Supply chain management
Sustainable farming practices
and farmer livelihoods
Tobacco leaf sourcing is a key part of our
supply chain, and a critical component of
future business growth. We work closelywith our directly contracted growers andthird-party leaf merchants to enhance
security of supply and leaf provenance. This
gives us greater flexibility when responding
to changing market requirements.
Read more

Respecting human rights
We respect human rights across our value
chain and recognize the Universal
Declaration of Human Rights, theInternational Bill of Human Rights, and theInternational Labour Organization’s
Declaration on Fundamental Principles andRights at Work.
Read more

Copyright© Japan Tobacco Inc. All rights reserved.

Sustainable farming practices
and farmer livelihoods
How do we work with our leaf suppliers?
Tobacco leaf sourcing is a key part of our supply chain, and a critical component of future businessgrowth. We work closely with our directly contracted growers and third-party leaf merchants toenhance security of supply and leaf provenance. This gives us greater flexibility when responding tochanging market requirements.
In 2022, we worked with more than 62,000 directly contracted tobacco leaf growers in Bangladesh,
Brazil, Ethiopia, Japan, Malawi, Serbia, Tanzania, Turkey, the US, and Zambia. Contracting leaf
growers directly enables us to produce a customized crop, while improving growers’ productivity,
leaf quality and leaf integrity. The direct contracting model also allows us to maintain verifiable
provenance and traceability of leaf supply.
Various information on tobacco leaf sourcing can be found at followings.
Read about responsible procurement on JT International sustainability website.
Read about supply chain due diligence in farming communities on
JT International sustainability website.

Agricultural Labor Practices and Leaf Supply Chain Due
Diligence
Our Agricultural Labor Practices (ALP) are based on the International Labour Organization’s
conventions and recommendations. They consist of three pillars: tackling child labor, respect forworkers’ rights, and ensuring workplace health and safety.
As part of our continuous improvement approach, the ALP program allows us and our suppliers to
identify potential labor challenges on tobacco farms and help improve labor practices. This is an
integral part of the supply chain due diligence (SCDD) process, and also contributes to the social
aspects of grower communities and supports sustainable agriculture overall. Whether we source
tobacco directly from growers or through tobacco leaf merchants, our contracted suppliers arecommitted to implementing our ALP.
Our SCDD is based on a five-step framework: Identify, Prioritize, Respond, Measure, Communicate
and Report. Our ALP program helps us identify issues on tobacco farms on a daily basis.
The SCDD process follows the Guidance on Responsible Agricultural Supply Chains provided by theOrganization for Economic Co-operation and Development (OECD) and the Food and Agriculture
Organization, as well as recommendations by the International Labour Organization. It also follows
the United Nations Guiding Principles on Business and Human Rights.

Managing labor issues at country level
Where we contract growers directly, Agronomy Technicians visit farms to provide technical advice
on crop management and discuss good labor practices. Where they identify labor-related issues,
they report their observations directly into our dedicated enterprise resource planning system.
Depending on the nature of the issue, the Agronomy Technicians may also make recommendations
to the grower.

The country management analyze and prioritize these observations at country-level SCDD
Governance Committee meetings. This enables the selection of improvement measures to address
root causes and respond to adverse impacts in the most appropriate way. We track theeffectiveness of the response using KPIs, internal evaluation, assessments, and on-site
investigations. We also consult relevant stakeholders, such as government authorities, civil society,members of affected communities, workers’ organizations and workers.
Our main objective at present is to align all our processes with the five-step framework. To ensure a
streamlined and consistent approach, we continuously map synergies between our SCDD process
and the ALP program with the Sustainable Tobacco Program, an industry-wide platform enabling
businesses to collaborate on human rights, environmental issues, and other sustainability
challenges, and to drive sustainable agriculture through a continuous improvement process.
Read more on ALP in our booklet

ALP progress update

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

Progress

Towards the 2025 ALP target

100% of our supplying entities to report on ALP

2022 Progress

94% of our supplying entities reported against
ALP

100% of our directly contracted growers and 98%
100% of our growers to be covered by ALP

of our leaf merchants' growers were covered by
ALP

100% of tobacco leaf volumes to be covered by
ALP

83% of our volumes were covered by ALPHistorical data
Our target is to implement ALP in all the countries we source from by 2025. Our sourcing basechanges from year to year due to new acquisitions or closures, demand to supply impact, andclimate change. In spite of these changes, we made progress in 2022 by implementing ALP in
Bangladesh and Ethiopia, conducting supply chain impact assessments in Tanzania, Brazil andIndonesia to enable the development of targeted action plans, and delivering supply chain due

diligence webinars and learning platforms. We have a clear plan to continue the progress in 2023. A
credible, impactful implementation of our programs and processes requires time and effort.

