IN FOCUS

IN FOCUS

24.

30.

PLOOM TECHAGRICULTURAL
LABOR
PRACTICES

FY2017

JT Group
Sustainability
ReportINTRODUCTION

6.
8.
10.

CEO statement
The year in brief
Corporate profile

OUR APPROACH TO SUSTAINABILITY

12.
13.
13.
14.

The 4S model
Corporate governanceRisk management
Our materiality issues

OUR BUSINESSES

18.

Our tobacco business

19.

Health risks, transparency, andtobacco regulation

22.

Reduced-Risk Products

28.

Supply chain management29.

Our tobacco leaf supply chain

34.

Tackling illegal trade in
tobacco products

15.

Driving oursustainability agenda

38.

Our pharmaceuticalbusiness

16.

Stakeholder
engagement40.

Our processed foodbusiness

OUR WAY OF DOING BUSINESS

42.
45.

Our business ethics
Respecting human rights

46.

Our people50.

Our planet

56.

Our community
investment

60.

About this reportContents
INTRODUCTION

CEO statement
The year in brief
Corporate profile

Scope of data andinformation presented
in this report
Unless the context indicates otherwise,references in this report to ‘we,’ ‘us,’ ‘our,’and ‘JT Group’ are to Japan Tobacco Inc.
and its consolidated subsidiaries. References
to ‘Torii Pharmaceutical’ are to Torii
Pharmaceutical Co., Ltd., our pharmaceuticalsubsidiary. References to ‘TableMark’ are to
TableMark Holdings Co., Ltd., our processedfood subsidiary, and its consolidated
subsidiaries.
This report contains Standard Disclosuresfrom the Global Reporting Initiative (GRI) G4
Sustainability Reporting Guidelines.
We report data for the entire JT Group
including subsidiaries, wherever possible.
See our Basis of Reporting document for
further detail.

FRONT COVER IMAGE
A view of the Bunda Hill in the vast plains of Lilongwe
in Malawi, an area where live barns are a common
practice on tobacco farms. This is part of our effort
to improve environmental conditions in the tobacco
growing communities, by saving vital wood resources.
4

6
8
10

OUR APPROACH TO SUSTAINABILITY

In this report we use the following scope
notations:*Athe entire JT Group, including subsidiaries(i.e., international tobacco business, Japanese
domestic tobacco business, pharmaceuticalbusiness, and processed food business.)*Bsolely Japan Tobacco Inc. (JT)(includes Japanese domestic tobacco andpharmaceutical businesses, and excludes
international tobacco business, processed foodbusiness, and subsidiaries of all businesses)*C
Japan Tobacco Inc. (JT) and Japanese domestic
Group companies (includes subsidiaries ofJapanese 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)Any data without annotated scope in thisreport covers the entire JT Group including
subsidiaries – *A.

The 4S model
Corporate governanceRisk management
Our materiality issues
Driving our sustainability agenda
Stakeholder engagement

12
13
13
14
15
16

OUR BUSINESSES

Our tobacco business

18

Health risks, transparency, and tobacco regulation

19

Reduced-Risk Products
IN FOCUS: Ploom TECH

22
24

Supply chain management28

Our tobacco leaf supply chain
IN FOCUS: Agricultural Labor Practices

29
30

Tackling illegal trade in tobacco products

34

Our pharmaceutical business
Our processed food business

38
40

OUR WAY OF DOING BUSINESSOur business ethics

42

Respecting human rights

45

Our people
Our planet
Our community investment

46
50
56

About this report60
5INTRODUCTIONINTRODUCTION

CEO
statement

CEO statement

4S MODELTACKLING ILLEGAL TRADE

Uncertainty in the business environment characterized
most of 2017, caused by an unclear global economic
outlook, changes to the political climate and increases ingeopolitical tension. Nonetheless, we remained consistentin our commitment to sustainability in 2017 and to ourmanagement principle, the 4S model, under which we
strive to fulfill our responsibilities to our valued consumers,
shareholders, employees and the wider society. We achieve
this by carefully considering the respective interests of thesefour key stakeholder groups and exceeding their expectations
wherever we can.

Tackling the illegal trade in tobacco products is anothercrucial aspect for the sustainability of our business. JT Groupis committed to fighting all forms of illegal trade, and wecontinue to focus on securing our supply chain and working
closely with law enforcement agencies as their credible
partner.

In this light, our approach supports the Sustainable
Development Goals set out by the United Nations. As we
fulfil our responsibility to our stakeholders, we will continue
to consider how we contribute to the goals of this global
initiative.

SOLID PROGRESS ON SUSTAINABILITYSTRATEGY
In 2017, our sustainability strategy took an important step
forward with the development of our Sustainable Business
Framework (SBF) for the Group’s tobacco business. The
SBF sets out four key strategic areas of focus and three
key enablers to help focus our efforts in this strategicallyimportant area and to realize our goals. Our pharmaceuticaland processed food businesses plan to set their respective
SBFs, in due course.

COMMITMENT TO REDUCED-RISK
PRODUCTS
Another notable development for our tobacco business thisyear was the redefinition of Emerging Products to ‘ReducedRisk Products’ (RRP*). We believe RRP offer real benefits to
consumers, society and our business, and we feel it is ourduty to develop RRP, which have demonstrable potential forrisk reduction. By prioritizing investment in RRP, we expect todrive the sustainable future growth of our tobacco business,
although conventional tobacco products will continue to play
an important role as another platform for future profitability.

BUILDING ON OUR PROGRESS
In order to respect human rights as stated in our policy, ourinitiatives focused on training and employee education andthe company also commenced a human rights due diligenceprogram in our operations.
Environmental protection also remained a priority for theGroup. We are pleased to announce that the target set
out in the JT Group’s Long-Term Environment Plan 2020
for reducing total GHG emissions was achieved ahead ofschedule.
We were recognized for our sustainability initiatives by anumber of external institutions in 2017, and were selected asa member of the Dow Jones Sustainability Asia Pacific Index
for the fourth consecutive year.
We also continued to place great emphasis on the health,safety and wellbeing of our employees. Our Japanese
operations were commended by the Japanese Ministry of
Economy, Trade and Industry last year, in recognition of
the progress made towards the wellbeing and productivity
among our employees. Our international tobacco business
was awarded the Global Top Employer Award in 2017.

FOR A SUSTAINABLE FUTURE
As the uncertain global conditions look set to continue, we
understand that it is no longer sufficient to simply respond or
adapt to the changing conditions from one year to the next.
In order to navigate and succeed in these challenging times,
the ability to assess our strategy and manage our businesswill be the key. By focusing our efforts on achieving the goals
set out by our SBF initiatives, the JT Group will continue todevelop a strong and sustainable future, for our stakeholders
and for our business, in the years to come.

ADDRESSING LABOR CHALLENGESON TOBACCO FARMS
Throughout 2017, our Group remained committed tosupporting and assisting the communities in which we
operate, particularly our tobacco growing communities.
The JT Group’s Agricultural Labor Practices (ALP) program
helps us to address the key labor challenges on tobacco
farms. The program made robust progress in 2017 and now
covers 90% of our directly contracted leaf growers and 70%
of our leaf merchants.

6

Masamichi Terabatake
President and Chief Executive Officer
Japan Tobacco Inc.

* Reduced-Risk Products are products with the potential to reduce the risks associated with smoking.

7

INTRODUCTION

The year in brief

INTRODUCTION

The yearin brief

Reduced-Risk
Products
In the JT Group’s Business Plan 2018, we redefined
Emerging Products as Reduced-Risk Products*(RRP). While conventional tobacco products willcontinue to play an important role as a platform of
profitability, RRP will be the growth driver and thecentrepiece of our tobacco business strategy, andwe will be making prioritized investments of over
100 billion Yen within the next three years.
* Reduced-Risk Products (RRP) are products with the potential
to reduce the risks associated with smoking.

100+

BILLION YEN
to be invested within
the next three years

Community
investment

VOLUNTEERING REALLY TOOK OFF
ACROSS THE JT GROUP:

9,785

employees
volunteered 21,911
hours on company
time

7,649

employees volunteered
28,608 hours on
activities proposedby the company, but
outside company time.

Environment

21.2%

ACHIEVING REDUCTION
OF CHILD LABOR IN
SUPPORT OF EDUCATIONREDUCTION

Our Jordan factory is the first tobacco
factory in the world to use direct solar steam
generation for thermal energy for processing,building heating and also for cooling.
Our Taiwanese factory was awarded a Leadership in
Energy and Environmental Design Certificate fromGreen Business Certification Inc. – a first for JTI.

Our people

15,095children
attended school
through our
ARISE program.

Our international tobacco business was certified as a
Global Top Employer for the fourth consecutive year*,in recognition of our rewarding work environments.

The seizure of genuine JTI products remained
below 0.01% of our annual production.

We were certified as a Top Employer by the Top
Employers Institute in 50 countries around the world.

8

Having established the JT Group Human Rights
Policy in 2016, we started implementing ourhuman rights due diligence process in 2017.

ALP* We were certified as a ‘Global Top Employer’ company in February 2018,
following the recognition in 2017.

* Original reduction target: 20% reduction between 2009 and 2020

Human rights
We identified and assessed potential and actual
human rights risks in our business, via gap analyses,
self-assessment questionnaires, and site visits.

AGRICULTURALLABOR PRACTICES

Our Malawi factory reduced its electricity
consumption by almost 65% between 2015 and 2017.

8

We helped law enforcement agencies seize over
one billion illegal cigarettes.

ARISE

THE TOTAL GHG EMISSIONS REDUCTIONTARGET IN JT GROUP'S LONG-TERM
ENVIRONMENT PLAN 2020 WAS
ACHIEVED AHEAD OF SCHEDULE.
in total Greenhouse
Gas emissions between
2009 and 2017*.

Anti-Illicit
Trade

90%

of our directly contracted
leaf growers were observed
by farming experts against
our ALP standards.
9

INTRODUCTION

SWEDENINTRODUCTIONBELGIUM *BELGIUM *GERMANYGERMANYRUSSIARUSSIAPOLANDPOLANDUKRAINESWEDENUKRAINESERBIA

ROMANIA

ROMANIAKAZAKHSTANTAIWANKAZAKHSTANTAIWAN

TURKEY

TURKEYMYANMAR

MYANMAR

IRAN

IRAN

INDONESIAINDONESIAJORDANMALAYSIAJORDANMALAYSIAPHILIPPINESSWITZERLAND SWITZERLAND

Corporate
profileSERBIACANADAITALYCANADAU.S.

U.S.

DOMINICAN
REPUBLICSPAIN (CANARIES)DOMINICAN SPAIN (CANARIES)REPUBLIC
EGYPT
EGYPT

ITALY

PHILIPPINESREPUBLIC OF SUDAN
REPUBLIC OF SUDANETHIOPIAETHIOPIAJAPAN

We are one of the world’s leading tobacco companies, with
offices and factories in more than 70 countries, and products
sold in more than 130 countries. Headquartered in Tokyo, Japan
Tobacco Inc. (TSE:2914) is listed on the Tokyo Stock Exchange.

BRAZIL

BRAZILZAMBIA

MALAWI

MALAWITANZANIAZAMBIATANZANIAInternational

33

Japanese domestic

6
39

TOTAL

Countries in which we directly source tobacco

7.6%

JAPAN

CIGARETTE AND TOBACCO-RELATED FACTORIESWe also operate pharmaceutical and processed food businesses.

TOTAL REVENUE IN 2017

Corporate profile

7

NUMBER OF EMPLOYEES IN 2017
0.4%

9.5%

1.7%

4.9%

Our businesses

3.2%

2,139.7

57,963

BILLION YEN

29.3%

EMPLOYEES

17.8%
57.8%

67.8%

INTERNATIONAL TOBACCO

JAPANESE DOMESTIC TOBACCOOur international tobacco business is headquarteredin Geneva, Switzerland. We manufacture andsell cigarettes; cigars; cigarillos; snus; roll-yourown, pipe, and water-pipe tobacco; e-cigarettes;
kretek; and other tobacco-based products.

Our Japanese domestic tobacco business is headquarteredin Tokyo, Japan, and manufacturing and sales are largely
focused on the Japanese market. We are the market leader inJapan, which is one of the largest markets in the world.

Our main markets include France, Italy, Russia,
Spain, Taiwan, Turkey, and the U.K.

Japanese portfolio includes key brands such as Winston,
Mevius, Seven stars and Natural American Spirit as well as
Ploom TECH for Reduced-Risk Products*.

The portfolio includes leading international brands incigarettes and fine cut, such as Winston, Mevius, Camel and
LD or, Ploom TECH and Logic for Reduced-Risk Products*.

10International tobacco business

International tobacco businessJapanese domestic tobacco businessJapanese domestic tobacco businessPharmaceutical businessPharmaceutical business

Processed food business

Processed food business

OthersOthersPHARMACEUTICALSPROCESSED FOOD

Our pharmaceutical business focuses on the research,development, production, and sales promotion activities
of prescription drugs, focusing on three therapeutic areas:
metabolic diseases, viral infections, and autoimmune/
inflammatory diseases.

Our processed food business manufactures and sells goods
such as frozen noodles, frozen and packed cooked rice,frozen baked bread, pastries, and seasonings.

* Reduced-Risk Products are products with the potential to reduce the risks associated with smoking.

11

OUR GROUP

Our way of doing businessOur approach to sustainability

Corporate governanceOur
approach tosustainability

JT’s corporate governance is rooted in our adherence tothe 4S model and our commitment to the four stakeholder
groups. We have built a robust system of governance tosupport this commitment, in order to ensure transparent,
fair, timely, and effective decision-making. This provides aframework for enhancing corporate value and achieving
sustainable growth in the medium and long term.

Strong governance is as much about ensuring the successful
operation of our business as it is about our role in society.
Our aim is to continuously enhance our organization to build
lasting value that we can share with our stakeholders. The JT
Corporate Governance Policy fully reflects this objective, as
do our commitments to ethical conduct, sustainability, anddiversity. Our Corporate Governance Report is publishedannually and provides the status and latest updates for ourGroup’s commitments and initiatives. Our Annual Reportprovides further insights into our governance framework andboard structure.

The 4S model
Our management approach and our approach to sustainability are underpinnedby our 4S model. Consumers, shareholders, employees and society represent thefour stakeholder groups (4S) at the heart of everything we do. Our commitment
to serving these groups is represented in this model and throughout thereport. Based on the principles of the 4S model, we always strive to exceed the
expectations of our four stakeholder groups, wherever we can.

THE 4S MODEL

Risk management
Our key financial and business risks are considered by the
Board of Directors on a quarterly basis. Internal audits arecarried out by a division independent of the business, which
reports directly to the Group President.
We have a crisis management and disaster response
protocol, whereby a project team, headed by the Group
President, can be swiftly called upon in times of crisis ordisaster. We recognize the need for a Group-wide global risk
management framework: this would allow us to be consciousof, and appropriately deal with, more complex, wide-ranging
risk factors. We are exploring more systematic ways toanalyze and respond to risk factors surrounding our Groupand our stakeholders, with a view to further strengthening
our risk governance.

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 their expectations wherever we can.
12

13

Our approach to sustainability

Our approach to sustainability

Our materiality issues

Driving oursustainability agenda

We have a list of material issues that are of medium and high-level importanceto the Group and to our external stakeholders. The list was compiled byengaging internal and external stakeholders, including employees, suppliers,
investors, trade unions, non-governmental organizations (NGO's), and industry
organizations.

In 2017, we established a Sustainable Business Framework for theGroup’s tobacco business. This strategic framework encompasses allof our material issues and is underpinned by our 4S model.

In 2017, we continued to address the highest priority issues, which form the foundation of ourSustainable Business Framework for our tobacco business (see page 15). We are committed to carryingout materiality reviews on a regular basis in order to update issues that are important to us.

These are: respecting human rights, improving oursocial and environmental impact, and exercising good
governance and business standards.

The framework covers four strategic focus areas forsustainability:›› Exceeding expectation with products and services

In 2018, we will establish long-term goals supported bytargets for each of the focus areas in our tobacco business.

›› Investing in our people

JT GROUP MATERIALITY MATRIXIMPORTANCE TO EXTERNAL STAKEHOLDERS

HIGH›› Building sustainable supply chains
Corporate
governance andtransparency

Laws and regulations

Product safety andproduct
responsibility

Supply chain
management

Product innovationand intellectual
property

Respecting humanrightsWhilst the strategic focus areas are dynamic and maychange over time, they are supported by three key enablers
that are at the heart of everything we do.

Our pharmaceutical business, and processed food businessboth plan to perform the same exercise in order to establish
their respective sustainable business frameworks. We will
update you on their progress in future reports.

SUSTAINABLE BUSINESS FRAMEWORK
strategic focus areas
Our 4

Employeedevelopment andtalent management

Equality and diversity
in the workplace

Environment

Contributions tosociety

Political andregulatory
decision-making
processes

MEDIUM

Our supply chain

ME
SU
C ON

S

SOC

I ET

Y

anagement prin
cip
4S m
r
les
Ou

Our 3 key enablers
for business sustainability

S

RESPECTING HUMAN RIGHTSIMPROVING OUR SOCIALAND ENVIRONMENTAL IMPACT
EXERCISING GOOD GOVERNANCE
AND BUSINESS STANDARDSHIGHIMPORTANCE TO THE JT GROUPVALUE CHAIN BOUNDARIESG E X P E C TAT I O
NEEDIN
PRODUCTS
WITH
V
R
I
C
E
S
E
S
D
AN
EXC

MEDIUM

RS

Collaborations andpartnerships

YEELO

G THE REGULIMIZINAO P T N V I R O N M E N T A N TO R YEDB AT I N G I L L E G A L T R
ADE

Workplacehealth and safety

P
EM

COM

Illegal tradeS

Anti-bribery andcorruption

DIN
SU G SUPP
LY S TA
CH IN
AI A
N BL
S

DER

Being a responsible
employer

BUIL

E

Anti-competitive
behaviorG
TIN LEES EOP
V
P
IN UR
O
IN

OL

Litigation

EH

Responsible
marketingAR

Information security

H

Environmental
impacts of products

Tax practices

14

We will report on these in our next sustainability report.

›› Optimizing the regulatory environment andcombating illegal trade

Our company

Our customers and consumers

Su

st a inable growth15

Our approach to sustainability

Our approach to sustainability

Stakeholder engagement
GUIDED BY PRINCIPLE AND STRATEGY
We understand that effective engagement with stakeholders
is vital to the sustainability of our business. We consult
widely with stakeholders on a daily basis, following theprinciple of our 4S model.

