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BRITISH AMERICAN TOBACCO BANGLADESH

SOCIAL REPORT 2002-2003


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Contact Details:

Corporate and Regulatory Affairs

British American Tobacco Bangladesh

P.O. Box 6069

New DOHS Road, MohakhaliDhaka 1206, Bangladesh

Telephone: +880 2 8822791-5

Fax: +880 2 8828718

OUR VISION

"TO EXTEND OUR LEADERSHIPTHROUGH WORLD CLASS PERFORMANCE"

SNAPSHOT - ON WHAT TOOK PLACE

British American Tobacco Bangladesh began its Social Reporting process in

April 2002 through for mal dialogue with it s external stakeholders to

understand t heir views and concerns on issues surrounding the tobacco

industry in general, and the Company in particular.

8 facilitated d ialogue sessions were held in t wo stages:

First stage of dialogue sessions in 2002:

21st and 28th July (Dhaka), 5th August (Kushtia) and 7th August(Chittagong)

Second stage of dialogue sessions in 2003:

8th March (Kushtia), 11th and 12th March (Dhaka) and 15th March(Chittagong)

23 stakeholder groups took part:

23 stakeholder groups attended the dialogue sessions with 79 participantsin Dialogue 1 and 58 in Dialogue 2

Issues raised by stakeholders were grouped in to 10 m ain categories:

Consumer Information

Public Smoking

Lower Risk Products

Youth Smoking Prevention

Responsible Marketing

Tobacco Regulation

Tobacco Taxation and Cigarette Pricing

Environmental Management

Corporate Citizenship

Corporate Governance

British American Tobacco Bangladesh issues its first Social Report in

September 2003


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A Message from the Managing Director

About t he Comp any

THE SOCIAL REPORTING PROCESS1.1 British American Tobacco Bangladesh's approach to

Social Reporting

1.2 Social reporting through stakeholder dialogue

1.3 Global Reporting Initiatives (GRI) Guidelines

1.4 Independent verification

1.5 Reporting exclusions and limitations

1.6 Learnings in the first cycle

STAKEHOLDER DIALOGUEIssues and responses

2.1 Issues relat ing to tobacco

2.1.a Consumer information

2.1.b Public smoking

2.1.c Lower risk products

2.1.d Youth smoking prevention

2.1.e Responsible marketing

2.1.f Tobacco regulation

2.1.g Tobacco taxation and cigarette pricing

2.2 Issues relating to environmental management,

corporate ci t izensh ip and corporate governance

2.2.a Environmental management

2.2.b Corporate citizenship

2.2.c Corporate governance

2.3 Stakeholder agreed action plans and indicators

2.4 Annexures

2.4.a Identification of stakeholders

2.4.b Invitation and attendance of stakeholders in the

dialogue sessions

GRI INDICATORSTrends and performance

3.1 Work place performance indicators

3.2 Social, environmental and economic performance

indicators

LOOKING AHEAD AND VERIFICATION4.1 Looking ahead

4.2 Bureau Veritas verification statement

APPENDICES5.1 International Tobacco Products Marketing Standards

(ITPMS)

5.2 Glossary of terms

5.3 Useful information and feedback

SECTION 1

SECTION 2

SECTION 3

SECTION 4

SECTION 5

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CONTENTS

The symbols above indicatewhere specific informationand facts have been verifiedby Bureau Veritas. Moredetails on the verificationprocess can be found in theverification statement onpage 71 to 75


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A MESSAGE FROM THEMANAGING DIRECTOR

It gives me great pleasure to introduce ourfirst Social Report.This report describesthe Social Reporting process that we havecarried out over the past year. The reportincludes a detailed analysis of ourstakeholder expectations that wereidentified during the process togetherwith our response to those expectations.

For many years now we have listened toand engaged with our stakeholders to

understand their expectations. This newSocial Reporting process provides aframework for stakeholder engagement

that is both transparent and accountable.

British American Tobacco Bangladesh isjust one of many companies within theBritish American Tobacco Group to engagein the Social Reporting process. We arefully committed to the process, as itprovides us with an opportunity to meetour objective of being a good corporatecitizen and a responsible company byengaging with all our stakeholders, from

government and non-governmentorganisations to business partners, in anopen, honest and constructive dialogue.

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"The Social Report ing process is about agreeing commonareas of int erest and ident ifying posit ive act ions where wecan address societal expectations."


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A Messagefrom theManagingDirector

We believe that organisations likeourselves are most successful when theyhave this congruence between corporategoals and expectations of thecommunities we operate in. This is alsoreflected in our Corporate Slogan that'Success and Responsibility Go Together'.

We are the first company in Bangladesh

to prepare a Social Report that complieswith the rigorous global benchmarks ofthe AA 1000 standards and the UnitedNations Foundation sponsored GlobalReporting Initiative (GRI) guidelines. Wehave opted to work with both, and moreimportantly, have sought an independentverification on the integrity of our SocialReporting process from Bureau VeritasQuality International (BVQI). We havealso established a formal CorporateSocial Responsibility Committee within

the company.I am particularly grateful to ourmoderator, Dr. Debapriya Bhattacharya forguiding us through the dialogue sessionswith great professionalism and integrity.For me, it was a stimulating and rewardingexperience. I believe that many of ourstakeholders similarly share this view and Iam extremely grateful for their meaningfuland positive contribution to our SocialReporting process.

The Social Reporting discussionscovered many of the areas that we havebeen addressing for some time and thatare often the centre of attention for ourindustry. We acknowledge that ourproducts pose risks to health and ourindustry is often seen as controversial.We are conscious of the implications ofmanufacturing and marketing acontroversial product. We believe thatit is all the more important to manageour business responsibly and to seeknew ways of demonstrating corporatesocial responsibility.

The dialogue sessions with ourstakeholders were wide ranging and

covered much ground. In order tosummarise the stakeholder issues wehave grouped the discussions into tenmain headings:

G Consumer information

G Public smoking

G Lower risk products

G Youth smoking prevention

G Responsible marketing

G Tobacco regulation

G Tobacco taxation and cigarette pricing

G Environmental management

G Corporate citizenship

G Corporate governance

As a result of this first Social Reportingprocess we have made a number ofcommitments to our stakeholders. I ampleased to confirm that some of these

commitments have already been deliveredwhile many are in progress.

This process is about agreeing commonareas of interest and identifying positiveactions where we can address societalexpectations. However, we acknowledgethat with the nature of our business we willnot always be able to satisfy all people.

I am confident that it is only throughongoing engagement with ourstakeholders that we can hope tounderstand our role both in addressing

societal issues and stakeholderexpectations. It will be exciting to see howthis new initiative develops within ourbusiness and it will not be easy to deliverimmediately on all the commitments thatwe made to our stakeholders. I can say,however, that we are fully committed tothe Social Reporting process and believethat it is imperative to the future successof our business.