Find out more about how we plan to achieve this target, below.

100% of our supplying entities to report on ALP
Progress so far: of all the entities that provided us with tobacco leaf, either directly or through leaf
merchants, 94% reported against ALP in 2022.

100% of our growers to be covered by ALP
Progress so far: in 2022, 100% of our directly contracted growers and 98% of the growers supplying
through our leaf merchants were covered by ALP.

100% of tobacco leaf volumes to be covered by
ALP
Progress so far: In 2022, 83% of our volumes were covered by ALP.

Sustainable Tobacco Program
Our international tobacco business is one of seven global manufacturers participating in the
Sustainable Tobacco Program (STP) Steering Committee. Two manufacturers joined the program in
2022, widening and strengthening the STP network. STP is a risk-based program (with a focus on
mapping and addressing high-risk areas and priorities), and a collaborative initiative to enable
continuous improvement in relation to supply chain due diligence. It is also an impact-driven
program. The aim is to improve the sector’s environmental and social footprints, to contributetowards meeting the United Nations’ Sustainable Development Goals, and to enable transparent
communication of responsible practices across the supply chain.
Since 2019, we have been working with other manufacturers, leaf merchants, external experts, andvarious organizations and service providers to further develop STP. Participants work together oneight themes, including Human and Labor Rights.
The development phase of the program was completed in June 2021, and full implementation is
ongoing. One Peterson continues to support the program in the role of STP Secretariat.

All our leaf merchants and vertically integrated origins are expected to submit self-assessments foreach crop season*. These assessments cover all eight of the STP’s themes: Water, Human andLabor Rights, Livelihoods, Climate Change, Soil Health, Crop, Natural Habitats and Governance. The
countries and themes for the assessments are selected following a risk matrix. Six detailed andfocused in-country assessments were executed in 2022, results are being analyzed and learning
embedded in assessments going forward. Action plans based on those assessments are required
to be developed and their progress is monitored. Currently, two more in-country assessments are
ongoing with several more planned for 2023.
The STP secretariat is performing continuous risk assessment data substantiation. This enables
smart use of data and support the dialogue for improvement of JTI’s supply chain due diligenceprocess and global view of industry collaboration.
*Our level of exposure to tobacco is over 90%.

Achieving Reduction of Child Labor in Support of
Education (ARISE)
Our flagship program ARISE - Achieving Reduction of Child Labor in Support of Education - has beencommitted to tackling child labor in our tobacco growing communities since 2011. Initiallydeveloped by JTI, the International Labour Organization (ILO), and non-profit organization Winrock
International, ARISE aims to end child labor in communities where JTI sources tobacco leaf. Today it
continues to drive positive change by implementing robust solutions to prevent child labor.
We believe that the only way to achieve a long-lasting solution to the problem of child labor isthrough the integrated efforts and cooperation of multiple stakeholders. We know that our successdepends on understanding child labor in the context of wider economic, social and cultural factors,
and that success can only be achieved with the socio-economic transformation of smallholder
farmers in rural agricultural communities. Experience has taught us that the long-term solution tochild labor is not simply to remove children from work, but to address the causes that allow childlabor to exist, and to ensure that children and their families have viable alternatives.
Through ARISE, we educate children, families, farmers and communities about the need to end childlabor. We listen to their concerns and help them understand the long-term benefits of educating
children. We provide families with the chance to develop skills and find new ways to earn an income.
We train farmers and communities so they can find new ways of working and change cultural beliefs
that put children at risk. We provide schools with resources, teachers with training, and governmentswith information so they can create relevant laws and enforce them. Our activities align withnational, regional and local government policies to improve regulatory frameworks in support of
improving labor practices, specifically reducing and eliminating child labor.

