BAT 2541.27p About us Our products How we work Sustainability Investors Media Reporting Careers Responding to human rights allegations A commitment to openness and transparency We have always done our utmost to uphold high standards, openly engage with our stakeholders and work to strengthen our approach to align to their expectations. Multinational businesses have long been subject to stakeholder scrutiny and allegations – especially one like ours in a controversial sector and with global operations and supply chains in challenging and diverse environments. So if we do receive any reports of unethical behaviour, we conduct detailed investigations, take appropriate action to address any issues identified, and report transparently on the progress and outcomes. We take any allegations relating to human rights extremely seriously, openly engaging with the relevant stakeholders and responding to the issues raised. Belarus In 2021, we received enquiries relating to BAT’s business in Belarus in light of recent political developments. Concerns were raised relating to Grodno Tobacco Factory Neman (“GFT Neman”), which manufactures cigarettes under contract on behalf of BAT Belarus. These included allegations around human rights abuses of factory workers who have taken part in political protests and allegations that BAT is complicit in the illicit trade of cigarettes in Belarus. BAT commitment and action to respect human rights BAT has a long-standing commitment to respect fundamental human rights, as affirmed by the Universal Declaration of Human Rights. This commitment includes respecting the rights of our employees, the people we work with and the communities in which we operate, across our supply chains and business operations. Our approach to human rights management is aligned to the UN Guiding Principles on Business and Human Rights. In following those principles, we work to keep ourselves – and our supply chain – aligned and accountable through strong policies, due diligence and remediation programmes. We are committed to complying with all applicable local and international legislative requirements, as well as with our own Standards of Business Conduct (SoBC). Our SoBC sets high standards of responsible behaviour and comprises our core policies for all Group companies worldwide, including for human rights, anti-bribery and corruption and anti-illicit trade. Our business relationship with GFT Neman has always been conducted in-line with the requirements of the BAT Group, including compliance with all due diligence procedures and our SoBC. We recognise that circumstances in some countries present a higher risk for human rights issues, such as where regulation or enforcement is weak, or there are high levels of corruption, criminality or unrest. So, in addition to Group-wide procedures and controls, we have a clear process in place to identify and carefully monitor BAT operations in high-risk countries. This includes annual risk assessment of all countries where Group companies are present, using Verisk Maplecroft’s human rights indices. Our businesses in each high-risk country must complete a human rights assessment, confirming compliance with Group policies, standards and controls and providing details of measures in place to support human rights. This process is monitored and reviewed by our Board Audit Committee twice a year. In 2021, BAT Belarus was subject to these enhanced due diligence procedures and underwent the human rights assessment. The results demonstrate full compliance with Group policies, standards and controls, as well as a range of measures in place to enhance human rights management. For example, procedures for BAT Belarus employees to report and raise concerns are maintained through the Group’s ‘Speak Up’ channels and all suppliers are required, through contract provisions, to comply with our Supplier Code of Conduct. Due to the recently announced sanctions and existing legal restrictions in Belarus, we have had to suspend a planned on-site independent audit at the GFT Neman factory to assess workplace conditions. BAT commitment and action to address the illicit trade in cigarettes Combatting illicit trade is a priority for BAT and we have strong measures in place to safeguard our business and prevent the wide-reaching negative societal impacts of the illicit trade in tobacco products. Further details of our approach to tackling illicit trade can be found at Illegal tobacco trade (bat.com). We are satisfied that BAT Belarus applies all the relevant BAT Group policies and procedures with regard to combatting illicit trade and to ensure that the products manufactured by under BAT Group’s trademarks are consumed in the Republic of Belarus. In addition, we have found no evidence of BAT brands being traded illicitly in Belarus. A KPMG report on Illicit cigarette consumption in the EU, UK, Norway and Switzerland1 and in the Russian Federation2, confirmed that certain local Belarus brands are illicitly traded, but not the brands manufactured under BAT Group Trademarks. BAT commitment to sanctions compliance In accordance with our SoBC and Sanctions Compliance Procedures, we are committed to ensuring all our operations are in compliance with all applicable sanctions regimes. Following the recent imposition of international sanctions against several Belarusian persons and entities, including GTF Neman, as well as restrictions targeting tobacco manufacturing materials, steps have been taken to ensure all activities remain compliant. This has included the suspension by our subsidiaries of relevant transactions impacted by these sanctions. Next steps We continue to closely monitor the situation in Belarus and will update our response and actions as it evolves, in accordance with our Group policies and international standards. Malawi In September 2019, the law firm Leigh Day sent a pre-action letter to certain BAT Group companies, which included allegations concerning child and forced labour on tobacco farms in Malawi. A response was provided in December 2019. Formal legal proceedings relating to those allegations were started against some of those BAT Group companies in December 2020. As legal proceedings have been commenced, it would be inappropriate for us to provide further comment at this time. Italy In 2019, The Guardian newspaper in the UK published allegations relating to illegal migrants working in tobacco growing in the Campania region of southern Italy. These included allegations of low wages, child labour, long working hours and health and safety breaches. Approximately 0.05% of the total tobacco leaf we purchased in 2019 was from a third-party supplier in this region. In response to the allegations, we engaged with the supplier and reviewed detailed evidence of their policies and application of human rights and health and safety standards, including details of audits and unannounced visits, prompt actions and training. While the supplier has documented migrant workers on their contracted farms, we found that practices are in place to ensure that the migrant farm labourers are working legally and that consistent standards for their employment are applied across the contracted farms. Our supplier is confident that there are no illegal migrant workers employed on contracted farms they source tobacco from in the Campania region. However, given the