JT GROUP SUSTAINABILITY REPORT FY2017

Basis of
ReportingIntroduction
This Basis of Reporting document outlines the scope, and the way we define, calculate, andconsolidate specific compliance, human resources (HR), health and safety, environment, andcommunity investment related data within the JT Group Sustainability Report FY2017, andassociated GRI Index. We aim to update the Basis of Reporting document each year, and to
expand the list of data in the future.
KEY
Definitions
In this section we clarify the meaning we attach to specific terms used as part of our performance data points.

Scope
This section states the scope of the data (correct forthe business structure of JT Group as of December
31, 2017) and any exclusions, if applicable. We report
data for the entire JT Group, including subsidiaries,
wherever possible. In the middle of 2015 JT Group
withdrew from the beverage business. As a result, we
excluded this business from historic reported data from2015, or stated otherwise where that was not possible
or appropriate. We use the following scope notations:*A = the entire JT Group, including subsidiaries(i.e.,international tobacco, Japanese domestic tobacco,
pharmaceutical, and processed food businesses)*B = solely Japan Tobacco Inc. (JT) (includes Japanese
domestic tobacco and pharmaceutical businesses, andexcludes international tobacco business, processed foodbusiness, and subsidiaries of all businesses)*C = Japan Tobacco Inc. (JT) and Japanese domestic Group
companies (includes subsidiaries of Japanese domestic
businesses, excludes international tobacco business)*D = Japan Tobacco Inc. (JT) and Japan Tobacco International(JTI)*E = solely Japan Tobacco International (JTI) (international
tobacco business)

Data calculation, consolidation method,
and assumptions
In this section we provide information for the calculations,formulas, consolidation method, and any assumptions or
estimates used.

Assurance
In this section we provide, where applicable, information on
the standard against which specific indicators are assured
and the level of assurance or verification.

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BASIS OF REPORTING

Compliance

Compliance

BASIS OF REPORTING

Compliance

SOCIETY – ANTI-CORRUPTIONGRI G4-SO4
Communications and training on anti-corruption policies and procedures

HUMAN RIGHTS – NON-DISCRIMINATIONGRI G4-HR3
Total number of incidents of discrimination and corrective actions taken
Definitions
An incident of discrimination is described as an act of treating an employee differently by imposing unequal burdens or
denying benefits, rather than treating each employee fairly, based on individual merit. Discrimination can also include cases ofharassment, which is defined as comments or actions that are unwelcome, or should reasonably be known to be unwelcome,to the person toward whom they are addressed, which has the purpose or effect of violating an individual’s dignity or creating
an intimidating, hostile, degrading, humiliating, or offensive environment.

Scope
The scope of this data covers the entire JT Group, including subsidiaries (*A).

Definitions
The number of employees includes those who receive communications on anti-corruption policies and how to report corruption
matters, including email reminders and material published through internal communication channels, such as our intranet andcompany magazine. The number of employees who underwent training include those who took e-learning courses, as well as
employee induction training content related to anti-corruption policies and how to report corruption matters.

Scope
The scope of this data covers solely JTI (*E).

Data calculation, consolidation method, and assumptions
The number of employees who underwent anti-corruption training is calculated by combining the number of employees who
received anti-corruption training in 2016 and in 2017.
The percentage is calculated using the above numbers, divided by the number of employees as of the end of 2017, exported
from our HR system.

Data calculation, consolidation method, and assumptions
The number of grievances are counted based on exported data from our Reporting Concerns management system.

SOCIETY – GRIEVANCE MECHANISMS FOR IMPACTS ON SOCIETY

GRI G4-SO11
HUMAN RIGHTS – GRIEVANCE MECHANISMSGRI G4-HR12

Number of grievances about impacts on society filed, addressed, and resolved through formal
grievance mechanisms

Number of grievances about human rights impacts filed, addressed, and resolved throughformal grievance mechanisms

Definitions

Definitions

A case is defined as ‘filed and addressed’ once it is received and recorded in our compliance systems, as actions to investigate
each case begin immediately. A case is defined as ‘resolved’ once it is closed, irrespective of what the final outcome to thecase is. Formal grievance mechanisms include both internal reporting procedures and external channels, for example, a thirdparty hosted hotline.

A case is defined as ‘filed and addressed’ once it is received and recorded in our compliance system, as actions to investigate
each case begin immediately. A case is defined as ‘resolved’ once it is closed, irrespective of what the final response to thecase is and its outcome. Formal grievance mechanisms include both internal reporting procedures and external channels, forexample, a third-party hosted telephone hotline. For JT and Japanese domestic Group companies, we include cases related tosexual harassment, moral harassment, and human relations. For our international tobacco business, we include cases related
to child labor, sexual harassment, moral harassment, discrimination, physical threats and violence, and data privacy.

Scope
The scope of this data covers the entire JT Group including subsidiaries (*A).

