OUR TOBACCO BUSINESS16

17

IN FOCUSRESPECT FOR HUMAN RIGHTSOUR SUSTAINABILITY STRATEGY

ABSOLUTE REQUIREMENTS

RESPECT FOR
HUMAN RIGHTS

We operate in parts of the world where human rights are at risk, and are therefore
exposed to human rights-related issues, such as child labor, bribery and corruption,
workplace discrimination, and inequality.
Our sustainability strategy is driven by three absolute requirements that are at the heart ofeverything we do. One of these requirements is respecting human rights.

Our Human Rights strategy

Our commitment to human rights is reinforced
in both our Codes of Conduct and our Reporting
Concerns Mechanism, which ensure that we listen
to and act on the grievances of those whose humanrights are impacted by our activities. We encourage
employees and suppliers to speak up on humanrights, without fear of retribution, about any concerns
they may have.

2016

Our suppliers and growers throughout the world arealso obliged to respect human rights by adopting
and maintaining internationally recognized labor
standards regarding child labor, rights of workers,
and workplace health and safety. They do this in linewith our JT Group Responsible Procurement Policy,
JT Group Supplier Standards, and Agricultural Labor
Practices (ALP). Read more on page 46.
Our strategy is based on three pillars: Inform, Assess,and Improve. Each plays a crucial role in embedding
human rights protections into the business anddriving continuous improvement. This approachprovides a consistent, efficient, and systematic wayof conducting ongoing due diligence and allows us toproactively shape a strategic plan regarding humanrights.

Chigusa Ogawa,Senior Vice President, Sustainability Management, JT

In line with the UN Guiding Principles (UNGPs) on
Business and Human Rights, we have made humanrights due diligence an essential and integrated partof our business. This enables us to identify and assess
actual and potential human rights risks, as statedin our JT Group Human Rights Policy. Conducting
human rights due diligence – through Human Rights
Impact Assessments – is part of our Company’s
responsibility to prevent adverse impacts on people
and ensure the highest standards of behavior are
upheld within our business and value chain.

TOBACCO BUSINESSThe JT Group Human Rights Policy follows theframework provided by the UN Guiding Principles
on Business and Human Rights (UNGPs) to monitor,
influence, and improve business practices within
our own operations and those of our suppliers andpartners. This means avoiding infringing the rights
of others and addressing the adverse impacts of ourglobal operations. We not only have a responsibility
to respect human rights – we also have the ability toadvance and promote these rights in all the areas we
operate.

OUR COMMITMENT TO CONDUCTINGHUMAN RIGHTS DUE DILIGENCE

To achieve this, we are committed to assessing 100%of our high-risk countries by 2025, in our tobacco
business.

NOVEMBER 2016

FEBRUARY 2017

OCTOBER 2017

MARCH 2018

JUNE 2018

OCTOBER 2018

A human rights e-learning
program is provided for our
employees in Japan with a
92% completion rate. (*C)

The annual meeting of the
Human Rights External
Advisory Board takes place. (*E)

Our international tobacco businesslaunches a human rights e-learning
program in 25 languages with a
68% completion rate.

A Human Rights Impact
Assessment takes place inTanzania.

We trained 75% of ouremployees through a humanrights e-learning module in ourinternational tobacco business.

Internal guidelines for thehiring and labor managementof foreign workers are
established in Japan. (*C)

2017

OUR WAY OF DOING BUSINESSWe recognize respecting human rights
as one of our absolute requirements
for sustainability.
Whilst we have made progress,
respecting human rights is a journey,
and our approach and managementof human rights issues will evolveand mature.
We still have much more work
to do and we will update you on
our progress as our human rights
initiatives unfold in the coming
years.

2018

SEPTEMBER 2016

DECEMBER 2016

SEPTEMBER 2017

FEBRUARY 2018

APRIL 2018

SEPTEMBER 2018

NOVEMBER 2018

The JT Group Human Rights
Policy is launched, formalizing
our commitment to respecting
human rights.

A Human Rights Impact
Assessment takes placein Japan. (*C)

An external gap analysis
concluded that we have a robust
set of policies and procedures toaddress human rights risks in ourinternational tobacco business.

The annual meetingof the Human Rights
External Advisory Board
takes place. (*E)

The Reporting
Concerns Mechanism
is enhanced for
migrant workers inJapan. (*C)

A Human Rights
Impact Assessment
takes place in Mexicoand the Dominican
Republic.

A Human Rights
Impact Assessment
takes place in
Myanmar andMalaysia.

18

19

IN FOCUSRESPECT FOR HUMAN RIGHTSINFORM

We train our employees on human rights through an
online human rights e-learning module, available in
25 languages. By June 2018, 75% of our employees
had completed the module in our international
tobacco business. To reach employees without
computer access, we now have a dedicated section
on respecting human rights integrated into face-toface training on the Code of Conduct.

ASSESSIn 2018, we completed our pilot year of Human
Rights Impact Assessments in five high-risk countries
in our international tobacco business. These countries
were identified through a risk analysis using publicly
available country risk human rights indices.
They covered a mix of geographical regions and thebreadth of our supply chain operations, from farmto store. In line with the UNGPs, the Human Rights
Impact Assessments focused on the greatest risk topeople, both within our own Company and throughbusiness relationships with our suppliers.
The Impact Assessments took place in Dominican
Republic, Malaysia, Mexico, Myanmar, and Tanzania,
demonstrating our willingness to go into countries
where serious human rights violations have beenreported, and assess the on-the-ground reality.
In our Japanese operations, the Impact Assessments
were implemented through self-assessment
questionnaires and site visits. We conducted due
diligence through self-assessment questionnaires inour processed food business in China and Thailand,
which will be followed by site visits and capacity
building in 2019.
Our corporate policies are consistent with humanrights best practice, as demonstrated by a third-party
assessment. Human Rights Impact Assessments
enable us to test the effectiveness of these policies
on the ground, and make improvements where
necessary.