Read more about the ARISE program

Case study

Promoting Good Agricultural Practices

One of the sustainability goals that JT works
to achieve is to help ensure that Japan’s
tobacco industry will be sustainable into the
future. In that endeavor, tobacco farmers are
essential partners. Our online column “JTwith Farmers” spotlights tobacco farmers
across Japan, illustrating for readers their
passion for agriculture and the challenges
they face in farming, as well as new
initiatives and their hopes for the future. We
believe that keeping close-knit relationships
with farmers and working together withthem is fundamental to a truly sustainabletobacco industry.
Read about JT with farmers

Related links
Supply chain

Supply chain

SustainableNon-tobacco

policies andstandards

farming practices
and farmer

materials, otherproducts, andlivelihoods

services
Copyright© Japan Tobacco Inc. All rights reserved.

Respecting human rights
Commitment

Strategy

GovernanceSalient issues

ImpactDue diligenceassessments
andGoing forward

questionnaires

We operate in parts of the world where human rights are at risk, and we are therefore exposed tohuman rights-related issues, such as forced labor, child labor, bribery, and corruption.

Our commitment

JT Group Human Rights Policy
We respect human rights across our value chain and recognize the Universal Declaration of Human
Rights, the International Bill of Human Rights, and the International Labour Organization’s
Declaration on Fundamental Principles and Rights at Work. Our JT Group Human Rights Policy,

which has been approved by the JT Board of Directors, follows the framework provided by the UN
Guiding Principles on Business and Human Rights. This means working to avoid infringing the rights
of others, and addressing any adverse impacts of our global operations.
Our commitment to human rights is reinforced by our Board of Directors through our
Code of Conduct. Our Reporting Concerns Mechanism helps us ensure that we listen to and act on
the grievances of those whose human rights might be impacted by our activities. Through thislegitimate, fair, and accessible mechanism, we encourage employees and suppliers to speak up on
human rights, without fear of retribution, about any concerns they may have.
Our suppliers and growers throughout the world are obliged to respect human rights by adopting
and maintaining internationally recognized labor standards regarding child labor, rights of workers,
and workplace health and safety. They do this in line with:■

JT Group Responsible Procurement Policy■

JT Group Supplier Standards■

Agricultural Labor Practices (ALP)

To address our human rights issues, markets put in place their own customized corrective
measures through human rights action plans. We also have global programs that can be applied by
the local markets to ensure a consistent approach across the Group.
Read more:
Code of Conduct
Health, safety, and well-being of employees
Agricultural Labor Practices
Our ARISE (Achieving Reduction of Child Labor in Support of Education) program
Community Investment
Diversity, equity and inclusion

Our human rights strategy

Our approach
Our human rights strategy is based on fivepillars. This circular approach provides asystematic way of conducting ongoing due
diligence and is in line with the UN Guiding
Principles on Business and Human Rights,
the Organisation for Economic Co-operation
and Development (OECD) guidelines, and the
Food and Agriculture Organization (FAO)
guidance on responsible agricultural supply
chains.

1 Embed2 Identify and Prioritize
3 Respond

4 Measure
5 Report

Read more on “Strategy” in our Human
Rights Report.

Our progressEmbed
To create a global culture around equality, respect and human rights, since 2016 we have continuallyprovided training programs for the entire Group. The content of our very first e-learning on
respecting human rights was totally aligned to the UN Guiding Principles, and was implemented
from 2016 to 2019. The e-learning has been provided in 25 languages.
In 2022, the tobacco business launched a new company-wide human rights e-learning module. The
platform was made accessible to all tobacco business employees via desktop and mobile and in 37
languages. It offers a new way of learning about human rights through dynamic and interactive bitesize content. The training program helps enable employees to spot human rights impacts andprevent abuses occurring in our workforce and supply chain, working to instill a better
understanding of how these issues play out in practice, using practical everyday examples.
Read more on “Culture change through training” in our Human Rights Report.

