In this section

Environmental management > P.39
Energy and GHG emissions > P.40
Resource efficiency – waste and water > P.42
Biodiversity > P.44

05 Environment
Environmental protection is a critical partof our responsibility to society. We work hard
to identify, understand, and reduce ourenvironmental impacts, going beyond strictlegal minima. We do this not only because
it is the right thing to do, but also because it
delivers business and cost benefits.
Our commitment to environmental protection
is reflected in the JT Group Environment
Charter and Environmental Policy. Ourcommitment is wide-ranging and focuses on
our whole value chain, from the procurementof raw materials to production, distribution,and sales.
To deliver improvements across the business,
we have set targets in four key areas:
prevention of global warming by reducing
greenhouse gas (GHG) emissions, protection ofwater resources through sustainable water use,
protecting biodiversity, and prevention of waste
and promoting recycling along with effective
resource use. Our newly developed Long-term
Environmental Plan outlines initiatives that
aim to deliver these goals by 2020.

38 | JT Group Sustainability Report

Environmental management
Three critical factors drive our commitment to reducing the environmental impacts of our business: our legal obligations, our businessperformance, and our responsibility as a corporate citizen.
Compliance with all relevant laws and regulations is our baseline everywhere we operate. Beyond compliance, there are soundbusiness reasons for effective environmental management. By reducing consumption of resources such as energy and water, as well
as avoiding waste, we minimize our impacts while also reducing costs. We also recognize our obligation to preserve resources andprotect the environment so that future generations can enjoy the same opportunities that we benefit from today.

Management approach
The JT Group Environment Charter and Environmental Policy
provide the foundation for our commitment to environmental
protection. They require that we reduce our environmental
impacts in every country that we operate in and acrossour entire value chain, from raw materials procurement toproduction, distribution, and sales. Our Environmental Policy
applies to all operations and covers the following areas:• Management systems: establish effective environmental
management systems and continually improve them
• Compliance: comply with environmental laws and regulations
everywhere that we operate• Products and services: reduce environmental impacts of our
products and services in their development phase, taking into
account potential impacts on biodiversity• Process and supply chain: reduce environmental impacts
and optimize the use of natural resources at all stages of ouractivities, taking into account potential impacts on biodiversity.
We encourage suppliers to understand and abide by ourEnvironment Charter• Environmental education: develop environmental awarenessamong employees through education and training, andencourage them to take personal responsibility for theenvironment• Environmental communication: openly communicate ourenvironmental performance and engage with our stakeholders
to build trust

The JT Group Long-term Environmental Plan

To support our Environment Charter and Policy, in 2014 wedeveloped a Long-term Environmental Plan to 2020. The Plan
outlines medium- and long-term improvement targets andinitiatives in four key areas:• Prevention of global warming by reducing GHG emissions• Protection of water resources through sustainable use of water• Protection of biodiversity through sustainable stewardship ofthe natural environment• Prevention of waste and promoting recycling along witheffective resource use
The Plan also aims to enhance our environmental management
approach on a global basis and deliver improvements inenvironmental data reporting.

Environmental responsibilities

Responsibility for environmental management rests with JT’s
Executive Deputy President. The head of each operating divisioncontrols environmental management within their division andrelevant Group companies. The Group Executive Committeemonitors performance and developments in environmental
management.

Environmental management systems

The JT Group’s environmental management system (EMS) isbased on the ISO 14001 environmental management standard.
Using a formal EMS ensures that our processes are consistentand systematic across the business and that we continually
improve our environmental performance.
All manufacturing sites are encouraged to obtain ISO 14001
certification. Non-manufacturing sites, such as research anddevelopment facilities and distribution centers, can seek formal
certification or implement their own ISO 14001 compliant EMS.
Smaller sites and offices use simplified versions. By using
different levels of EMS, we manage environmental impacts
according to the nature and scale of an individual operation.
In 2013, 100% of our Japanese domestic tobacco factories
and 78% of our international tobacco business factories werecertified to ISO 14001. Recent acquisitions in our international
tobacco business explain the lower figure, and we are working
towards all manufacturing sites becoming certified to ISO
14001.
JT Group Sustainability Report | 39

Environment

Environment Charter and Environmental Policy05|

Energy and GHG emissions
As a company that uses agricultural commodities as a key component in many of our products, climate change poses a potential
long-term risk to our operations. Temperature changes, shifting weather patterns, and water scarcity could all have an impact on
agricultural growing patterns and productivity, affecting the security of our supply chain. As a result, we have set long-term targets tomeasure, manage, and reduce our GHG emissions.