IMPROVE
To address issues identified through Human
Rights Impact Assessments and self-assessment
questionnaires, we develop action plans. These
plans enable us to drive improvements and integrate
human rights into our existing management
processes, in a consistent manner.
The plans have defined responsibilities, clear
timelines for implementation, and key performanceindicators to monitor progress.

20

Governance andstakeholder engagement
Given the breadth of the JT Group’s operations
around the world, it was critical to establish an
appropriate governance structure. We believe it
is important to embed respect for human rights
throughout our entire organizational structure.
This is driven by our dedicated human rights team,which is responsible for raising awareness andimproving engagement internally. Our Business
Ethics Committee (*E) also has an important role toplay, as it provides overall governance to ensure thatrightsholders’ concerns are listened to and addressed
effectively.
Central to our governance structure was theestablishment of a Human Rights Champions
network in 2018. This network comprises employees
from the countries in which we have conducted
Human Rights Impact Assessments, and facilitates
the sharing of guidance and best practice on humanrights.
To advance the rights of our stakeholders, it isimportant that we listen to the advice, concerns, andcriticisms of people outside the JT Group. Therefore,
we have continued to take counsel from our Human
Rights External Advisory Board.

To further strengthen our external engagement,
we have partnered with Business for Social
Responsibility (BSR), Mazars, EY, and KPMG Azusa
Sustainability. These organizations provide technicalsupport with our ongoing human rights due diligenceapproach and overall human rights strategy.

HUMAN RIGHTS EXTERNALADVISORY BOARDTOBACCO BUSINESSIn November 2018, we organized an awarenessraising session on human rights, which 81 employees(*E) attended. The objective of the session was toengage and educate our staff on the subject throughan external voice. In line with our aim to harness
external expertise as part of our strategy, we invited
BSR’s Human Rights Managing Director, Margaret
Jungk, to give a speech at the session. Margaret
previously directed the business and human rights
department at the Danish Institute for Human
Rights and was a member of the UN Working Groupon Business and Human Rights. Her speech wasrecorded and shared with the rest of the Company
via our intranet.

We also provide printed communication materials
to increase employee awareness and strengthen
their understanding of human rights. In 2018, wedeveloped an educational booklet on respecting
human rights in our businesses in line with the
UNGPs and shared this with over 25,000 employees
in our Japanese operations (*C). In addition, ourCode of Conduct was revised to include updated
information on human rights.

In our Japan operations, we agreed on action plansfor 21 key sites (*C) which have head office functions.
In addition to those local efforts, we also enhanced
our corporate policy and Reporting Concerns
Mechanism towards migrant workers.

OUR WAY OF DOING BUSINESSOur efforts to build awareness of the JT Group
Human Rights Policy and provide human rights
information to employees start with training,awareness raising, and communication. This is about
getting human rights thinking into the culture of theCompany and helping employees understand thehuman rights implications of business decisions.

In 2018, we developed five action plans with therespective countries, each with an agreed timeline.
A total of 12 Human Rights Champions wereappointed within these countries, as part of a
network. The responsibility of this network is
to ensure that action plans are managed andimplemented by each country and respect for humanrights is firmly established in the business.

OUR SUSTAINABILITY STRATEGYOur approach and progress in 2018

Our Human Rights External Advisory Board
plays a vital role in providing us with a broadexternal perspective in the human rights area.
Made up of international experts on businessand human rights, the Board advises us on
all issues that the members consider relevant
for the implementation of our human rights
strategy. The panel of experts guides us with
their expertise and challenges us where
they believe we need to improve, helping
strengthen our efforts to deliver on our humanrights commitments.

Our programs
We have a long and complex supply chain and are exposed to a diverse range of human rights risks. To addressthese, we have put in place a number of corporate programs and initiatives. Read more about them on the pages
listed below.
Code of Conduct
see page 32

ARISE
see page 48

Workplace Health & Safety
see page 38

Community Investment
see page 24

Agricultural Labor Practices (ALP)see page 46

Diversity & Inclusion
see page 76

21

IN FOCUSRESPECT FOR HUMAN RIGHTSOUR SUSTAINABILITY STRATEGYHUMAN RIGHTS IMPACT ASSESSMENTS
Our Human Rights Impact Assessments focus on our main operations and value streams. Key activities during the
Impact Assessment include visiting and observing farming, processing, manufacturing, and sales and distribution
operations. During the assessments, we conduct a series of interviews with employees and workers, in ourinternational tobacco business as well as representatives from suppliers, clients, and partners.

SOME KEY FINDINGS AND HOW WE ARE ADDRESSING THEM

MEXICO
Mexico’s severe security concerns will continue to be taken into consideration when
designing routes and sales objectives across the country. As the third-party sales team
expands, workers at JTI distributors need to be properly trained on security and safety.
WE WILL: consider Mexico’s security problems in fine-tuning sales routes. We will design an
online training platform so that any field sales force member can easily access information.
This will enable us to increase security levels and personal safety.

OUR WAY OF DOING BUSINESSTANZANIA
Awareness of the Your Voice grievance mechanism can be improved to increase its overall
effectiveness.
WE HAVE: relaunched the Your Voice communication in May 2018 to reach all employees.
We translated our communications and training programs into Kiswahili, the local language.
We have actively promoted Your Voice and the Code of Conduct on notice boards, leaflets, viaa launch event, and direct communication from the General Manager. In our continuous global
effort to encourage employees to speak up, we continue to provide targeted communications
for markets in this regard.

MALAYSIA
Workers at a JTI supplier reported long working hours.
WE WILL: clarify with the supplier the labor laws on working hours, ensure they are not inbreach of the law, and increase sharing of best practice on working hours.

JAPAN
TOBACCO BUSINESSThe guidelines in some of our Japanese subsidiary companies are not fully aligned toaccommodate the rapidly increasing flux of migrant workers in Japan.
WE HAVE: developed a set of Group-wide guidelines on responsible labor management, withthe focus on hiring of foreign workers. We made the Reporting Concerns Mechanism moreaccessible to migrant workers by making it available in Vietnamese and Nepali.