Stephen DaintithManaging Director

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ABOUT THE COMPANY

OUR VISION

The Vision that mot ivates our people and dr ives our businessis "to extend our leadership through World Class performance"

OUR SLOGAN

"SUCCESS AND RESPONSIBILITY GO TOGETHER".

Our Four Guiding Principles:

NStrength from Diversity reflects our

working environment where employees'individual differences are respected andhonoured. It also allows for a workingenvironment where we harness diversityof people, cultures, viewpoints, brands,markets and ideas to create opportunitiesand strengthen performance.

NOpen Minded reflects openness toopportunities and new ideas, includingways to address regulatory issues andadopting to changes in expectations ofsociety. We seek to be active listeners,

genuinely considering others' point ofview and not prejudging.

NFreedom through Responsibility reflects

our belief that decisions should not all bemade at the highest level but across thecompany at all levels. Along with thisfreedom comes ownership ofresponsibility for the way our decisionsaffect our stakeholders.

NEnterprising Spirit is a characteristic ofour business. As a result we seek out newopportunities for success, strive forinnovation and accept risk-taking as away of life. This is reflected in growing

our business in diverse cultures andmarkets and assist in living our values.

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About t heCompany

OUR HISTORY

British American Tobacco Bangladesh is amember of British American Tobacco plcthat is based in UK and is one of theleading players in the global tobaccobusiness. British American Tobacco plc is a

market leader in more than 50 countrieswith 85,000 employees selling more than300 brands in more than 180 marketsworldwide. British American TobaccoBangladesh, a market leader in the country,is a subsidiary of British American Tobaccoplc and is one of the 66 countries in whichBritish American Tobacco plc hasmanufacturing plants. The Company hasoperated in Bangladesh since pre-independence and has its headquarters inDhaka with a tobacco leaf processingoperation in Kushtia. It is one of the oldest,largest and most respected multinationalcompanies operating in Bangladesh.

British American Tobacco Bangladeshcurrently employs more than 1,300 peopleand provides indirect employment to afurther 24,500 farmers, distributors andsuppliers. The company started its journeyas Imperial Tobacco Company Limited in1910 in the then undivided India. After thepartition of India, Pakistan TobaccoCompany (PTC) was established in 1949 to

reflect the new country and to meet thedemand for cigarettes in the region.

The first factory in Bangladesh (then EastPakistan) was set up in Fauzdarhat area ofChittagong in 1954. The second factorywas set up in 1965 in Dhaka. After theindependence of the country, BangladeshTobacco Company Limited (BTC) wasincorporated on 2 February 1972 as aprivate limited company. Since then it hasbeen the market leader in the country. In

1990 the Chittagong Factory was closedand in 1995 a Green Leaf Threshing Plant(GLTP) was set up in Kushtia.

Currently, British American TobaccoBangladesh has two factories in Bangladesh.The Cigarette Manufacturing Factory(Dhaka Factory) is located on the samepremises as the Head Office in Mohakhali,Dhaka. The Green Leaf Threshing Plant(GLTP) is situated in Kushtia.

In line with the global identity change ofBritish American Tobacco plc, BTC wasrenamed as British American TobaccoBangladesh Company Limited (BATB) in1998. The Company is listed on both theDhaka and Chittagong stock exchanges inthe country.

OUR BRANDS

British American Tobacco Bangladesh hasa wide range of cigarettes for differentconsumer segments. These includeinternational brands such as Benson &Hedges, State Express 555, and JohnPlayer Gold Leaf. National brands such asStar, Scissors and Capstan are also part ofthe portfolio.

OUR SOCIAL AND ECONOM IC

CONTRIBUTION

British American Tobacco Bangladesh hasalways taken seriously its wider role as acorporate citizen. The company iscommitted to building constructivepartnerships for change, listening to ourstakeholders to try and understand theirexpectations, and defining anddemonstrating responsible behaviour.

We are the single largest revenuegenerator in the private sector, generatingsome Tk. 1,700 crores in the 2002/03 fiscal

year in supplementary duty and VAT forthe government. Through variousinitiatives and projects, we are also

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ABOUT THE COMPANYOUR SOCIAL AND ECONOMIC CONTRIBUTION CONTINUED

involved in improving the environment,supporting community developmentprogrammes, promoting arts and culture,and assisting with primary health careand disaster relief. Here's a glimpse ofsome of our key activities:

NThe company's afforestation efforts,initiated in 1980, go beyond its tobaccogrowing areas across the country. To datethe company has planted and distributedmore than 42.5 million trees with a saplingsurvival rate exceeding 90%. Initially inconsultation with the Forest Department,the thrust of our afforestation

programme was on Ipil Ipil (an exoticspecies) because of its fast growingnature. With the aim to achieve a balancebetween native and exotic species, 3.5million saplings were distributed in 2003with new 15% native species. We aim toimprove this coverage of native speciesfurther over time. A new dimension hasbeen added to our afforestationprogramme by introducing commercialafforestation in the Chittagong Hill Tractsfrom the year 2001.

NCompanies are often unaware abouttheir impact on biodiversity, as these arecomplex and difficult to measure and acompany's Environmental ManagementSystems relate specifically to products andprocesses which minimise the company'simpact from emissions, mostly on water,air and energy.

NWe have drafted our BiodiversityConservation Strategy, first of its kind in

the country, with the objectives to raiseawareness; ensure efficient land resourcemanagement within the company;

promote biodiversity and sustainable useprinciples within the supply chain; andinfluence others to participate inbiodiversity conservation.

NWe promote the use of briquettes andpaddy husks for tobacco curing asalternatives to wood fuel. This, along withour afforestation initiatives, has kept thecost of wood fuel in the Kushtia leafgrowing region unchanged over the last 10years while supporting governmentinitiatives in forestry.

NBritish American Tobacco Bangladesh is

firmly committed to the principle thatsmoking is an adult choice and that thoseunderage (below 18 years) should notsmoke. Throughout the world, underagesmoking is an issue for society. The causeof youth smoking is based on variouscomplex factors. Independent researchhas shown that peer pressure, influenceof family members and defiance are thebiggest causes of youth smoking. Our"BE SMART" campaign discourages theunderage from smoking. We have taken

the Youth Smoking Prevention (YSP)campaign to schools as well, inpartnership with the Students' AntiSmoking Committee (SASC).

NIn support of the government's emphasison IT and in response to stakeholders'expectation, we provide basic ITEducation in some rural communities freeof cost. We have opened 2 centres todate, one at Chechua and one atMoulvibazar. The two month courseteaches Basic English as well as

introduction to operating systems andnetwork environment, MS Word, Excel,Power Point, Database and project work in

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About t heCompany

a Windows 2000 network environmentwith each student having a dedicated PC.This enables many under-privileged youthto realise their dream of making a livingwith IT knowledge. To date, 72 studentscompleted the course; more than 15

students are self employed; most of themare going for higher studies and one ofthem is teaching at Dishari.