Identify and prioritize
Human rights due diligence is an integral part of our business - it aligns us with the UN Guiding
Principles on Business and Human Rights, and enables us to identify actual and potential humanrights risks across our own operations and those of our suppliers and partners.
Human Rights Impact Assessments
Our Human Rights Impact Assessments focus on impacts to people within our main operations andvalue streams. Key activities during an impact assessment include visiting and observing farming,
processing, manufacturing, and sales and distribution operations. During the assessments, we
conduct a series of interviews with employees and workers, as well as representatives of suppliers,clients, and partners. At the end of the assessment, we report on the findings and discuss
recommendations for improvement with local management. Our head office then works closely withthe local team to address any issues raised and improve the situation.
In total, we have completed 10 Human Rights Impact Assessments across our entire value chain:
Bangladesh, Dominican Republic, Egypt, Ethiopia, Kazakhstan, Kyrgyzstan, Malaysia, Mexico,
Myanmar, and Tanzania.
Self-assessment questionnaires
On the recommendation of our External Human Rights Advisory Board, in 2019, we introduced aself-assessment questionnaire to evaluate the human rights profile of more countries, and toincrease the scope and impact of our human rights due diligence. Following the same methodology
as our Human Rights Impact Assessments, this smartly designed survey targets our lower-ranked
high-risk countries that have not been prioritized for Human Rights Impact Assessments in the shortterm. During the pandemic, the self-assessment questionnaire become a valuable tool for
conducting remote human rights due diligence.
In total, we have completed 19 self-assessment questionnaires across our entire value chain.
Assessments for tobacco leaf supply chain
In 2022 we also conducted three supply chain impact assessments in Brazil, Indonesia, andTanzania. These assessments provide a more comprehensive understanding of the human rights
impacts within one specific part of our value chain - our tobacco supply chain and tobacco growing
business - and the challenges that tobacco growers face in their communities. In 2022, we havealso initiated similar assessments with the same goal under the umbrella of industry Sustainable
Tobacco Program - in-depth assessments.
Our existing programs - Agricultural Labor Practices (ALP), Achieving Reduction of Child Labor in
Support of Education (ARISE) and Grower Support Programs (GSP) - fit perfectly within our five-pillar
strategy: ALP supports the identification part of the cycle, while ARISE and GSP support our
response. The ARISE and GSP programs are specifically designed to improve the livelihoods ofthose within the communities where we operate by overcoming issues such as access to educationor access to safe drinking water. Our investments include building boreholes and water distribution
points, investing in solar projects, and refurbishing structures that provide basic social services.
Read more:■

Our human rights due diligence■“Our assessments” in our Human Rights Report■

Supply chain due diligence (SCDD) programs

Respond
We develop human rights action plans for each country that has undertaken an assessment, eachwith an agreed timeline. Human rights champions have been appointed within these countries, aspart of a network. The responsibility of this network is to ensure that action plans are managed andimplemented by each country, and respect for human rights is firmly established in the business.
The human rights champions manage the implementation of the action plans locally. Our tobacco
business head office provides the champions with training materials on the UN Guiding Principles
on Business and Human Rights, as well as support with specific points within the action plans.
Read more:■“Role of local governance” in our Human Rights Report■

Human rights impact assessments and self-assessment questionnaires: key findings

MeasureWe have been measuring the effectiveness of our action plans, which include an individual set of
key performance indicators to measure the effectiveness of our improvements over time. Ourhuman rights champions track the implementation of each action item and report on a quarterly
basis to the human rights team to measure progress.
There are various ways to measure the effectiveness of our responses in our leaf supply chain. Oneof them is the number of issues which we observe during subsequent crop cycles.
Read more on Sustainable farming practices and farmer livelihoods

ReportOur understanding of our obligations under the UN Guiding Principles is to “know and show” that weare aware of the potential human rights-related risks to which we may be connected, and that we aretaking appropriate steps to manage those that occur. The UN Guiding Principles encourage
corporate transparency to the benefit of a broad set of stakeholders. We are committed to this levelof transparency and disclosure.

In 2021, to coincide with the 10th
anniversary of the United Nations Guiding
Principles on Business and Human Rights,
we published our first standalone Human
Rights Report, which examines the potential
human rights risks arising from ourworldwide operations. The report identifies
nine salient human rights issues and thesteps we are taking to remedy them.
JT Group Human Rights Report■

Integrated Report■

Our human rights correspondencewith Human Rights Watch, the UN Human Rights Council,

and The Guardian.
■

JTI UK Modern Slavery Statement (JTI UK Website)

JTI UK, the JT Group’s U.K. subsidiary,

has been publishing a Modern Slavery Act Statement yearly since 2016.