We have defined our main areas of impacts on society as anti-bribery and corruption, and anti-competitive behavior.

Scope
The scope of this data covers the entire JT Group including subsidiaries (*A).

Data calculation, consolidation method, and assumptions
The number of grievances are counted based on exported data from our Reporting Concerns management system.
Cases recorded as related to corruption and anti-competitive behavior make up this indicator.

Data calculation, consolidation method, and assumptions
The number of grievances are counted based on exported data from our Reporting Concerns management system.

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BASIS OF REPORTING

Compliance

LABOR PRACTICES AND DECENT WORK – LABOR PRACTICES GRIEVANCE MECHANISMSBASIS OF REPORTING

Compliance

Percentage of employees who responded to compliance survey

GRI G4-LA16

Definitions

Number of grievances about labor practices filed, addressed, and resolved through formal
grievance mechanisms

The percentage of employees who responded to our annual compliance survey, conducted online, or by a paper questionnaire.

Definitions
A case is defined as ‘filed and addressed’ once it is received and recorded in our compliance systems, as actions to investigate
each case begin immediately. A case is defined as resolved once it is closed, irrespective of what the final outcome to the caseis. Formal grievance mechanisms include both internal reporting procedures and external channels, for example, a third-party
hosted hotline.
For JT and Japanese domestic Group companies, we include cases relating to improper work instructions, management’s work
attitude, colleagues’ work attitude, personnel assessment, personnel transfers, overtime pay, retirement issues, labor contract,labor conditions, work environment, and smoke environment. For our international tobacco business, we include cases relating
to breach of HR policies and procedures, conflict of interest, retaliation, unlawful dismissal, inappropriate behavior, non-respectfor employee safety, and severely disrespectful behavior.

Scope
The scope of this data includes JT and JT Japanese domestic Group companies (*C), excluding Torii Pharmaceutical.

Data calculation, consolidation method, and assumptions
The data is calculated based on an assumption that all employees with a valid corporate email address receive the invitation tocomplete the survey, and all employees who do not have an email address receive a paper questionnaire.

Percentage of eligible employees who participated in JT Group Code of Conduct training
Definitions

Scope

The number of employees who underwent training, namely e-learning regarding JT Group Code of Conduct.

The scope of this data covers the entire JT Group including subsidiaries (*A).

Scope

Data calculation, consolidation method, and assumptions

The scope of this data includes JT and Japanese domestic Group companies (*C), excluding Torii Pharmaceutical.

The number of grievances is counted based on exported data from our Reporting Concerns management system. Excluded
from the data for our international tobacco business are HR cases that are classified as confidential.

Data calculation, consolidation method, and assumptions
The training data is calculated based on an assumption that all employees with a valid corporate email address receive
electronic communications regarding JT Group Code of Conduct.

OTHER DATA

Number of reported cases of fraud and misuse of company assets
Definitions
For JT and Japanese domestic group companies, we include relevant cases related to personal and business integrity, as wellas other company rules and regulations. For our international tobacco business, we include cases relating to fraud and theft of
JT Group and third-party assets, misuse of IT resources, and the cases of intellectual property infringements recorded under theReporting Concerns management system.

Scope
The scope of this data covers the entire JT Group including subsidiaries (*A).

Data calculation, consolidation method, and assumptions
The number of reported cases is counted based on exported data from our Reporting Concerns management system.

Number of GHE requests
Definitions
The number of gifts, hospitality, and entertainment (GHE) requests, including those reported via our GHE application portal.

Scope
The scope of this data covers solely JTI (*E).

Data calculation, consolidation method, and assumptions
Data is collected and collated through our GHE application portal.
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Human resources

Human resources
GRI G4-10
Workforce information
Definitions
Workforce consists of people working for the company at the end of 2017 as follows:›› Full-time employee is defined according to national legislation and practice regarding working time (such as national
legislation that defines “full-time”as a minimum of 9 months per year and a minimum of 30 hours per week).
›› Part-time employee is defined as an employee whose working hours per week, month, or year, are less than ‘full-time’, asdefined above.
›› Supervised worker is defined as an individual who performs regular work on-site for, or on behalf of, the organization, but is
not recognized as an employee under national law or practice.

BASIS OF REPORTING

Human resources

ECONOMIC – MARKET PRESENCEGRI G4-EC5
Ratios of standard entry‐level wage by gender compared to local minimum wage at significant
locations of operation
Definitions
Significant locations for this indicator are defined as JT Tokyo HQ, JTI Geneva HQ, JTI Moscow, and JTI Trier factory. Tokyo andGeneva are our headquarters, and Moscow is the HQ office of the JTI Russia market – this market has the highest number of
employees in our international tobacco business.
Standard entry-level wage is defined as the theoretical lowest wage in the location and is therefore equal to, or lower than,
the actual lowest wage paid in the entity. Local minimum wage refers to compensation per hour or other unit of time for
employment allowed under law. For Tokyo, we use the official minimum wage of the Tokyo metropolitan area.
For Moscow, we use the official minimum wage of Moscow City. For Trier, we use the official German minimum wage.
For Geneva, there is no official minimum wage.