We also invested in ways for consumers to contact us; forexample, we opened a dedicated customer service hotline
for phone and online enquiries. In addition, we established a
Ploom ‘Owner’s Club’ online community to provide a forum
for users to share opinions, provide us with feedback, and toaccess further information on the technology.

16

engagement, our international tobacco business recently
launched PULSE, a shorter survey that allows us to gather
information and feedback more regularly.
The Sustainability Awards is our international tobacco
business’s flagship initiative that celebrates the hard workand dedication of our employees around the world in supportof sustainable growth. The projects submitted demonstratecommitment that goes beyond day-to-day work. The
Awards take place annually and contribute to embedding
sustainability into the mindset of our people.

BUILDING SUSTAINABLE SUPPLYCHAINS – ENGAGING WITH SUPPLIERS,FARMERS, AND ORGANIZATIONS
We have a responsibility to ensure that our large and complex
supply chain is transparent and managed responsibly.

PRODUCTS AND SERVICES THAT EXCEED EXPECTATIONS - ENGAGING WITH CONSUMERS
AND SHAREHOLDERS

We took a great deal of care in the way that we
communicated Ploom TECH to consumers. We launched
it via a dedicated online store and through selected retailstores. We then expanded its sales reach through our own‘Ploom Shops’ in the Japanese capital Tokyo, enabling
consumers to visit us to purchase and learn about how the
product works.

We engage with our employees regularly, to ensure we invest
appropriately in their development. Performance appraisal
goes far beyond simply reviewing results at the end of theyear; instead, it is an ongoing process to help employees to
identify and build their strengths, and focus on developing
their skills.
We also carry out Employee Engagement Surveys every year
in our domestic operations in Japan, and every three years
in our international tobacco business, as part of organization
development. In recognition of the need for stronger

The Sustainable Business Framework established for our
tobacco business guides our engagement with stakeholders
by concentrating our efforts on four strategic focus areas,
as described below. In addition to increasing transparency
and accountability, our Framework will help us to align oursustainability efforts according to a shared vision.

We believe in strong and continuous engagement with our
stakeholders, and our goal is to exceed their expectations.
The development of Reduced-Risk Products (RRP*) isa priority for the JT Group, and has led to increased
engagement. For example, consumers and shareholders haveexpressed a keen interest in RRP, such as Ploom TECH, aninnovative tobacco product with a number of unique features.

INVESTING IN OUR PEOPLE – ENGAGING WITH EMPLOYEESIn 2017, our innovations in this space culminated in the
launch of our science website – www.jt-science.com, awebsite profiling our scientific developments to both thescientific community and our consumers.
In 2018, we will continue our global roll-out of RRP.
To achieve this, we will continue to engage with our
stakeholders to ensure that this innovative product continues
to exceed their expectations.
Our dedicated investor relations team, based in Tokyoand Geneva, continues to communicate with the Group’s
institutional shareholders on a daily basis.
This engagement takes the form of one-to-one meetings,
group meetings, and conference calls – more than 650
meetings are held throughout the year. A range of issues are
discussed in these meetings, such as the Group’s businessstrategy, financial performance, or sustainability issues.
The team also organizes quarterly financial result
presentations and investor roadshows, in Japan andoverseas, to enable investors to address questions directly to
our top management. Another key forum of engagement is
the General Meeting of Shareholders, which was attended by
6,020 shareholders in March 2018.

* Reduced-Risk Products are products with the potential to reduce the risks associated with smoking.

We work with our suppliers through continuous training andface-to-face meetings, to address their concerns and support
them in making the required improvements. We develop
strong and direct relationships with our farmers during
regular farm visits, and provide guidance on good agricultural
practices. By working with farmers and their respective
communities, we are able to identify social, environmental,
and labor challenges, and develop plans to address them.
We engage with governments, international organizations,and NGOs on issues related to environment sustainability,
labor practices, and child labor, through both collaborationand long-term partnerships. Examples include, but are notlimited to, our membership of the Eliminating Child Labourin Tobacco Growing (ECLT) Foundation, a multi-stakeholder
initiative of trade unions, leaf growers, and companies
working together to eliminate child labor in the tobaccogrowing sector, and of the industry-wide Sustainable Tobacco
Program. This program was developed in collaboration
with other tobacco companies to share best practice anddrive continuous improvement in areas such as sustainableagriculture, labor standards, and safe working environments.

OPTIMIZING THE REGULATORYENVIRONMENT AND COMBATINGILLEGAL TRADE – ENGAGING WITH
GOVERNMENTS AND REGULATORSWe believe in regulation that is better for government, betterfor business, better for all.
We actively seek dialogue with governmental authorities
around the world, as well as with business associations andthe media on regulatory topics that will help to achieve a
positive outcome for all stakeholders.
We engage with national governments and law enforcement
agencies to tackle illegal trade, and our partnerships arerecognized as best in class: we helped authorities seize morethan 1 billion illegal cigarettes in 2017.
17

OUR GROUP

Our way of doing business

OUR BUSINESSES

Our tobacco business

Health risks, transparency
and tobacco regulation

OUR BUSINESSES

Our tobacco
business

OUR TOBACCO PRINCIPLESOur core business is tobacco products, which generate nearly 90% of ourconsolidated revenue.*1 These are manufactured in over 30 cigarette factories
around the world and distributed in more than 130 countries. In addition toconventional tobacco, we have a Reduced-Risk Products*2 portfolio which includes
e-cigarettes and tobacco vapor products. In this section, we look at the key topics
relevant to the future growth and sustainability of our tobacco business.

1

2

OPENNESS ABOUT THE RISKS OF SMOKING

Smoking is a cause of serious diseases, and everyone should be appropriately informed about thehealth risks of smoking.

TRANSPARENCY ABOUT OUR PRODUCTS

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

REDUCED-RISK PRODUCTS

3

4

OUR TOBACCO BUSINESS VALUE CHAIN

We believe products that do not involve combustion and do not produce tobacco smoke areproducts with the potential to reduce the risks associated with smoking. We are committed todeveloping and bringing to market Reduced-Risk Products*2 that meet consumer expectations.
We will help adult consumers to make informed choices by providing factual information acquired
through scientific assessment about the products they may wish to use.

YOUTH SMOKING PREVENTION

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

ACCOMMODATION BETWEEN SMOKERS AND NON-SMOKERS

43,500+

Directly contracted
tobacco leaf farmers andthird-party merchants

Our suppliers

8

Leaf threshingand processing
factories

4

Leaf storage
hubs

Our company

130+Countries
sales distribution

5

Many people have concerns about exposure to environmental tobacco smoke. We advocate tailored,
practical, and effective solutions, which separate smokers and non-smokers while accommodating
the legitimate interests of both. Further to this, we are committed to developing and bringing tomarket Reduced-Risk Products*2 that also have the potential to reduce the impact of smoking toothers.

Our customers & consumers

SENDING THE RIGHT SIGNALS: SMOKING AND HEALTH

400+

Suppliers of production
materials (non-tobacco
materials)

18

26,500+
Suppliersof other products
and services

30+

Factories

70+

Offices
worldwide* 1 JT Group consolidated revenue in FY2017.
* 2 Reduced-Risk Products (RRP) are products with the potential to reduce the risks associated with smoking.

500+

Warehouses

The JT Group is committed to being transparent about
the health risks of smoking tobacco products. We do
this by providing consumers with the right information to
help them make informed decisions on whether or not tosmoke. We monitor regulatory changes, and prepare for the

implementation of those changes well in advance. We also
subject all of our ingredients to toxicological assessments, inline with stipulated requirements. Our positions on smoking
and health are available on our websites, as are the lists ofingredients we use in our products.

19

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Our tobacco business

TOBACCO PRODUCTS, PLAIN PACKAGING AND RELATED REGULATIONS
As our operating environment is highly regulated, the JT Group has a number of position statements on a range of topics.
These are available to read online: www.jti.com/our-views

RESPONSIBLE MARKETING OF TOBACCOPRODUCTS
We take responsible marketing very seriously, particularly
when it comes to preventing youth smoking. We only
market our tobacco products to adult smokers, never tominors (see our position statement on youth smoking).
This focus is reflected in our Global Tobacco Marketing
Principles, a guiding document developed in 2016.
For tobacco retailers, we continue to support our retailpartners by training staff and providing campaign
materials to reinforce the message that underage sales
are not allowed. During 2017, our targeted responsible
tobacco-retailing programs (e.g. No ID, no Sale) in the
U.K., Denmark, the Netherlands, and Ireland, showedstrong progress in terms of tackling youth smoking, andretailers welcomed these programs as effective tools.

PLAIN PACKAGINGHEALTH WARNINGSYOUTH SMOKING PREVENTIONATTRACTIVENESSPRODUCT DISPLAY BANSINGREDIENTSDISCUSSING PROPORTIONATE REGULATIONAs a tobacco company, we constantly face evolving regulatory challenges, e.g.
public smoking bans, the adoption of plain packaging, and exclusion of ourindustry from regulatory and policy-making processes. Tobacco products carryrisks to health. We therefore support appropriate and proportionate regulation of
our products and our industry. However, stringent regulation can have unintended
negative consequences for our consumers, our business, and wider society. We
welcome constructive dialogue with governments and regulators pertaining to newlegislation, but we have a right – and an obligation – to express our point of view
regarding regulation that affects our products and our industry. We believe that
tobacco regulation should be proportionate, evidence-based, practical, enforceable,
and competitively neutral.
At a global level, we continue to follow the evolution of the WHO Framework
Convention on Tobacco Control (FCTC). The FCTC Conference of the Parties (COP)
takes place every two years, and its decisions can have far-reaching implications on
our operating environment. We are monitoring preparations for the next conference,
and will seek opportunities to share our views with decision makers wherever
possible.

20

PLAIN PACKAGINGREMAINS A PRIORITY
REGULATORY ISSUE
With regard to tobacco product regulation, the issueof plain packaging, which is effectively a ‘brandingban’, remains one of the JT Group’s top regulatory
challenges. The branding ban should be a concern toall companies that value their intellectual property.
The ability to build and use a brand is an importantfactor that allows businesses to thrive andeconomies to prosper. In order to defend our brands
and their value to our business, we maintain adialogue with stakeholders, and communicate ourviews widely. This type of engagement supports ourappeals for reasonable regulations.
Proposals for plain packaging are not based on,or consistent with, a credible and scientificallyrigorous understanding of the behavior of smokers.
Evidence shows that plain packaging is not effectiveat reducing smoking rates or changing smoking
behavior. In fact, the latest government data from
Australia, which introduced plain packaging in
December 2012, shows that the long-term decline
in smoking rates has stalled. Since plain packaging
was introduced, illegal tobacco consumption has
increased.

21

OUR BUSINESSES

Our tobacco business

OUR BUSINESSESReduced-Risk
Products

Our tobacco business

OUR PROGRESS IN 2017›› In 2017, we experienced another year of strong performancewith Logic e-cigarettes in terms of geo-expansion, and rolled out
Ploom TECH to new retail outlets in Tokyo, while introducing it in
Switzerland and Canada as well as expanding availability in the
U.S.A.

JT GROUP COMMITTED TO
REDUCING HEALTH RISKS›› In the U.S.A., Ploom TECH is available under the name ‘Vapeleaf’*.
Vapeleaf has been expanded into four states, including New York,
Texas, New Jersey, and Florida.

In our Business Plan 2018, we redefined Emerging Products
as Reduced-Risk Products (RRP). RRP are products thathave the potential to reduce the risks associated withsmoking. Health risks associated with smoking are believed
to be caused primarily by potentially harmful constituentsfound in smoke from burning of tobacco. We therefore
believe that RRP, which do not involve combustion or
smoke, have risk reduction potential, and offer real
benefits to consumers, society, and our business. It istherefore our duty to develop RRP with demonstrable riskreduction potential that satisfy consumer expectations.

›› In July 2017, we also launched ‘JT Science,’ a dedicated websitethat showcases scientific progress in the realm of Reduced-Risk
Products. This comprehensive website is a valuable resource
to inform, educate, and collaborate with all those interested inlearning about the science behind RRP – from consumers toscientists and the regulatory community.
Visit www.jt-science.com for more.
*In the USA, Ploom TECH is sold by Logic Technology Development
LLC, a member of the JT Group.

We market RRP as alternative choices for existing adultsmokers. By providing easy-to-understand and easily
accessible factual information about RRP, we allow adultconsumers to make informed choices from our full portfolio.
We believe that RRP which do not involve combustion
or smoke, have risk-reduction potential. Currently,
among the scientific community and regulators, there
are no globally agreed standards for assessing risk
reduction of tobacco products and e-cigarettes, althoughsome countries have set guidelines in this field.
Our Group continues to engage in research and developmentof evaluation methods that provide scientific evidenceof risk-reduction through RRP. We will communicate ourprogress via our science website – www.jt-science.com
TOBACCO AFFINITY

USABILITY

T-VaporHeatedTobaccoTobacco-Infused
Vapor

E-VaporOUR RRP PORTFOLIOThe RRP market is comprised of several categories. We offer
product choice in T-Vapor (Heated Tobacco and Tobacco
Infused-Vapor), and E-Vapor (e-cigarettes*1).
Heated Tobacco has an affinity with tobacco and consumer
behavior similar to traditional tobacco smoking, while
E-Vapor is often characterized by its usability. The TobaccoInfused Vapor is a hybrid of these two categories.
As for T-Vapor (Tobacco Vapor) products*2, we currently have
Ploom TECH, which is a Tobacco‐Infused Vapor product,available in four markets, including Japan. We are currently
upgrading existing Ploom TECH products, and are working
on the development of a Heated Tobacco product, whichheats at a high temperature.
Our E-Vapor focus is on our Logic branded e-cigarettes,
which are sold in markets such as the U.S., U.K., France,
Ireland, Italy, Germany, Russia, South Korea, Greece, Belgium,
and in a number of airports (World-Wide Duty Free).
To ensure ongoing business success in the RRP sector, andto keep meeting and exceeding consumer demands, ourapproach is to deliver new and inspiring RRP based on thedevelopment of new technologies.
Consumer electronics involving the use of batteries is a newarea for our business. We are investing time and effort toensure that best practices are applied.

LATEST DEVELOPMENTS IN
RRP REGULATION
We witnessed two key regulatory developments in 2017.
Firstly, the US FDA released a guidance for industry,
providing an extension of compliance deadlines for ‘newly
deemed’ products, such as e-cigarettes. As a result,manufacturers have been given an additional four years
to submit applications to sell these products in the U.S.
Secondly, several E.U. countries included reduced-risk
related provisions in their national legislation setting out
requirements to substantiate reduced-risk claims for novel
tobacco products.
The JT Group remains committed to working with regulatory
authorities, public health bodies, and the scientificcommunity to create the best possible frameworks allowing
these products to reach their full potential.

DISPOSAL AND RECYCLING OF
ELECTRONIC PRODUCTS
E-cigarettes and Ploom TECH products contain physicalcomponents that require responsible waste management.
While it remains a challenge, we continue to investigate moresustainable solutions for recycling and waste management.

The Ploom TECH online store (in Japan) provides disposal
guidelines, as do the local Ploom and Logic websites.

Currently, we encourage consumers to dispose of theseproducts responsibly. In some of our markets, dedicatedschemes allow consumers to return items to points of sale, or
to JTI, either directly or via a specialist collaboration partner/organization, to be disposed of responsibly.

In Japan, following a pilot recycling program in Fukuoka in
2016, we carried out a second pilot program in November
2017. Recycling boxes were sent out to almost 16,000 people
who purchased Ploom TECH online. The boxes can take up to
10 cartridges and 50 capsules.

E-cigarettes are electronic devices that typically contain a nicotine-based liquid. The liquid is heated electronically and released as a vapor. There is no combustion involved.
* 1 ‘Logic’ is our flagship e-cigarette brand.

22

T-Vapor products, unlike e-cigarettes, contain tobacco and create a tobacco-enriched vapor that can be inhaled. Importantly, the tobacco is not combusted during the use of* 2 such products.

This section is intended to explain the business operations of JT Group, not to promote sales of tobacco and nicotine delivery products to encourage smoking byconsumers

23

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Strong potential to reduce therisks associated with smoking

IN FOCUSPLOOM TECH

With Ploom TECH, there is no burning of tobacco and hence
no smoke. When Ploom TECH’s tobacco vapor was analyzed,
almost none of the potentially harmful constituents thathave been associated with health risks*2 were found. Recent
studies*3 have shown that there is approximately a 99%
average reduction in the levels of measured constituentscompared to cigarette smoke. This means that we believethat Ploom TECH has the potential to reduce the risks
associated with smoking, while retaining the features oftobacco, including its authentic flavor.

Ploom TECH is an innovative T-Vapor
product*1 which enables consumers toexperience tobacco without smoke, smell,or ash. When it was first launched in Japan
in 2016, the demand was so strong that we
immediately made further investment plans.
In this In Focus section, we look at the uniquefeatures of Ploom TECH and its potential toreduce the risks associated with smoking.

100%
1 puff of smoke of a ready-made cigarettecompared to 1 puff of tobacco vapor of
Ploom TECH.

99%

REDUCTIONTOBACCO CAPSULECARTRIDGE

BATTERY

Capsules containgranulated tobacco

1 cartridge can be used fora refill pack of 5 capsules

Rechargeable battery which
can generally run through anentire refill pack of 5 capsules

Ploom TECH is made up of three parts: the tobacco capsule,the cartridge, and the battery. Ploom TECH uses a hybrid
technology to create a tobacco-enriched vapor by heatinga non-nicotine liquid, which passes through a capsulecontaining granulated tobacco. In this way, the vapor isinfused with nicotine and flavors from the tobacco blend; thetobacco inside the capsule is warmed at around 30 degrees
Celsius. The device is activated by simply inhaling, so it canbe used immediately, at any time.

Our strategy is to provide consumers with a wide variety ofhigh-quality products. Our continuous investments in this
sector illustrate our strong commitment, and our challenge
continues as we strive to change the future of tobacco.

RETHINK TOBACCO WITH PLOOM TECH

Tobacco-Infused Vapor– how it works

24

Our tobacco business

When compared to traditional cigarettes, Ploom TECH allows
consumers to experience an authentic, clear tobacco taste
whilst significantly decreasing the smoke smell. Other unique
attributes include the ability to use the device over several
separate occasions without having to replace the tobacco
capsule. Moreover, it is light in weight and has a long-lasting
battery, which lasts through an entire refill pack before
recharging is requiredof potentially harmful
constituents that havebeen associated withhealth risks*20%
Smoke ofready-madecigarettes

Tobacco vapor*1 ofPloom TECH

Use of this product carries health risks.