Going forward
MYANMAR
Contracted workers have written contracts and received pay slips, but this documentation
was not communicated in the local language.
WE HAVE: translated all contract worker contracts and pay slips into Burmese. All
communication posters regarding the Your Voice grievance mechanism and the ‘Your Guide to
Making Ethical Decisions’ are now available in both English and Burmese.

DOMINICAN REPUBLIC
Transition to two shifts at the factory could lead to potential human rights risks.
WE WILL: conduct a survey amongst employees to understand the potential impact of theshift change on factors outside of work, such as transportation, healthcare, and day care.
We will ensure key risk-management activities are in place before moving to two shifts, with
controls around transportation, food service, and a safety training program.

22

Our work to promote and respect human rights will
evolve and adapt to the changing economic andpolitical context of the countries where we operate.
Our approach to human rights due diligence is ongoing, as the risks to human rights may changeover time. We will continue to act where actions arenecessary and focus on our human rights priority
areas.
In 2019, we will review the list of high-risk markets
in which we have committed to conducting Human
Rights Impact Assessments. We will prioritizecountries based on a set of risk-based criteria in order
to assess our most high-risk countries first. Goingforward, we are committed to assessing actual andpotential human rights risks in at least six countries
each year and will continue to embed respect forhuman rights within the business.
In our Japanese operations, as a continuing processof Human Rights Impact Assessments, we will makesite visits in our processed food business in China
and Thailand, and provide capacity building in theserespective operations.

23

ABSOLUTE REQUIREMENTS

AN IMPROVEDSOCIAL AND
ENVIRONMENTAL
IMPACT

OUR APPROACH
In 2018, we revised our Community Investment Policy
which determines a common goal for Community
Investment across the JT Group: “To contribute to thedevelopment of sustainable societies, by helping to
make communities more inclusive”. This will allow us
to maximize our social impacts and contribute more
to our sustainable growth.

Improving oursocial impact

Through long-term partnerships with various
stakeholders, we are implementing 315 community
programs that contribute to the developmentof inclusive and sustainable societies across 63
countries. The programs are based on global andlocal needs, and three specific issues:

Community Investment has always been an inherent
part of the JT Group’s Corporate Sustainability
strategy. A cornerstone of our 4S model, which
focuses on consumers, shareholders, employees,
and the wider society, is our belief that our businesscan prosper only in stable and open societies. We are
therefore committed to making communities where
we operate more inclusive and resilient.
These activities also offer volunteering opportunities,
enabling employees to engage with our communities,
develop new skills, and gain a sense of pride andsatisfaction. Find out more about our projects in the‘Investing in People’ section on page 74.

1. Reducing inequalities, e.g. helping underprivileged
people gain access to food and education.

An employee volunteering project to protect saplings in Kosuge, JapanOUR TARGET*

Between 2015 and 2030
we will invest 600 million
U.S. dollars to help makecommunities inclusive
and resilient, with our
employees contributing
300,000 volunteering
hours.

CONTRIBUTING TO COMMUNITIES

53 million

6,285,671

25,429315

839

BENEFICIARIES

U.S. dollars

VOLUNTEER HOURS

46,778,935 in cash
5,525,526 in management cost
717,987 in employee
volunteering time
85,236 in kind24*

We applied average exchange rate in 2018

2. Improving community resilience in disaster-prone
areas, e.g. providing access to clean water and/or
electricity.
3. Protecting the environment, e.g. replanting
trees with the help of our employees in severely
deforested areas.
Our work is highly rated by external agencies,
including the Dow Jones Sustainability Indices(DJSI), which recognized us as the industry leader in
corporate citizenship and philanthropy, with a perfectscore of 100.
Accessibility program, La Scala, Italy*This is a Group-wide target.

TOTAL VALUE OF INVESTMENTS
IN THE COMMUNITY IN 2018*

TOTAL

We encourage more accurate reporting andmeasurement to ensure all of our programs deliver
the social impact according to our policy.
OUR WAY OF DOING BUSINESS

We believe that everyone should have the opportunity
to participate in society, and that inclusive societies
are also better for business. Our policy helps ensurethat this philosophy is coherently implemented, bothinternally and externally, and that all of our programs
have a positive impact.

To measure the social impact of our work, we use theframework provided by the London Benchmarking
Group (LBG). According to this benchmark, theJT Group ranks 10th out of 96 companies for total
community contributions.

COMMUNITY INVESTMENTPROGRAMS

1 U.S. dollar = 110.44 Yen

ORGANIZATIONSSUPPORTED

We strive to make a positive differencein everything we do. Our Community
Investment program focuses on
projects and initiatives that will help
make the communities in which we
operate more inclusive. This enables
everyone to thrive and play an activerole in their community.
Suzanne Wise,
Senior Vice President, Corporate Development, JT International

25

THE JT GROUP ENVIRONMENT PLAN 2030
To create the JT Group Environment Plan 2030, we
firstly carried out a review of global environment
trends to understand which topics matter most to ourbusiness and stakeholders. We then identified the key
environmental risks and opportunities associated withthose topics in order to define the focus areas forthe plan, namely “Energy and Emissions”, “Natural
Resources”, and “Waste”. Our 2030 plan reflects
changes in our business, societal expectations, andgrowing scientific understanding of the environment.

Improving ourenvironmental impact

OUR OBJECTIVES AND TARGETS FOR 2030*

ENERGY AN D EM I S S I ON S

role to play in reducing our environmental impacts.
As with most industries, the environment has a direct
influence on our business. We also know that ouroperations impact the environment, through resource
usage, emissions, and waste generation, but westrive to minimize this impact. By implementing
sustainable business practices, we are able toconserve resources, reduce waste, manage costs,
and meet the growing consumer demand for moresustainable products – bringing benefits to boththe environment and our business. This approach is
explained in the JT Group Environment Policy.
Throughout our whole operation, we direct ourenvironmental efforts towards:›› Minimizing negative impacts on global climatechange›› Protecting water resources›› Eliminating and reducing waste›› Promoting recycling and optimizing resource use.