NWe have recently signed an agreementwith Agro-based Industries & TechnologyDevelopment Project-II (ATDP-II) toexplore assisting the farmers of Bangladeshin producing quality vegetables for export.There is an increasing demand forvegetables in the foreign market and theGovernment has also declared this to be a

thrust sector for the country.

NWe are involved in vegetable seedmultiplication programme and receivedthe Food and Agricultural Organization(FAO) award for pioneering thedevelopment of vegetable seed industry inBangladesh.

NA call centre established by BritishAmerican Tobacco Bangladesh is currentlyproviding business consultancy andtechnical IT supports to different BritishAmerican Tobacco operating companies inSri Lanka and Middle East. This showcasesBangladesh as an exporter of leading edgeservices and also helps to earn muchneeded foreign exchange for the country.

NOur tobacco buying process has resultedin fair prices to farmers by reducingreliance on other third parties in thebuying process. This has allowed thefarmers to get direct payment to their

bank accounts and has assisted them togenerate savings.

NWe have demonstrated environmentalhealth and safety practices of the highestquality international standards. This isevidenced by the installation of a bio-filterat a cost of Tk. 6 crores and minimal lost-time due to accidents in recent years. We

have received international recognition inthese areas.

NWe provide support to programmes likeShandhani's posthumous eye donation, thegovernment's polio vaccinationprogramme, blood donation programme aswell as to the Center for Rehabilitation ofthe Paralyzed (CRP).

NWe provide advice and assistance tofarmers in crop rotation and optimumutilisation of land.

NIn national disasters the company hasbeen prompt in lending their support topeople of the affected regions.

British American Tobacco Bangladesh haswon many awards during the last 30 years.Among the awards won are the 1st Prize ofPrime Minister's National Award on TreePlantation in 1999 and 2002, the PrimeMinister's Afforestation Award in 1993, thePresident's Award in Agriculture in 1976,

the FAO Award in 1999 and the NationalExport Trophy award in 2000.

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THE SOCIAL REPORTINGPROCESS

"Social Report ing aims to st rike a balance between meet ingstakeholders' reasonable expectat ions and running a

successful business."

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1.1 BRITISH AMERICAN TOBACCO

BANGLADESH'S APPROACH TO

SOCIAL REPORTING

British American Tobacco Bangladesh iscommitted to continuous improvement.Its approach to Social Reporting recognisesthat running a business is not just aboutprofits. Social Reporting aims to strike a

balance between meeting stakeholders'reasonable expectations and running asuccessful business.

Corporate Social Responsibi lit y Steering Group

The company has established a CorporateSocial Responsibility (CSR) Steering Groupchaired by the Managing Director andconsisting of the Deputy Managing Directorand all function heads. It is responsible forthe review of stakeholder feedback, thedevelopment of responses, the integration

of CSR principles into its business activities,and overseeing the preparation of theSocial Report.

British American Tobacco Bangladeshfollows the accepted standard for SocialReporting (AA1000), developed andregulated by the Institute of Social andEthical AccountAbility (also known asAccountAbility). This standard allows usersto embed the social accounting, auditingand reporting procedures into currentmanagement systems. The essence of this

standard includes:NPutting stakeholder dialogue at the centreof our approach;

NEmbedding the approach, while engagingin dialogue and producing regular reports;

NFollowing both the AA1000 and the GlobalReporting Initiative (GRI) framework;

NBeing measured against the AA1000Standard through a highly rigorous externalverification.

This Social Report focuses mainly on issuesraised in the stakeholder dialogue sessions.It also provides overviews on a number ofother key and relevant topics.


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1The SocialReportingProcess

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Social Reporting Process OverviewBrit ish American Tobacco Bangladesh

Stakeholder Mapping

Internal Scoping & Preparation

Identify Stakeholders for Dialogue

Dialogue 1(Understand Expectations)

Identify Gaps & Make Commitments

Dialogue 2(Discuss Commitments &

Indicators)

Implement &Measure against Indicators

Report & Communicate

Social Repor t

LISTEN

DECIDE

ENTER

DELIVER

VERIFY

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THE SOCIAL REPORTING PROCESS1.2 SOCIAL REPORTING THROUGH

STAKEHOLDER DIALOGUE

The Dialog ue Process

The dialogue with stakeholders is central

to the approach and the Social Report is

structured around the key topics raised indialogue by stakeholders.

It recognises that stakeholder dialogue is

about listening and absorbing and, ifpossible, seeking areas of common ground

and solutions. In this first reporting cycle,

the emphasis has largely been on listening

and building greater understanding.The initial dialogue objectives have been:

NTo enable opportunities for the company

and its stakeholders to learn more about

each others' views, beliefs, activities androles in society;

NTo identify key issues;

NTo enable the company to respond tothose issues and to establish areas of focus

for dialogue going forward;

NTo agree on action plans that thecompany will undertake, wherever

appropriate, in addressing the concerns

raised by the stakeholders.

Comments and suggestions were sought

in all dialogue sessions on the approach

itself.The future Social Reports will report

on progress against the action plansshown in Section 2.3 and will also include

any new issues identified in future

stakeholder dialogues.

The dialogue processes were designed to

enable the company to respond to the

economic and political environment,

regulatory regimes and differingstakeholder attitudes towards the tobacco

industry. The sessions were held in Bangla

and in English, where stakeholders had the

option to talk in their language of choiceand ask for any clarification. Responses to

the issues raised in dialogue were

discussed and agreement of stakeholderson actions and indicators to measure

delivery of these plans was reached.

Dialogue Structure

The company engaged in dialogue with a

broad range of stakeholders. Theattendance and invitation of stakeholder

groups are mapped in Annex 2.4.b under

Section 2. A stakeholder is defined as anyperson or organisation on whom the

business impacts or whose actions impact

on the business. Broadly this means

governments, regulators, politicians,

consumers, investors, employees,commercial and trade partners, the

scientific and medical community, localcommunities, welfare, education, NGOs

and campaigner/pressure groups.

BATB conducted two researches, the

Stakeholder Mapping and Classificationand Internal Scoping Study, to identify key

stakeholder groups. The advice of the

independent Moderator, Dr. DebapriyaBhattacharya, a renowned economist, was

also sought in inviting stakeholders.Though a wide group of stakeholders wereinvited, for the sake of inclusivity even

more stakeholder groups will be added

going forward into the future cycles of

Social Reporting. Some stakeholders wereapprehensive or uncertain of the motives

and felt unable to participate. The

company respects their position and willseek to build on the dialogue to be

increasingly inclusive going forward.

Stakeholders were approached in twomain dialogue stages to understand theirconcerns and expectations. In Dialogue 1,


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the emphasis was largely on activelistening by various members of themanagement of British American TobaccoBangladesh. In Dialogue 2, the Company'sresponses to the stakeholder expectationswere presented by the senior managementand various directors of British American

Tobacco Bangladesh. The stakeholdersthen had the opportunity to offer views onthe extent to which they felt that theresponses aligned with their initialexpectations and to explore opportunitiesfor further involvement.