T-Vapor products, unlike e-cigarettes, contain tobacco and create a tobacco-enriched vapor that can be inhaled. Importantly, the tobacco is not combusted during the use of* 1 such products. See footnote 2 on p.22
Based on the comparison of 9 harmful constituents, recommended as a priority for reduction by the World Health Organization in Cigarette Smoke, measured in the smoke* 2 of a standard reference cigarette (3R4F) versus the vapor from Ploom TECH. Use of this product does not mean it is necessarily safer than smoking regular cigarettes.
Chemical analysis and in vitro toxicological evaluation of aerosol from a novel tobacco vapor product: A comparison with cigarette smoke. 2017. Takahashi et al.
* 3 Regulatory Toxicology and Pharmacology.

This section is intended to explain the business operations of JT Group, not to promote sales of tobacco and nicotine delivery products to encourage smoking byconsumers

25

OUR BUSINESSES

Our tobacco business

OUR BUSINESSESIN FOCUSPLOOM TECH

Retailing
Ploom TECH

Packagingand flavors

Ploom TECH was originally launched in Japan in 2016, in thecity of Fukuoka, as well as online. In 2017, our sales reach
expanded to Tokyo, with a total of seven stores opening in
the capital, including the Ploom Shop in Ginza. Ploom TECH
capsules are also available at tobacconists and convenience
stores around Tokyo, and from our online store.

A Ploom TECH refill pack includes five
tobacco capsules and one cartridge.

Our tobacco businessWe are further expanding production capacity for
Ploom TECH in Japan as a high priority, in order to takethe product nationwide during 2018*. By offering a wide
range of products to meet diverse consumer needs,
and delivering on consumers’ growing expectations,
we aim to be the leader in the tobacco vapor products
market in Japan, over the coming years.
* For further information about Ploom TECH nation-wide sales expansion, pleasecheck the latest JT press release, here: www.jt.com/media/news

OUR PLOOM TECH SUPPLY CHAIN■横ver.(基本形)

Our supply chain for Ploom TECH is spread over several locations in Japan and China. The tobacco capsules are made inJapan, while batteries and cartridges are manufactured in China*. The supply chain presents new challenges to our group andwe plan to provide updates of our initiative, as well as our progress, in future reports.

使用例：PCサイトヘッダ

Ploom TECH in Switzerland,
the first market outside Japan■縦ver.

CHINA

JAPAN

使用例：SP/FPサイトヘッダ※領域が狭い場合に使用

Our first international market launch for Ploom TECH was Switzerland, hometo the headquarters of our international tobacco business. The product was
launched in July 2017 and made available nationwide in over 1,500 stores.
In 2017, we also introduced the product to Canada and expanded Ploom TECH
availability in the U.S.*. We will continue to explore opportunities around theglobe to further roll-out Ploom TECH.
Commenting on this product, Daniel Torras, JTI's Senior Vice President for
Reduced-Risk Products states:“ We believe that the technology behind Ploom
TECH provides a real potential to reduce the healthrisks from smoking, while maintaining a true
tobacco taste. Its innovative technology combines
the best of both tobacco and e-cigarettes, adding anentirely new concept to our ever-growing portfolio.”
26

Supply chain as of December 2017
Daniel Torras
Senior Vice President, Reduced-Risk Products,
JT International.

* In the U.S., Ploom TECH is sold by Logic Technology Development LLC, a member of the JT Group, under the name “Logic Vapeleaf”.

Manufacturing of capsules

Device manufacturing and assembly* Our supplier factories in China are ISO 14001 and ISO 9001 certified.
This section is intended to explain the business operations of JT Group, not to promote sales of tobacco and nicotine delivery products to encourage smoking byconsumers.

27

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Supply chain
management

Our tobacco leaf
supply chain

MANAGING RISKS IN OUR SUPPLY CHAINSUSTAINABLY MANAGING OUR
SUPPLY OF TOBACCO LEAF

Our supply chain is large and complex, as we have large-scale operations
around the world. In terms of our raw materials, we purchase half our tobacco
leaf from 43,500 directly contracted farmers, and the other half from tobacco
leaf merchants. We also partner with over 27,000 suppliers for non-tobacco
materials, and other products and services. Managing our supply chain
responsibly is a priority for our business; we believe this is beneficial not only forour sustainable growth, but also for our stakeholders and the wider society.
Most of our tobacco leaf growers, both directly contracted, as well as those contracted
by our tobacco leaf merchants, are covered by our Agricultural Labor Practices
program, which addresses labor practices on tobacco farms (see pages 30-33).
Suppliers who provide non-tobacco materials or other products and services to ourinternational tobacco business are managed by our newly established Supplier Lifecycle
Management (SLC) tool. For details about how suppliers are managed in the Japanesemarket, please visit our website www.jt.com/sustainability/our_business/tobacco/value_chain. As a result, we continue to identify and mitigate risks among our Tier 1
suppliers so that we establish and implement best practices across our supply chain.

AN INTEGRATED APPROACH
TO SUPPLIER MANAGEMENT
The launch of SLC in 2017 by our international tobacco
business will help us to identify and mitigate risk in our
supply chain for non-tobacco materials suppliers. Before
beginning a commercial relationship, suppliers must now
go through a certification process. This process allows
us to manage risks related to compliance, environment,
health and safety, human rights and global economic
sanctions, amongst others. Where supplier integrity is aconcern, or when suppliers do not adhere to our JTI SupplierStandards, we offer collaboration and support aroundthe steps required to make necessary improvements.

VISIBILITY ACROSS OUR BUSINESSSLC is currently in its implementation phase and, as such, weare ensuring that employees and suppliers understand the
new tools, and the importance of upholding our standards
and policies. We are striving for a robust, easy-to-use
certification process that will help us integrate new suppliers
more quickly when we enter new markets. SLC will give
us transparency across our supply chain, and will provide
insights to help us better understand how we can support
suppliers in meeting our standards.
A higher level of visibility on potential issues and risks
in our supply chain will ensure we manage this integral
part of our business responsibly and sustainably.
28

Sourcing a sustainable supply of tobacco leaf lies at
the heart of what we do, and our tobacco leaf sourcing
and growing operations are a key part of our supply
chain. Securing a long-term supply of quality leaf, at thebest cost, is critical to our future business growth. We
source 50% of our tobacco leaf from merchants; theother 50% of our tobacco leaf is directly sourced from ourcontracted growers. These farmers and their communities
hold a central position in our leaf-growing operations.

Our tobacco business

CREATING SHARED VALUE
We apply an integrated approach to working with tobacco
leaf farmers, based on creating shared value. This means
that, as our business thrives, our farmers reap higher profits,
too. In addition to ensuring stable incomes, we work withthe farmers to improve labor conditions, living standards,
and environmental conditions. These positive impacts
reach beyond the farm, and into the wider community.

ADDRESSING ENVIRONMENTAL ISSUESWe help promote a balanced farming environment
through efficient and sustainable use of resources. This
includes building live barns to avoid deforestation:
live barns are an eco-friendly solution that avoids
deforestation and at the same time improves leaf quality,
allows more efficient stalk-cut harvesting, and is fairly
low in cost and maintenance. Other examples include
encouraging recycling through responsible disposal of
empty containers used for crop protection agents, andtree planting. This latter initiative helps farmers become
self-sufficient in their curing activities, which rely on
wood, and helps them manage the process sustainably.
Turn to page 54 to read more about our biodiversity activities.

TOBACCO FARMING CREATESSTABLE LIVELIHOODS
Tobacco is fast becoming one of the most valuable andreliable crops in the areas in which we operate. We havepartnered with farmers to improve yields and quality of
tobacco leaf and, as a result, tobacco is now an attractive
commodity, and farmers are thriving on tobacco growing.
Thanks to close collaboration with our farming experts,
farmers benefit from guidance on good agricultural practices
and certified seeds. By working hand in hand, we can also
map social, environmental, and labor gaps, and identify ways
to address these through tailored programs and initiatives.
29

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Our tobacco business

COVERAGE OF ALP›› ALP is implemented in all the farming regions where
we directly operate, namely Brazil, Serbia, Malawi,
Tanzania, Zambia, the U.S., and Turkey

IN FOCUSAGRICULTURAL
LABOR
PRACTICES›› We have a long-standing relationship with leaf
growers in Japan. In order to further address labor
issues on tobacco farms, ALP was piloted in Japan
in 2017.
›› We are engaging with leaf growers and merchants in
90% of the countries where we source tobacco leaf,
including, but not limited to, the following, where
we directly engaged on the ground in 2017: Greece,
India, Indonesia, Zimbabwe, Spain, Germany,
Argentina, Brazil, Malawi, Tanzania

Improving labor conditions
on tobacco farms
Our Agricultural Labor Practices (ALP) program wasdeveloped to improve labor conditions on tobacco farms. The
program helps us to address labor challenges faced by the
tobacco industry. These vary from country to country, anddiffer widely from developing to developed regions.
In particular, given that it is widely known that agriculturallabor practices could be improved in developing countries,
ALP provides a robust framework with which to address
this. ALP fosters good labor practice and takes into accountthe various challenges that we encounter. This strong,
locally relevant approach helps ensure the right standards
across our tobacco leaf supply chain. ALP is built on threefundamental pillars: Rights of Workers, Workplace Healthand Safety, and Child Labor. Since problems rarely exist
in isolation, ALP allows us to identify other issues such asaccess to education, water, or health facilities.

›› We receive ALP reports for the majority of countries
we source tobacco from, and we engage mostdeeply with those listed above, as they are where themajority of our tobacco leaf is sourced›› Currently, we observe 90% of our 43,500 directly
contracted leaf growers against our ALP standards.
›› 70% of our third-party suppliers reported on ALP in
2017

ALP was developed and piloted by JTI in 2013, and since2015 the International Labor Organization (ILO) has provided
support in the areas of training and impact assessment.
In 2017, 90% of our directly contracted leaf growers wereobserved by farming experts against the ALP standards. As
for our leaf merchants, 70% reported on ALP in 2017.

100 %OF OUR FARMING EXPERTS
UNDERWENT TRAINING IN 201790 %OF OUR DIRECTLY CONTRACTED
LEAF FARMERS WERE OBSERVEDBY FARMING EXPERTS IN 2017CONTINUAL CYCLE OF
IMPROVEMENT AND DIALOGUE
ALP drives a continual cycle of improvement and dialogue,
which reflects the unique Japanese philosophy of Kaizen, or
continuous improvement, a concept that is deeply rooted
in our business*1. By closely observing the situation on thefarm*2, recording findings, and understanding issues that
affect the farmer, we can make targeted, impact-based
improvements on the ground.

Kaizen is the Japanese word for ‘improvement’. More exactly, it means ‘change for better’. Within the JT Group, Kaizen is the foundation of how we work. It is a practice of* 1 continuous improvement in order to ensure sustainable growth.

30

Our experts include leaf technicians who closely observe the situation on the farm: they visit every single farm several times a year and have clear visitation plans with
* 2 assigned farms. During their visits, they provide technical advice on crop management and discuss good labor practices.

31

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Our tobacco business“ There are several benefits ofgrowing tobacco with JTI:
it gives me a good income,I can take my children toschool, and I learn how tokeep my farm surroundings
clean and safe.”

IN FOCUSAGRICULTURAL
LABOR
PRACTICES

Jackson Phiri
Chililambombwe Farms in Chipata,
Eastern Zambia

ADDRESSING SOCIAL ISSUESOUR LEAF MERCHANTS ARE
ALSO IMPLEMENTING ALPALP defines the expected social and labor standards on thefarm regarding child labor, worker's rights, and health andsafety. As child labor occurs within agriculture, our businessis committed to tackling this issue. We do so through ARISE- Achieving Reduction of Child Labor in Support of Education our flagship program, which seeks to eliminate child labor bylooking at the root causes. The program draws on expertisefrom international organizations and NGOs, national andregional governments, local communities, and experts.

In 2017, we continued to engage with those tobacco leaf
merchants who provide the remaining 50% of our tobacco
leaf, to identify further areas for improvement, in particular toaddress challenges within the ‘Rights of Workers’ pillar.
This type of engagement is carried out in a truly collaborative
way, both on and off the farm.

In addition to ARISE, our Grower Support Programs aredesigned to improve the livelihoods of those within our
farming communities by overcoming issues such as accessto safe drinking water by building boreholes.

ACHIEVEMENTS THIS YEAR›› Endorsement from the Indian Tobacco
Board, which is now supporting JTI with ALP
implementation; next steps include continued
close collaboration with the Board and suppliers
to define the future of the ALP implementation
roadmap.
›› 70% of our leaf merchants and their subsidiaries
provided ALP reports for 2017. For 2018 we aimfor 90%.
›› Engagement of our smaller-volume suppliers
around ALP toward our objective of covering thewhole supply base by 2019.
›› Together with the ILO, we piloted Impact
Assessments in Malawi and Brazil, and these willcontinue in 2018.

The effectiveness of these programs is due to theircustomizable nature - they are tailored to local contexts andchallenges. Our local teams on the ground are trained tohave a full understanding of the issues that can arise, and of
the appropriate solutions.

ARISE: OUR CONTRIBUTION TO PREVENTING CHILD LABORB R A Z I L

32

M A L A W I

2017

2016

COMMUNITY
MEMBERSEDUCATED IN
CHILD LABORELIMINATION

31,991

34,640

CHILDREN OFF
FARMS ANDINTO SCHOOLS

3,185

766

2017

10,0287,063

Z A M B I A

2016

11,820

6,414

2017

8,166

4,167

TA N Z A N I A

2016

1,384

2,562

2017

5,060

680

2016

879

0

OUR FUTURE VISION FOR ALP
Since launching ALP in 2013, we have built strong
relationships with thousands of farmers. Together, we are
improving incomes, living standards, and labor practices,
and are having a positive impact in 90% of the countries that
supply us with tobacco. Considerable progress was madewith ALP in 2017 and we will continue to focus on improving
the quality of our data as well as implementing external
assessments.
33

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Tackling illegal trade in
tobacco products

An unlawful value chain frommanufacturing to distribution

Annual consumption of illicit tobacco isestimated to exceed 10% of all cigarettes
sold globally (excluding China), with anapproximate 35 billion U.S. Dollars in global tax
revenue lost each year. This illegal trade fuels
human trafficking, organized crime, and terrorgroups, and undermines legitimate tobacco
businesses. It also causes harm to consumers,
as uncontrolled products circumvent regulations
and quality controls.

The illegal tobacco trade is big business, aggressively protected byorganized gangs. This ever-evolving industry covers an unlawful value
chain that reaches from the streets to internet forums, from factories
to entire geographic zones, spanning bulk tobacco leaf to finishedsmuggled goods, as we explain below.

Tackling illegal trade is a top priority for us. Not only does it harm
legitimate manufacturers, farmers, and taxpayers, it also affects
our business and reputation. Our Anti-Illicit Trade (AIT) team isrecognized as the industry leader in combating this problem.
The team is made up of experienced professionals with yearsof service within law enforcement and governments across theglobe. This team focuses on the parts of our business that are
most impacted by illegal tobacco.

Our tobacco business

FROM LOOSE TOBACCO ON THE STREETS…

…TO UNAUTHORIZED TOBACCO FACTORIES

Illegal tobacco is not limited to finished goods: there is a
growing problem of tobacco leaf or semi-processed tobacco
being sold on streets across the globe. JTI combats thisillegal bulk tobacco trade by providing law enforcementwith the latest trends and locations, thereby allowing theauthorities to prevent the distribution of illegal bulk tobacco.
Read the case study on how we helped to seize bulk illegal
leaf in Serbia.

AIT supports law enforcement agencies in shutting down
illegal tobacco factories and warehouses. When theselocations are identified, JTI provides a forensic analysis of
illegal production machinery, packaging, and cigarettes.
If counterfeit JT Group brands are present, the team works
with JTI’s intellectual property team to initiate legal action for
trademark infringement. In 2017, JTI provided intelligence tolocal law enforcement teams which resulted in the following:

20 illegal factories closed down
23.3 million counterfeit JTI cigarettes seized›› 298 tons of tobacco seized›› 210 arrests››››

Our AIT team's role is to:

CASE STUDY

1

Seizing and destroying illegal
tobacco leaf in Serbia

Combat the diversion of
genuine JT Group products into
the illegal supply chain;

2Fight the counterfeiting of JT Groupbrands, including e-cigarettes; and3
Educate stakeholders about the
proliferation of illicit whites(cigarettes manufactured for the sole
purpose of being smuggled and sold in
another market).

34

The picture show the scale of the operation.
In total, 48 hectares of tobacco plants were destroyed.

In 2017, our work with local enforcement and government agencies
culminated in the massive destruction of roughly 190 tons of illegal
tobacco leaf crop which had been grown in Serbia. This is equivalent
to 190 million cigarettes and is an example of a ‘seize and destroy’procedure at the start of our value chain (i.e., on the farm). Within
the illegal trade, a percentage of the tobacco leaf grown is diverted
to criminals who practice intimidation or extortion on well-meaning
farmers. In other instances, some farmers grow excess tobacco tomake additional profit from criminals willing to buy the crop at a highprice. In an example of this latter scenario, we received informationthat certain farmers were unlawfully over-producing tobacco andselling to the illegal trade. Police used satellite screening and image
mapping to identify the areas of illegal crop.

35

OUR BUSINESSES

Our tobacco business

OUR BUSINESSES

Our tobacco business

ILLEGAL MANUFACTURING IN PARTS
OF EUROPE…

…TO ILLEGAL TRADING IN
FREE-TRADE ZONESACCURATE INFORMATION BUILDS
TRUST WITH AUTHORITIESHistorically, counterfeit JT Group brands were manufactured
in Asia. However, there is a growing trend for illegal andcounterfeit products to be manufactured within the European
Union. Products can be transported across this region withno customs controls, thereby reducing the risk of seizures.
Currently, Poland is being targeted as a major location for
illegal manufacturing of products.

Elsewhere, Free-Trade Zones, which are special geographic
regions exempt from traditional customs authorities, arebeing exploited by criminal gangs to manufacture andtransport illegal goods, including tobacco products. The
Organization for Economic and Cooperative Development isstrengthening its focus on the illegal trade in these areas andis working in partnership with AIT personnel. One proposal
is to champion Free-Trade Zones that prevent the storage
or transportation of illegal products, and that are approved
through a positive certification scheme.

One of the factors behind JTI’s success in tackling illegal trade is the close
collaboration we enjoy with our law enforcement partners. A continual flow of
quality information has established JTI as a credible and reliable source. JTI is
proud to have been recognized by multiple law enforcement agencies as theindustry leader in providing information on illegal tobacco to law enforcement.