WHAT HAVE WE ACHIEVED
SO FAR?
Through our Long-Term Environment Plan 2020, we
committed to a 20% reduction in GHG emissions
between 2009 and 2020. These GHG emissions relate
to both Scope 1 emissions (those for which we are
directly responsible) and Scope 2 emissions (thoserelated to energy supplied by third parties).
We achieved the absolute emissions target three
years ahead of schedule at the end of 2017. By theend of 2018, we had reduced our absolute emissions
by 21.4% and our emissions intensity by 16.1%.
We are on track to achieve the quantitative goals andcommitments outlined in the 2020 Plan.

WHAT ARE THE NEXT STEPS?
In 2019, we launched the JT Group Environment Plan
2030, which sets our new objectives and targets.
Please see opposite.

26*

Solar electricity generation in our Batangas factory in the Philippines

N ATU RAL R E S O UR CE S

EnergyWater

Transition our operations to net zero carbon
energy supply.

Support global water stewardship by reducing
our water withdrawal and by encouraging
water risk management in our supply chain.

TARGETSTHE JT GROUP ENVIRONMENTMANAGEMENT

We will double the proportion of renewable electricity that
we use to 25% by 2030 and 100% by 2050.

TARGETSIn our more complex operations, we align our
approach to environmental management withinternationally recognized standards – ISO 14001
and ISO 50001*. In our smaller and less complex
operations in Japan (*B), we have implemented
our own ‘JT Green System’, which promotes asimple and consistent approach to environmental
management.

Emissions

To better understand water risk and use in our supply
chain, by 2022, we will implement a water risk
management process in our manufacturing supply chain.

ISO 14001, which was revised in 2015, encourages
businesses to think more broadly about
environmental issues – not only those associatedwith their direct operations, but throughout their
entire value chains. We have successfully aligned ourenvironmental management systems with the revised
standard. A revised ISO 50001 standard was issued
in 2018 and we are in the process of broadening ourapproach to energy management according to the
new framework. We are also working to streamline
and better integrate our environmental andenergy management systems with other businessconsiderations, such as quality, occupational healthand safety, and business continuity.

TARGETSTo objectively review our approach to environmental
management and our overall performance, we use
external disclosures and ratings agencies, such as
CDP and the Dow Jones Sustainability Indices (DJSI).
We are proud to report that in 2018 we achieved
leadership status for CDP Climate Change andmanagement status for CDP Water Security. We also
greatly improved our rating in DJSI’s environmental
dimension, and achieved the maximum score in
Environmental Reporting.

Further reduce the environmental impactsof waste associated with our processes andproducts.

ISO 14001 and ISO 50001 are the internationally recognized standards for environmental management systems and energy management systems,
respectively. These standards do not prescribe absolute performance requirements. Rather, they provide us with a framework to help build effective
management systems that deliver continual improvement in environmental and energy performance.

Reduce our greenhouse gas emissions to
support the Paris Agreement on global climatechange with the aim to achieve net zerocarbon emissions from our operations.
We will reduce greenhouse gas emissions from our own
operations by 32%.
We will reduce emissions associated with our purchased
goods and services by 23%. This will be achieved througha 40% reduction from our direct leaf supply chain
and reductions in our non-tobacco materials, such as
packaging.

WAS TEWaste

We will reduce water withdrawal associated with ourtobacco business by 15%.

Forestry
Ensure a sustainable wood supply for our
product supply chains and further contributeto forest conservation and rehabilitation.
TARGETSTo further focus our efforts on sustainable forest
management, by 2020, we will have assessed the drivers
for deforestation and forest degradation in communities
where we source tobacco and developed action plans for
improved wood resource use, forest conservation, andforest rehabilitation.
We will replace all wood from natural forests used in the
tobacco curing process of our directly contracted growers
with renewable fuel sources.

TARGETS

We will reduce waste associated with our tobacco
business by 20%.
By 2020, we will have targets and action plans relating to
the appropriate use and responsible disposal of materials,
including plastics, used in our products and packaging.

*

Baseline year for all targets is 2015.

Target year is 2030 unless stated otherwise.

The overall plan is to be reviewed every 5 years.

27

OUR WAY OF DOING BUSINESS

Environmental issues are of increasing societal
concern and have brought many challenges to oursociety. For instance, today we are facing melting
ice caps, rising sea levels, and changing weather
patterns, and we all need to address them. As a
global organization, we recognize that we have a key

It also goes further than our current plan byaddressing a broader range of issues and considering
not only our operations, but also key elements of ourvalue chain. It contains longer-term objectives forenergy and emissions, along with quantified targets
by 2030. We will track performance and progress
towards our objectives and targets and we will revisit
the plan periodically to ensure that it remains relevant
to our business and stakeholders.

MAKING PROGRESS IN ENERGYAND GHG EMISSION REDUCTION

It will have serious implications for the supply
chain of our materials, as our products are mainly
agricultural-based.

SETTING A SCIENCE
BASED TARGET
We have set a Science Based Target (SBT) to ensurethat we fulfil our commitment to reduce GHG
emissions and our contribution to climate change.
We have committed to reduce GHG emissions fromour own operations by 32% across the Group (2015 to2030). Our target was validated by the Science Based
Targets initiative (SBTi) in February 2019.

In our direct operations, the renewable electricity
target will be achieved through on-site generationand sourcing of third-party renewable energy.
Our Renewable Energy Task Team has carried out afactory-by-factory feasibility review of opportunities
associated with solar, hydro, wind, and biomass
power. Where feasible, and where it makes businesssense, we have included these opportunities inour business planning and in our feasibility study
for the 2030 Science Based Target. The team has
also reviewed options relating to zero or lowcarbon energy tariffs and green energy certificates.
In addition, our locations are encouraged to consider
fuel and emissions efficiency, and alternative vehicles
when selecting fleet vehicles.
We are well on the way to achieving our 2030
renewable electricity target. By the end of 2018, 31%of electricity in our international factories was eitherpurchased*¹ or generated*² from renewable sources.