Governance
Our CEO and the Board of Directors play a key role in formulating the JT Group sustainability
strategy, which has respect for human rights at its core. They oversee and are accountable for theeffectiveness of this strategy, as they are committed to the Group achieving its sustainability
targets. The Chief Sustainability Officer is responsible for driving sustainability across the Group,
including respect for human rights.
While our CEO and Board of Directors are accountable for the strategy, governance, and reporting ofadherence to the JT Group Human Rights Policy, each local business unit is responsible for
operational implementation and has an appropriate management system to apply human rights
initiatives. This is driven by our dedicated Human Rights team, which is also responsible for raisingawareness and improving engagement internally.
To secure an effective due diligence system, it is critical to link impact assessments to effective
governance structures that ensure accountability for acting on the findings. The human rights
champions network plays a vital role to facilitate the sharing of guidance and best practice onhuman rights by those closest to the issues on the ground.
To advance the rights of our stakeholders, it is important that we listen to the advice, concerns, andcriticisms of people outside the JT Group. Therefore, we have continued to take counsel from our
Human Rights External Advisory Board.

Human Rights External Advisory Board
In our tobacco business, the Human Rights External Advisory Board plays a vital role in providing uswith a broad external perspective in the human rights area. Made up of international experts on
business and human rights, the Board advises us on all issues that the members consider relevant
for the implementation of our human rights strategy. The panel of experts guide us with theirexpertise and challenge us where they believe we need to improve, helping to strengthen our efforts
to deliver on our human rights commitments.
Board members include:■

Paul Bowden (Professor of Law, The Nottingham Law School)■

Donna L. Westerman (Sustainable Purchasing Leadership Council)■

Rona Starr (Association for Professional Social Compliance Auditors)■

Jonathan Drimmer (Paul Hastings (a leading international law firm))■

Richard Karmel (Mazars (a leading international audit, tax and advisory firm))

Supply Chain Due Diligence Committees
These committees work across the Leaf operations to ensure meaningful processes are developedand implemented to act on the assessment findings. Led by senior management, the committees
are crucial to ensuring that we meet our long-term improvement objectives.

External experts
These experts work together with support from organizations such as Business for Social
Responsibility (BSR), providing us with technical support as we strive for continual improvement inour human rights strategy and our approach to due diligence.
Read more on “Board oversight and governance” in our Human Rights Report.

Salient human rights issues
To strengthen the focus of our policies and programs on human rights areas that matter most, it is
crucial to have an understanding of our respective salient human rights issues.
According to the UN Guiding Principles Reporting Framework, “a company’s salient human rights
issues are those human rights that stand out because they are at risk of the most severe negative
impact through the company’s activities or business relationships.”
The concept of salience focuses on the risk to people, not to the business, and impacts areprioritized according to their severity and likelihood.
We created our first Group human rights risk maps to assist us in developing JT Group Human
Rights Policy in 2016. As external and internal environments have evolved, we have reviewed ourgroup salient issues in 2021. These reviews resulted in the identification of nine salient issues
associated with our own operations, value chain and new business relationships.

Our nine salient issues
Identification of salient issues
In order to identify the salient human rights issues for the JT Group, the assessment was conductedin two aspects, Severity and Likelihood, in line with the UN Guiding Principles on Business andHuman Rights. Firstly, we identified the full range of human rights that could potentially be
negatively impacted by our activities or through its business relationships. We then prioritized
potential negative impacts by using severity and likelihood framework.

Severity assessment
The severity of human rights impacts was assessed by the scale, scope, and irremediability of the
impacts, which means how grave the impact would be, how widespread the impact would be, andhow hard it would be to put right the resulting harm. Based on that framework, we identified theseverity of each human rights issue using a scoring system for risk mapping.

Likelihood assessment

In assessing the likelihood of human rights issues in our value chain, the following steps were taken.
We analyzed the operations of our entire value chain (in over 130 countries) across five categories;
Leaf sourcing, Processing, Manufacturing, Office, and Sales and Marketing. We determinedmagnitudes of risk for each operational category in each country. We then quantified each risk using
environmental and social country indices published by a leading global risk analytics company, andusing country indices published by international organizations.