KEY WINS IN 2017

Partnerships with law
enforcement led to theseizure of over 1 billion
illegal cigarettes orcigarette equivalents.

SPOTTING UNLAWFUL RETAILING
IN SMALL SHOPS…

We trained law
enforcement officials
around the world on how
to better identify illegal
tobacco products.

We are stamping out the prevalence of illegal products
in small retail shops. When local enforcement agencies
prosecute owners of retail premises for selling illegal
cigarettes, AIT personnel provide evidential statements
regarding counterfeit JTI brands. In the UK, 505 witness
statements were prepared in 2017.

…STAMPING OUT ILLEGALSALES ONLINE.
In 2015, our AIT team identified an increasing amount ofcounterfeit JTI products being sold online, particularly onsocial media platforms. A pilot project was set up in the UK
to address this, using special software that can identify illegal
sales.
›› To date, just under 13,000 links advertising illegal JTI
products were removed within 24 hours. This represents
an estimated 1.6 million U.S. dollars worth of JTI products
advertised at any one time.
›› Enhanced software was introduced in October 2017, withimpressive results. In September, 444 social media
posts were removed, with a JTI product value estimatedto be 68 million U.S. dollars; in October, 2,483 posts were
removed, with an estimated value of 170 million U.S.
dollars.
›› The project has been extended to Ireland, Italy, France
and Spain, and a similar project has now commenced in
Russia.
36

AIT helped law
enforcement seize
thousands of counterfeit
Logic brand products,
and provided informationthat led to the raid of acounterfeit e-cigarettes
factory in China.

The Bigger Picture:

NEW TRACK AND TRACE
RULES ACROSS THE GLOBE
Across the globe, governments are assessing andadopting new rules requiring the tracking and tracingof tobacco products. JTI does not see Track and Traceas the solution that will solve the problem of illegal
trade, because it will inevitably exclude all illicit whites,counterfeits, and any product manufactured in a country
that does not require track and trace. Nevertheless, ourposition on Track and Trace is clear: governments mustensure that any legislation is based on ‘open standards,'
where the technology is inter-operable and affordable foreveryone in the supply chain. Without this, governments
risk imposing a system that could seriously interferewith the commercial supply chain. JTI continues towork closely with key stakeholders across the globe toensure that any final Track and Trace system is effective,
efficient, and accessible to everyone.

37

OUR BUSINESSES

Our pharmaceutical business

OUR BUSINESSES

Our pharmaceutical business

TRAINING IN DRUG SAFETYOUR BUSINESSES

Our pharmaceuticalbusiness
Our pharmaceutical business has a mission to deliver innovative drugs to patients inthe shortest time possible, safely and securely. As this business has a direct impact
on human health and life, we not only comply with strict laws, regulations, andindustry codes, but are also guided by a strong sense of ethics and responsibility.
This is particularly the case in areas such as clinical trials and the promotion ofdrugs, as well as animal testing, and the management of chemical substances.
While JT focuses on R&D, our pharmaceutical subsidiary, Torii Pharmaceutical,
primarily carries out the production and promotion of drugs in Japan. Outside
Japan, we license drugs to other pharmaceutical manufacturers, and do not have asales function.

We have strict processes in place to ensure that ourpharmaceutical business activities are always responsible
and appropriate. We provide e-learning to help employees
understand the importance of drug safety and quality
assurance. In 2017, all of approximately 800 employees
in our pharmaceutical business completed this e-learning
course.

ENSURING ETHICAL INTEGRITY
Employees based at JT’s Central Pharmaceutical ResearchInstitute regularly attend educational programs in areas suchas ethics, animal testing, managing chemical substances,and environmental management, so that they are always up
to date in these fields.
We have established in-house regulations on animal testing,based on government legislation. Our Institutional Animal
Care and Use Committee ensures we follow the ‘3R’ concept:
Replacing laboratory animals with other research materials
where possible; Reducing the number of animals used; andRefining tests so that animals do not suffer unnecessary painand distress. We carry out periodic in-house inspections andassessments to ensure compliance with regulations. Our
animal-testing practices are certified by the Japan Health
Sciences Foundation, an external authority.
Our Ethical Review Committee is comprised of both internaland external members, and is based also on relevantJapanese guidelines. The Committee examines the ethicaljustification and scientific validity of research utilizing humantissue samples.

OUR PHARMACEUTICAL BUSINESS VALUE CHAIN*

Clinical trial
participants& institutions

Licensepartners

Joint
research
partners

Our suppliers

Research &development

1

Factory

Our chemical management system covers every aspect of
the chemical handling process, from the moment we takedelivery of the chemicals, through to their storage, use, andeventual disposal. It also provides employees with vital
information, such as how much remains of the chemical, andthe most up-to-date safety data sheet for each substance.
Employees are regularly made aware of chemical safety risks.
Torii Pharmaceutical separates chemicals into categories
requiring different levels of management, and has specificrules and procedures according to the characteristics andsafety risks of each category of chemicals.

Wholesale

Torii Pharmaceutical

Our company

Our customers & consumers

REGULAR INSPECTIONS OFPRODUCTION METHODS
We have developed guidelines outlining how to conduct
annual inspections to confirm consistency between
government-registered and actual production methods.
To guarantee robust quality assurance, we are now making
sure that our own factories and our contracted factories fully
adhere to these guidelines. In 2017, our Group factory and
50% of our contracted factories rolled out these processes.
We will finish applying the guidelines to the remainder of ourcontracted factories by the end of 2018.

RESPONSIBLE PROMOTION OF DRUGS
We have established our own code of practice on the
ethical promotion of prescription drugs, based on the codeof practice of the Japan Pharmaceutical Manufacturers
Association (JPMA). We have 526 medical representatives(MRs), who provide and gather information on drugs to/from health-care professionals, and we run monthly training
programs to ensure adherence to our code. In 2017, Torii
Pharmaceutical held several web-based conferences
between relevant headquarter divisions and local offices
to further consolidate the MRs’ understanding of theappropriate way to manage product information. The Medical
Compliance Department and Compliance Advancement
Department help to educate employees on compliance withthe promotion code.

TRANSPARENCY OF CONTRIBUTIONS

6

Suppliers

38

3

Contracted
factories

2

Sales & Promotion

Warehouses

Torii Pharmaceutical

Torii Pharmaceutical* This diagram represents the value chain of products manufactured and/or developed by JT, and sold and promoted by Torii Pharmaceutical.

Medical institutions
and patients

Collaboration and partnership is part of our business. In someinstances, we make financial contributions to partners, suchas research institutes, universities, or medical institutions.
When we do so, we are transparent about these payments
and disclose them on our website, in line with transparency
guidelines from JPMA.

39

OUR GROUP

Our way of doing business

OUR BUSINESSESFOUR FOCAL AREAS OF FOOD SAFETYOUR BUSINESSESFOOD QUALITY

Our processed foodbusiness
The TableMark Group is a processed food business of the JT Group, dedicated todelivering safe and high-quality food products to our consumers. To achieve this,we have a rigorous system in place based on four focal areas: food safety, fooddefense (i.e. protecting foods from intentional contamination), food quality, andfood communication.
TableMark’s sourcing policy on food safety covers all suppliers at every pointin our procurement and manufacturing processes. We are also mindful of theenvironmental impacts of our products and operations, and make continuous
improvements wherever possible.

OUR PROCESSED FOOD BUSINESS VALUE CHAIN

FOOD COMMUNICATIONFOOD SAFETY

FOOD DEFENSE

FOOD SAFETY STANDARDS: EXTERNALAND INTERNAL CONTROLS
TableMark has 31 factories producing a variety of foodproducts, including frozen noodles, frozen and packed
cooked rice, frozen baked bread, pastries, and seasonings.
We are currently implementing a plan to have all of thesefactories certified to FSSC22000, the global food safety
standard, by the end of 2018. FSSC22000 is recognized by
the Global Food Safety Initiative, the food industry's global
body, to promote food safety management. So far, 29 of our
31 factories, inside and outside of Japan, have been certified
to FSSC22000*1. TableMark ensures that all contracted
factories mandated to manufacture frozen food products on
our behalf are certified to ISO 22000 or FSSC22000, as an
assurance of food safety.

Our processed food business

MAINTAINING QUALITY STANDARDSBY LISTENING AND LEARNING
Food quality control is an essential element of our daily
operations. Along with quality improvement efforts on factory
floors, we ensure that all TableMark employees receive
training through customized e-learning materials.
We also listen to our consumers and their suggestions
for improving product quality. Our internal Quality
Improvement Committee helps us effectively respond totheir recommendations. The Committee is made up ofrepresentatives from different divisions, including ProductDevelopment, Manufacturing, Sales, Quality Control, and
our Consumer Call Center. Our consumer complaints
management system is compliant with ISO 10002, theinternational standard for customer satisfaction andcomplaints handling.

LET’S TALK: FOOD COMMUNICATION
We are always willing to provide details about our foodproducts. We respond to consumers’ requests for
information, and can disclose the factory where foodproducts were made, or the country of origin of the main
ingredients. We record information on our raw materials,
such as farm origin, and can trace back our products if
necessary. We also have toll-free numbers on our productlabels for consumers to call for extra information.

We also call upon three independent advisors, who havehelped to develop our approach to food safety since 2008. In
2017, these advisors visited six factories, giving useful advice
which resulted in improved awareness of quality control.
There were no voluntary recalls of our food products in 2017.

31

100+
Packagingmaterials
suppliers

Factories
The TableMark Group

Our suppliers

Our company

300+

Wholesale trading
companies*

40

50+

Contracted factories

Distribution

DETECTING AND DETERRINGCONTAMINATION WITH FOOD
DEFENSE GUIDELINES

Our customers & consumers

Customers &consumers* We do not deal directly with raw material producers such as farmers, who provide raw materials to the trading firms or to the contracted factories that supply us.

‘Food defense’ is about protecting our manufacturing
processes and products from intentional contamination.
TableMark applies robust food defense guidelines across the
supply chain, which are applied both in our own factories
and in our contracted factories, and are referred to during ourannual audits. Recent initiatives to strengthen our defense
mechanisms against deliberate contamination include greateruse of factory cameras and enhanced management ofchemical substances. These measures help detect and deter
any incidences of intentional contamination.

REDUCING OUR ENVIRONMENTAL IMPACTS
As part of our efforts to reduce environmental impacts
within our operations, Thai Foods International, a TableMark
Group company focusing on the manufacture and sale ofseasonings, is building a biomass co-generation system thatuses rice husks as fuel, in its Thai factory.
This factory uses electricity procured from a local electriccompany, and once the system starts operating in 2019,
it is expected that purchased electricity usage and theresultant Scope 2*2 greenhouse gas (GHG) emissions could
be significantly reduced (by 7,000 tons of CO2e*3 annually).
This project, which has been adopted by the Joint Crediting
Mechanism of the Ministry of the Environment in Japan, will
not only help us to address environmental issues and reduceenergy costs, but will contribute to GHG emissions reductionin Thailand.

* 1 As of Mid February 2018
* 2 Scope 2 GHG emissions are those emissions relating to the consumption of purchased energy, such as electricity, steam, or other energy sources.
* 3 CO2e stands for ‘carbon dioxide equivalent’ emissions, a standard unit for measuring carbon dioxide footprints.

41

OUR GROUP

Our way of doing business

OUR WAY OF DOING BUSINESSOur business ethics

REPORTING CONCERNSOUR WAY OF DOING BUSINESSOur businessethicsWe offer multiple communication channels for employees
and business partners to confidentially raise concerns about
violations of our Codes of Conduct and policies or concernsthat are perceived to carry the risk of violating our Codes andPolicies.
We review all concerns raised and where necessary launch
investigations and implement appropriate corrective actions,as required. Employees are informed about our Reporting
Concerns Mechanism through various channels including theGroup intranet. We also encourage customers, distributors,
and suppliers to speak up about potential violations of theCodes of Conduct through our website.

At the JT Group, our Codes of Conduct form the foundation of our business ethics.
We have a Reporting Concerns Mechanism in place that allows employees, as wellas our business partners, to report any concerns they have confidentially.
Our Group takes a zero-tolerance approach to bribery and corruption, and we havean anti-bribery policy in place.
We have a JT Group Human Rights Policy, which complements our Codes ofConduct, and this commits us to respecting human rights across the company.

The concerns we receive from our employees are dealt withby specially trained Contact Persons. In our international
tobacco business, all newly appointed Contact Persons
follow a mandatory online and face-to-face training course
and receive the Contact Person Manual, explaining their rolein detail.
Throughout their role as a Contact Person, they can takepart in online refresher courses and remain up to date via a
dedicated internal platform and video/phone conferences. In
2017, we received 445 reports across the JT Group, up from
441 in 2016.

BREAKDOWN OF REPORTED CASES
1.6%
2.5%

34.5%

19.7%

22.9%

19.1%

2016

2017

441

Living our Codes of Conduct

25.2%

24.0%

32.4%

Our Codes of Conduct outline our responsibilities toward consumers, shareholders,
employees, and society, and define our legal and ethical obligations. We ensure that ourCodes of Conduct are implemented effectively, by providing relevant training to all staff.

Cases related to Labor Practices(excluding Human Rights)

Cases related to corruption

Cases related to Human Rights

Cases related to anti-competitive behavior

The Codes are essential for conducting business ethically, and as a responsible corporate
citizen. Employees are encouraged to refer to the Codes whenever guidance is needed.

Cases related to fraud and misuse of company
assetsOther

In 2017, we provided training across our Japanese operations in areas such as humanrights, risk management, and prevention of long working hours. In 2017, 12,134
employees completed these courses (*C). In 2017 we also distributed our annualcompliance survey, which was completed by 94.9% of employees (*C). The survey
outcomes are reported to each executive officer and to each department. From the resultsof the feedback, relevant departments will introduce measures to improve the situationin their annual compliance action plans, and will use quantitative targets to evaluate theeffect of these measures. Based on the survey results, we acknowledged long working
hours and harassment as important business risks. These two risks have been set ascompany-wide priority issues for 2018.
In 2017, our international tobacco business, in line with its E.U. Cooperation Agreement
obligations, rolled out training on Anti-Illicit Trade, which included a section on Conflictsof Interest. The training was deployed online and translated into 24 languages. 15,599
employees successfully completed the course by December 31, 2017. During 2018, thecourse will be adapted to employees in various locations who do not have access tocomputers.
42

18.1%

445

There were no cases related to anti-competitive behavior for 2016 or 2017.

94.9

*c

%

OF EMPLOYEES RESPONDED TO
THE 2017 COMPLIANCE SURVEY43

OUR WAY OF DOING BUSINESSOur business ethics

OUR WAY OF DOING BUSINESS

Anti-bribery and corruption

Respecting human rights

The JT Group has a zero-tolerance approach to bribery and corruption. In addition, we do not
permit facilitation payments. In 2017, our Japanese operations (including the subsidiaries of ourprocessed food division overseas) made available an anti-bribery handbook. 2,179 employees
took part in an anti-bribery e-learning course to deepen their understanding of this topic in
2017.

We need to respect Human Rights in every market where we operate. Since we are present incountries where human rights may be at risk, we have made a commitment to assess those asa priority. We will develop actionable plans to make improvements where required, to ensure
the highest standards of behavior are upheld within our business and value chain.

Similarly, in 2016, our international tobacco businesslaunched its own communication campaign on antibribery and corruption. An online training module was alsoestablished, and this was completed by 15,202 employees in2016. An additional 1,720 employees completed the online
training in 2017. For those without online access, we are
currently developing a train-the-trainer program (in local
languages) to cover these employees. This will be rolled out
in 2018.

Over the past three years, we have been working on a more systematic approach to human rights issues. In September 2016,
we launched the JT Group Human Rights Policy (the Policy), which follows the UN Guiding Principles on Business and Human
Rights, and delivers on our management principles, as set out in our 4S model.

57.8 %*E

OF EMPLOYEES RECEIVEDANTI-BRIBERY AND
CORRUPTION TRAINING
IN 2016 AND 2017

The Policy was originally developed in consultation with internal and external stakeholders. As per our commitment to the policy,
in 2017 we began carrying out human rights due diligence programs across our businesses. In order to strengthen and improve
implementation of the Policy, our international tobacco business created a Human Rights External Advisory Board.

INFORMING

78 %*AGIFTS, HOSPITALITY, AND ENTERTAINMENT
Our internal policies and procedures help to prevent bribery
and to maintain an appropriate level of exchange of gifts,
hospitality, and entertainment (GHE) within the Group.
The giving and receiving of GHE is limited to promoting ahealthy business relationship, and should not be used to seek
preferential treatments. As such, GHE must always respect
all local regulations, be transparent, and be reasonable.
We therefore require that all employees of Japanese
operations seek approval for any GHE received or provided.

EMPLOYEES WITH COMPUTER ACCESS WHOCOMPLETED THE HUMAN RIGHTS E-LEARNINGCOURSE IN 2016 (JAPANESE DOMESTICOPERATIONS) AND IN 2017 (INTERNATIONALTOBACCO BUSINESS)ASSESSING

In our international tobacco business, all GHE exchanges
with non-governmental third parties above 250 U.S. Dollars
must receive prior approval. For government and public
officials, all requests, regardless of amount, must be
approved. The number of requests for GHE approval in 2017
was 740, compared to 702 in 2016.
To ensure GHE compliance is well embedded in theorganization, we conduct regular training, and run
communications campaigns. In 2017, in our international
tobacco business, 165 employees completed GHE training
via face-to-face sessions or online. In December 2017,
we rolled out a Christmas GHE video campaign to all our
employees (*E).

We are committed to carrying out due diligence to identify
and assess actual and potential human rights risks in ourbusiness.

ANTI-COMPETITIVE BEHAVIOR
Our Codes of Conduct underpin the JT Group’s strong
commitment to fair competition. Our commercial strategy
and actions must be determined independently of ourcompetitors. Our international tobacco business has acompetition law policy and guidelines in place, designed
to ensure that its business operations are conducted fairly
and in compliance with competition laws, wherever it does
business.
To ensure that employees understand the principles of faircompetition and the standards of the policy and guidelines,
we provide face-to-face training, with online training alsoavailable to complement this, as necessary.