Managing emissions
We started measuring our energy and GHG emissions in
1995. All of our sites are required to produce action plans withquantified energy and/or emissions reductions targets that
include details of investments required and the payback period
for investments. In this way we have a continual focus on
monitoring our performance and identifying opportunities for
improvements.

Measuring emissions across our value chain

In addition to direct (Scope 1) emissions from fuel use at oursites and indirect (Scope 2) emissions from the electricity we

GHG emissions across
the JT Group value
chain (2013)
All of our Scope 1 and 2 emissions are
externally verified. Currently, some of our
Scope 3 emissions are externally verified,including emissions from purchased
non-tobacco materials in our Japanese
domestic tobacco business and tobacco
leaf for both Japanese domestic andinternational tobacco businesses. Scope
3 employee travel data in our international
tobacco business is also externallyverified.

purchase, we have been monitoring GHG emissions for the
JT Group’s entire value chain (Scope 3) since 2011. Althoughthese Scope 3 emissions are outside the direct control of the JT
Group, this process allows us to identify the areas responsible
for the greatest emissions and to examine the most effective
way to reduce them.
In 2013, approximately 87% of the total GHG emissions of the
JT Group came from Scope 3 sources, with 13% coming fromScope 1 and 2. The main sources of Scope 3 emissions are theproducts and services we purchase (55%) and transport anddistribution of our products (15%).

Scope 1 and 2

Capital goods

Purchased goods and services

OthersTransportation and distribution

GHG emissions throughout value chain 5.95 million tons
Scope 3 emissions 87%

13%

Targeted reductions
We have set long-term GHG targets for 2020:• To reduce the JT Group GHG emissions (Scope 1 and 2) by
20% by 2020 compared to 2009
• To reduce GHG emissions from our tobacco business per
million cigarettes equivalent by 20% by 2020 compared to2009• To monitor GHG emissions through the JT Group’s entire value
chain (Scope 3 emissions) and to establish an effective way to
reduce these emissions
We will deliver these targets through focused efficiency
programs, including an ongoing, comprehensive energy survey

55%

8% 9%

in our production facilities. We are also targeting fuel efficiency
and emissions from our vehicle fleet. For example, we provide
eco-efficient driver training and run high-stack loading of trucks.

Performance
The tables show our performance on Scope 1 and 2 emissions
for the whole JT Group. Our Scope 1 and 2 emissions havesteadily decreased over the past few years as a result of
increased focus on monitoring and improvement measures.
With a reduction of 11.5% in emissions over 2009, we are wellon track to achieve our emissions reduction target for 2020.

GHG emissions (Scope 1 and 2) *A
Total Scope 1 and 2 GHG emissions (1,000 tons)

GHG emissions intensity (Scope 1 and 2) *A
GHG emissions intensity for tobacco business (tons / million cigarettes equivalent)

40 | JT Group Sustainability Report15%2009 2010 2011 2012 2013
903

880

836

830

799

2009 2010 2011 2012 2013
0.73

0.76

0.73

0.75

0.73

Carbon Disclosure ProjectIn the last two years that the JT Group has been reporting to the Carbon Disclosure Project(CDP), on a Group-wide basis, we have seen improvements in our disclosure score for
effective emissions management. Our disclosure score has risen from 83 in 2012 to 96
in 2013.

Initiatives to reduce emissions

05

Vending machines are a key sales channel
for our beverage business in Japan, andwe focus on reducing their energy use.
Energy efficiency measures include
installing low-energy LED lighting (49% of
our vending machines have LED lighting)and optimizing lighting hours. 59% of ourbeverage vending machines have energyefficient heat pumps and 100% havepeak cut systems, where the refrigeration
compressor is shut down during peak load
hours in summer to save power.