1.00

1,000

CO2e thousand tons

7%472

21.0% reduction
achieved ahead of
the target year

10%
714

6,951

500

483

410

390

360

347

354

425

393

373

385

371

361

FY
FY
2009 2014
Base Year

2015

2016

2017

2018

65%
4,531
Combined Scope 1 and 2 GHG Emissions

SCOPE 3Purchased goods and services

0.50

Original Target:
20% on FY2009

10%
667

Beyond our own operations we take responsibility
to positively influence the environmental impactsof our value chain by working in partnershipwith our suppliers. Most Scope 3 emissions forour business are associated with the goods andservices that we purchase and in particular withtobacco leaf, our main raw material.

CO2e tons/million cigarettes equivalentCO2e thousand tons

8%
566

REDUCING OUR ENVIRONMENTAL
IMPACTS IN SCOPE 3 EMISSIONSGHG EMISSIONS INTENSITY FOR
THE TOBACCO BUSINESSCOMBINED SCOPE 1 AND 2
GHG EMISSIONSGHG EMISSIONS IN OUR VALUECHAIN IN 2018

For programs and initiatives specifically related to our
tobacco business, please see page 52-53.

OUR WAY OF DOING BUSINESSWe are committed to tackle this issue and we will
be reducing our GHG emissions to support the Paris
Agreement on global climate change, with the longerterm aim of achieving net zero carbon emissions fromour operations.

In pursuing this target, we will double the proportionof renewable electricity that we use to 25% by 2030,
in support of our goal of reaching 100% by 2050.

As part of the JT Group Environment Plan 2030, weare committed to reducing emissions associatedwith our purchased goods and services by 23%(2015-2030). We aim to achieve this through a 40%
reduction in emissions from our direct leaf supply
chain and reductions in non-tobacco materials suchas packaging. As such, we will continue to improve
our existing curing barn projects and expand to more
locations (read more on page 51). We will reduce
the amount of wood used for curing, while at thesame time ensuring that the wood we use comesfrom renewable sources in Zambia and Tanzania,
for instance. In addition, we aim to reduce leafrelated emissions by further optimizing the use ofcrop inputs, such as fertilizers and crop protection
agents, wherever possible. We will also be working
with suppliers to reduce the amount of packaging
associated with our non-tobacco materials.

2020
Target0.80 0.75 0.70 0.69 0.67 0.67

FY
FY2009 2014
Base Year

2015

2016

2017

2018

20% on FY2009

Climate change is the biggest environmental
challenge facing society and our business.

Through our Energy Opportunities Scheme, ourfactories have identified over 150 no- or lowinvestment projects. These avoid over 7,600 tons of
GHG emissions and represent a cost saving of over2 million U.S. dollars, with an average payback of 8months.

2020
TargetCapital goods
Transportation and distribution

Scope 1OthersScope 2

* 1 We purchase electricity from renewable sources in Canada, Germany, Poland, Romania, Sweden, and the Philippines.
28* 2 We generate electricity on-site from renewable sources in Jordan, Nigeria, The Netherlands, The Philippines, and Turkey.

29

Societal demand for water is increasing globally and water-related issues such as availability, quality, flooding,drought, or regulatory changes can have a major impact on society and our business.
Our tobacco and food manufacturing activities all use water. However, our main operation, the tobacco business,
is not water-intensive and the water that is required for tobacco crops comes predominantly from rainfall.
As part of our ongoing program to address water-related risks to our business and further promote effective water
management, by the end of 2018 we had completed water risk assessments at 60 of our 80 factories (75%).
OUR 2030 GOALSWATER RISK IN OUR SUPPLY CHAIN

In the JT Group Environment Plan 2030, we
commit to supporting global water stewardship byreducing our water use and encouraging water risk
management in our supply chain. We have set atarget to reduce our tobacco business-associatedwater withdrawal by 15% by 2030 vs 2015. Thistarget was calculated taking into account site level
water intensities and regional predictions for futurewater stress. We plan to achieve the target by using
less freshwater for factory site irrigation, reducing
water use in our processes and improving leakcontrol, using more recycled water, and improving
cleaning practices.

Many of our raw materials require water in theirproduction and water is an important resource formany of our suppliers. To better understand water
usage and water-related risk in our supply chain
across the Group, by 2022 we plan to implement awater risk management process.

Read about current best practices in our tobacco
business on page 52-53.

Peter Mitchell,
EHS Director, Environment, Global EHS, Corporate Sustainability,
JT International
Yusuke Takaki,
Manager, Environment, Sustainability Management, JT

WATER WITHDRAWAL

WASTE

Thousand m³

From a societal and stakeholder perspective, waste,
and particularly plastic waste is of increasing
concern. From a business perspective, all waste has
a direct cost (handling and disposal) and an indirect
cost (resource and processing costs etc.).

15,00012,958

10,56010,000

10,155 10,093 9,875 10,035

Waste management is a key component of ourEnvironment Plan. Across the Company we apply
a ‘Reduce, Reuse, Recycle’ approach. We also
set targets for waste reduction as we believe that
reducing waste helps to conserve resources, which inturn helps to minimize our environmental impact andcut business costs.

LONGER-TERM GOALS

In our Environment Plan 2030, we commit tofurther reducing the environmental impact of waste
associated with our processes and products.
By 2030, we will reduce waste associated with ourtobacco business by 20% vs 2015. We will do thisby improving resource efficiency and rolling out
innovative solutions across different sites.
Moreover, by 2020, we will have targets and actionplans relating to the appropriate use and responsible
disposal of materials, including plastics used in our
products and packaging.
Read about how we reduce waste in manufacturing
on page 53.