Scope›› Temporary contract is defined as a contract for a limited duration or determinate period.

For our international tobacco business, the scope includes permanent full-time and part-time employees, and temporary fulltime employees. In JT, the scope includes only permanent full-time and part-time employees. Temporary full-time employees
are excluded.

Scope

Data calculation, consolidation method, and assumptions

For the breakdown of supervised workers, the scope is only JT and Japanese domestic Group companies (*C). Workforce
information broken down by JT Group businesses includes entities where an SAP‐system has not yet been introduced, toensure consistency with JT Annual Report FY2017.

For the data reported under JT Tokyo HQ, the basis for calculation is hourly minimum wage and monthly entry-level wage. For
the data reported under JTI Trier factory, the basis for calculation is hourly minimum wage and hourly entry-level wage. For thedata reported under JTI Moscow, the basis for calculation is yearly minimum wage and yearly entry-level wage.

›› Permanent contract is defined as a contract for an indeterminate period.

Currently, the gender breakdown of temporary part-time employees cannot be provided by JT and Japanese domestic Group
companies, as we calculate this number based on full-time equivalent.

GRI G4-EC6

The gender breakdown of supervised workers cannot be disclosed, because we do not record this kind of data. No substantial
portion of our work is performed by workers who are legally recognized as self-employed, or by individuals other thanemployees or supervised workers, including employees and supervised workers of contractors.

Proportion of senior management hired from the local community at significant locations ofoperation

Data calculation, consolidation method, and assumptions

Definitions

The figures are calculated based on exported data from our HR systems.

Significant location of operation for this indicator is chosen based on the number of employees. In 2017 our biggest market interms of employees was the Russian market. Geneva HQ and Tokyo HQ are not included, as they are not representative for thisindicator, due to the high proportion of senior management.
Senior management is defined as:

GRI G4-11›› all people that report directly to the General Manager (including himself/herself)

Percentage of total [eligible] employees covered by collective bargaining agreements›› all people that report to the head of Marketing and Sales

Definitions›› the Head of IT, who reports to the Chief Financial Officer

An employee is covered by a collective bargaining agreement if the employee declares their intentions to be part of a tradeunion and pays periodical union dues.

Scope
The scope of this data includes JT and Japanese domestic Group companies (*C), including 24 Group companies and excluding
22 Group companies. Data from our international tobacco business is excluded, because the law in some of the countries
where we operate prohibits us from investigating whether an employee is unionized.

Data calculation, consolidation method, and assumptions›› the Security Director and Anti-Illicit Trade Director, who report to the Head of Legal.

Scope
This indicator includes both full-time and part-time senior managers, but currently all senior managers are full-time employees.

Data calculation, consolidation method, and assumptions
The proportion is calculated as the number of senior management hires from the local community as of the end of 2017,
divided by the total senior management as of the end of 2017.

Data is calculated as of the end of 2017, using data held in our HR systems.

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Human resources

BASIS OF REPORTING

Human resources

LABOR PRACTICES AND DECENT WORK – EMPLOYMENTLABOR PRACTICES AND DECENT WORK – LABOR/ MANAGEMENT RELATIONSGRI G4-LA1

GRI G4-LA4

Total number and rates of new employee hires and employee turnover by age group, gender,and region

Minimum notice periods regarding operational changes, including whether these are specified
in collective agreements

Definitions

Definitions

New employee hires are defined as the number of new employees joining the company.

Minimum notice periods are defined as those required, if any, by law in the country where the operational change occurs.

Employee turnover is defined as the number of employees who left the company for any reason, voluntarily or not. Employee
age is classified in three groups: under 30, between 30 and 50, and above 50 years of age. Regions are defined as thegeographical business areas specified within the JT Annual Report.

Scope
The scope of this data is detailed below, and excludes employees in entities where an SAP-system has not yet been introduced.
›› The number and rate of turnover by age: the entire JT Group including subsidiaries (*A), and includes permanent full-timeand part-time employees, and temporary full-time employees. Akros Pharma Inc., Fuji Foods, and Saint-German America are
excluded from the data by age group.

Scope
We disclose significant operational changes that have substantial consequences for a large proportion of employees.
The reported information corresponds to closures or withdrawal from business publicly announced in 2017 or earlier, but which
had not been completed yet during the reporting period.