Risk mapping
These mapping exercises were carried out for all three of our businesses; tobacco, pharmaceuticals,
and processed food. In the consolidated map of those businesses, the issues of high severity andhigh likelihood were finally identified as salient in the JT Group.
■Child labor■

Environmental impacts■

Fair wage■

Forced labor■

Harassment and gender impacts■

Health and safety■

Health risk■

Non-discrimination and equality■

Working hours

Knowing what our salient issues are has been vital to prioritizing our work. However, this list is not
exhaustive. We know that there are other important and novel human rights issues in our value
chain. We know we need to keep our salient issues under review in order that we remain focused on
the things that matter most.
Read more on “Salient issues” in our Human Rights Report.
Read more on “Salient issues” on JT International sustainability website.

Our human rights due diligenceIn line with the UN Guiding Principles, we have made human rights due diligence an essential andintegrated part of our business. This enables us to identify and assess actual and potential humanrights risks, as stated in our JT Group Human Rights Policy.
Embedding human rights due diligence - which is in part informed by our widely applied Human
Rights Impact Assessments - is our responsibility. It helps us to prevent adverse impacts on people
and ensure the highest standards of behavior are upheld within our business and value chain.
We have committed to assessing 100% of high-risk countries by 2025.
In addition to the high-risk countries identified, we completed the assessment in Japan where ourheadquarters and many subsidiary companies are located, given its scale of businesses; tobacco,
pharmaceuticals, and processed food. We also conducted the assessment in Switzerland,
headquarters of our tobacco business, and also in China and Thailand for our processed foodbusiness.
Our commitment to conducting human rights due diligence as part of our human rights policy neverwavered during the pandemic. To ensure continuity and protect everyone involved, we tailored ourapproach in our assessments. One of the ways we have done this is by rolling out human rights selfassessment questionnaires (SAQs). The SAQs is a set of around 100 questions based on JT Group’s
human rights due diligence methodology, our operational model, and our salient issues. The
responses to these questions are reviewed by both internal and external human rights experts with
relevant gaps and risks identified, which the business is able to address through targeted actionplans. The extensive deployment of SAQs is a temporary measure for high-risk countries until onsite assessments can be conducted again.
In 2022, we assessed two new markets: Bolivia and Philippines. In total, we have completed 10
Human Rights Impact Assessments and 19 self-assessment questionnaires across our entire value
chain. We also conducted three supply chain impact assessments (SCIAs). By the end of the year,
32 out of 67 (48%) high-risk countries had been assessed. This outcome reflects our commitment toprioritizing assessments in countries where the greatest risks to people lie. It also shows ourwillingness to go into countries with histories of human rights allegations and assess the on-theground reality.
In 2023, we will review our list of high-risk countries to ensure that we prioritize our due diligence
efforts by applying a risk-based approach in the countries which have the potential greatest risk topeople.
Read more on “Our assessments” in our Human Rights Report.

Human Rights Impact Assessments and selfassessment questionnaires: key findings

Read more on key findings which include one humanrights risk identified in each of our assessments, todemonstrate the wide range of issues our stakeholders
may face.
For our tobacco business, please refer to “Human rights
assessments map” on
JT International sustainability website.
For the processed food business, please see below.

■

China (2019)■

Thailand (2019)

Case study

Migrant Workers in Japan
Japan’s Technical Intern Training Program was further sensitized to the risk of forced labor by arecent U.S. Trafficking in Persons report. Since we started Human Rights Impact Assessments in
our Japan operation (tobacco, pharma, and processed food businesses - including China andThailand), migrant workers have been identified as the most vulnerable stakeholders who need our
special attention.
Read more on how we have addressed a focus on migrant workers in our Human Rights Report.

Going forward
Our work to promote and respect human rights will evolve and adapt to the changing economic andpolitical context of the countries where we operate. Our approach to human rights due diligence isongoing, as the risks to human rights may change over time.

We will continue to act where actions are necessary and focus on our human rights priority areas.
We will continue to prioritize countries based on a set of risk-based criteria in order to assess ourhighest-risk countries first.

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