All the dialogue sessions were facilitatedby Dr. Debapriya Bhattacharya, whoretained independence throughout. Heselected and contacted stakeholders fromthe initial stakeholder mapping exercise,with a view to obtain a broad and balancedrepresentation in dialogue. The Moderatorstructured the dialogue sessions andreported on stakeholder inputs. All thesedialogue reports have been verified by theindependent verifier, BVQI.

To capture any regional differences, thedialogue sessions were held in Dhaka,Chittagong and Kushtia, the three majorareas where the company operates. Intotal, 160 individual stakeholders orrepresentatives of stakeholderorganisations were invited by Dr.Bhattacharya to join one of the fourDialogue 1 sessions and 79 attended. InDialogue 2, 91 stakeholders were invited ofwhich 58 attended. Views of absentstakeholders expressed through lettershave also been included in the list ofstakeholder views in consultation with theModerator. The Moderator emphasisedthat the identity and affiliation of theparticipants should not be revealed in thereports. Therefore stakeholder commentsare not identified to any particular

stakeholder. The independent verifier hashowever verified the record of thoseinvited and attending.

Independent Standards

The AA1000 Standard, a rigorous

reporting standard established by the

Institute for Social and Ethical

AccountAbility, also known as

AccountAbility, was followed as thestandard for this process. This is the

eminent international professional body

supporting organisational accountability

and sustainable performance. Current

membership includes over 300 major

businesses, NGOs, service providers,

professional bodies, academics and

research establishments.

AA1000 was first published in November

1999 and was designed to improve

accountability and performance with aprocess of learning through stakeholder

engagement. It is a process standard

covering the way that social performance

reporting is carried out, and embodies a

set of key principles which aim to

encourage a high standard of transparency

and impartiality.


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THE SOCIAL REPORTING PROCESS

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SOCIAL REPORTING THROUGH

STAKEHOLDER DIALOGUE CONTINUED

AA1000 requires Social Reporting to meetthe principles of:

Inclusivity: consideration of the views and

needs of stakeholders;

Completeness: unbiased inclusion of allappropriate areas of social and ethicalactivity;

Materiality: alignment of reporting withstakeholders' interests, expectations andneeds;

Regularit y and t imeliness: regularreporting;

Qualit y assurance: verification of the

process by an independent and competentthird party;

Accessibility: appropriate and effective

communication to stakeholders of social

performance and reporting;

Information quality: relevance of

information and its ability to enable

comparisons with past performance or the

performance of other organisations;

Embeddedness: embedding of reporting

processes and principles into policies,

decision-making and management

systems, ensuring that the agreed action

plans are incorporated in the relevant

processes and social and ethical

performance is measured and reported

under the Global Reporting Initiatives (GRI)

Indicators;

Cont inuous improvement: recognised

and audited steps to improve social

performance in response to stakeholder

inputs.

1.3 GLOBAL REPORTING INITIATIVES

(GRI) GUIDELINES

The GRI was convened in 1997 by CERES,the Coalition for EnvironmentallyResponsible Economies, a US-based NGO,in partnership with UNEP, the United

Nations Environment Programme, toproduce guidelines applicable globally forvoluntary use by organisations reportingon the economic, environmental and socialdimensions of their activities.

The GRI Guidelines were first published inJune 2000, after consultation in 51countries, and revised in 2002. These areexpected to evolve over time. They offera reporting framework that promotescomparability between organisations,

while recognising the practicalconsiderations of collecting andpresenting information across diverseorganisations. The GRI recommendstopics on which companies may report,with indicators of performance thatthey may use.

While this report is substantially shaped bythe issues raised by stakeholders in thedialogue sessions, it also reported againstsome of the Social and EnvironmentalGRI indicators.

GRI Indicators

NThis reporting uses the 2002 GlobalReporting Initiative (GRI) Indicators and isbased on information available at this time.

NThe report includes performance againstsome Social and Environmental GRIIndicators currently measured in BritishAmerican Tobacco Bangladesh and infuture, aim to refine and develop to

improve alignment with the GRI.


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1.4 INDEPENDENT VERIFICATION

Bureau Veritas Quality International (BVQI)

was appointed as independent verifier to

verify the Social Reporting process against

the AA1000 Standard. This standard has

been applied for all participating British

American Tobacco Group companies. BVQIis a professional services company that

specialises in Quality, Health and Safety,

Social and Environmental management,

with a presence in over 120 countries.

As Verifier, the role of Bureau Veritas

Quality International is to:

NMonitor the company's performance

throughout the process against the

AA1000 Standard and to report publicly on

the degree of attainment;

NAudit and verify the accuracy of dialogue

summaries compiled by independent

moderator;

NAudit and verify the accuracy of the

stakeholder commentary, responses and

social performance data in this report.

BVQI assessed the Social Reporting process

against AA1000 using VeriSEAAR, a unique

proprietary verification tool that it has

developed as a result of the company'sbrief to measure rigorously against the

AA1000 requirements. VeriSE+AAR is

owned by BVQI and has been welcomed by

the Institute of Social and Ethical

AccountAbility, which established the

AA1000 Standard. It enables assessment of

the extent the company has met each

individual AA1000 requirement. To date,

this form of rigorous verification has not

been carried out for any other organisation.

1.5 REPORTING EXCLUSIONS AND

LIMITATIONS

Employee views, perceptions about

stakeholders and their expectations were

captured in the Internal Scoping Study. No

specific employee dialogue took place in

the first cycle, as it was felt thatappropriate structures are already in place

to capture employee views, including

holding open forum discussions with staff

on smoking and health issues. Discussions

with employees also take place regularly at

informal meetings that cover all hierarchies

of employees. In addition, a global

employee survey, Your Voice, was carried

out in Bangladesh in 2002. The summary of

the results of this global employee survey

is also included in Section 3.1.

The first Social Reporting cycle

concentrated on engaging with external

stakeholders. However, some of the

business stakeholders such as suppliers,

distributors, tobacco growers and retailers

were included. To allow the stakeholders

to talk freely about their concerns about

the industry, members of competition

were not included.


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THE SOCIAL REPORTING PROCESS1.6 LEARNINGS IN THE FIRST CYCLE

British American Tobacco Bangladesh has

learned much from the first cycle of

dialogue and reporting but recognises that

there is some way to go. Though a wide

group of stakeholders attended the

dialogue sessions, there were somestakeholder groups who were unable to

attend. By being able to bring more

stakeholder groups in the future dialogues

the company shall be able to identify more

clearly how they see the issues around the

tobacco business. This is a key area of

focus going forward. This first Social

Report identifies many of the key issues

that face the company and represents the

start of a continuing journey.

The key learnings from the first SocialReporting cycle are summarised below:

NThe company has learned the

importance of achieving a shared

agreement on the boundaries of company

responsibility; what a commercial

organisation can and cannot do and the

contributions it can make, how much

further it can extend corporate

responsibility, and its legal, political,

commercial and moral boundaries. It

expects to continue to explore thisimportant area in future dialogue sessions.