Data calculation, consolidation method, and assumptions
Notice periods are disclosed for each specific case of operational change. Notice periods are calculated and disclosed in two
different ways: the number of months between the announcement of the closure and the first redundancies, and the number ofmonths between the announcement of the closure and the closedown›› The number and rate of turnover by gender: the entire JT Group including subsidiaries (*A), and includes permanent full-timeand part-time employees, and temporary full-time employees.
›› The number and rate of turnover by region: JT and JTI (*D), and includes permanent full-time and part-time employees, andtemporary full-time employees.

LABOR PRACTICES AND DECENT WORK – TRAINING AND EDUCATION›› The number and rate of new employee hires by age: JT and JTI (*D), and includes permanent full-time and part-time
employees, and temporary full-time employees.

GRI G4-LA10›› The number and rate of new employee hires by gender: the entire JT Group including subsidiaries (*A), and includes
permanent full-time and part-time employees, and temporary full-time employees.

Programs for skills management and lifelong learning that support the continued employabilityof employees and assist them in managing career endings›› The number and rate of new employee hires by region: the entire JT Group including subsidiaries (A*), and includes
permanent full-time and part-time employees, and temporary full-time employees.

Definitions

Data calculation, consolidation method, and assumptions

We consider skills management programs that take account of employees’ needs and future career opportunities, as well as
requirements of the business.

Employees transferring from another JT Group company are excluded, and not classified as a new employee hire.
Data for these indicators is collected in our HR systems. The turnover and new employee numbers are based on exported datafrom our HR systems, at the end of 2017.
Turnover rate is calculated as the total number of turnover, divided by the total number of employees at the end of 2017, for thedefined scope above.
New employee hire rate is calculated as the total number of new employee hires in 2017, divided by the total number of
employees at the end of 2017, for the defined scope above.

Scope
We disclose global development programs within JT and JTI (*D)

Data calculation, consolidation method, and assumptions
The examples of programs are included in our GRI index.

GRI G4-LA11
GRI G4-LA2
Benefits provided to full-time employees that are not provided to temporary or part-time
employees, by significant locations of operation

Percentage of employees receiving regular performance and career development reviews, bygender and by employee category
Definitions

Significant locations for this indicator include JT Tokyo HQ, and JTI Geneva HQ.

We consider an employee to be receiving regular performance and career development reviews if the employee has anopportunity to have their development and business objectives, as well as competences, evaluated by their superior at least
once a year.

Scope

Scope

For data reported under Tokyo, the scope is solely JT (*B). The scope of data reported under Geneva is solely JTI (*E).

The scope of employees is the entire JT Group including subsidiaries (A*), and it includes permanent full-time and part-time
employees, and temporary full-time employees, but excludes employees in entities where an SAP-system has not yet been
introduced. However, the breakdown by positions include only JT and JTI (D*).

Definitions

Data calculation, consolidation method, and assumptions
Benefits for temporary part-time employees in Geneva have been stated pro rata.

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Human resources

BASIS OF REPORTING

Data calculation, consolidation method, and assumptions

The following definitions are applied for employee categories for our international tobacco business:

Data is calculated as the total number of employees who received a performance and career development review in 2016
divided by the total number of employees at the end of 2016. New hires joining in Q4 2016 in our international tobacco
business are excluded from the data, as they were not eligible for a 2016 performance review.

›› Vice President

Human resources›› Director›› Manager›› Associate

LABOR PRACTICES AND DECENT WORK – DIVERSITY AND EQUAL OPPORTUNITY

Scope

GRI G4-LA12

In JT Tokyo HQ, the scope includes permanent full-time and part-time employees, and temporary full-time employees. In JTI
Geneva HQ, the scope includes permanent full-time employees, and excludes those who are not paid in CHF, and members of
the Executive Committee.

Composition of governance bodies and breakdown of employees per employee category
according to gender, age group, minority group membership, and other indicators of diversity

Data calculation, consolidation method, and assumptions

Definitions

The figures for both JT Tokyo HQ and JTI Geneva HQ are calculated based on ‘annual base salary.’

Employee age is classified in three groups: under 30, between 30 and 50, and above 50 years of age. For JT and Japanese
domestic subsidiaries, the following definitions are used for employee categories:

In JT Tokyo HQ, each of the categories defined above (Executive Officers, Management, and Employees) includes multiple
grades. We select grades that include both female and male employees to calculate the ratio of annual base salary of women
to men. Then, those pay ratios are consolidated into the above three categories based on the weighted average of employees
within each grade. For JTI Geneva HQ, we calculate the average annual base salary by gender for each employee category
defined above. This average is used to calculate the ratio of annual base salary of women to men within each category.

›› Executive Officers are persons who are appointed by the Board of Directors, are assigned certain responsibilities, anddelegate relevant authorities in accordance with the Rules Defining the Extent of Responsibility and Authority.
›› Management is defined as persons in positions of supervision or management according to national legislation and practice,and excluding Executive Officers.
›› Employees are persons who are not in management positions.
For our international tobacco business, the following definitions are used for employee categories:›› Employees that are members of the Executive Committee are categorized as Executive Officers.