WASTE GENERATION
Thousand tons
200

BREAKDOWN OF WASTE
GENERATED IN 2018 (%)

150
FY
2009

FY
2014

2015

2016

2017

18

2018

FORESTRY
Ensuring a sustainable wood supply and further
contributing to forest conservation and rehabilitation
are key objectives set out in the JT Group
Environment Plan 2030.
We already have a number of programs andinitiatives in relation to sustainable forestry and wood.
Through our ‘live barns’ initiative in Malawi, we are
reducing the number of trees that are cut down tobuild curing barns, by constructing the barns out ofliving trees.
In addition to our current programs and to further
focus our efforts on sustainable forest management,

30

we will have assessed the drivers for deforestationand forest degradation in communities where wesource tobacco and we will have action plans for
improved wood resource use, forest conservation,and forest rehabilitation by 2020.
Within the JT Group Environment Plan 2030, we havea target to replace all wood from natural forests inthe tobacco curing process of our directly contracted
growers with renewable fuel sources by 2030. For
more examples and targets in our tobacco business,please see page 50 (Promoting forestry at small-scale
farms).

100

152

126

126

121

121

122

7

122
THOUSAND TONS

50

75

FY
2009

FY
2014

2015

2016

2017

2018

Recycling

Recovery

Disposal

31

OUR WAY OF DOING BUSINESSTo address pressing environmental issues, it isessential for us to collaborate across the Group.
By working towards the same goal, we havelearned a great deal from each other anddelivered solid results.
In order to achieve the targets of the JT Group
Environment Plan 2030, we will continue towork together as one team.

WATER

ABSOLUTE REQUIREMENTS

GOOD
GOVERNANCE
AND BUSINESSSTANDARDS

Our framework of governance allows us to enhance
corporate value and achieve sustainable growth in
the medium to long term. This approach is outlinedin the JT Corporate Governance Policy, which wasrevised in December 2018.

Our annual Corporate Governance Report shows ourprogress, as well as insights into our governanceframework and board structure.
For more details about JT’s corporate governance,
including tax practices, risk management, andinformation security, seewww.jt.com/sustainability/way_of_business.

As part of our efforts to improve our workplaceenvironment and better understand compliance inthe workplace, we distribute a compliance survey.
In our Japanese operations, the survey outcomesare reported to each executive officer and to eachdepartment. The relevant departments then introduce
measures in their annual compliance action plans toaddress any issues raised, using quantitative targets
to evaluate the effectiveness of these measures.
In 2018, 97.6% of employees completed the survey.

THE ROLE OF THE COMPLIANCE SURVEY IN OUR JAPANESEOPERATIONS’ ACTION PLANEMPLOYEES TAKE
THE COMPLIANCESURVEYCORPORATE GOVERNANCERISK MANAGEMENT

the Philippines and Indonesia. The same approach
applies to trainings on Anti-Bribery and Corruption,
including Anti-illicit Trade and Conflicts of Interest.

OUR WAY OF DOING BUSINESS

Conducting business in a responsible way is a toppriority for us. Our corporate governance is rooted in
our adherence to the 4S model and our commitment
to our stakeholders. We have built a robust system ofgovernance to support this commitment, to ensuretransparent, fair, timely, and effective decisionmaking. This means not only complying with local
laws and regulations, but also proactively seeking
to exceed expectations and hold ourselves to higher
standards.

We continued to provide training on the Codes ofConduct to our employees online and face-to-facein 2018. In our Japanese operations, 99.4% of
employees completed the online courses (*C).
In our international tobacco business, we launcheda Code of Conduct video that included messages
from our executives to employees. 2019 will see theglobal launch of a new interactive training video in
25 languages to enhance understanding of the Code.
For employees without computer access, we haveadopted a Train-the-Trainer approach. So far we havetrained 91 local trainers, who provide face-to-facetraining in local languages to 15,777 employees,
including those from the newly acquired entities in

RELEVANTDEPARTMENTCARRIES OUT
THE ACTION PLAN

INFORMATION SECURITY

JT COMPLIANCE
OFFICE ANALYZESTHE SURVEY RESULTS
JT COMPLIANCE
OFFICE DEVELOPS
THE ACTION PLAN

TAX PRACTICES

Our business ethics
Our JT Group Codes of Conduct form the foundation of our business ethics. Reflecting our commitment to the 4S
model, they outline our responsibilities towards our consumers, our shareholders, our employees, and the wider
society. Our Reporting Concerns Mechanism allows employees and business partners to report concerns in aconfidential manner. We take a zero-tolerance approach to bribery, corruption, and other financial crime, and we
actively manage risks related to these areas.

LIVING OUR CODES OF CONDUCTOur Codes of Conduct allow us to conduct businessethically and be a responsible corporate citizen.
We ensure that they are implemented effectively
throughout the entire business by running various
training courses for employees.
Our employees also sign an acknowledgment formto show their commitment to following our Codes ofConduct.
Our international tobacco business and Torii
Pharmaceutical have developed a version of theCodes of Conduct to reflect the needs of theiroperations.

32

We review and update our Codes of Conduct
continuously to improve our standards, and thelatest revision took place in 2018. In our Japanese
operations (including the subsidiaries of ourprocessed food division in China, Thailand, andthe U.S.), the revised Code now includes new
sections such as Sensible Conduct as a Member ofSociety, Prohibition of Discrimination, and Maintainand Promote Health. In our international tobacco
business, we digitalized the Code into an accessible,easy-to-read document, including a decision-making
guide to assist employees in making the rightchoices. It is now available in 36 languages, andwe provide printed booklets for those with limited
internet access.

In our Japanese operations, the latest survey results
showed that preventing long working hours andharassment* remained top priorities in 2018. As aresult, we shared recommendations and tips with
our employees on how to prevent long working
hours, and provided online training and seminars on
harassment prevention. We will continue to monitor
progress and make every effort to improve thesituation in these two key areas.
In our international tobacco business, the Employee
Engagement Survey covers compliance questions.
It is distributed every three years, and the last one
was completed in 2018. The results showed that,compared to the previous survey, line managers
are now understanding and enforcing the Code of
Conduct more effectively.

*

Includes sexual harassment and bullying

33

REPORTING CONCERNS

Any concerns are then dealt with by specially trained
contact persons. Contact persons follow a mandatory
face-to-face training course. In our international
tobacco business, there is a Reporting Concerns
Mechanism called Your Voice, which is available in 16
languages. Newly appointed contact persons receive
face-to-face training and a manual detailing their role.
In 2018, we received 414 reports across the
JT Group, covering issues such as labor practices
and discrimination. In the case of proven violationsof our Codes of Conduct, we took appropriate actionin the form of dismissal, verbal or written warnings,
financial penalties, or other measures.

