, decisionmaking, and overseeing the legal aspects of the work.
Volunteering created a sense of belonging in what is arelatively new market for the Company. For the inhabitantsof the villages, the project brought not only clean water
but also hope. Until we reached out to them with water,most people there felt neglected by society. The successof the project is not only seen in the clean water flowing
through the new pipes, but also in the improved healthand productivity in the communities we reached.

78

TOBACCO BUSINESS

Bringing water and hopeto rural Egypt

Although disaster-affected areas can be reconstructed,
resilience is key to ensuring the well-being of people andcommunities. In the Philippines, the JTI Foundation
partners with Build Change to increase families’ physical,
economic, and social resilience to natural disasters. In
particular, we have worked to build resilience among
the informal settlement communities located in the cityof Makati – these are built on unstable, disaster-prone
flood plains in the region of Metro Manila. Our project
ensures the long-term sustainability of communities
here. We helped retrofit 90 poorly built houses, trained
90 local builders and homeowners, and have also helpedby offering innovative financing mechanisms securing
affordable funding for 450 local slum dwellers.

*

The amount in U.S. dollars was calculated using average exchange rate (1 U.S. dollars = 0.98 CHF).

79