OTHER EMPLOYEE-RELATED DATA

Percentage of management positions held by women at the end of 2017›› The Vice President and Director-level employees are categorized as Management.
›› Persons of Manager level and Associate level are categorized as Employees.

Scope
The scope of this data includes the entire JT Group including subsidiaries (*A), excluding employees in entities where an SAPsystem has not yet been introduced. Akros Pharma Inc., Fuji Foods, and Saint-Germain America are included in the data by
position and gender, but excluded from the data by age group and gender. The data consists of permanent full-time and parttime employees, and temporary full-time employees. We store information only for the gender and age of our employees.

Data calculation, consolidation method, and assumptions
The figures are calculated based on exported data from our HR systems.

Definitions
In JT and Japanese domestic subsidiaries, an employee is categorized at a position of management if the employee is in aposition of supervision or management, according to national legislation and practice, but is not an Executive Officer. In ourinternational tobacco business, an employee is categorized at a position of management if the employee is Director or Vice
President level.

Scope
The scope of this data includes the entire JT Group including subsidiaries (*A), excluding employees in entities where an SAPsystem has not yet been introduced. Data consists of permanent full-time and part-time employees, and temporary full-time
employees.

Data calculation, consolidation method, and assumptions
LABOR PRACTICES AND DECENT WORK – EQUAL REMUNERATION FOR WOMEN AND MEN

GRI G4-LA13
Ratio of basic salary and remuneration of women to men by employee category, by significant
locations of operation
Definitions
Significant locations for this indicator include JT Tokyo HQ, and JTI Geneva HQ.
Unless specifically stated, the following definitions are used for employee categories for JT and Japanese domestic subsidiaries:›› Executive Officers are persons who are appointed by the Board of Directors, are assigned certain responsibilities, anddelegate relevant authorities in accordance with the Rules Defining the Extent of Responsibility and Authority.

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Data is calculated as the total number of women holding a management position at the end of 2017, divided by the total
number of employees who had a management position at the end of 2017. In JT, employees who were in management
positions, but who have been reassigned to pre-retirement positions, as they are reaching the mandatory retirement age, areexcluded from the calculation.

Percentage of management positions held by internal hires
Definitions
In JT and Japanese domestic subsidiaries, an employee is categorized at a position of management if the employee is in aposition of supervision or management, according to national legislation and practice, but is not an Executive Officer.
We define internal hires as current employees who would be reassigned to a new position by promotion or internal transfer. In
our international tobacco business, an employee is categorized at a position of management if the employee is Director level orabove.

›› Management is defined as persons in positions of supervision or management according to national legislation and practice,and excluding Executive Officers.

Scope›› Employees are persons who are not in management positions.

The scope of this data is the entire JT Group including subsidiaries (A*), and it excludes employees in entities where an SAP
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BASIS OF REPORTING

Human resources

system has not yet been introduced. Data consists of permanent full-time and part-time employees, and temporary full-time
employees.

BASIS OF REPORTING

Health and safety

Workplace Health and Safety

Data calculation, consolidation method, and assumptions
Data is calculated as the total number of management positions filled by internal hires in 2017, divided by the total number ofmanagement positions filled in 2017.

OVERVIEW OF WORKPLACE HEALTH AND SAFETY DATA
Assurance

Total number of talent partnership program exchanges
Definitions
Total number of our Talent Partnership Program exchanges is defined as the sum of employees who are transferred asfunctional or development assignees from JT to JTI, or vice versa, at the end of 2017.

Scope
The scope of this data includes JT and JTI (*D).

Data calculation, consolidation method, and assumptions
Data is calculated as the sum of the number of functional assignees and development assignees seconded between JT and JTI
at the end of 2017.

Our international tobacco business commissioned an independent services body to provide limited-level verification over
occupational health and safety performance data, and underlying data management systems. Assurance was carriedout against the International Standard on Assurance Engagements (ISAE) 3000. Absenteeism data in the finished goods
manufacturing sites and tobacco processing facilities is out of scope of the verification.

LABOR PRACTICES AND DECENT WORK – OCCUPATIONAL HEALTH AND SAFETYGRI G4-LA6Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total
number of work-related fatalities, by region, and by gender
Definitions
We define lost-time incidents (LTIs) as the sum of lost-time injuries, lost-time illnesses/occupational diseases, and fatalities.
Lost-time injury is a work-related injury that results in an individual being unable to work on a subsequent scheduled workday
or shift. Lost-time illness/occupational disease is a work-related illness/occupational disease resulting in an individual being
unable to work on a subsequent scheduled workday or shift.
Fatality is a death resulting from a work-related injury or illness/occupational disease. We record and report the following
fatalities:›› Fatal occupational injuries and/or fatal work-related ill-health cases that occur on, or across the immediate external perimeterof, our site/office to our employee while he/she is on duty, a contractor while he/she is working for us (including on-site thirdparty operations), or a person visiting our site/office.
›› Fatal occupational injuries or work-related ill-health cases that occur while an employee is away from our site/office, but oncompany business (i.e., while on duty).
›› All fatal accidents involving members of the public that are associated with JT Group’s own operations and/or associatedwith a JT Group employee while she/he is on duty.
Absenteeism is, in JT(B*) medical leave, sick leave, and absent from work without notification for permanent leave (excluding
paid leave) for temporary full-time employees. Part-time employees are excluded as out of scope.
In our international tobacco business, absenteeism is only defined in the scope below and it refers to the hours an employee
is paid but not present at the workplace due to illness supported with a medical certificate. Statutory holidays, training, andbusiness trips are excluded.