BREAKDOWN OF REPORTED CASES (%)

ANTI-COMPETITIVE BEHAVIOR

Our internal policies and procedures help to prevent
bribery and to ensure an appropriate level ofexchange of gifts, hospitality, and entertainment,
which must be transparent and reasonable, andmust respect local regulations. We therefore require
all employees in our Japanese operations to seek
approval for anything they receive or wish to offer.
To ensure that compliance is well-embedded within
the organization, we conduct regular training and run
communications campaigns across the Group.

Our Codes of Conduct underpin the JT Group’s
strong commitment to fair competition.
Our commercial strategy and actions must be
determined independently of our competitors.
Our international tobacco business has a policy andguidelines in place, designed to ensure that business
operations are conducted fairly and in compliancewith competition laws, wherever we do business.
Our employees are trained accordingly.
OUR WAY OF DOING BUSINESS

We offer multiple communication channels for
employees, customers, and business partners
to confidentially raise concerns about potential
violations of our Codes of Conduct or policies.
We review all concerns raised, launch investigations
as needed, and take appropriate corrective actions.
Employees are informed about our Reporting
Concerns Mechanism through various channels
including the Group intranet. In 2018, our Japanese
operations made the Mechanism available in four
additional languages (English, Chinese, Vietnamese,and Nepalese) to meet the needs of our diverse
workforce.

GIFTS, HOSPITALITY, AND ENTERTAINMENT

In our international tobacco business, all exchanges
with non-governmental third parties above 250 U.S.
dollars must be approved. For government and public
officials, all requests, regardless of the amount, haveto be approved. The number of gifts, hospitality, andentertainment requests sent for approval in 2018 was
603, vs 740 in 2017.

15.9

19.1
1.6

2.9

2017

24.0

32.4

445

2018
17.6

40.1

414

22.9
23.4

Cases related to labor practices(excluding human rights)

Cases related to corruption

Cases related to human rights

Cases related to anti-competitive behavior

Cases related to fraud and misuse ofCompany assets

Other

There were no cases related to anti-competitive behavior for 2017 or 2018.

PREVENTING FINANCIAL CRIMEANTI-BRIBERY AND CORRUPTIONThe JT Group has a zero-tolerance approach tocorruption and bribery, and all executives andemployees must respect and comply with our antibribery and corruption policy.
In our Japanese operations, we run an e-learning
course on anti-bribery and corruption once every two
years. 2,179 employees took this course in 2017.
In 2018, we prepared for the next e-learning course,which will take place in 2019.

34

In our international tobacco business, since 2016,
18,468 employees have taken our online course on
anti-bribery and corruption, which included 1,546
new employees in 2018. The course has enabled us
to engage more closely with our employees on the
topic. Employees without computer access complete
face-to-face training as part of the general Code of
Conduct training provided locally (read more on page
32).

Financial crime is a global trillion-dollar issue that isof great concern to governments and businesses.
Moreover, it can harm our society.
The JT Group does not tolerate any form of financial
crime. In our international tobacco business, weabide by the EU Cooperation Agreement obligations,and take into account the U.K. Criminal Finances
Act 2017. We perform policy controls and provide
program training, and we publish employee
communications on the subject. In 2018, we updated

our existing Anti-Money Laundering policy to include
other elements of financial crime.
The global policy sets out principles and guidelines toprevent employees from being involved in any formof financial crime, including money laundering, tax
evasion, and facilitating tax evasion.

35

Our people

RESPECTING DIVERSITY IN THE WORKPLACE
TREAT ALLEMPLOYEESFAIRLY ANDRESPECTFULLY

JT Group Human
Resources Management
Philosophy
ENSURE
TRANSPARENCY
OF RULES AND
STANDARDSPROVIDE ALL
JT GROUP EMPLOYEESWITH GROWTHOPPORTUNITIESLEARNING AND SHARING BUSINESS SKILLS
Unlocking and maximizing our employees’ potential
is a vital element of our sustainable growth agenda.
Today’s business environment is disruptive anduncertain, and it requires all of our employees toacquire advanced skills. We have implemented
initiatives globally and locally to help our people
flourish professionally.
To develop the global capabilities of our employees
and to train our future business leaders, we provide
various talent partnership programs for employeeswith different backgrounds to learn and network
together. One of the programs provides specialist
leadership training courses for future businessleaders, selected globally from across our operations.

In 2018, we organized the Exchange Academy for
25 employees from our domestic and international
tobacco business around the world as part of thistalent partnership program. They participated in a
two-week joint training program, with one week
in Japan and one week in Switzerland. During the
program, the participants worked in teams in orderto analyze and formulate the JT Group strategy
for sustainable growth. Each team then gave apresentation and made a recommendation to senior
executives within our Group.
We provide comprehensive business training
programs for employees of all levels. Fundamental
business courses in presenting, writing, or time
management are available to those in juniorpositions, while more advanced programs such as
task execution, negotiation skills, or leadership are
aimed at middle-management and senior positions.
These courses are available to employees across ourorganization, offering an opportunity to meet andexchange ideas with colleagues from different teams.
In 2018, in our Japanese operations 2,039 employees
completed these courses. To attract the best talent,
we will continue to offer good career development
and training opportunities.
Moreover, we empower employees to hold regularperformance and career discussions throughout theyear, to ensure that we leverage the full potentialof our employees and boost their development andcareer progression. In 2018, 68.7% of our employees
participated in the performance review for the year
2017.
Our high internal hire rate which was 94.2% in2018, is proof of our commitment to employee
development and sustainable business practices.

36

We promote a workplace environment that allows all
employees to fulfil their potential, and this includes
working parents. In recognition of this, JT was
certified as a childcare-supporting company by theJapanese Ministry of Health, Labor and Welfare in2018.