NWhile both dialogue on controversial

issues and developing appropriate

company responses is a challenging

process, it has learned that progress is

possible. Stakeholders have devoted

significant time to dialogue, for which the

company is extremely grateful.

NIt learned how a genuinely independent

moderator can add significant value to

the process.

NIt has learned that independent

verification is of considerable value in

assuring stakeholders that the process is

objective and in helping to ensure

consistency and quality of reporting.

NThe dialogue sessions have reinforced

that the very nature of the product and

the way it is marketed remains a core issue

for stakeholders.

NThe dialogue with stakeholders providedopportunities to bridge 'knowledge gaps'

for both the company and stakeholders, in

turn creating a valuable basis for

developing a better understanding.

Looking forward, it also aims to include

more internal dialogue within the

company.

NThe company learned that not all

stakeholders share the same views.

Indeed, some stakeholder expectations

can contrast.


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ISSUES AND RESPONSES

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Stakeholder Expectat ions

Corporatecitizenship

31%

Environmentalmanagement

16%

Youth smoking prevention

13%

Lower risk products

2%

Public smoking

7%

Consumerinformation

12%

Corporategovernance

3%

Tobacco taxation andcigarette pricing

Tobacco regulation

4%

Responsible marketing

10%

A total of 122 expectat ions were ident ified during t he dialoguesessions, which are grouped into 10 broad categories.

2%


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2StakeholderDialogue

17

more meaningful

information should

be provided on

hazards of smoking

2.1 ISSUES RELATING TO TOBACCO

2.1.a CONSUMER INFORMATION

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STAKEHOLDER VIEWS

Stakeholders expressed that the current

warning clause printed on cigarette

packets and all tobacco advertisements

was inadequate. They expressed that more

meaningful information should be

provided on hazards of smoking by theindustry.

STAKEHOLDER EXPECTATIONS

NIntroduce cautionary warnings for all

sorts of tobacco products

NProvide rotational health warnings, with

specific messages on diseases caused by

smoking - if not on packs then on ads

NProvide information on cigarette packs

which is easily understandable with

specific messages

NProvide health information to the

consumers through advertisements

NDisseminate negative impact of

smoking while giving any advertisement in

any media

NImprove accessibility to information

related to hazards of smoking

NPrint hazards of smoking on each

cigarette stick and packet

NLabels to contain information oningredients

NGive counselling on how to give up

smoking

NIntroduce an authority for quality

control of cigarettes and publish quality

information of all cigarettes

NMedia should play active role in educating

people about hazards of smoking

NIntroduce programmes to identify people

affected by smoking related disease

NHighlight financial burden of smoking on

family through anti-tobacco messages


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NCommission a study on the socio-economic consequences of tobacco

NEconomists should provide informationon treatment and social costs of smoking

for comparing with the excise generatedby BATB/the industry

OUR POSITION

Given that there are real risks of seriousdiseases associated with tobacco use, webelieve that smoking should be aninformed adult choice. We support therights of adults who choose to smoke andbelieve that they should have access toinformation on the health risks associatedwith smoking either from the Governmentor related organisations includingourselves. Our group of companiesproduce fine quality products that providepleasure to many millions of adult smokersaround the world. We want to ensure thatour stakeholders are aware of our views onsmoking and health issues.

We also recognise that for many people,smoking is difficult to quit, despiteknowing that it poses risks to health. Butwe also believe that smokers can quit,given the necessary motivation and self-

belief. This is evidenced by the largenumber of people who have given upsmoking.

We will always ensure that information wedo provide is based on sound science andevidence. However, we believe thatconsumers should look to - and listen to -public health agencies as the prime sourceof information about the health risks ofusing tobacco.

We also believe that legislation shouldprescribe the minimum level of consumerinformation and we will support anyenforceable law by the government in thisrespect.

OUR RESPONSE

NHealth warnings on packets arelegislated and regulated by thegovernment, and we are not able tochange the content of the warnings at ourown discretion. We will supportreasonable and enforceable law by thegovernment which makes it mandatory forall tobacco products to give visible andmore specific health warnings on packetsand all brand communications.

NAs required by law we print healthwarning clauses in all our brandcommunications. However, to match thespirit of the law we have on our ownincreased the size of health warnings to

make it visible and legible. As a resulthealth warnings on our packets comprise10% of both the front and back panel. Inaddition, British American TobaccoBangladesh has been proactively givingvoice-over health warnings in all its brandadvertisements in TV before stopping allbrand advertisements in TV from 1stJanuary 2003.

NWe believe that for smoking and healthmessages to be credible, the governmentand public health community should play a

central role in providing information onhealth risks and the impact of smoking onpublic health. We will help by providingadditional relevant information to thegovernment to assist them in this rolewhenever we are requested to do so.

NHowever, we do acknowledge theconcerns about improving accessibility toinformation and in response tostakeholders' expectations we havedecided to provide additional informationon smoking and health risks.

N

It is impractical to print health warningson sticks. Health warnings are clearly andvisibly given on all our packets and brandcommunications.


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NWe will be happy to work with relevantgovernment bodies through BangladeshCigarette Manufacturers' Association(BCMA), to make it mandatory for tobaccocompanies to disclose tar and nicotinelevels on packets. We would, however,emphasise on the need for an independent

body to ensure compliance.

NWe believe that smoking does not takeaway anyone's free will, and we believe itis important that smokers realise that theycan give up smoking, given the necessarymotivation and self-belief. This isevidenced by the fact that a large numberof people have today given up smoking.While we believe that we are not theappropriate body to give counselling ongiving up smoking, we are willing tosupport initiatives by appropriate external

organisations by providing relevantinformation.

NWe follow a rigorous standard for qualitycontrol of all our products and constantlymonitor quality of our products through asophisticated quality assurance process.Quality measurement, however, is acomplex area. Therefore we believe thatfor any standardised quality controlsystem for the industry the governmentshould play a role in introducing anauthority, through discussion with industry

members, to independently andobjectively monitor quality control ofcigarettes.

NWhile media does play a role in providinginformation to the public on the healthimpact of tobacco, we will alwaysparticipate in any Smoking and Healthdebate in the print and electronic media.

NWe believe that there are other bodieswho are better equipped to take upstudies on the impact of tobacco on health

and society and to provide relevantinformation. We will play our part byadding to the body of information for

consumers by communicating our views onSmoking and Health risks.

NWe will assist any independenteconomist that may wish to conduct astudy on relevant socio-economic issuesrelating to tobacco by providing

appropriate information. Apart fromgenerating significant governmentrevenues, we provide direct employmentto more than 1,300 people. 24,500 farmers,distributors, retailers and suppliers areactively engaged in our business.