Scope›› Number of fatalities: Group-level data (A*) covers number of fatalities of employees, contractors, and third parties resulting
from an incident involving an asset, such as a facility, or a vehicle being driven for business purposes.
›› Number of LTIs: Group-level data (A*) covers employees, contractors, and supervised workers. Currently, in our international
tobacco business,lost-time illness/occupational disease only covers reported cases from the U.K. and Brazil markets.
›› LTI rate: Group-level data (A*) includes employees and supervised workers.
›› Absenteeism rate: we cover JT(B*) and global supply chain manufacturing units (the finished goods and semi-finished goods
manufacturing sites) within our international tobacco business.

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Health and safety

Data calculation, consolidation method, and assumptions
In our Japanese domestic operations, health and safety data is reported to headquarters by individual functions and Group
companies on an annual basis, while serious incidents are reported immediately. The number reported is based on the numberof health and safety related events that were submitted to, and are recognized by, relevant Japanese authority as such. In ourinternational tobacco business, health and safety data is collected at individual sites and locations, and reported internally on
an ongoing basis. Calculation is performed in the following manner:›› Number of fatalities: the sum of all fatalities within our defined scope.
›› Number of LTIs: the sum of all LTIs within our defined scope.

BASIS OF REPORTING

Health and safety

Percentage of cigarette and tobacco-related factories certified to
OHSAS 18001 safety management standard
Definitions
Cigarette and tobacco-related factories include all our leaf processing, cigarettes, and tobacco product manufacturing facilities.

Scope›› LTI rate: the number of LTIs divided by 200,000 hours worked within our defined scope.

The scope of this data is JT and JTI (*D), excluding market, R&D, non-tobacco material processing factories, and other support
services.

›› Absenteeism rate: absence hours as defined above, divided by total theoretical working hours within our defined scope.
However, in JT, the rate is calculated by total actual absent days divided by theoretical working days.

Data calculation, consolidation method, and assumptions
Certification information is collected at individual factories. The percentage is calculated as the number of certified factories
and locations, divided by the total number of all factories within scope.

OTHER DATA

Vehicle accidents and vehicle accident frequency rate
Definitions
Our Japanese domestic operations define a vehicle accident as any incident that results in death or an injury to an employee
and/or third party, and if no injury occurs, any property damage that requires an insurance claim.
Our international tobacco business defines a vehicle accident as any incident involving a fleet vehicle that results in a deathor an injury to an employee and/or third party, and if no injury occurs but property damage results, from one of the following
events:›› collision between vehicles in motion›› collision of fleet vehicle with stationary object›› single-vehicle incidents (events that involve a driver/rider overturning, spinning, skidding, and/or running off the road)›› collision with pedestrian›› collision with animal.

Scope
The scope of data covers:›› Number of vehicle accidents: covers vehicles and motorcycles used by our employees on company business in JT and ourinternational tobacco business (D*).
›› Vehicle accident frequency rate: covers the number of vehicle accidents per million kilometers driven in JT and ourinternational tobacco business (D*).

Data calculation, consolidation method, and assumptions
Vehicle accident data is collected at individual sites and locations, and reported internally on an ongoing basis. Calculation is
performed in the following manner:›› Number of vehicle accidents: sum of all vehicle accidents within our defined scope.
›› Vehicle accident frequency rate: the number of vehicle accidents divided by million kilometers driven within our defined
scope. While our international tobacco business uses actual data for kilometers driven, JT calculates it based on the volume
of fuel used by type.

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Environment

BASIS OF REPORTING

Environment

Environment

Data calculation, consolidation method, and assumptions
We calculate energy consumption, and Scope 1 and 2 GHG emissions, based on actual energy consumption at our sites andlocations from invoices and meters. Where this information is not available, in our international tobacco business, we use
extrapolations based on actual data from a similar site or location to provide estimated energy consumption, which is thenused to calculate associated GHG emissions. Production, floor area, or full-time equivalent (FTE) data are the main benchmarks
used to calculate intensity metrics that are used in the extrapolation process.