seriousness of the allegations, they have committed to continued unannounced visits to farms, further expanding their training programme and conducting worker interviews from the next crop season. We continue to monitor the situation closely. Zimbabwe In April 2018 the NGO Human Rights Watch published a report entitled ‘A Bitter Harvest: Child Labor and Human Rights Abuses on Tobacco Farms in Zimbabwe' . We take alleged human rights issues, and the issue of child labour, extremely seriously and agree that children must never be exploited, exposed to danger or denied an education. Almost all of the tobacco leaf we purchase in Zimbabwe is from Northern Tobacco, one of the largest buyers of tobacco in Zimbabwe, which directly contracts with farmers. As with all our suppliers, Northern Tobacco is required, as part of our contractual agreements, to ensure there is no child labour in the supply chain and to ensure that the health and safety and labour rights of all tobacco workers are protected. Northern Tobacco was positively referenced in the Human Rights Watch report for providing comprehensive, clear and transparent responses to Human Rights Watch when contacted, and for its comprehensive approach to risk assessment and mitigation. We are confident that our policies and processes in Zimbabwe are robust. Nevertheless, recognising the seriousness of the allegations contained within the report, we undertook a series of unannounced visits to farms in Zimbabwe that supply BAT, none of which revealed any material issues of concern. We continue to monitor the situation in Zimbabwe closely. Bangladesh tobacco growing In June 2016 the NGO Swedwatch published a report entitled ‘Smokescreens in the supply chain: the impacts of the tobacco industry on human rights and the environment in Bangladesh ’. We conducted our own internal review in Bangladesh which did not raise any significant concerns and indicated that the report as a whole is not representative of the reality on the ground. However, we recognise the serious nature of the allegations and also commissioned an independent assessment of the human rights-related impacts of tobacco growing in the country. A summary of the independent review findings can be found below. We are pleased that the outputs from the review were aligned with the outcomes of our own investigations and that DNV- GL found no evidence to support the allegations in the Swedwatch report, including claims of child and bonded labour. Equally, we are grateful that the review highlighted some procedural and control issues that can further help us manage human rights risks in-country. Furthermore, BAT Bangladesh has implemented a number of initiatives that will strengthen our approach, particularly around preventing child labour, bonded labour and gender discrimination. Responding to allegations of human rights abuses in the Bangladesh tobacco supply chain (1.1 mb) Bangladesh fire at supplier’s factory In September 2016, there was a fire at the factory of one of our third-party packaging suppliers in Bangladesh, in which 39 people tragically lost their lives. From the time of the accident, we worked closely with the Bangladesh Government which co-ordinated both the investigations into the cause of the fire and compensation for the victims and their families. Although the outcomes of the formal investigations are yet to be disclosed, there has been no suggestion that BAT was to blame for this tragedy. The Government has provided compensation to the victims and their families through its Workers Welfare Fund – to which we have contributed more than £2.21m since 2011. We have been informed that the compensation equates to approximately £2,000 per victim. As a reflection of our long-standing relationship with the supplier and our commitment to supporting human rights throughout our supply chain, we have also contributed an additional £1,000 allocated for each victim’s family. We understand the owners of the factory will also be required to pay £1,000 per victim once court proceedings have been finalised. In parallel, and as part of our ongoing improvement of our processes, we brought forward on-site independent audits, conducted by the global audit firm Intertek, for all priority suppliers in Bangladesh, including all direct materials suppliers. Some suppliers performed below our expectations on health and safety criteria, so the local team worked tirelessly in 2017 to support the suppliers’ corrective action plans, and provide specialist training and advice. We also organised Intertek training for both our own and suppliers’ employees. When the suppliers were re-audited by Intertek, they achieved significant improvements in their audit scores. Ultimately, this not only improved the working conditions for our suppliers’ employees, but also made sound business sense in enabling us to maintain our existing supply base in the country and contribute to the local economy. BAT takes its commitment to human rights seriously and seeks to comply with all related national and international frameworks. In addition to enhancing our own due diligence processes, we will continue to offer our support to the Government as they finalise their response to the tragedy. Indonesia In May 2016, the NGO Human Rights Watch published a report entitled, ‘The Harvest is in My Blood: Hazardous Child Labor in Tobacco Farming in Indonesia ’. The report into tobacco growing in Indonesia highlighted a number of issues that result from the way in which certain types of tobacco are traditionally grown and sold in the country. We are pleased that it acknowledges the collective responsibilities of the Government, the tobacco industry and NGOs, and we support many of the recommendations on how these groups can tackle this issue. The report findings have been fed into an existing review of our practices in Indonesia and have contributed to our ongoing plans. For example, in 2017 our business in Indonesia continued its work with ECLT on a multi-stakeholder project to address child labour in tobacco growing. This included developing a new collective strategy, involving national and local governments, farmers’ associations, tobacco companies, civil society, international organisations and development agencies. United States In 2019, we were pleased to see the resolution of a complaint made in 2016 regarding tobacco growing in the US, which found that BAT had not breached its obligations under the OECD Guidelines for Multinational Enterprises relating to human rights and due diligence. The complaint was made by the IUF union and the Farm Labor Organizing Committee to the UK National Contact Point (UK NCP) for the OECD Guidelines – full details can be found in the UK NCP’s final statement . KPMG (June 2020), Illicit cigarette consumption in the EU, UK, Norway and Switzerland (KPMG EU Report (stopillegal.com) ) KPMG (May 2019) Eurasian Economic Union Illicit Cigarette Report (KPMG Eurasian Report (stopillegal.com) ) New programme drives industry-wide supplier standards Sustainable Tobacco Programme External links Organisation for Economic Cooperation and Development Eliminating Child Labour in Tobacco Growing Foundation International Labour Organization Human Rights Report Highlighting how we promote, uphold and protect human rights across our supply chain. 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