In 2018, JT was included as a Gold status in the
PRIDE Index for the third consecutive year inrecognition of our commitment to inclusive policies
for the LGBT community. In 2019, JT has been
named a “Nadeshiko Brand” company for the second
year running, in recognition of exceptional work inpromoting the success of women in the workplace.

OUR WAY OF DOING BUSINESSIn order to contribute to the company’ssustainable growth, and with the recognition
that highly skilled, talented, and diverse people
are the foundation of its success, JT Groupmanagement proactively takes steps tosecure long-term employee engagement andsatisfaction.

We believe a diverse workplace brings a rich mix ofviewpoints and perspectives that can inspire newideas, find solutions to complex issues, and drive
our business forward. For us, ‘diversity’ means all
the ways in which current and potential employees
may differ from one another, such as age, gender,
ethnicity, religion, disability, sexual orientation,
education, and national origin.

We are also looking to create a more genderbalanced environment across the Group. In JT, we
aim to have a minimum of 10% female representation
within management by 2023. In 2018, the ratio was
5.7% which is approximately 4 times higher thanwhen the target was set in 2013, when the figure was
1.4%. In our international tobacco business, the ratioof female to male directors was 28.4% in 2018, andwe are aiming to reach 30% by 2020.
Recognizing that different people have different
working styles and needs, we encourage flexible
hours and remote working throughout the Company.

ENGAGING WITH EMPLOYEESOur human resources programs have been developed
to motivate and empower our employees to address
new business challenges.
To evaluate the effectiveness of our programs andthe level of engagement of our employees, we carryout an Employee Engagement Survey every year in
our Japanese operations, and every three years in
our international tobacco business. The feedback we
receive from employees helps us to understand ourstrengths, the progress we have made, and the areas
where we need to keep improving.
Importantly, our people also help us understand what
we need to do differently to maintain our reputation
as a top employer.
In 2018, the overall survey response rate was 99% in
JT and 93% in our international tobacco business.
The survey includes a ‘Sustainable Engagement’category, which measures employees’ job satisfaction
and long-term commitment to the business. In JT,
the total favorable score for this category was 82%,
which is 12 points ahead of the average score forJapanese companies. In our international business,
89% of employees gave a positive response, placing
the Company one point above the Global HighPerforming Companies Norm.

37

TOWARDS A BETTER WORKPLACEThe JT Group health andsafety strategy
Health and safety in the workplace is extremely
important to us, not only for our employees’
well-being but also for the sustainable growthof our business. We align our health and safety
standards with OHSAS 18001 and always meet or
exceed legal requirements. When our standards arestricter than local laws, we require our local offices
to comply with our standards. The scope of ourstandards extends beyond our employees, covering
contractors and visitors to our operations as well.
Well-being programs often include family membersof employees.

OUR WAY OF DOING BUSINESS

We care deeply about employee health andwell-being, and preventing work-related disease.
Our international tobacco business conducts general
occupational hygiene and ergonomic assessments.
In 2018, we started collecting data across theGroup to better understand our employees’ risk ofoccupational health issues. All reported cases areinvestigated by local managers to identify the causes.
If they are attributed to the work or workplace, wetake appropriate measures immediately to protect
employees’ health and prevent recurrences.
In our Japanese operations, we focus on boththe psychological and physical well-being of ouremployees. Programs for stress management are
in place, and we work to raise awareness about ahealthier lifestyle. As a result, JT was named a ‘White
500’ company for the third consecutive year. Thisaward is presented by Japan’s Ministry of Economy,
Trade and Industry. It recognizes large enterprisesthat are making outstanding progress towards betterwell-being and proactivity among their employees.

WORKPLACE HEALTH AND SAFETY DATA *1
2014

2015

2016

2017

2018

targetEmployees

2

1

2

0

2

0

Contractors

3*e

1*e

1

2

1

0

Employees

113

154

186

186

183

n/a

Contractors

12*e

17*e

8

13

11

n/a

NUMBER OF FATALITIES *2

NUMBER OF LOST-TIME
INCIDENTS (LTIS)EMPLOYEE LTI RATE(NUMBER OF LTIS PER 200,000 HOURS WORKED)% OF CIGARETTE AND TOBACCORELATED FACTORIES CERTIFIED TOOHSAS 18001 (*D)

NUMBER OF VEHICLE ACCIDENTS

VEHICLE ACCIDENT FREQUENCY RATE(ACCIDENTS PER MILLION KILOMETERS)

0.32

0.36

0.42

0.37

0.26

n/a

81.0%

78.9%

77.8%

74.4%

76.9%

100%

1,341*e

1,108*e

1,294*D

1,457*D

1,418*D

n/a

5.9*e

4.8*e

4.4*D

5.2*D

3.5*D

n/a

THREE PILLARS OF SAFETY
Our safety programs are based on three fundamental
pillars: safe workplaces, safety competence, and aGroup-wide culture where the safety of our people
always comes first. The level of risk varies fromlocation to location, but the highest risks across the
JT Group are driving vehicles, riding motorcycles(fleet safety), and working with machinery, as well as
slips, trips, and falls.
To mitigate these risks and prevent injuries, we
conduct risk assessments throughout the whole
supply chain. This helps us to identify hazards,
implement appropriate measures, and ensure that
our approach helps us to meet our targets. We also
focus on raising awareness among employees andthoroughly embedding our safety culture in day-today work.
Regrettably, we had to report three fatalities among
our workers and five among third parties in our
workplaces in 2018. Although we have been running
driver safety programs for many years, most of
the cases involved vehicle accidents. To eliminate
such risks, we continue to develop and improve ourprograms.
In the unfortunate event of a fatality, we work hardto support the affected families as much as we can.
We also try to learn from the incident and develop
informed and targeted measures to help reduce thelikelihood of recurrence.

The scope of reporting for contractor fatalities and LTIs, as well as vehicle accident data, expanded in 2016 compared to previous years. Further details* 1 on the scope of data can be found in the Basis of Reporting document.
38* 2 Excludes third-party fatalities.

39