OVERVIEW OF ENVIRONMENTAL DATA
Scope
We use an operational control approach to determine the scope and boundaries of our environmental data reporting, which
covers the entire JT Group including subsidiaries (*A), as well as some affiliates, and some contract manufacturers that meet
specific criteria. Thus, coverage of environmental data is wider than other *A level data shown in the other sections of the
Sustainability Report.

For GHG reporting, in Japan we use GHG emission conversion factors set by the Act on Promotion of Global WarmingCountermeasures, 2009. In other countries, we use GHG emission conversion factors provided by the International Energy
Agency for 2009, the U.K. Department for Environment, Food and Rural Affairs, along with supplier-specific GHG emission
conversion factors, where electricity is sourced from low carbon energy sources.
For calculating Scope 3 GHG emissions, emissions factors come from a variety of sources, including emissions factors fromthird-party databases and our own life cycle assessments.

We restate our environmental data, in accordance with our recalculation policy, to take account of significant changes to ourbusiness, such as acquisitions, divestments etc. We do this so as to allow a fair comparison of environmental performance overtime. We carried out such a recalculation exercise in 2017, hence data for years prior to 2017 have been restated.

ENVIRONMENTAL – WATER AND EFFLUENTS AND WASTE

Assurance
We commissioned independent bodies to provide assurance of Group-wide energy, and Scope 1 and Scope 2 greenhouse gas(GHG) emissions. We also commissioned them to provide assurance of certain categories of Scope 3 GHG emissions: namely,
Category 1, purchased goods and services in our Japanese domestic tobacco business; Category 1, leaf-related emissions; andCategory 6, business travel in our international tobacco business. Assurance for our Japanese domestic tobacco business wasprovided against ISO 14064-3 and ISAE 3000 (revised) in our international tobacco business.
In addition, water withdrawal, water discharge, waste generation, and percentage of recycled waste of our international
tobacco business have also been verified.

GRI G4-EN8

GRI G4-EN22

Total water withdrawal by source

Total water discharge by quality and destination

Definitions
We record and report water withdrawal and water discharge at our sites and locations, and take into consideration theframework on water reporting set out by CDP.
We report total water withdrawal and breakdown by source, and total water discharge and breakdown by destination.
The reporting unit for water withdrawal and water discharge is 1,000 m3.

ENVIRONMENTAL – ENERGY

Data calculation, consolidation method, and assumptions

GRI G4-EN3

GRI G4-EN17

Energy consumption within the organization

Other indirect GHG emissions (Scope 3)

GRI G4-EN15

GRI G4-EN18

Direct GHG emissions (Scope 1)

GHG emissions intensity

GRI G4-EN16

GRI G4-EN19

Energy indirect GHG emissions (Scope 2)

Reduction of GHG emissions

Definitions
We measure energy consumption and GHG emissions using the World Resources Institute/World Business Council for
Sustainable Development Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004 revised edition)
and Greenhouse Gas Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard as guidance.
We report GHG emissions across three areas:›› Scope 1: direct GHG emissions from corporate activities, such as burning of fossil fuels at factories.
›› Scope 2: indirect GHG emissions from consumption of purchased electricity, heat, or steam.

Water withdrawal data and water discharge data are collected at our sites and locations from invoices and/or meters. If a site
is unable to report volume of water withdrawal, we use extrapolations based on actual data from a similar site or location toprovide estimated data. Production, floor area, or FTE data are the main benchmarks used to calculate intensity metrics that areused in the extrapolation process. In the absence of water discharge data, it is assumed that water discharge will be equivalent
to water withdrawal.

ENVIRONMENTAL – EFFLUENTS AND WASTE

GRI G4-EN23
Total weight of waste by type and disposal method
Definitions
Our sites manage their waste based on the following waste hierarchy: reduce, reuse, recycle, and recover. If these methods are
not feasible, a site will dispose of its waste (disposal being incineration without energy recovery, or landfilling).
We report total waste generation and breakdown by disposal method that includes both non-hazardous and hazardous waste.
The reporting unit for waste generation is 1,000 metric tons.

›› Scope 3: other indirect emissions, including from the manufacture of products bought from other companies.
The reporting unit for energy consumption is terajoules, and for GHG emissions is 1,000 metric tons CO2 equivalent. GHG
emissions intensity is reported in metric tons CO2 equivalent per million cigarettes equivalent, which covers Scope 1 and 2 GHG
emissions of our Japanese domestic tobacco and international tobacco businesses only.

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Data calculation, consolidation method, and assumptions
Waste data is collected at our sites and locations, and is reported by handling method, primarily from invoices. If a site isunable to report volume of waste generation, we use extrapolations based on actual data from a similar site or location toprovide estimated data. Production, floor area, or FTE data are the main benchmarks used to calculate intensity metrics that areused in the extrapolation process.
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BASIS OF REPORTING

Environment

OTHER DATA

Percentage of ISO 14001 certified cigarette and tobacco-related factories

BASIS OF REPORTING

Community investment

Community investment

Scope
The scope of ISO 14001 data is cigarette and tobacco-related factories, including subsidiaries, such as non-tobacco materials
manufacturing factories, within our Japanese domestic tobacco and international tobacco businesses only.