WHAT WE WILL DO

NWe will support reasonable andenforceable law by the government, inrespect of improved health warnings on

packets and brand communications.NWe will provide additional informationon smoking and health through distributionof the "Smoking and Health Risks - OurViews" booklet amongst stakeholders andalso through consumer leaflets.

NWe will initiate dialogue with relevantgovernment departments, through BCMA,to make it mandatory for all tobaccocompanies to disclose tar and nicotinelevel on their packets. We would however,emphasise on the need for an independentbody to ensure compliance.

NWe will support initiatives byappropriate external organisations oncounselling to give up smoking byproviding them with relevant information.

NWe will assist any credible andindependent body that may wish toconduct any relevant socio-economicstudies relating to tobacco by providingappropriate information.


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2.1.b PUBLIC SMOKING

laws should be

enacted to restrict

public smoking and

also protect the

smokers' rights

STAKEHOLDER VIEWS

Stakeholders expressed their view thatlaws should be enacted to restrict publicsmoking. Opinions were also expressedregarding protection of smokers' rights.


NProhibit smoking in public places.Smoking in open public gathering andpublic transports like bus, train, launch andsteamer should be banned.

NIn defining public place, hotels andrestaurants should be clearly defined so asto distinguish between eating andsleeping places.

NThe rights of non-smokers and smokersshould be ensured. While ensuring non-smokers' rights, smokers should not besubjected to uncomfortable confinements.

NTake initiative to stop smoking in thetransport sector.

NBe proactive in preventing secondarysmoking and enforcement of existing laws.

NAll open space should be declared smokefree zone.

NSupport enforcement of laws relating tosmoking in public place.

NSmoking should be prohibited in primary

schools, mosques and temples.

OUR POSITION

We acknowledge that EnvironmentalTobacco Smoke (ETS) can be a realannoyance and may be of concern to somepeople. Based on our assessment of theavailable science, we think that many ofthe claims against ETS have beenoverstated. In our view, there is noconvincing evidence that ETS is a cause of

chronic disease such as lung cancer,cardiovascular disease or chronicobstructive pulmonary disease.


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But we cannot say that it is proven to be

harmless to everyone. There is evidence,

for example, that exposure to ETS is

related to acute illnesses, like respiratory

and ear infections in children and may also

cause discomfort to people, specially

those who suffer from respiratory

problems such as asthma. We believe that

one should not smoke around young

children and infants and also around people

who suffer from respiratory problems.

We support initiatives that aim to reduce

exposure to ETS for non-smokers, while

balancing the rights of smokers. We will

continue to support the rights of adult

smokers who wish to smoke. Any

restriction on smoking in public places

needs to take these rights intoconsideration.

OUR RESPONSE

We will welcome any government

initiative in enacting enforceable and

practical laws to restrict smoking in public

places including public transports

balancing the need of both non-smokers

and smokers. The term public place can

mean different things for different people.

We believe that public places should be

properly defined and incorporated in any

legislation seeking to restrict smoking in

public places. The government is currently

working on a new legislation which seeks

to address these concerns.

WHAT WE WILL DO

We will support initiatives of the

government to restrict smoking in public

places and will work with the government

to have clear definition of public places

with the objective of protecting both non-

smokers' and smokers' rights.


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2.1.c LOWER RISK PRODUCTS

undertake long

term research

programme for

developing products

which would be less

harmful to

consumers

STAKEHOLDER VIEWS

Stakeholders expressed that they wouldlike to see British American TobaccoBangladesh undertake long term researchprogramme for developing products whichwould be less harmful to consumers.


NMinimise the harmful effects of tobacco

NInvest in Research & Development toreduce the hazardous effect of cigarette

OUR POSITION AND RESPONSE

Along with the pleasures of smoking come

real risks of serious diseases. We believe

that there is no such thing as a safecigarette. However, a realistic view is that

a large number of people will still choose to

smoke even though it is risky. We therefore

think it is important to continue working

towards products which might offer

reduced risks, and which consumers would

also find acceptable. We see the

development of such products as a priority,

and British American Tobacco's central

Research & Development (R&D) team

based in London, U.K. are coordinating ourglobal efforts in this respect.

To date, the development of lower tar

products is the only product modification

that has been encouraged by some

governments and medical bodies as having

the potential to make smoking less risky.

There is, however, disagreement as to

whether current low tar products are less

risky than current full flavour products. We

do not make health claims for lower tar

products as it cannot be conclusivelydemonstrated that for any particular


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individual, lower tar is less risky than higher

tar. The only way to avoid the risks of

smoking is not to smoke, and the best way

for smokers to reduce the risks is to give

up smoking.

Globally, the British American Tobaccogroup of companies aspires to be the first

to launch new generation tobacco

products with critical mass appeal that

will, over time, be recognised by scientific

and regulatory authorities as posing

substantially reduced risks to health. British

American Tobacco will seek endorsement

from independent regulatory or scientific

bodies before making any claims about a

lower risk product to consumers.

In Bangladesh we will launch such aproduct, once it gets endorsement from

independent regulatory or scientific

bodies, as a potentially reduced exposure

product and is acceptable by consumers.


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2.1.d YOUTH SMOKING

PREVENTION

stop cigarette

advertisements in

televisions which

attract the youth

STAKEHOLDER VIEWS

While some stakeholders commended theinvolvement of British American TobaccoBangladesh in Youth Smoking Prevention(YSP) campaign, there were others whowere critical of the campaign.

STAKEHOLDER EXPECTATIONSNYSP campaign by BATB contradicts itsobjectives. By saying that one should notsmoke before 18, it is implied that one cansmoke after crossing that age.

NMake advertisements showing harmfuleffects of cigarettes on children.

NYSP campaign should cover the issue intotality including health hazards.

N

Support enforcement of laws relating tojuvenile smoking.

NRestrict availability of cigarettes tounderage.

NStop selling of cigarettes outsideeducational institutions.

NBar should be imposed on smoking forchildren aged below 16. Selling of cigaretteto underage to be strictly prohibited andtreated as a punishable offence.

NIncrease age limit to 20 years forprohibiting juvenile smoking.

NYSP campaign advertisement should beaired after 10 pm.

NStop cigarette advertisements intelevisions which attract the youth.

NParents, family and school to playprimary role in preventing their childrenfrom smoking.

NIntroduce anti-smoking education inschool curriculum.

NHarmful impact of smoking should beincorporated in school curriculum.

NGenerate information on number ofunderage starting smoking every year.


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NAnalyse the impact of BATB's YSPcampaign on the youth.

NIntroduce cigarette selling throughdoctor's prescriptions to protect teenage.

OUR POSITION

We believe that tobacco should never bemarketed to the underage and thatsmoking should be for informed adults whounderstand the risks associated with it. Allour brand promotions are targeted at adultconsumers and we are committed toensuring that none of our marketingactivities is directed at, or particularlyappeals to, the underage.

