OUR TOBACCO BUSINESS

4S modelOur management approach and our approach to sustainability are
underpinned by our 4S model. Consumers, shareholders, employees, andsociety represent the four stakeholder groups (4S) at the heart of everything
we do. Our commitment to serving these groups is represented in thismodel and throughout the report. Based on the principles of the 4S model,
we always strive to exceed the expectations of our four stakeholder groups,
wherever we can.

We strive to fulfill our responsibilities to our valued consumers, shareholders, employees, and the wider
society, carefully considering the respective interests of these four key stakeholder groups, and exceeding theirexpectations wherever we can.

89For our Group to grow and build a sustainable futurewith our stakeholders, we have selected a list ofmaterial issues or key issues with high priorities.
This list was compiled for the first time in 2015,
by engaging internal and external stakeholders,

including employees, suppliers, investors, tradeunions, non-governmental organizations (NGOs), andindustry organizations. We are committed to carryingout materiality reviews on a regular basis in order toupdate issues that are important to us.

HIGH

IMPORTANCE TO EXTERNAL STAKEHOLDERS

Corporate
governanceandtransparency

Laws andregulations

Product safety
and productresponsibility

Supply chain
management

Product
innovation andintellectual
property

Environment

MEDIUM

Respecting
human rights

Environmental
impacts ofproducts

Information
security

Anti-competitive
behavior

Being aresponsible
employer

Anti-bribery
and corruption

Illegal trade

Workplacehealth and safety

Collaborations
andpartnerships

Employeedevelopment
and talentmanagement

Equality anddiversity inthe workplaceTax practices

Contributions
to society

Political andregulatory
decision-making
processes

Responsible
marketing

MEDIUM

Our supply chain

HIGH

Our Company

The foundations of our sustainability strategy,
applying across the Group, are our ‘Three absolute
requirements for sustainability’:

Respect forhuman rights
We are committed to respecting humanrights across our global operations andvalue chains, as expressed in the JT Group
Human Rights Policy.

Litigation

IMPORTANCE TO THE JT GROUP

Value chain boundaries

The foundationsof the JT Groupsustainability strategy
Our sustainability strategy is based on our Group’smateriality assessment and underpinned by our 4S
model. It encourages us to look beyond our usual
planning cycle period and think about the longevity ofour business, the future of our planet, and the society
we live in.

THE JT GROUP MATERIALITYOUR SUSTAINABILITY STRATEGY

Our material issues

Our customers and consumers

Since the first materiality assessment was carried out, we have noted increasing concern about the adverse
effects on our environment. We share this concern and have therefore repositioned ‘Environment’ from MediumMedium to High-High in the above matrix. We will continue to strive to reduce environmental impact on ourplanet.

An improved social andenvironmental impact
We are committed to protecting theenvironment and making a positive difference
wherever we operate.

Good governance andbusiness standards
We are committed to promoting transparent,
fair, and timely decision-making that carefully
considers the respective interests of consumers,shareholders, employees, and the wider society.

Read more on JT.com.

1011

We formulated and introduced our tobacco businesssustainability strategy in 2017. It illustrates theimportant choices we have been making for years– and will continue to make – across all of ourmarkets and business functions to drive sustainability
throughout the entire organization. We have chosen
four focus areas which we consider to be essential
for the sustainability of our tobacco business and forour stakeholders.

OUR SUSTAINABILITY STRATEGY

Committed tothe UN Sustainable
Development Goals

Tobacco businesssustainability
strategy
In 2018, our sustainability strategy evolved further,with eleven specific targets set for each of the four
focus areas. These will provide a solid basis formeasuring and benchmarking our sustainability
performance, and support the sustainability of theJT Group. We will be updating our progress regularly,
as we strive to contribute and fulfill our commitmentsthat we have made to our stakeholders and toourselves. To learn more about our targets, pleasesee page 14.

The four strategic focus areas
PRODUCTS AND SERVICES

SUPPLY CHAIN

We 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 reduce environmental andsocial risks, and enable transparent
and responsible practices across oursupply chain.