Supply chain partnership

Promoting eco-driving

Our international tobacco businessis actively developing a supply chain
carbon management strategy. As part ofthis, we have partnered with 23 of ourleading international suppliers to focus
on emissions reduction in areas outside
our direct control. We are also working
with directly contracted farmers to reduce
emissions from fertilizers and tobacco
curing, the two main sources of GHG
emissions in our tobacco supply chain. For
more details on initiatives in our supply
chain, see pages 30–37.

We undertake a variety of eco-driving
training across the JT Group. In ourinternational tobacco business, this has
included training fleet drivers to reduce
fuel consumption and emissions. In ourbeverage subsidiary, sales representatives
took part in an eco-driving contest between
August 2013 and January 2014. The
contest involved the whole sales fleet
of more than 100 vehicles and aimed to
improve fuel efficiency as well as prevent
accidents.

Investing in saving
In 2011, we conducted an energy survey
covering 20 factories in our international
tobacco business. The survey identified 100
energy saving capital-investment projects
with a combined investment of US$17
million. Senior management provided fullbacking for the investment, which will bedelivered between 2011 and 2015. The
result of these projects should be a 7%
net reduction in energy consumption by
2015 with a similar reduction in carbon
emissions.

evaporators that are eight times more
efficient. This single change is expected
to reduce energy consumption across ourinternational manufacturing sites by 2.4%.
The survey also highlighted that ongoing
review of energy efficiency opportunities isessential. As a result, factories will continue
to review their operations annually to buildon the survey findings and maintain apipeline of energy efficiency improvements
beyond 2015.

One of the highlights of the survey, and thebiggest single saving, came at our Yelets
factory in Russia. In 2013, we replaced
evaporators used in the production of
tobacco sheet with new

JT Group Sustainability Report | 41

Environment

Energy saving vending
machines

Resource efficiency - waste and water
As a business with significant global manufacturing operations, using resources efficiently is a high priority across the JT Group. Our
main areas of focus are reducing waste and increasing recycling, and using water efficiently and responsibly. This not only provides
environmental benefits, but also delivers cost savings and drives efficiency in our operations.
We project waste generation and water use at each of our sites as part of the planning cycle at our operations. We also assess ourprocesses and equipment to identify and implement waste reduction and water efficiency programs.

Our Long-term Environmental Plan prioritizes waste prevention
through continuous promotion of the 3R waste hierarchy –Reduce, Reuse, Recycle.
Our factories are the main source of waste generation across
the JT Group, and we started to monitor and record waste data
in 1995. The challenge we face is to improve the detail of ourwaste monitoring in order to identify improvement initiatives
and enable good practice sharing between operations. We
remain focused on this challenge and anticipate continued
improvements in this area.
The waste recycling rate in 2013 was 75% across the business,stable since 2012.

Performance
Our total waste generation has steadily reduced since 2009. In 2013,
we achieved a reduction of around 8% in overall waste generation over
2012.
160
Total waste generation (1,000 tons) *A

Waste

140
120
100
80
60
40
20
0

2009

Sustainable waste management practices in Malawi

42 | JT Group Sustainability Report

2010

2011

2012

2013

Initiatives to reduce waste

05

Environment

Photo by Natsuki Yasuda / studio AFTERMODEReducing packaging weight
The JT Group’s beverage business is
reducing the weight of cans and PET
bottles used for its beverages, andTableMark, our processed food subsidiary,is also reducing packaging materials where
possible. Changing the base paper used incontainers for some of our beverages, from
170g/m2 to 160g/m2 resulted in a reductionof 148 tons of packaging in 2013.

Support the food bank
‘Second Harvest Japan’
The JT Group’s beverage and processedfood subsidiaries support Japan’s first foodbank, Second Harvest Japan (http://2hj.
org/english). Through Second Harvest
Japan, products with cosmeticallydamaged packaging that are within theirsell-by date and have no safety concerns
are donated to welfare and support
organizations such as orphanages, womenshelters, and shelters for people without
homes. This support has the dual benefitof helping people in need at the sametime as stopping products that cannot besold commercially from becoming waste.
According to the Ministry of Agriculture,
Forestry and Fisheries of Japan,
approximately 17 million tons of food is
destroyed every year in Japan.