We believe that underage smoking is a

complex societal issue and needs to betackled by society as a whole. We arecommitted to playing our part inaddressing the issue of underage smoking.With this objective we launched acomprehensive Youth Smoking Preventioncampaign in 2001. We are willing to workwith appropriate third parties to makeimprovements to our Youth SmokingPrevention campaign.

OUR RESPONSE

NIt is generally acknowledged that at theage of 18, a child reaches adulthood whensociety deems appropriate for people totake decisions on important issues likedriving, voting, etc. The decision to smokeis a similar important decision to be takenby informed adults who understand therisks associated with smoking. We do notimply anywhere in our Youth SmokingPrevention campaign that smoking after 18is desirable.

NA research study conducted amongparents and teachers showed thattraditional messages on health hazards of

smoking do not have any real impact onchildren. Our YSP campaign is based ondiscouraging the under-age to smoke byshowing them typical children environmentwith the message that it is not right tosmoke. We will support any governmentinitiative which suggests practical

solutions to underage smoking and also toenforce the law on juvenile smoking whichprohibits sale and purchase of tobaccoproducts by the underage.

NThe current law prohibits the sale of alltobacco products to those under the ageof 16. We believe this age definition shouldbe extended and 18 years should be theminimum age at which individuals canlegally purchase tobacco products. Wehave a clear company policy, which we

communicate to our distributors, not toengage or sell cigarettes to underagevendors (those under 18 years of age).

NThe government is currently working ona new law which we believe will raise thelegal age for smoking from 16 years of ageto 18 years. It is a legislation that we willwelcome and support. If the governmentincreases it to 20, we do not have anyissue. What is important however is thatthe law should be enforced with theretailers. We are willing to work with the

government in this respect.

NOur YSP campaign advertisements areaired before 10 p.m. in TV because they aretargeted at the underage. Contrarily up tothe end of 2002, our brand advertisementswere aired only after 10 p.m. when theviewers are primarily adults.

NHowever, we are happy to report that, asof 1st January 2003 we have stopped allsorts of brand advertisements in TV. This isin line with stakeholders' expectations andthe International Tobacco ProductsMarketing Standards (ITPMS) which sets


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guidelines for marketing our productsresponsibly. (See Appendix 5.1)

NWe believe the underage smoking issueshould be addressed by society as a wholeincluding parents and teachers. Our YSPcampaign has specific elements whichaddress both parents and teachers inpreventing youth smoking. We arecommitted to playing our part and areprepared to discuss any practical solutionsto address the campaign more effectively.

NThe government has introduced anti-smoking education in the schoolcurriculum. To supplement this we supporta programme for schools by Students'Anti-Smoking Committee (SASC) todiscourage the underage from smoking,and also to create awareness among theteachers about their role in preventingunderage smoking.

NAs a policy we do not conduct anyresearch among the underage. However,we will support a neutral and appropriate3rd party to carry out research to analysethe underage smoking pattern and the

impact that our YSP campaign has on theunderage.

NWe do not think cigarettes are productswhich should be prescribed by doctors.

WHAT WE WILL DO

NWe will continue to work with otherappropriate third parties, including thegovernment in order to makeimprovements to our YSP campaign.

NWe will continue to supportorganisations like Students' Anti SmokingCommittee to take YSP programmes to agreater number of schools.

NWe will support an appropriate 3rdparty to conduct any meaningful researchto analyse the underage smoking patternsand the impact of our YSP campaign onthe underage.

NWe will reinforce our communication toour distributors, advising them not toengage or sell cigarettes to underagevendors (those under 18 years of age).


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2.1.e RESPONSIBLE MARKETING

stop aggressive and

unethical cigarette

advertisements

www.bat.com

STAKEHOLDER VIEWS

Stakeholders expressed that tobacco

advertisements are too aggressive, often

taking almost the entire page of a

newspaper. They also expressed concern

regarding showing of unethical and vulgar

cigarette advertisements in the electronic

media.


NStop unethical tobacco advertisements

NIntroduce a code of conduct for print

and electronic media regarding cigarette

advertisements

NRestrict cigarette advertisements by

tobacco companies; Form a policy fortobacco product marketing

NStop aggressive advertisement in

newspapers

NTelevision advertisements should be

controlled

NNo tobacco advertisements should be

given during prime time

NInitiate a study by stopping all media

campaigns for five years to see the impact

of such step

NStop indirect advertising through sports

sponsorships and stop sponsoring of sports

like cricket

NAll tobacco advertisements should go

through government censorship

NGet permission from local government

for advertising on bill boards

NProvide information on BATB's

advertisement expenditure

NRedistribute advertisement cost to anti-

smoking motivation programmes


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OUR POSITION

As a responsible market leader in acontroversial industry, we have always

taken care to market our productsresponsibly. We believe we should be ableto communicate responsibly with adultconsumers who have already decided tosmoke and to compete fairly for theirchoice of brands.

All our advertisement and promotionscomply with our own Code of Conduct,introduced in 2000, which addressesvarious aspects of marketing of ourproducts responsibly. Our Code ofConduct sets high standards for our brandcommunications, going beyond thecurrent laws and regulations of thecountry. British American TobaccoBangladesh has further enhanced its Codeof Conduct by implementing the ITPMS inBangladesh from January 2003. (SeeAppendix 5.1 )

The new International Tobacco ProductsMarketing Standards (ITPMS) was launchedin September 2001 by British AmericanTobacco together with two other global

tobacco companies (Philip MorrisInternational and Japan TobaccoInternational) in response to society'schanging expectations on how responsibletobacco companies should market theirproducts. The ITPMS governs all aspects oftobacco marketing, from print, billboardsand electronic media to promotionalevents, packaging and sponsorship.

OUR RESPONSE

NIn compliance with the InternationalTobacco Products Marketing Standards

(ITPMS) to which our company subscribes,we carefully regulate the content of ouradvertisements and the way we advertiseto ensure that they are done responsibly.

(See Appendix 5.1). If any relevant bodywants to restrict tobacco advertisementfurther we are open to discussion.

NWe would recommend to the print andelectronic media to form their own codeof conduct regarding tobaccoadvertisements. From 1st of January 2003we have voluntarily stopped advertising inthe electronic media. We now also havelimited presence in the print media in linewith the requirements of ITPMS

NThe question of whether tobaccoadvertising affects the prevalence ofsmoking has been the subject of muchacademic study. Some studies suggest animpact and some do not. For example inboth Norway and Portugal there was nosignificant change in total smokingconsumption following an advertising ban.Many governments around the world haveinitiated advertising bans on tobaccoproducts. Should the government ofBangladesh follow that route we will

support it. However, we believe we shouldbe able to communicate directly withadult consumers who have chosen tosmoke to encourage them to switch overto our brands.

NWith effect from January 2003, incompliance with ITPMS British AmericanTobacco Bangladesh does not sponsor anysports events. However, it should be notedthat we have not sponsored any large scaleoutdoor sporting event for many years.