44

Our business ethics

In our international tobacco business, we conducted a gap
analysis of our corporate framework, including policies,
procedures, and processes in 2017. This analysis concluded
that we have a robust set of policies and procedures in place
to investigate and mitigate human rights risks across ouroperations and business relationships. While our policies are
consistent with human rights expectations, we will ensurethat they are more integrated and conform more closely withinternational standards. An important recommendation was
to test policy implementation in our key markets. As a result,
this has now been integrated in our human rights market
assessments.
We completed a gap analysis in Japan, followed by a pilot
due diligence project across our Japanese operations.
This included distribution of a Self Assessment Questionnaire
to over one hundred logistics sites, R&D centers, andfactories across the three key business segments of tobacco,
pharmaceutical, and processed food. Selected sites werealso visited for face-to-face interviews with internal audit
teams. We analyzed the questionnaires and shared our
findings and risk assessments with the business.

We have been rolling out e-learning modules and training
on human rights within the JT Group since 2016. In 2017,
our international tobacco business launched a module in
English and in 24 other languages. Training for employees
without computer access will take place in 2018 to ensure
all our employees have an awareness of our company's
commitment to the Policy.

“ BSR (Business for Social Responsibility)
has a partnership with JTI to help
the company build robust humanrights policies and practices, andimplement these across the corporationand its country operations.”
Margaret Jungk
Managing Director, Human Rights, BSR

IMPROVING
The extensive Self Assessment Questionnaire analysis in ourJapanese operations provided us with further insights intohigh risk areas, including issues around foreign workers,
harassment, and long working hours. We identified a needto reinforce our internal policies and a need to continue
engaging internally, in order to keep making improvementsin this area. Based on our findings and our learnings fromthe due diligence pilot programs in 2017, we will focus in2018 on establishing internal guidelines for the hire of foreign
workers, and for their working conditions in Japan.
45

OUR WAY OF DOING BUSINESSOur people

OUR WAY OF DOING BUSINESS

Maximizing people potential

OUR WAY OF DOING BUSINESSOur people

Maximizing the potential of our people is a role undertaken by line managers, who help drive employee motivation andperformance. Expectations are clearly communicated to line managers, and new programs have been introduced that enhance
our managers’ ability to help employees unlock their potential and flourish in their professional development.

JT Group Human Resources Management Philosophy
In order to contribute to the Company’s sustainable growth, and with therecognition that highly skilled, talented, and diverse people are the foundationof its success, JT Group management strives for the highest level of employee
satisfaction with a long-term view.

TREAT ALLEMPLOYEESFAIRLY ANDRESPECTFULLYENSURE
TRANSPARENCY OF
RULES AND
STANDARDS

Building success byinvesting in people
Employees are one of four principal stakeholders within our
4S model. Our strong commitment to employees is describedin the JT Group Human Resources Management Philosophy,
and is reflected in our HR strategies.
In 2017, based on the ideas outlined in our Philosophy, ourinternational tobacco business established its latest HR
strategy. This has a strong emphasis on attracting andmanaging talent, and is supported by an organizational
design that suits our current and future businessenvironment. It also looks into competitive remunerationfor employees, and the value of the employer brand for
employees.

Within our international tobacco business, we are also working on improving the quality of performance appraisals, and arebuilding a new online HR platform. In 2017, 80.4% of our workforce took part in performance appraisals for the year 2016.
Proof of our commitment to employee development is seen in the number of open vacancies that are typically filled internally.
Employees in junior positions are frequently promoted to management positions, a practice we favor over automaticallyseeking external recruits. We enjoyed an internal hire rate of 94.2% in 2017.

Diversity inthe workplace

PROVIDE ALL JT
GROUP EMPLOYEESWITH GROWTHOPPORTUNITIESWe believe diversity often equates to significant competitive
advantage, as it promotes different perspectives, which
foster creativity and innovation.

“Our operating environment ischaracterized by disruption, from evertougher regulatory requirements to exciting
new opportunities in our portfolio.
Our people are changing too,demonstrating more diversity in theirvalues and desiring more personal growthin their work.
In recognition of these evolutions, I am
committed to creating a workplace whereindividuals can achieve their full potentialand entrepreneurship will flourish.
This will equip us with the mindset andmanpower to navigate these shiftingtides, and ensure we remain steadfastly
successful.”
Kiyohide Hirowatari
Member of the Board and Executive Vice President, JT

46

Our people

The JT Group, with employees from more than 100 different
countries, has long carried out various initiatives to promote
all forms of diversity. In 2017, we continued to uphold thiscommitment by establishing a dedicated ‘Diversity andInclusion’ department in our international tobacco business.
Furthermore, JT was ranked as a ‘Gold’ employer in the
PRIDE Index, for the second consecutive year, recognizing
our commitment to the inclusion of the LGBT community.

WOMEN IN MANAGEMENT
We are keen to promote female employees and achieve amore gender-balanced workforce. JT is pleased to reportthat female representation within the management teamincreased from 4.7% (*B) at the end of 2016, to 5.5% at theend of 2017. This is in line with our plans to achieve 10%
female representation in our management by 2023.
Our international tobacco business is aiming for 30%
female representation in director positions by 2020, with28.2% at the end of 2017. In June 2017, Suzanne Wise wasappointed Senior Vice President, heading the Corporate
Development function including CSR. She is the first woman
on the Executive Committee of our international tobacco
business. We acknowledge we have a long way to go andare committed to improving female diversity.
47

OUR WAY OF DOING BUSINESSOur people

OUR WAY OF DOING BUSINESS

Workplacehealth and safety
HEALTH AND SAFETY FIRST

Health and safety in the workplace is of the utmost
importance to us, not only for our employees’ wellbeing but
also for the sustainable growth of our business. Our standards
on health and safety usually exceed legal requirements,
and their scope extends beyond our employees to covercontractors and visitors in our operations. Wellbeing programs
often include family members of employees.
WORKPLACE HEALTH AND SAFETY DATA*1

FY2013

2014

2015

2016

2017

TARGET

Employees

1

2

1

2

0

0

Contractors

0 *E

3 *E

1 *E

1

2

0

Employees

n/a

113

154

155

172

n/a

Contractors

n/a

12 *E

17 *E

8

13

n/a

EMPLOYEE LTI RATE

0.26

0.32

0.36

0.42

0.35

n/a

% OF CIGARETTE AND TOBACCO-RELATED
FACTORIES CERTIFIED TO OHSAS 18001 (*D)

85.4%

81.0%

78.9%

77.8%

74.4%

100 %

NUMBER OF VEHICLE ACCIDENTS

1,362 *E

1,341 *E

1,108 *E

1,294 *D

1,457 *Dn/a

6.1 *E

5.9 *E

4.8 *E

4.4 *D

5.2 *D

n/a(Number of LTIs per 200,000 hours worked)

VEHICLE ACCIDENT FREQUENCY RATE
(Accidents per million kilometers)

BUILDING A SAFE WORKING ENVIRONMENT
Our safety programs are based on three fundamental
pillars: safe work places, safety competence, and aGroup-wide safety culture, where safety is the priority.
The highest safety risks across our business relate todriving (fleet safety); working with machinery; as well
as slips, trips, and falls. We mitigate occupational safety
risks by conducting risk assessments, delivering safety
trainings and raising awareness, implementing prevention
measures, and managing emergency response. As part ofthese efforts, in 2017, the manufacturing function of ourinternational tobacco business initiated a new program,‘Wesafe’, to increase awareness, and accelerate safety.
In spite of these measures, we still experience challenges
and, at times, safety incidents. We are committed toaddressing these by strengthening safety education for both
employees and contractors, and by systematically sharing
incidents reported within the Group, to prevent recurrence.

PROMOTING HEALTH AND PREVENTING
WORK-RELATED DISEASESJT RECOGNIZED BY JAPANESE MINISTRY
OF ECONOMY, TRADE AND INDUSTRY

The JT Group promotes general employee health andwellbeing, as well as work-related disease prevention.
To support this, our international tobacco business offersa range of tools to mitigate occupational health risks, andprevent health concerns in the workplace. This includes
regularly assessing levels of noise and dust in manufacturing
sites, ergonomic and manual handling hazards, andoccupational hygiene.

In recent times, JT has placed a special focus on stressmanagement and prevention of lifestyle diseases.
As a result, JT was named a ‘White 500’ company for thesecond consecutive year, in recognition of exceptional
efforts toward employee wellbeing. The ‘White 500’ award
is presented by Japan’s Ministry of Economy, Trade andIndustry (METI) and recognizes large enterprises that are
making outstanding progress toward better wellbeing andproductivity among their employees.

CASE STUDYNUMBER OF FATALITIES * 2

NUMBER OF LOST-TIME
INCIDENTS (LTIs)

Our people

Over the course of 2017, we regrettably had to report
fatalities in our workplaces. One contractor died in a
motorcycle accident, while another contractor died during
the relocation of equipment in our factory. Fleet safetycontinues to be a major challenge, as four third-party
fatalities took place in accidents involving our company
cars and/or motorcycles. In these tragic situations we
support the affected families as much as we can.
In response to these recent accidents, we are reinforcing
our safety programs and training courses for vehicle andmotorcycle drivers to reflect the current reality of road-relatedrisks, and we are helping individuals develop their skills inrecognizing road traffic hazards, and preventing collisions.
To address the fatality in our factory, additional safety
trainings for employees and contractors, as well as factorywide safety re-assessments, were immediately implemented.

JTI Petro’s comprehensive
wellbeing program

BeWell Careerseeks to maximize the employee’s potential,
and supports each individual in developing
their own career path.

HOLISTIC APPROACH FOR EMPLOYEE HEALTH, WITH
FOUR PILLARS OF WELLBEING

BeWell Financial

In 2017, the factory, located just outside St. Petersburg,
continued to enjoy the fruits of its ground-breaking healthand wellbeing program, BeWell, which was first launched in
2016.

BeWell Health

The campaign reaches some 1,300 employees, and carries
the motto “Energy of Health for Work and Life”. It is this final
aspect, 'life', that sets the campaign apart from anything that
the JT Group has done before. This campaign is unique, as
it brings together different wellbeing pillars into one holistic
program, focusing not only on physical health, but also on
employee wellbeing as a whole. The program encompasses
the four areas in life that typically generate the most stress,
and which deserve deeper attention.
Ekaterina Melnikova and Irina Stepanova are both HR
managers based in St. Petersburg who lead the BeWell
program. They explain that the goal of the program is to“increase workplace efficiency and employee engagement
over the long term”, but more importantly, it will “empower
employees to be more conscious of their own wellbeing”.
The success of this program has been communicated toother factories and offices in our international tobacco
business to see if it can be applied in other locations.

improves financial literacy and money
management, for better mental wellbeing.

encourages healthy lifestyle habits for moreenergy, less absenteeism, and increased
productivity.
BeWell Social

promotes a sense of community andbelonging, with initiatives to ‘give back’, andmore opportunities to meet new people orcolleagues.

“ The BeWell program helps you unlock yourpotential. It gives you an impetus to growand develop in the areas of greatest interest– be they career, personal finances, health,or social relations. Seminars and training
sessions, sporting events, family days, andspecial healthy eating projects are just a small
sample of what the company offers as part ofBeWell. I took part in the Getting Fit Together
project, which helped me not just to lose excess
weight, but also to improve my health, get into
good eating habits, and learn how to stay fit.”
Aleksandr Raspopov, Quality Control Specialist, Petro factory48*1Unless otherwise specified, 2017 safety data covers the entire JT Group. The scope of reporting for contractor fatalities and LTIs, as well as vehicle accident data, has
expanded in 2016 compared to previous years. Further details on the scope of data can be found in the Basis of Reporting document.

* 2 Excludes third-party fatalities. For details on third-party fatalities, please refer to the 'Building a Safe Working Environment' section.

49

OUR WAY OF DOING BUSINESSES

Our planet

OUR WAY OF DOING BUSINESSOur planet

JT GROUP LONG-TERM ENVIRONMENT PLAN 2020
OUR WAY OF DOING BUSINESSOur planet
As a responsible business, the JT Group is committed to protecting theenvironment. By reducing our environmental impacts, we are able to conserve
resources, improve performance and enhance our reputation, and manage costs.
All of this supports the environment and the sustainability of our business. Thisethos is at the heart of our approach to environmental management, laid out in our
Company Environmental Charter. The Charter is supported by the JT Group’s LongTerm Environment Plan 2020, which presents our targets for greenhouse gas (GHG)
emission reduction and our approach to managing water, waste, and biodiversity.
We are pleased to report that our target for total GHG emissions reduction set out
in the plan was achieved ahead of schedule in 2017. Looking beyond 2020, we arebuilding our next Environment Plan, which will address energy, GHG emissions,natural resources (water and wood), and waste, with clear objectives and targets foreach topic.

A sustainable approach toenvironmental stewardship
We align our environmental and energy management systems with relevant international
standards (namely IS0 14001 and ISO 50001) and have also developed the JT Green System(a simplified environmental management system) to promote a sustainable approach toenvironmental management in our smaller and less complex operations.
Recent revisions to ISO 14001:2015 have required ongoing actions
during 2017, including aligning our environmental management
systems with these updates. We also started to integrate energy
management into our existing management systems.
Going forward, we will continue to explore how we can better
integrate our environmental and energy management systems
with other business considerations, such as Quality, Occupational
Health and Safety, and other operations. While this presents
challenges, it also brings with it opportunities. We are piloting theapproach to developing an integrated quality, environment, healthand safety management system at our Leaf factory in Malawi.
We will use the insights gained from this process to help otherfactories build more efficient and integrated management systems.

50

MINIMIZE OUR CONTRIBUTION TO GLOBAL CLIMATECHANGE WITH A
 TARGET OF 20% REDUCTION OF
GHG EMISSIONS AND INTENSITY BY 2020

PROTECT WATER RESOURCES THROUGHSUSTAINABLE USE O F WATERPREVENT WASTE, PROMOTE RECYCLING,
AND OPTIMIZE RESOURCE USE

CONSERVE BIODIVERSITY THROUGHPROMOTING SUSTAINABLE STEWARDSHIPOF THE NATURAL ENVIRONMENTKEEPING A CAP ON GREENHOUSEGAS EMISSIONS
Climate change remains the most important environmental
challenge of our times. For the JT Group, and particularly forour tobacco business, climate change can directly affect the
supply of key raw materials, including tobacco and many ofthe production materials used across our supply chain.
It is, therefore, critical that we reduce fossil fuel energy use
and greenhouse gas (GHG) emissions for the benefit of theplanet, and of our business.

“We strive to be a responsible businessat all times, and we are committed tolooking after the environment in which
we operate. In this year’s report, I am
pleased to announce that we havesuccessfully achieved our total GHG
emissions reduction target ahead of theoriginal schedule.”
Chigusa Ogawa Senior Vice President, CSR.
51

OUR WAY OF DOING BUSINESSES

Our planet

OUR WAY OF DOING BUSINESSESGHG emissions in our operations

Our planet

GHG EMISSIONS INTENSITY FOR
THE TOBACCO BUSINESSCO2e tons/million cigarettes equivalent

The JT Group remains committed to cutting its GHG emissions, notably throughfocusing on energy reduction, and increasing the proportion of renewable energythat we use.

As part of our efforts to tackle GHG emissions, we haveestablished a cross-functional team for renewable energy,
allowing for a more coherent approach towards renewableenergy and emissions reduction. To help compare various
GHG reduction projects, in terms of anticipated emissions
reduction, the cost of that reduction, and also project
payback, we have adopted a tailored MACC*2 tool. This
helps us better plan and prioritize projects and focus our
GHG reduction efforts. Our new Environment Plan will

0.67

0.66

0.64

0.50

We are pleased that more and more of our factories andoffices now purchase or generate energy from renewablesources.
Examples of renewable energy purchased:
Sweden, Romania, Germany, Canada, Switzerland, Poland
FY
2009

Examples of renewable energy generated on-site:
Brazil, Turkey, Jordan, Nigeria, The Netherlands.

FY
2013

2014

2015

2016

2017

2020
Target

GHG EMISSIONS IN OUR VALUECHAIN IN 2017

COMBINED SCOPE 1 AND 2
GHG EMISSIONS

CO2e thousand tons

CO2e thousand tons

12%
694

CASE STUDY

Generating steam
in Jordan
Our factory in Jordan is a pioneering example
of our increasing use of renewable energy.
Thanks to solar steam generation, the factory
can cover the majority of its thermal energy
demands for tobacco processing, and convert
part of the solar energy into energy for building
heating and for cooling. This significantly
reduces the factory’s carbon footprint. It is
the first tobacco factory in the world to use
direct solar steam generation. Overall, theproject is anticipated to save approximately
10% of the factory’s annual GHG emissions
and 18% of its annual energy costs, witha payback of approximately eight years.

In 2017, our factory in Tainan (Taiwan) became the first
JTI factory to be awarded a Leadership in Energy andEnvironmental Design (LEED) Certificate from Green
Business Certification Inc. (GBCI®). This represents official
recognition of our leadership in energy and environmentalbuilding design, and an acknowledgement of efforts madein the areas of energy and water efficiency and innovation,
amongst others.

1,000
21.2% reduction achieved
ahead of the target year

7%
413

404
389

376

500

62%
3,742

476

355

408

401

380

FY
2013

2014

2015

369

355

349

339

2016

2017

Combined Scope 1 and 2 GHG Emissions
FY2009

Scope 3Purchased goods
and services
Transportation anddistribution

Capital goods
Others* 1 Original reduction target: 20% reduction between 2009 and 2020.
* 2 MACC, or Marginal Abatement Cost Curve.

Scope 1

Original Target: 20%
on FY2009

6,031

11%
645

52

0.72

on FY2009

include revised emission targets in line with science-based
approaches, taking into account the Paris Agreement on
climate change.

0.73

The majority of our factories continue to implement energy
reduction opportunities. One impressive example of thisis our factory in Malawi, which achieved an almost 65%
reduction in electricity consumption from 2015 to 2017.

PLANNING AND PROMOTINGEMISSION REDUCTION

9%
537

0.78

20% reduction

We have reduced absolute GHG emissions between 2009
and 2017 by 21.2%, achieving the target set out in the
JT Group Long-Term Environment Plan 2020*1. This wasachieved through a number of initiatives, one of them
being the use of renewable energy. GHG emissions relate
to both Scope 1 emissions (those for which we are directly
responsible), and Scope 2 emissions (those related to energy
supplied by third parties). We are still working hard to meetour 2020 emissions intensity target for our tobacco business.
To achieve this, we have set a goal to improve our overall
emissions efficiency by a further 5%, during the period 20182020.

1.00

2020
TargetAN INNOVATIVE APPROACH TO REDUCINGEMISSIONS IN OUR VALUE CHAIN
As well as our own emissions, we continue to seek ways
to reduce GHG emissions across our value chain (‘Scope 3’
emissions) – in particular, emissions associated with tobacco
leaf, our main raw material, which represent the largest single
source of Scope 3 emissions for our business. Our innovative
Matope curing barns in Zambia optimize tobacco quality whilst
reducing wood consumption, resulting in a 12% reduction in CO2emissions.