Our commitment
In order for our Group to achieve sustainable growth,
it is essential for our business to contribute to thesustainable development of our society. We maintainongoing dialogues with our stakeholders and work
continuously on a variety of sustainability issues tofulfill our responsibilities.
Our Group supports the United Nations’ Sustainable
Development Goals (SDGs) and their related targets
in the context of its own business and operational
environments. Our commercial strategies andbusiness practices support the global goals, and wehave developed specific targets and initiatives that
contribute to the SDGs’ global agenda. We take ourresponsibility to manage our business sustainability
very seriously. Our Group’s three businesses –tobacco, processed food, and pharmaceutical – differ
by sector, scope, and size, and therefore each one
contributes to the SDGs in different ways.

Prioritization process
WITH TARGETS SET FOR:
REDUCED-RISK PRODUCTS

WITH TARGETS SET FOR:
GREENHOUSE GAS EMISSIONSWATER AND WASTE, FORESTRYAGRICULTURAL LABOR PRACTICESSUPPLIER SCREENINGPEOPLEREGULATORY ENVIRONMENT
AND ILLEGAL TRADE

We will be theemployer of choice byinvesting in people.

WITH TARGETS SET FOR:ZERO INJURIESCOMMUNITY INVESTMENTEMPLOYER OF CHOICE

12In 2018, we determined how our approach tosustainable business is aligned with the SDGs. We
mapped the activities of our tobacco business against
all 17 SDGs and concluded that our tobacco business
contributes most significantly to the following ninegoals. We intend to undertake the same process forthe other two businesses in the Group.

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

WITH TARGETS SET FOR:ENGAGEMENTILLEGAL TRADE

13

4 strategic focus areas

aspirational goaltarget*PRODUCTS
AND SERVICES

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

REDUCED-RISK PRODUCTSPEOPLEWe will be the employer of choice by investing inpeople.

ZERO INJURIESsdgs

Reduced-Risk Products (RRP) offer real benefits to consumers andsociety. Our responsibility as a manufacturer is to continuously
develop and launch RRP that meet consumer expectations and toprovide information on them. We will lead in providing the widest
range of consumer choice in the RRP category.

In line with our vision of zero workplace injuries, we will reduce injury
rates by 25% by 2023 and 50% by 2030. (Baseline year: 2015).
COMMUNITY INVESTMENT

Between 2015 and 2030 we will invest 600 million U.S. dollars tohelp make communities inclusive and resilient, with our employees
contributing 300,000 volunteering hours.
EMPLOYER OF CHOICE

We will be a certified employer of choice every year in at least
60 locations by focusing on talent management, rewards, andempowerment.

SUPPLY CHAIN

We will reduce environmental and social risks, andenable transparent and responsible practices acrossour supply chain.

GREENHOUSE GAS EMISSIONS

We will reduce greenhouse gas emissions from our own operations
by 35% and from our direct leaf supply chain by 40%, between 2015
and 2030.
WATER AND WASTE

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

We will replace all wood from natural forests used in the tobacco
curing process of our directly contracted growers with renewable fuelsources by 2030.
AGRICULTURAL LABOR PRACTICES

We will implement our Agricultural Labor Practices (ALP) program inall sourcing countries by 2025.
SUPPLIER SCREENING

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

REGULATORYENVIRONMENT
AND ILLEGAL TRADE

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

ENGAGEMENT

We will always protect our ability to participate in public policy debatewith the aim to achieve balanced regulation that meets societal
concern and supports business growth.
ILLEGAL TRADE

We will engage in dialogue with law enforcement agencies, with thegoal to exchange intelligence regarding illegal tobacco products, inorder to support the reduction of illegal tobacco products.
14*The targets are for the JT Group’s tobacco business, except for Community Investment which is a Group-wide target.

15OUR SUSTAINABILITY STRATEGY

Driving sustainability acrossour tobacco business

The SDGs provide a shared blueprint for peace and prosperity for people and the planet, now and into the future. The goals
recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education,
reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
That makes sense to us at the JT Group. We share and support these goals and here are the specific ways in which we believe,
we can contribute to achieving some of the goals.