Halving waste in Jordan
In 2013, our factory in Jordan produced
five and a half billion cigarettes while
delivering a 48% reduction in waste. Witha specific focus on non-tobacco packaging
materials and raw material packaging,
the factory worked with employees andexternal suppliers to reduce waste througha commitment to reducing, reusing, andrecycling. Actions included reusing steel
and plastic drums as water containers
for agriculture, or as chemical mixing
containers for chemical companies, andthe creation of furniture from items such asaluminum foil, wooden covers, and plastic
containers.

JT Group Sustainability Report | 43

Sustainable water use
Many of our products are made from natural components; thus, we consider the conservation of water resources as one of themost important environmental issues for the JT Group. Our Long-term Environmental Plan includes a goal to conduct a waterrisk assessment for all our businesses and to establish appropriate protective and remedial measures in the coming years. The
risk mapping process will involve assessing water scarcity and availability forecasts up to 2050, as well as flood, regulatory, andreputational risks.

Performance
Our global water consumption has steadily decreased since 2009. In
2013, we achieved a reduction of around 8% in total water consumption
over 2012.

Total water consumption *A (1,000m3)

16,00014,00012,00010,000Wastewater treatment plant in Malawi

8,000
6,000
4,000
2,000
0

2009

2010

2011

2012

2013

Until recently, our tobacco processing plant in Malawi
discharged its wastewater to a municipal treatment facility. To
ensure wastewater at the site is properly treated prior to release,
our international tobacco business has built an on-site treatment
plant for all wastewater. The plant will ensure that wastewater isprocessed and re-used on-site when it becomes fully operationalin 2014.

Biodiversity
Biodiversity plays an important part in natural processes that are critical to agricultural productivity, such as crop pollination. Linked
to this, tobacco is usually grown in biologically diverse areas, so we collaborate with our supplier farmers to minimize biodiversity
impacts in our tobacco supply chain.

Our approach
We do not currently have a uniform approach to biodiversity
across the JT Group. It is, however, a focus of our Longterm Environmental Plan. This outlines our commitment andapproach towards biodiversity to 2020 and establishes a goal toassess the impact of our worldwide operations on biodiversity.
Once we understand our impacts better, we can establish

44 | JT Group Sustainability Reportmeasures to protect biodiversity in a way that responds to theneeds and challenges in our operating locations. We launcheda program to assess our biodiversity impacts in 2014, and we
expect to complete this in the next two years.

Biodiversity in our supply chain
Our approach is to focus on aspects of biodiversity where we can make a difference directly or have a positive influence on thoseworking in the tobacco supply chain. This includes:

05

Agrobiodiversity relates to biodiversity on farms. A key factor
in this area is including tobacco growers in the process ofmanaging biodiversity on their tobacco farms. Our aim withagrobiodiversity is to establish tobacco production systems
that are economically viable, socially acceptable, andenvironmentally sustainable. Our developing approach toagrobiodiversity is currently being monitored and studied in our
agro-research center in Brazil (ADET) through several baseline
studies in tobacco growing areas in collaboration with local
universities and NGOs.

Tree planting

Growing and planting trees is central to our sustainability
approach and serves two purposes. Agroforestry is our main
focus, and is designed to ensure an adequate and sustainablesupply of wood for tobacco curing. But we also reforest areas
where trees have been cut down for use as timber and firewood.
Please see page 37 for further details.

Good agricultural practices and integrated pest
management

Integrated pest management helps farmers with pest control
and ultimately reduces the use of pesticides, which may riskthreatening biodiversity.
A large part of our approach is assessing and tackling socialand economic factors that lead to biodiversity depletion andunsustainable natural resource use, in particular deforestation. A
large part of this is working with, and educating, growers on thebenefits of considering and managing biodiversity on their farms
and promoting the adoption of best practices.

Protecting endangered forests in Brazil

In Brazil, we are supporting a project with the Brazilian NGO
SPVS (Society for Wildlife Research and Environmental
Education) to avoid deforestation in Paraná State. Through the
project, we have adopted a 100-hectare area of the endangered
Araucaria forest for a period of five years. Protecting the forest
for this period allows time for environmental improvements to
be made to the land based on a conservation plan developed
and monitored by SPVS.

We aim to promote agricultural practices that support
sustainable tobacco production and meet our requirements, atthe same time as improving productivity and returns for farmers.
JT Group Sustainability Report | 45

Environment

Agrobiodiversity