Scope 253

OUR WAY OF DOING BUSINESSES

Our planet

OUR WAY OF DOING BUSINESSES

Water

Research and Environmental Education, and approved by
the National Bank for Social Economic Development. Overthe next five years, the project aims to restore 335 ha ofPermanent Protection Areas at our integrated tobacco farms
as well as in Flona de Irati, a National Forestry Reserve;
seedling planting has already started in this area. The projectwill contribute to environmental conservation in Brazil,
increase our efforts in protecting biodiversity, and impact
positively on our farmer communities.

Water is a fundamental resource for the JT Group and, in particular, for our processedfood business. Water is also a risk factor within our operations. Water-related issues,
such as availability, quality, flooding, drought, and how water is regulated, represent
potential risks to our business.
We take steps to ensure effective water management. We do this by ensuring our business units set annual withdrawal targets
and by undertaking water risk assessments in our factories. By the end of 2017, we had completed water risk assessments at
40 of our factories (56%).
As part of our new Environment Plan we are committing to context-based water targets for relevant parts of our business.

Our Miombo Woodland Project in Zambia is an initiative
for the sustainable management of Miombo woodland.
It includes, amongst other things, the conservation ofwood, rehabilitation of existing woodland areas, andempowerment of communities to use these resources
sustainably. Achievements from the first phase of the project,

Our planetcompleted in 2017, include a baseline study, engagementwith local communities and local authorities, and training onsustainable bee keeping, use of efficient cook stoves, andimproved land management.
To improve farm productivity and reduce farming costs, weinvest in innovation. This includes partnering with leadinginternational academic institutions and non-governmentalorganizations. Our Agronomy, Development, Extension,and Training (ADET) centers in Brazil and Zambia carry out
research into topics that ultimately enhance returns forfarmers in the long term. We have recently developed aprotocol to help farmers establish an inventory of biodiversity
and how to monitor it. This enables farmers to implement
action plans for environmental restoration in relation to native
vegetation, water, soil, fauna, and climate.

Recent water-related improvement projects include water recovery and recycling at our factories in Turkey, Jordan, and Russia,
and improved wastewater treatment at two of our Russian factories.

RECOGNIZED FOR ENVIRONMENTALLEADERSHIPIn 2017, we achieved Leadership status in both CDP Climate
Change and CDP Water. In addition, we invited 47 of our
suppliers to disclose information about climate change andwater management through the CDP Supply Chain Program.
We recognized World Water Day 2017 with a seminar at our
Geneva headquarters, where we showcased our approach towater management and water-related community projects in
Malawi, Ethiopia, and Bangladesh.

Waste

WATER WITHDRAWAL
Thousand m3

15,00012,958
10,783

10,56010,0009,936 9,900 9,735

Going forward, we will be further investigating the potential
environmental impacts, including water-related issues, in our
Reduced-Risk Products supply chain.
FY
2009

FY
2013

2014

2015

2016

2017

Biodiversity

Waste management is a key component of both our current and new Environment
Plans. Across the company we apply a ‘Reduce, Reuse, Recycle’ philosophy
approach to waste management. We believe that, if waste is reduced, resources
can be reduced, and so can costs to the business. Our factories develop targets
for reducing waste, and increasing the proportion of waste recycled.
We experienced an unexpected challenge in 2017 resulting
from an unintended consequence of legislation: one of
our European factories was faced with increased recycling
targets, leading to more waste being diverted for recycling
instead of being reused. This increased the overall quantity of
waste generated, and resulted in higher costs.

WASTE GENERATIONBREAKDOWN OF WASTE
GENERATED IN 2017 (%)

Thousand tons

Responsible management of biodiversity within our operations supports the longterm viability of our business, whilst protecting the environment.
Embedding biodiversity considerations into internalmanagement processes and strategic decision making isfundamental to our business. This involves assessing ourdependence and impact on biodiversity and natural resources
and identifying how we utilize and manage these. We thendeploy appropriate responses, such as good agricultural
practices, initiatives on soil management, sustainable woodand water conservation, and natural forest restoration.
In 2017, we launched our project on nature restoration in
Brazil. This was in collaboration with the Society for Wildlife

54

We are also seeking ways to better manage electronic andelectrical waste within our Reduced-Risk Products supply
chain. To address this, we are developing guidance around
improved waste management in this area. Turn to page 23 toread more about environmental practices for our ReducedRisk Products.

200
16%

145
118

119

119

114

114

114

7%

100

THOUSAND TONS
78%

FY
2009

FY
2013

2014

2015

2016

2017

Recycling

Recovery

Disposal

55

OUR WAY OF DOING BUSINESSOUR WAY OF DOING BUSINESSOur community
investment
We are committed to being a good corporate citizen, ensuring that ourbusinesses deliver positive impact in local communities. For us, community
investment is a way to voluntarily engage with charitable organizations andreach beyond our core business operations. In total, we have 355 community
projects across 66 countries. In the last two years, our community
investment programs have been well rated by recognized external agencies.

Our community investment

IN 2017

6,090

MILLION YEN CONTRIBUTEDTO CORPORATECOMMUNITY INVESTMENT

9,785

EMPLOYEES DONATED
21,911 VOLUNTEERING HOURSTO HELP OTHERS

For further details on our community investment,
visit jti.com or www.lbg-online.net

5,330 million Yen in cash
648 million Yen in management costs
75 million Yen in employee volunteering time
38 million Yen in kind
4,730,987 beneficiaries
719 organizations

Our community programs enable us to extend a special focus to two particular stakeholders within our 4S model, notably our
employees, and wider society. We use the framework provided by the London Benchmarking Group (LBG), the global standard
for measuring corporate community investment, to measure the social impact of our work. According to the LBG Benchmark,the JT Group ranks 9th out of 100 member companies in total community contributions. We continue to uphold our community
investment program even in light of growing restrictions facing our industry. See The Bigger Picture for a quick snapshot ofchallenges in this area.

The Bigger Picture:

SHOULD TOBACCO
COMPANIES BE ALLOWEDTO OPERATE COMMUNITYINVESTMENT PROGRAMS?
The tobacco industry is facing increasing regulation
around its community investment programs. JTI’s
charitable work has already been banned in several
countries such as France, Lithuania, and Mongolia.
While such legislation aims to discriminate against the
tobacco industry and destabilize our position as a legal
and legitimate business, it first and foremost undermines
the sustainable development of communities where
we operate. We believe that there is no justification forprohibiting tobacco companies from exercising their rightand obligation to be a responsible corporate citizen andto support communities.

56

57

OUR WAY OF DOING BUSINESSOur community investment

OUR WAY OF DOING BUSINESSOur community investment

Our priorities incommunity
investment
We are committed to building open andresilient communities. We support this with
programs that address three specific issues:

REDUCING INEQUALITIESWe have a mission to promote open and fair societies.
We support programs that drive social inclusion, such as
those for older persons, people with disabilities, and theunderprivileged, as well as arts programs that encourage
access to the arts for all.

PROTECTING THE ENVIRONMENT
From a business perspective, we know how important it
is to sustainably manage our resources. It’s something we
promote through our environmental programs that benefit
our communities.

IMPROVING COMMUNITY RESILIENCE
We help to build safe and sustainable communities thatare more resilient to man-made and natural disasters. This
work is carried out by certain programs within JT, andby the JTI Foundation. For more information, please visit
www.jtifoundation.org.

CASE STUDY

Replanting the
Nakahechi Forest

After

We have carried out forest replantation programs inJapan for over 12 years, with the aim of engaging withlocal communities, providing volunteering opportunities,
and making a positive contribution to forest areas. In
2005 our first such initiative was in the vast Nakahechi
Forest, located in Japan’s Wakayama Prefecture on theKii Peninsula. After felling the required amount of trees,
the local community experienced difficulties replenishingtrees, due to the stagnation of the forestry economy.
Eventually, with the support and participation of the local
authority and community, we began replanting trees,and have replenished around 200,000 new trees to date.
To maintain and promote the growth of the bestindividual trees, continuous thinning throughout theyear is needed. This resulted in the employment of local
people, assigned with the maintenance of the forest,
who reported a great improvement of their skills and are
now crucial to the Nakahechi forestry association.

JOB SATISFACTION
THROUGH VOLUNTEERING
Volunteering is a proven way to build staff
satisfaction and offer employees the chance toengage with local communities, to grow theirleadership skills, and develop a variety of ‘soft’skills. In our U.K. office, 48% of employees
volunteered in 2017. In Geneva, JTI employees
can help out at a local charity for up to fourhours a month. We are looking to increase suchinitiatives company-wide, and to develop a global
volunteering policy.

Before“ Replanting trees across 50 hectares ofland would have been difficult for local
people without support, so I appreciateJT’s assistance.”

Our office in Russia doesn’t just pursue
profits: we enjoy giving back to our local
communities, too. Each year, we hold ourcompany-wide ‘Day of Doing Good’, attended
by the whole of the Russia team and theirfriends and family. Typically, we help elderly
residents in care homes, do a clean-up in a
local park, or lend a hand at animal shelters.

Moscow Charity Race “Job That Inspires” for JTI Russia employees, their families
and friends, organized in Moscow, St. Petersburg, and Yelets.

Tsuneo Nakamura landowner of Nakahechi forest.
58

59

INTRODUCTION

About
this report
IN ACCORDANCE WITHGRI G4 ‘CORE’

We report annually on our sustainability
activities and performance, and have been
publishing environmental or CSR reports
since 1998. Our last report, JT Group
Sustainability Report FY2016, was publishedin June 2017.

NOTES ON DATAThe FY2017 report has been
compiled in accordance with the
Global Reporting Initiative (GRI) G4
Sustainability Reporting Guidelines‘Core’ option. We defined thecontent of this document using
a materiality assessment thatcovered the entire JT Group.
Our GRI G4 Content Index shows
the list of Standard Disclosures forwhich we have provided information
either in this report or in other public
documents, such as our Annual Report.
The identification of Specific Standard
Disclosures is based on materiality
assessments for the entire JT Group.

of Reporting document, which wewill continue to update in the future.
The Japanese Yen exchange rates
against the U.S. Dollar used in thisreport are the same as those used inour consolidated financial reporting.

Data in this report covers January to
December 2017, unless otherwise
stated. In 2014 the JT Group moved
its reporting period to the calendar
year ending December 31. Until
March 2014 the fiscal year for ourJapanese domestic operations
began on April 1 and ended on
March 31. Historical data indicatedwith ‘FY’ covers those periods.

EXTERNAL VERIFICATION
AND ASSURANCE
This report is not externally assured,although some of the data within it
have been externally verified. This
includes Group-wide Scope 1 and 2
GHG data, and some Scope 3 GHG
data, as we state on our website.
Furthermore, energy consumption
data, water withdrawal data, andwaste generation/recycled data havebeen externally assured. In the future
we will consider expanding the scopeof assurance of our non-financial
data and the contents of this report.

Although we report overall JT
Group figures wherever possible,
in some areas this has not beenpossible. In such instances wehave made it clear to which partof the business the data applies.
We have shown how we calculate
and consolidate compliance, humanresources (HR), health and safety,
environment, and community
investment data in our separate Basis

CHANGES IN STRUCTURE,
SIZE, OR OWNERSHIPAWARDS AND
RECOGNITION

In 2017, we acquired the Indonesian company, PT.
Karyadibya Mahardhika, a kretek cigarette company,
and its distributor, PT. Surya Mustika Nusantara.

We are a member of the Dow Jones Sustainability Asia
Pacific Index (www.sustainability-indices.com) andof the Morningstar Socially Responsible Investment
Index (www. morningstar.co.jp/sri, in Japanese).

In September 2017, we completed the acquisitionof assets related to the tobacco business ofMighty Corporation, in the Philippines.
In December 2017, we purchased 30% of the total
shares in National Tobacco Enterprise Share Company(NTE), in Ethiopia, taking the JT Group’s share ownershipto over 70% of the total number of NTE shares.

OTHER
PUBLICATIONSIn 2017, we were selected as a component of the
FTSE Blossom Japan Index (http://www.ftse.com/
products/indices/blossom-japan), which is designed
to measure the performance of Japanese companies
that demonstrate strong sustainability practices.
In 2017 we achieved Leadership status for climatechange and for water with CDP, a globally-recognized
platform for environmental disclosure (www.cdp.net).
In June 2017 JT was awarded Gold status in the PRIDE
index which highlights companies that are most friendly
toward LGBT workers, for the second consecutive year.

Websites
Japan Tobacco Inc.
(global site): www.jt.com
Japan Tobacco International(international tobacco business): www.jti.com
Torii Pharmaceutical Co., Ltd.
(pharmaceutical subsidiary): www.torii.co.jp/en
TableMark Co., Ltd.
(processed food subsidiary): www.tablemark.co.jp(in Japanese)

In March 2017, JT was selected as the runner up of
the ‘Basic Achievement’ of the J-Win Diversity Award
2017, sponsored by the nonprofit organization, Japan
Women’s Innovation Network (J-Win), which promotes
diversity and inclusion in Japanese companies.
In 2017, our international tobacco business was certified asa Global Top Employer, and JT was selected as a ‘White 500’
company. (Please see pages 8 and 49 for more details.)

Publications
JT Annual Report:
www.jt.com/investors/results/annual_report/index.html

DATA REPORTING HIERARCHY
*A

*B

*C

*D

JAPAN TOBACCO INC. (JT)CONTACTS AND FEEDBACK
*A

*B

*C

*D

*A

CORPORATEFUNCTIONS*APROCESSED FOOD*C*ASUBSIDIARIES

*C

60

*D

*A

*C

*A

*A

*B

*C

*D

JAPANESE DOMESTICTOBACCO*C

TORIIPHARMACEUTICALTABLEMARK GROUPCOMPANIES*B*C

PHARMACEUTICALTABLEMARK

*A

*B

*A

*C

SUBSIDIARIESINTERNATIONALTOBACCO

*A

*D

*C

SUBSIDIARIES*AThe entire JT Group

Solely Japan Tobacco Inc. (JT)*C

Japan Tobacco Inc. (JT) and Japanese domestic Group companies*D

Japan Tobacco Inc. (JT) and Japan Tobacco International (JTI)*E

Solely Japan Tobacco International (JTI)*E

JAPAN TOBACCO
INTERNATIONAL

Japan Tobacco Inc.
(Headquarters):
2-1, Toranomon 2-chome
Minato-ku
Tokyo 105-8422
Japan

JT International SA
Rue Kazem-Radjavi 8
CH-1202 Geneva
Switzerland

For more informationor to provide feedbackon this report,
please e-mail:www.jt.com

www.jti.com

jtgcsr@jt.com*A
SUBSIDIARIES

61

The JT Group Sustainability Report FY2017 contains Standard Disclosures from the Global
Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines, and is in accordance with the
GRI G4 ‘Core’ Guidelines. The identification of the material Aspects is based on a materiality
assessment for the entire JT Group.

JT GROUP SUSTAINABILITY REPORT FY2017

GRI G4content index

The GRI G4 Content Index below includes the location, omissions, and additional information
around the General Standard Disclosures and the Specific Standard Disclosures. Further
information on the calculation methodology and scoping is available in a separate Basis ofReporting document for the areas of compliance, human resources (HR), workplace healthand safety, environment, and community investment. Some of the data within the report has
been externally verified.

General Standard Disclosures#

GENERAL STANDARD DISCLOSURESLOCATIONOMISSIONS AND ADDITIONAL INFORMATIONSTRATEGY AND ANALYSIS
G4-1

Statement from the most senior Decision-maker of the organization

CEO statement

ORGANIZATIONAL PROFILE
G4-3

Name of the organization

Corporate profile

G4-4

Primary brands, products, and services

Corporate profile

G4-5

Location of the organization’s headquarters

Corporate profile

G4-6

Number of countries where the organization operates, and namesof countries where the organization has significant operations

Corporate profile

G4-7

Nature of ownership and legal form

JT Annual Report FY2017

G4-8

Markets served

Corporate profile

G4-9

Scale of the organization

Corporate profile

Detailed information is presented in the JT Annual Report FY2017: www.jt.com/investors/results/annual_report/index.html

Detailed information is presented in the JT Annual Report FY2017: www.jt.com/investors/results/annual_report/index.html
The following financial information can be found in the JT Annual Report FY2017:›› net sales (page 12)›› total capitalization broken down in terms of debt and equity (page 3)›› total assets (page 3)›› beneficial ownership (including identity and percentage of ownership of largest shareholders) (pages 69–70)

63

GRI G4

General Standard Disclosures

#
G4-10

GENERAL STANDARD DISCLOSURESLOCATIONOMISSIONS AND ADDITIONAL INFORMATION

Workforce information

Corporate profile

EMPLOYEES BY TYPE OF CONTRACT AND GENDER AS OF THE END OF 2017

GRI Index

TYPE OF CONTRACTMALE

FEMALETOTAL

Permanent (full-and part-time)

29,533

10,17039,703

Temporary full-time

6,513

1,749

8,262

Temporary part-time (*C)

n/a

n/a

5,210

Temporary part-time (*E)

11

29

40

Supervised workers (*C)

n/a

n/a

2,071

REGIONMALE

FEMALE

TOTAL

Japan

13,022

3,396

16,418South and West Europe

1,715

1,128

2,843

North and Central Europe

3,563

1,693

5,256

CIS+*

5,250

2,061

7,311

Other

12,497

3,640

16,137

Basis of Reporting

EMPLOYEES PER REGION AND GENDER AS OF THE END OF 2017

* Commonwealth of Independent States

G4-11

Percentage of total employees covered by collective bargaining agreements

JT Global website
www.jt.com/sustainability/
people_planet_society/people/

57 companies have a union in our Group, and 90.1% (*C) of eligible employees are covered by collective bargaining
agreements. Due to legal requirements in certain countries, we cannot know whether employees are unionized,
and thus cannot provide the information regarding employees in our international tobacco business.

GRI Index
Basis of Reporting
G4-12

Organization’s supply chain

Our tobacco business- Our tobacco business value chain
Our tobacco business- Supply chain management
JT Global website
www.jt.com/sustainability/our_business/tobacco/value_chain/
Our pharmaceutical business- Our pharmaceuticalbusiness value chain
Our processed food business- Our processed foodbusiness value chain

G4-13

Significant changes during the reporting period regarding theorganization’s size, structure, ownership, or its supply chain

About this report65

GRI G4

General Standard Disclosures

#
G4-14

GENERAL STANDARD DISCLOSURESLOCATIONOMISSIONS AND ADDITIONAL INFORMATION

Report whether and how the precautionary approach or principle is addressed by
the organization

JT Global website
https://www.jt.com/sustainability/
people_planet_society/planet/enviroment/

The JT Group Environment Charter reflects how we have addressed the precautionary principle.