SOCIETY – LOCAL COMMUNITIESGRI G4-SO1
Percentage of operations with implemented local community engagement, impact
assessments, and development programs
Definitions
Implemented local community investment programs are defined as investments in projects that improve the quality of life ofpeople where we operate in an impactful way.
All community investment programs have a recorded output defined following the LBG criteria (www.lbg-online.net).
In 2017, we assessed impact on eight of our fifteen community investment programs at our Japan domestic market, and weare continuously improving our impact assessment methodology.
An operation is defined as a country in which we have a business presence. Investments in communities that relate to tobacco
leaf production are specifically excluded from this indicator.

Scope
The scope of this data covers the entire JT Group including subsidiaries (*A).

Data calculation, consolidation method, and assumptions
The figures are calculated based on data from our community investment database, and data sourced directly from markets,
which is cross-referenced with our finance systems to confirm that the program was implemented.

ECONOMIC – ECONOMIC PERFORMANCEGRI G4-EC1
Direct economic value generated and distributed [community investment]
Definitions
The value of community investment is the total sum of inputs as defined by the LBG criteria (www.lbg-online.net).
Investments include employee time, cash, in-kind, and management cost contributions for the programs included in indicator
G4-SO1 that are provided to benefit a community, and JT International S.A.’s annual endowment to the JTI Foundation.
The calculation of time and management cost is based on the LBG methodology. For all Japan-based employees, an averagehourly rate provided by the Japanese government is used. For our international tobacco business, cost of time is based on
an average hourly rate calculated using a weighted average salary (including bonuses) across all work groups (excluding the
Executive Committee) based on data for the year up to December 31, 2017. Cash contributions are calculated based on the
gross monetary value donated. In-kind contributions are calculated taking into account depreciation for the goods or services
provided.

Scope
The scope of this data covers the entire JT Group including subsidiaries (*A).

Data calculation, consolidation method, and assumptions
The figures are calculated based on data from our community investment database and market reports, and checked against
financial reports. All financial data is converted from local currency to Japanese Yen at the time of payment, using internallyagreed exchange rates.

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BASIS OF REPORTING

Other definitions

Other definitions
SOCIETY – ANTI-COMPETITIVE BEHAVIOURBASIS OF REPORTING

Definitions
Significant fine/Significant monetary fine is set at a level that may have a certain impact on the financial position of JT
Group. A significant fine is a fine which is reported to the designated functions of our organization, in accordance with theinternal reporting requirements. We do not report on decisions imposing the fine, penalty, or warning if they are confidential, or
not final. Neither do we report about pending actions.

Scope

GRI G4-SO7

The scope of this data covers the entire JT Group including subsidiaries (*A).

Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices
and their outcomes

Data calculation, consolidation method, and assumptions

SOCIETY – COMPLIANCEGRI G4-SO8
Monetary value of significant fines, and total number of non-monetary sanctions for noncompliance with laws and regulations

Other definitions

Information concerning significant fine/significant monetary fine is reported through an internal reporting mechanism, and inaccordance with internal reporting requirements.

Definitions
Voluntary Codes are defined as codes/commitments made with third parties. An example of such a voluntary code is the selfregulatory marketing standard of Tobacco Institute of Japan (TIOJ) with which our tobacco business in Japan fully complies. JT
Group Global Marketing Standards and other internal policies are not covered as part of voluntary codes.

Scope
The scope of this data covers the entire JT Group including subsidiaries (*A).

PRODUCT RESPONSIBILITY – CUSTOMER, HEALTH AND SAFETYGRI G4-PR2

Data calculation, consolidation method, and assumptions
Violations against voluntary code resulting in significant fines are reported through an internal reporting mechanism, and inaccordance with internal reporting requirements.

Total number of incidents of non-compliance with regulations and voluntary codes concerning
the health and safety impacts of products and services during their life cycle, by type ofoutcomes

PRODUCT RESPONSIBILITY – PRODUCT AND SERVICE LABELINGGRI G4-PR4
Total number of incidents of non-compliance with regulations and voluntary codes concerning
product and service information and labeling, by type of outcomes

PRODUCT RESPONSIBILITY – MARKETING AND COMMUNICATIONGRI G4-PR7
Total number of incidents of non-compliance with regulations and voluntary codes concerningmarketing communications, including advertising, promotion, and sponsorship, by type ofoutcomes

PRODUCT RESPONSIBILITY – COMPLIANCEGRI G4-PR9
Monetary value of significant fines for non-compliance with laws and regulations concerning
the provision and use of products and services
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