GRI Index
G4-15

List externally developed economic, environmental and social charters, principles,or other initiatives to which the organization subscribes, or which it endorses

JT Global website
https://www.jt.com/
sustainability/way_of_business/stakeholder_engagement/

G4-16

List memberships of associations and national or international advocacy
organizations

JT Global website
https://www.jt.com/
sustainability/way_of_business/stakeholder_engagement/

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES
G4-17

a. List all entities included in the organization’s consolidated financial statements
or equivalent documents

JT Annual Report FY2017

b. Report whether any entity included in the organization’s consolidated financial
statements or equivalent documents is not covered by the reporta. Explain the process for defining the report content and the Aspect Boundaries

About this reportb. Explain how the organization has implemented the Reporting Principles for
Defining Report Content

Our approach to sustainability

G4-19

Material Aspects identified in the process for defining report content

Our approach to sustainability

G4-20

For each material Aspect, report the Aspect Boundary within the organization

Our approach to sustainability

G4-21

For each material Aspect, report the Aspect Boundary outside the organization

Our approach to sustainability

G4-22

Effect of any restatements of information provided in previous
reports, and the reasons for such restatements

About this report

Significant changes from previous reporting periodsin the Scope and Aspect Boundaries

About this report

G4-18

G4-23

Identification of GRI Aspects is based on the materiality assessment conducted for the entire JT Group.

GRI Index

GRI Index

The number of fatalities in 2016 has been restated to include one case that relevantJapanese authority recognized as Lost time injury/diseases in January 2018.

STAKEHOLDER ENGAGEMENT
G4-24

List of stakeholder groups engaged by the organization

G4-25

Basis for identification and selection of stakeholders with whom to engage

G4-26

Organization’s approach to stakeholder engagement

G4-27

Key topics and concerns that have been raised through stakeholder engagement

Our approach to sustainability
Our approach to sustainability
Our approach to sustainability
Our approach to sustainability
Our approach to sustainability
Our approach to sustainability
67

GRI G4

General Standard Disclosures#

GENERAL STANDARD DISCLOSURESLOCATIONOMISSIONS AND ADDITIONAL INFORMATIONREPORT PROFILE
G4-28

Reporting period for information provided

About this report

G4-29

Date of most recent previous report

About this report

G4-30

Reporting cycle

About this report

G4-31

Contact point for questions regarding the report or its contents

About this report

G4-32

GRI Content Index

GRI Index

G4-33

Organization’s policy and current practice with regard
to seeking external assurance for the report

About this report

GOVERNANCE
G4-34

Governance structure of the organization, including committees of the highest
governance body

Our approach to sustainability
JT Annual Report FY2017
JT Global Website
https://www.jt.com/about/corporate_governance/

ETHICS AND INTEGRITY
G4-56

Organization’s values, principles, standards, and norms of behavior such as codesof conduct and codes of ethics

Our way of doing business- Our business ethics
Our approach to sustainability

69

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Specific Standard Disclosures

Specific Standard Disclosures
MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONDMAJT Global Website
www.jt.com/sustainability/way_of_business/tax_it_practice/

OMISSIONS AND ADDITIONAL INFORMATIONECONOMICECONOMIC PERFORMANCEJT Annual Report FY2017
G4-EC1
Direct economic value generated and distributed

JT Global Website
www.jt.com/sustainability/way_of_business/tax_it_practice/
Our community investment

DIRECT ECONOMIC VALUE GENERATED AND DISTRIBUTED

Revenue*2017 (million Yen)

2,139,653

JT Annual Report FY2017

Total employee benefits and wages

379,845GRI Index

Current income taxes

112,081

Tobacco excise taxes

4,572,362

Basis of Reporting

Dividends

243,572

Community investment

6,090* Excluding tobacco excise taxes and revenue from agent transactions

MARKET PRESENCEDMAGRI Index

G4-EC5
Ratios of standard entry level wage by
gender compared to local minimum wage
at significant locations of operation

GRI Index
Basis of Reporting

The hiring of local talent contributes to the economies of countries and regions in which we operate, and is a part of our corporate
responsibility to those communities. While we have no Group-wide policy on the hiring of local employees, and our approach is torecruit and assign ‘the right person in the right position at the right time,’ we are mindful of our responsibilities in this area. All ourbusinesses conform with legally set local minimum wage levels, and in many cases remunerate staff well above these levels due
to our policy of offering pay and benefits that are highly competitive. This also applies to part-time employees.
SIGNIFICANT OPERATIONSJT Tokyo HQ

JTI Moscow

JTI Trier

RATIO OF STANDARD ENTRY LEVEL WAGE TO LOCAL MINIMUM WAGE

Male

161.4%

Female161.4%

Male

205.6%

Female205.6%

Male

142.9%

Female142.9%

71

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Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATION

MARKET PRESENCE

G4-EC6
Proportion of senior management
hired from the local community at
significant locations of operation

GRI Index

DMA

Our tobacco business– Our tobacco leaf supply chain

INDIRECT ECONOMIC
IMPACTS

Basis of ReportingOMISSIONS AND ADDITIONAL INFORMATIONSIGNIFICANT LOCATIONPERCENTAGE OF SENIOR MANAGEMENT HIRED FROM THE LOCAL COMMUNITY

JTI Moscow

50%

Respecting human rights
Our tobacco business– Illegal trade
Our community investment
G4-EC7Development and impact of infrastructure
investments and services supported

GRI Index

As part of our Global Leaf CAPEX projects, we invested 19.65 million U.S. Dollars in infrastructure-related projects in Brazil,
Malawi, Tanzania, U.S., and Zambia. In addition, we invested 1.853 million U.S. Dollars in infrastructure-related projects in thesame locations, as part of our Grower Support Programs.
Investments in the locations where we source tobacco include:›› Provision of safe water through boreholes, water distribution points, and water canals for communities and agriculture
purposes›› Investments in solar projects for schools and communities, for efficient energy use›› Refurbishment of structures that provide basic social services to communities i.e. schools and health centers.

G4-EC8Significant indirect economic impacts,
including the extent of impacts

Our tobacco business– Our tobacco leaf supply chain

Apprenticeship and internship programs for youth in our tobacco communities in Arroio do Tigre Brazil. Literacy programs forfarmers in Zambia and Malawi.

Respecting human rights
Our tobacco business– Illegal trade
Our community investment

PROCUREMENT
PRACTICESDMA

Our tobacco business- Supply chain management
Our pharmaceutical Business– Our pharmaceutical business value chain
Our processed food Business– Our processed food business value chain

73

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Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONOMISSIONS AND ADDITIONAL INFORMATIONPROCUREMENT
PRACTICES

G4-EC9Proportion of spending on local suppliers
at significant locations of operation

GRI Index

We define local as the country of operation.
Significant location is defined as any location with more than 5% of global spend.
SIGNIFICANT LOCATIONSSUPPLIER TYPE

% OF LOCAL SPEND IN 2017Japan

Tobacco leaf and non-tobacco material suppliers

67%

JTI Geneva HQ

Other products and services suppliers

53%

Germany

Non-tobacco materials and other products and services suppliers

25%

RussiaNon-tobacco materials and other products and services suppliers

45%

PolandNon-tobacco materials and other products and services suppliers

19%

Taiwan

Non-tobacco materials and other products and services suppliers

89%

Outside of Japan, our central leaf function purchases tobacco from directly contracted farmers and merchants, which is thensupplied to our cigarette and tobacco-related factories. About 50% of our spend is local – from directly contracted farmers – andthe rest we buy from merchants. The percentage of local suppliers of bulk drug substances to our pharmaceutical business is 0%.
The percentage of local spend for suppliers of TableMark is 100%.
In 2016, we reported the % of the local suppliers vs global suppliers in the following countries: JTI Geneva HQ, Germany, Russia,
Poland, and U.K. For 2017, we are reporting the actual % of local spend vs % of global spend, a correction from last year. The
countries for 2017 are the same, with Taiwan replacing the U.K. The calculation for Japan is the same as for last year.
G4-FP1
Percentage of purchased volume from suppliers
compliant with company’s sourcing policy

GRI Index

DMA

Our planet– A sustainable approach toenvironmental stewardship

100% of purchased volume from suppliers is compliant with the sourcing policy of the
JT Group processed food business, via self-declaration of suppliers.

ENVIRONMENTAL
ENERGY

Our planet– GHG emissions in our operations
G4-EN3
Energy consumption within the organization

Our planet– GHG emissions in our operations
JT Global Website
https://www.jt.com/sustainability/
people_planet_society/planet/enviroment/

We use renewable and non-renewable energy sources within the organization. Renewable energy sources include solar,hydropower, biomass, and geothermal. Non-renewable energy sources include natural gas and fuel oils for heating, and diesel
and petrol for fleet vehicles. We also purchase electricity, heating, and steam.

GRI Index
Basis of Reporting
WATER

DMA

Our planet– A sustainable approach toenvironmental stewardship
Our planet– Water75

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Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATION

WATER

G4-EN8
Total water withdrawal by source

Our planet– Water

OMISSIONS AND ADDITIONAL INFORMATIONJT Global Website
https://www.jt.com/sustainability/
people_planet_society/planet/enviroment/
Basis of Reporting
BIODIVERSITYDMA

Our planet– Biodiversity

G4-EN12
Description of significant impacts of activities,
products, and services on biodiversity in protectedareas, and areas of high biodiversity value outside
protected areas

Our planet– Biodiversity

We do not approach biodiversity as a topic that is separate from responsible business operation. Impacts on biodiversity can beobserved directly or indirectly through activities such as:

GRI Index›› Crop production/land management e.g., promotion and adoption of good agricultural practices; land/soil use and conservation
practices; the use and management of agricultural inputs such as crop protection agents and fertilizers, and the use andmanagement of water resources›› Wood use and forestry management e.g., tree planting, natural regeneration, avoided deforestation and forest remediation;and the use of wood for tobacco curing, domestic consumption, and construction materials for curing barn and other buildings›› The building of new, or expansion of, buying stations, processing facilities, offices etc.

GHG EMISSIONSDMA

Our planet– GHG emissions in our operations

G4-EN15
Direct GHG emissions (Scope 1)

Our planet– GHG emissions in our operations

G4-EN16
Energy indirect GHG emissions (Scope 2)

JT Global Website
https://www.jt.com/sustainability/
people_planet_society/planet/enviroment/

G4-EN17
Other indirect GHG emissions (Scope 3)

Our processed food business– Reducing our environmental impacts

G4-EN18
GHG emissions intensity

Basis of Reporting

G4-EN19
Reduction of GHG emissions
EFFLUENTS AND WASTE

DMA

Our planet– Water
Our planet– Waste

G4-EN22
Total water discharge by quality and destination

Our planet– Water

We do not have a single global standard on quality of discharged water, but we comply with local laws andregulatory requirements on water. We confirm our discharged water is not reused by other organizations.

JT Global Website
https://www.jt.com/sustainability/
people_planet_society/planet/enviroment/
GRI Index
Basis of Reporting77

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATION

EFFLUENTS AND WASTE

G4-EN23
Total weight of waste by type and disposal method

Our planet– WasteOMISSIONS AND ADDITIONAL INFORMATIONJT Global Website
https://www.jt.com/sustainability/
people_planet_society/planet/enviroment/
Basis of Reporting
PRODUCTS AND SERVICESCOMPLIANCE

SUPPLIER
ENVIRONMENTALASSESSMENTDMAGRI Index

Litter from tobacco products is an issue that calls for collective action to educate adult consumers to act responsibly. A litter-freeenvironment benefits everyone, smokers included. We adopt a two-pronged approach to this issue: creating awareness throughcampaigns, and providing smokers with facilities to easily dispose of their cigarette butts.

G4-EN27
Extent of impact mitigation of environmental
impacts of products and services

GRI Index

We understand that the mitigation of environmental impacts of products and services is an important issue. We do not currently
have a holistic approach in place to address the environmental impacts of all our products and services. However, we will belooking into this in future years.

DMA

Our planet– A sustainable approach toenvironmental stewardship

G4-EN29
Monetary value of significant fines and total
number of non-monetary sanctions for noncompliance with environmental laws andregulations

GRI Index

DMA

Our tobacco business– Our tobacco leaf supply chain

During 2017 there were no significant monetary fines or non-monetary sanctions for non-compliance with environmental laws
and regulations in our international tobacco business.

Our planet– GHG emissions in our operations
G4-EN32
Percentage of new suppliers that were screenedusing environmental criteria

Our tobacco business– Our tobacco leaf supply chain

G4-EN33
Significant actual and potential negativeenvironmental impacts in the supply chain andactions taken

Our tobacco business– Our tobacco leaf supply chain

GRI Index

GRI Index

Through the new supplier life cycle management system, we verify if suppliers are certified to ISO 14001, the Eco-Management
and Audit Scheme (EMAS), or other environmental certified systems, and we are working toward being able to report thepercentage of new suppliers screened using environmental criteria in subsequent years.
Through the new supplier life cycle management system, we screen if suppliers have identified their significant environmental
risks, and if they have been associated with a significant environmental incident in the last 5 years. In addition, we are working
toward being able to report the significant actual and potential negative environmental impacts in the supply chain, and actions
taken, in subsequent years.

79

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Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONOMISSIONS AND ADDITIONAL INFORMATIONLABOR PRACTICES AND DECENT WORKEMPLOYMENTDMAOur people

G4-LA1
Total number and rates of new employee hires
and employee turnover by age group, gender, andregionGRI Index
Basis of Reporting

NEW EMPLOYEES’ HIRE AND TURNOVER:BY GENDER

MALE

FEMALE

TOTAL

Total number of new employees

7,600

1,848

9,448

Rate of new employees’ hire

21.1%

15.5%

19.7%

Total employee turnover

3,620

1,498

5,118

Employee turnover rate

10.0%

12.6%

10.7%

<30

30–50

>50

TOTAL

Total number of new employees (*D)

4,434

4,144

113

8,691

Rate of new employees’ hire (*D)

56.3%

17.5%

2.2%

23.7%

Total employee turnover

1,306

2,362

1,385

5,053

Employee turnover rate

13.6%

7.8%

17.3%

10.6%

BY AGEJAPAN

SOUTH AND WESTEUROPENORTH AND CENTRALEUROPE

CIS+*

OTHER

TOTAL

Total number of new employees

896

264

854

840

6,595

9,449

Rate of new employees’ hire

5.5%

9.3%

16.2%

11.5%

40.9%

19.7%

Total employee turnover

662

303

671

983

1,470

4,089

Employee turnover rate

4.0%

10.7%

12.8%

13.4%

9.1%

8.5%

BY REGION* Commonwealth of Independent States

81

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONOMISSIONS AND ADDITIONAL INFORMATIONEMPLOYMENTG4-LA2
Benefits provided to full-time employees that are
not provided to temporary or part-time employees,
by significant locations of operation

GRI Index

As of the end of 2017, significant locations include our JT head office in Tokyo, Japan, and our international tobacco businesshead office in Geneva, Switzerland.

Basis of Reporting

Our international tobacco business, for instance, positions compensation levels in the 75th percentile against companies withwhich we compete for talent.
JT HEAD OFFICE IN TOKYOBENEFITSPERMANENTEMPLOYEESTEMPORARY FULL-TIME EMPLOYEESTEMPORARY PART-TIMEEMPLOYEESCOMMISSIONEDPERSONNEL

CONTRACTEMPLOYEES*

Y

Y

Y

Y

Bereaved family
compensation program

Y

Regular healthexamination

Y

Y

Medical leave systemYY

Parental leave

YY

Retirement provisionY

Stock ownership

Y

INTERNATIONAL TOBACCO BUSINESS HEAD OFFICE IN GENEVA
BENEFITSPERMANENTEMPLOYEESTEMPORARY FULL-TIMEEMPLOYEESTEMPORARY PART-TIMEEMPLOYEESLife insuranceYY

Y (Prorated)

Health care

Y

Y

Y

Disability and invalidity
coverageYY

Y (Prorated)

Parental leaveYY

Y (Prorated)

Retirement provisionYY

Y (Prorated)

Stock ownershipY* Contract employees may be given benefits if they are exempt from Company regulations.

LABOR/MANAGEMENTRELATIONSDMAJT Global Website
www.jt.com/sustainability/
people_planet_society/people

83

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Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONLABOR/MANAGEMENTRELATIONS

G4-LA4
Minimum notice periods regarding operationalchanges, including whether these are
specified in collective agreements

JT Global Website
www.jt.com/sustainability/
people_planet_society/people
About this reportGRI Index
Basis of Reporting

OCCUPATIONAL HEALTHAND SAFETYDMA

Our people– Workplace health and safety

G4-LA6
Type of injury and rates of injury, occupational
diseases, lost days, and absenteeism, and total
number of work-related fatalities, by region, andby gender

Our people– Workplace health and safety
GRI Index
Basis of ReportingOMISSIONS AND ADDITIONAL INFORMATIONMINIMUM
NOTICE PERIODSREGARDINGOPERATIONALCHANGESNUMBER OF MONTHS BETWEEN
THE ANNOUNCEMENT AND
THE TIME THE FIRST EMPLOYEELEAVES THE FACTORYBECAUSE OF THE CLOSURE

NUMBER OF MONTHSBETWEEN THE ANNOUNCEMENT
AND THE FINAL CLOSURE

IS THE MINIMUM NOTICEPERIOD FOR CONSULTATION
AND NEGOTIATION SPECIFIEDIN COLLECTIVE AGREEMENTS?

Wervik, Belgium

33 months

41 months

No

Lisnafillan,
Northern Ireland

20 months

37 months

No

Malaysia

3 months

8 monthsYes

We report lost-time incidents (LTIs) instead of lost-day rate, due to our data-collection methods within our management systems.
Absenteeism is recorded only in the finished goods manufacturing sites and tobacco processing facilities in our international
tobacco business, which covers approximately 9,000 employees, and in 2017 was reported as 2.13, against a target of 2.16. In
2016 this figure was 2.09.
In JT, absenteeism in 2017 was reported as 0.63.
EMPLOYEES’ NUMBER OF FATALITIES, LOST-TIME INCIDENTS (LTIS), AND LTI RATE PER REGION AND GENDER(FY2017)REGIONTRAINING AND
EDUCATION

DMA

Our people– Building success by investing inpeople, Maximizing people potential

G4-LA10Programs for skills management andlifelong learning that support the continued
employability of employees and assist
them in managing career endings

Our people– Building success by investing inpeople, Maximizing people potential
Basis of Reporting
Stakeholder engagement

NUMBER OF FATALITIESNUMBER OF LOST TIME
INCIDENTS (LTIs)

LTI RATE

MALE

FEMALEMALE

FEMALESouth and West Europe

0

0

6

7

0.21

North and Central Europe

0

0

17

6

0.50

CIS+

0

0

6

4

0.14

Japan

0

0

30

38

0.41

Other

0

0

38

20

0.38

We aim to offer a work environment that allows employees to express their potential, and that provides them with the mosteffective development opportunities.
For example, we have a Talent Partnership Program that builds employees’ skills and experiences by exposing them to thedifferent working styles and cultures within our two biggest businesses(JT and JTI). As of December 2017, 206 employees
participated in this Program. Exchange Academy is part of this Program, and takes place every two years, and helps employees
learn and network together, turning them into better future global leaders.

85

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONOMISSIONS AND ADDITIONAL INFORMATIONTRAINING AND
EDUCATION

G4-LA11Percentage of employees receiving regularperformance and career development reviews,
by gender, and by employee category

Our people– Building success by investing inpeople, Maximizing people potential

PERCENTAGE OF EMPLOYEES RECEIVING REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEWS:GRI Index
Basis of Reporting

BY GENDER (*A)

2016

Male

79.6%

Female82.2%

BY EMPLOYEE CATEGORY (*D)

2016

Executive Officers

100%Management (excluding Executive Officers)

93.5%

Employees (excluding management)

75.7%

We have reported on the 2016 performance appraisal data because the information for 2017 is currently being analyzed.
DIVERSITY AND EQUALOPPORTUNITY

DMA

Our people– Diversity in the workplace

G4-LA12Composition of governance bodies andbreakdown of employees per employee category
according to gender, age group, minority groupmembership, and other indicators of diversity

Our people– Diversity in the workplace
GRI Index
Basis of Reporting

BREAKDOWN OF EMPLOYEES BY GENDER AND AGE GROUPAGE GROUP

MALE

FEMALETOTAL

Under 30

6,986

2,640

9,626

30–50

22,514

7,603

30,117

Over 50

6,431

1,561

7,992

EMPLOYEES BY POSITION AND GENDER AT THE END OF 2017

3.2%

Male

96.8%

13.6%

86.4%

25.8%

74.2%

63

3,463

44,439EXECUTIVE OFFICERSMANAGEMENT
EXCLUDING EXECUTIVE OFFICERSEMPLOYEESEXCLUDING MANAGEMENTAND EXECUTIVE OFFICERS

FemaleMale

FemaleMale

Female87

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATION

EQUAL REMUNERATION
FOR WOMEN AND MEN

DMA

JT Global Website
www.jt.com/sustainability/
people_planet_society/people

G4-LA13
Ratio of basic salary and remunerationof women to men by employee category,by significant locations of operation

JT Global Website
www.jt.com/sustainability/
people_planet_society/people
GRI Index

OMISSIONS AND ADDITIONAL INFORMATIONSIGNIFICANT OPERATIONSEMPLOYEE CATEGORYJTI Geneva HQVice President

94.9%

Director

98.2%

Manager

93.0%

Associate103.4%

Executive Officer

87.7%Management

94.9%

Employee

99.8%

Basis of Reporting

JT Tokyo HQ

SUPPLIER ASSESSMENT
FOR LABOR PRACTICESDMA

Our tobacco business- Supply chain management

G4-LA14
Percentage of new suppliers that werescreened using labor practices criteria

Our tobacco business- Supply chain management
Our tobacco business– Our tobacco leaf supply chain(including In Focus – ALP)RATIO OF ANNUAL BASE SALARY OF WOMEN TO MEN IN 2017

Through our ALP program and the new supplier life cycle management system, we are working toward being able to report thepercentage of new suppliers screened using labor practices criteria in subsequent years. In Japan, we implemented an ALP pilot
study in 2017.

GRI Index
G4-LA15Significant actual and potential negative
impacts for labor practices in the
supply chain, and actions taken

Our tobacco business- Supply chain management
Our tobacco business– Our tobacco leaf supply chain(including In Focus – ALP)

Through our ALP program and the new supplier life cycle management system, we are working toward being able to report thesignificant actual and potential negative impacts for labor practices in the supply chain, and actions taken in subsequent years. In
Japan, we implemented an ALP pilot study in 2017.

GRI Index
LABOR PRACTICESGRIEVANCE MECHANISMS

DMA

Our business ethics– Reporting concerns

G4-LA16
Number of grievances about labor
practices filed, addressed, and resolved
through formal grievance mechanisms

Our business ethics– Reporting concerns

In 2017, 144 cases about labor practices were filed, of which 127 were resolved. The remaining 17 cases are under investigation.

GRI Index
Basis of Reporting89

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATION

DMA

Respecting human rights

G4-HR1
Total number and percentage of significant
investment agreements and contracts
that include human rights clauses or that
underwent human rights screening

Respecting human rights

DMA

Our business ethics– Reporting concerns

OMISSIONS AND ADDITIONAL INFORMATIONHUMAN RIGHTSINVESTMENTNON-DISCRIMINATION

Our tobacco business- Supply chain management

We do not currently have a formal process in place, and are working toward implementing one. Once acquisitions are made, we
put in place a remedy plan to ensure the area of human rights is taken into consideration in our business plan, in line with our
JT Group Human Rights Policy.

GRI Index

JT Global Website
www.jt.com/sustainability/
people_planet_society/people
G4-HR3
Total number of incidents of discriminationand corrective actions taken

Our business ethics– Reporting concerns

In 2017 there was one alleged case of workplace discrimination, and the appropriate corrective actions were taken.

JT Global Website
www.jt.com/sustainability/
people_planet_society/people
GRI Index
Basis of Reporting

FREEDOM OF
ASSOCIATION AND
COLLECTIVE BARGAINING

CHILD LABORDMARespecting human rights

G4-HR4
Operations and suppliers identified in which
the right to exercise freedom of association andcollective bargaining may be being violated, or atsignificant risk, and measures taken to support
these rights

Respecting human rights

DMA

Respecting human rights

Our tobacco business- Supply chain management
GRI Index
JT Global Website
www.jt.com/sustainability/
people_planet_society/people

The right to exercise freedom of association and collective bargaining is at significant risk in a number of countries where we
directly or indirectly source tobacco leaf. We assess and mitigate those risks through our ALP. In 2017, we provided additional
guidance on the rights of workers to leaf merchants (through a guidance document and face-to-face meetings). Additionally, we
continued collaboration with the ILO to see how best to improve the fundamental principles of rights of work. As a result, several
initiatives will be developed in 2018, including a social dialogue pilot in Zambia, and a set of indicators put in place to support
people working on the ground in the field and to demystify the topic.

Our tobacco business– Our tobacco leaf supply chain
CHILD LABOR

G4-HR5
Operations and suppliers identified as having
significant risk for incidents of child labor, andmeasures taken to contribute to the effective
abolition of child labor

Respecting human rights
Our tobacco business– Our tobacco leaf supply chain
GRI Index

Operations and suppliers identified as having significant risk for incidents of child labor have been identified in a number ofcountries where we directly or indirectly source tobacco leaf. We assess and mitigate those risks in our leaf supply chain throughour ALP and, subsequently, programs such as GSP, ARISE, and Good Agricultural Practices, communication and training, andthe ECLT Foundation. In 2017, we implemented an ALP pilot study in Japan, and we relaunched JTI’s ALP standards, to be more
precise in defining hazardous work. With a now more specific position, our expectations to suppliers and people on the groundare clearer, which should make it easier to act on our requirements.

91

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONFORCED OR COMPULSORY
LABOR

DMA

Respecting human rights

G4-HR6
Operations and suppliers identified as having
significant risk for incidents of forced orcompulsory labor, and measures to contributeto the elimination of all forms of forced orcompulsory labor

Respecting human rights

DMA

Respecting human rights

G4-HR9Total number and percentage of operations thathave been subject to human rights reviews or
impact assessments

Respecting human rights

ASSESSMENT

Our tobacco business- Supply chain management
GRI Index

Our tobacco business- Supply chain management
GRI Index

SUPPLIER HUMAN RIGHTSASSESSMENT

DMA

Respecting human rights

G4-HR10Percentage of new suppliers that were screenedusing human rights criteria

Respecting human rights
Our tobacco business- Supply chain management

OMISSIONS AND ADDITIONAL INFORMATION

Operations and suppliers identified as having significant risk for incidents of forced or compulsory labor have been identified
in a number of countries where we directly or indirectly source tobacco leaf. We assess and mitigate those risks through our
ALP in our leaf supply chain. In 2017, we provided additional guidance on the rights of workers to leaf merchants (through a
guidance document and face-to-face meetings). Additionally, we continued collaboration with the ILO to see how best to improve
the fundamental principles of rights of work, and how to go about it. As a result, several initiatives will be developed in 2018,
including a social dialogue pilot in Zambia, and a set of indicators put in place to support people working on the ground in thefield and to demystify the topic. In Japan, we implemented an ALP pilot study in 2017.

In 2017 we carried out human rights due diligence in Japan, which covered our Japanese domestic tobacco, pharmaceuticaland processed food businesses. Those businesses in total represent 41.8% of our Group’s consolidated revenue. We have also
conducted a human rights due diligence in the headquarters of our international tobacco business. In the future, we plan toperform due diligence in our international tobacco business in a minimum of three markets each year, with a particular focus onhigh risk markets.

Through our ALP program and the new supplier life cycle management system, we are working toward being able to report thepercentage of new suppliers screened using human rights criteria in subsequent years. In Japan, we implemented an ALP pilot
study in 2017.

GRI Index

HUMAN RIGHTSGRIEVANCE MECHANISMS

G4-HR11Significant actual and potential negative humanrights impacts in the supply chain, and actions
taken

Respecting human rights

DMA

Respecting human rights

G4-HR12
Number of grievances about human rights
impacts filed, addressed, and resolved throughformal grievance mechanisms

Respecting human rights

Our tobacco business- Supply chain management

Our business ethics– Reporting concerns

Through our ALP program and the new supplier life cycle management system, we are working toward being able to report thesignificant actual and potential negative human rights impact in the supply chain, and actions taken in subsequent years.

In 2017, 102 grievances about human rights impacts were filed, all of which were addressed.
88 grievances were resolved through formal grievance mechanisms. The remaining 14 cases are under investigation.

GRI Index
Basis of Reporting93

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONDMA

Our community investment

OMISSIONS AND ADDITIONAL INFORMATION

SOCIETY
LOCAL COMMUNITIESOur tobacco business– Our tobacco business leaf supply
chain (including In Focus: ALP)
G4-SO1
Percentage of operations with implemented local
community engagement, impact assessments,
and development programs

Our community investment
Our tobacco business– Our tobacco business leaf supply
chain (including In Focus: ALP)GRI Index

Corporate community investment programs
We have corporate community investment projects implemented in 86% of the countries where we operate. There are 66
countries in which we have corporate community investment projects.
ARISE and Grower Support Programs (GSPs)
In addition to our corporate community investment programs, we also have ARISE and GSPs in Brazil, Malawi, Tanzania, andZambia. In 2017, we covered 81% of these vertically integrated leaf operations.

Basis of Reporting
MARKETSANTI-CORRUPTIONDMA

Our business ethics– Living our Codes of Conduct

G4-SO4
Communication and training on anti-corruption
policies and procedures

Our business ethics– Living our Codes of Conduct
Our business ethics– Anti-bribery and corruption

NUMBER OF GSPS

ARISE

Brazil13

Y

Malawi

41

Y

Zambia56

Y

Tanzania

19

Y

Our anti-bribery and corruption policies and procedures, including on gifts, hospitality, and entertainment, are outlined in our
Codes of Conduct, which we communicate to all employees. Mandatory training on our Codes of Conduct is provided to all our
employees. We also require all business partners in our international tobacco business to act in accordance with our SupplierStandards. Further details on training are included in our Sustainability Report.

GRI Index
Basis of Reporting
PUBLIC POLICYDMA

Our tobacco business– Discussing Proportionate Regulations
Our tobacco business– Latest Developments In RRP Regulation

ANTI-COMPETITIVEBEHAVIOR

G4-SO6
Total value of political contributions by country
and recipient/beneficiary

GRI Index

DMA

Our business ethics– Anti-competitive behavior

G4-SO7
Total number of legal actions for anti-competitive
behavior, anti-trust, and monopoly practices, andtheir outcomesOur business ethics– Anti-competitive behavior
GRI Index

In compliance with Political Funds Control Laws in Japan, JT refrains from making political contributions. None of JT’s subsidiaries
made political contributions in any jurisdiction in 2017, except a non-tobacco subsidiary in Japan, which made a politicalcontribution that amounted to low-single-digit million Yen, at its own discretion, in compliance with all relevant Japanese laws.

In 2017, there were no legal actions for anti-competitive behaviour, anti-trust, and monopoly practices that resulted in a significant
fine for the JT Group, and no such legal actions that resulted in a penalty, or warning, with material impact for sustainability,
taking into account the size of the JT Group.

95

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONCOMPLIANCE

DMA

Our business ethics– Living our Codes of Conduct

G4-SO8
Monetary value of significant fines and total
number of non-monetary sanctions for noncompliance with laws and regulations [related toaccounting fraud, workplace discrimination, or
corruption]

GRI Index

DMA

Our tobacco business- Supply chain management

SUPPLIER ASSESSMENT
FOR IMPACTS ON SOCIETYOMISSIONS AND ADDITIONAL INFORMATION

During 2017, there were no significant monetary fines or non-monetary sanctions for non-compliance with laws and regulations(related to accounting fraud, workplace discrimination, or corruption) for the JT Group.

Our tobacco business– Our tobacco business leaf supply
chain (including In Focus: ALP)
G4-SO9Percentage of new suppliers that were screenedusing criteria for impacts on society

Our tobacco business- Supply chain management

Through the new supplier life cycle management system, we are working toward being able to report the percentage of new
suppliers screened using criteria for impacts on society in subsequent years.

Our tobacco business– Our tobacco business leaf supply
chain (including In Focus: ALP)GRI Index

G4-SO10Significant actual and potential negative impacts
on society in the supply chain, and actions taken

Our tobacco business- Supply chain management

Through the new supplier life cycle management system, we are working toward being able to report the significant actual andpotential negative impacts on society in the supply chain, and actions taken in subsequent years.

Our tobacco business– Our tobacco business leaf supply
chain (including In Focus: ALP)GRI Index

GRIEVANCE MECHANISMSFOR IMPACTS ON SOCIETY

DMA

Our business ethics– Reporting concerns

G4-SO11
Number of grievances about impacts on society
filed, addressed, and resolved, through formal
grievance mechanisms

Our business ethics– Reporting concerns

In 2017, 7 grievances about impacts on society were filed, all of which were addressed. 4 grievances were resolved throughformal grievance mechanisms. The remaining 3 cases are under investigation.

Basis of Reporting

PRODUCT RESPONSIBILITYCUSTOMER HEALTHAND SAFETY

DMA

Our tobacco business– Smoking and health
Our pharmaceutical business
Our processed food business

G4-PR1
Percentage of significant product and service
categories for which health and safety impacts areassessed for improvement

Our tobacco business– Smoking and health

Health and safety impacts for our products in our tobacco business, pharmaceutical business, and processed food business are
all fully (100%) assessed for improvement.

Our pharmaceutical business
Our processed food business
GRI Index
97

GRI G4

Specific Standard Disclosures

MATERIAL ASPECTDISCLOSURES ON MANAGEMENTAPPROACH (DMA) AND INDICATOR

LOCATIONOMISSIONS AND ADDITIONAL INFORMATIONCUSTOMER HEALTHAND SAFETY

G4-PR2
Total number of incidents of non-compliancewith regulations and voluntary codes concerning
the health and safety impacts of products
and services during their life cycle, by type ofoutcomes

GRI Index

During 2017, there were no incidents of non-compliance with regulations or voluntary codes concerning the health and safety
impacts of products and services during their life cycle that resulted in a significant fine for the JT Group, and no such incidents
that resulted in a penalty, or warning, with material impact for sustainability, taking into account the size of the JT Group.

PRODUCT AND SERVICELABELING

DMA

Our tobacco business– Responsible marketing
Our pharmaceutical business
Our processed food business– Food communication

MARKETING
COMMUNICATIONS

G4-PR4
Total number of incidents of non-compliancewith regulations and voluntary codes concerning
product and service information, and labeling, by
type of outcomes

GRI Index

G4-FP5Percentage of production volume manufactured
in sites certified by an independent third party,
according to internationally recognized food safety
management system standards

Our processed food business

DMA

Our tobacco business– Responsible marketing

During 2017, there were no incidents of non-compliance with regulations or voluntary codes concerning product and service
information, and labeling that resulted in a significant fine for the JT Group, and no such incidents that resulted in a penalty, or
warning, with material impact for sustainability, taking into account the size of the JT Group.

Our pharmaceutical business– Responsible promotion of drugs
G4-PR6
Sale of banned or disputed products

GRI Index

In 2017, in our international tobacco business, the sales and/or imports of e-cigarettes with nicotine were banned in 44 countries,
flavored products were restricted in 40 countries, snus was banned in more than 45 countries, and waterpipe tobacco wasbanned in 9 countries, with more expected to follow. All of the aforementioned products are part of our product portfolio. The JT
Group fully complies with these bans.
Note regarding JT Group key markets: In Japan, e-liquid containing nicotine requires a pharmaceutical license. Therefore,e-cigarettes and e-liquid containing nicotine are essentially unavailable for purchase in the Japanese market without the
aforementioned pharmaceutical license.

MARKETING
COMMUNICATIONS

G4-PR7
Total number of incidents of non-compliancewith regulations and voluntary codes concerningmarketing communications, including advertising,promotion, and sponsorship, by type of outcomes

GRI Index

COMPLIANCE

DMA

Our business ethics– Living our Codes of Conduct

During 2017, there were no incidents of non-compliance with regulations or voluntary codes concerning marketing
communications, including advertising, promotion, and sponsorship that resulted in a significant fine for the JT Group, and nosuch incidents that resulted in a penalty, or warning, with material impact for sustainability, taking into account the size of the JT
Group.

Our tobacco business– Responsible marketing
G4-PR9
Monetary value of significant fines for noncompliance with laws and regulations concerning
the provision and use of products and services

GRI Index

In 2017, we did not receive any significant fines for non-compliance with laws and regulations concerning the provision and useof products and services for the JT Group.

99