NWe follow all laws and regulations of thecountry in conducting our brandpromotion activities. Furthermore, we


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believe that our compliance with the

ITPMS will satisfy any sensible censor

requirements. However, should the

government want to restrict tobacco

advertisements further we are open to

discussion.

NWe don't believe that the disclosure ofmarketing spend will provide any

meaningful information. It is also not

supplied for competitive reasons.

NWe believe we should be able to

communicate about our brands responsibly

with adult consumers who have already

decided to smoke. Our advertisement

spend is designed to encourage adults who

have chosen to smoke to switch over to

our brands. However, we support any

initiative by public health authorities and

the media to educate people about the

health hazards of smoking. We will

continue to support the government

initiative through appropriate warning

clauses on our packs and all brand

promotions.

WHAT WE WILL DO

NWe will recommend to the print and

electronic media that they introduce their

own code of conduct to restrict

aggressive and unethical tobacco

advertisements.

NWe will fully comply with our own ITPMS

and encourage our fellow members in the

industry to adopt these standards.


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2.1.f TOBACCO REGULATION

support enforcement

of laws to restrict

tobacco relatedproducts

STAKEHOLDER VIEWS

Stakeholders were concerned about the

poor enforcement of laws relevant to the

industry which they felt was contributing

to the rapid increase in the number of

smokers in the country.


NSupport enforcement of laws to restrict

tobacco related products

NA system of penalty should be

introduced for violating laws which will be

used to create fund for treatment of

addicted people

NStop tobacco growing by enactment of

a new law

NGradual prohibition of smoking should

be made

NBATB should not exist as a cigarette

producer

OUR POSITION


advocates and supports practical and

enforceable tobacco regulation. We

believe that the wider public interest is

better served by responsible tobacco

companies, like ourselves, manufacturingand making available tobacco products

that comply fully with the regulatory

requirements of the country.

We believe in engaging constructively

with the government and regulators to

work out practical solutions to tobacco

issues. We will always welcome and

support enforcement of laws relevant to

our business. We have a long track record

and are well respected for complying with

rules and regulations of the country and

for cooperating with the government on

relevant issues of the company and the

cigarette industry.


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In addition we conduct our marketing

activities under our Marketing Code of

Conduct and the International Tobacco

Products Marketing Standards, which

provide for restrictions that are stricter

than the laws governing the industry. We

will continue with our efforts to engage

constructively with relevant governmentdepartments and regulatory bodies to

discuss further practical solutions to

tobacco issues.

OUR RESPONSE

NWe will welcome any government

initiative to introduce laws which will

provide practical solutions to tobacco

related issues.

NThe government is responsible forframing and enforcement of laws and

managing funds generated from violation

of laws. We have no role to play in this

respect.

NWe cannot support the proposal of

banning tobacco growing. Tobacco is a

legal product globally. A significant

amount of tobacco requires to be grown

each year to meet the demands in

Bangladesh. Banning of tobacco growing in

Bangladesh will lead to the loss of

livelihood for many farmers. It will also lead

to large foreign exchange payments to

import tobacco from overseas to replace

local tobacco. The export of locally growntobacco which is a growing industry in the

country will also be jeopardised.

NWe are engaged in the manufacturing

and marketing of a legal product. No

government or society seeks total

prohibition of tobacco smoking or tobacco

cultivation. We will continue to conduct

our business complying with all legal

requirements of the country. Because our

product is a risk to health, we believe it is

important that we do it responsibly.

WHAT WE WILL DO

We will support the government on

regulations providing realistic solutions to

relevant tobacco issues


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2.1.g TOBACCO TAXATION AND

CIGARETTE PRICING

increase tax on

tobacco products toa prohibitive level

STAKEHOLDER VIEWS

Stakeholders expressed that tax on

tobacco products should be increased to a

prohibitive level to discourage consumers

from purchasing the product.


NIncrease tax on tobacco products to a

prohibitive level

NIncrease the price of cigarettes to a

prohibitive level

NMake serrated banderole diagonal, along

the hinge, instead of straight

OUR POSITION

Cigarettes are already heavily taxed with

as much as 70% of the retail selling price

going to the government. Cigarettes are

one of the highest, if not the highest,

taxed consumer product in Bangladesh.


supports government initiatives to

establish reasonable and practical tax

rates. We believe high taxes on tobacco

products encourage smuggling and

counterfeit trade. When prices are too

high compared to disposable income, the

opportunity and incentive for illegal tradeincrease. Thus, although an overall higher

price could reduce consumption of legal

products, it would encourage illegal

products. Illegitimate operators will

invariably explore alternative ways to

service demand and the actual impact on

consumption may be minimal.

OUR RESPONSE

NIf tobacco taxation on manufactured

cigarettes is further increased, it is likelythat in our country there will be a significant

shift in consumption to handmade


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cigarettes i.e. biris and encourage a growthin smuggled products. A market withsmuggled and counterfeit goods deprivesgovernments of tax revenue.

NWe believe that the industry and thegovernment should work together to

identify appropriate levels of tobaccotaxation. We will continue to work withBangladesh Cigarette Manufacturers'Association (BCMA) and the governmentfor a tobacco taxation regime thatmaximises government revenue andminimises the incidence of smuggling andcounterfeit products.

WHAT WE WILL DO

NWe will engage with the government andNational Board of Revenue (NBR) to ensurereasonable, sustainable growth ingovernment revenues

NWe will communicate the serration

quality issue on tax stamps to BCMA andNBR to find a practical solution to the issue.


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make more

meaningful

contributions to

environmental

management

Five main themes emerged:

NAfforestation

NAlternatives to wood fuel

NFertilisers

NSoil conservation

NProduct waste and factory emissions

2.2 ISSUES RELATING TO ENVIRONMENTAL MANAGEMENT,

CORPORATE CITIZENSHIP AND CORPORATE GOVERNANCE

2.2.a ENVIRONMENTAL MANAGEMENT

STAKEHOLDER VIEWS

Stakeholders expressed their concern

regarding the impact that tobaccocultivation has on the environment. While

afforestation programme by British

American Tobacco Bangladesh was

commended, some stakeholders felt that

the company was also contributing to

deforestation, as wood cut down for

tobacco curing by farmers could become

timber in the future. They also expressed

their concern regarding the soil fertility

issue due to tobacco cultivation.

Stakeholders mentioned that British

American Tobacco Bangladesh shouldmake more meaningful contributions to

environmental management.

OUR POSITION

Each stage in the production, distribution

and consumption of tobacco products has

environmental implications. British

American Tobacco companies are in a

position to influence directly some of the

environmental impacts occurring during

the product life cycle. Our aim is tominimise or eliminate these impacts to

reduce our burden on the environment.

Wherever we cannot directly manage

impacts, we seek actively to encourage

best practices amongst suppliers, clients

and consumers. Since almost all the raw

materials used for the production of

cigarettes are based on goods from the

natural environment, such as tobacco,

paper and board, British American Tobacco

has committed itself to attaining world

class standards of environmentalperformance. In line with this approach,

British American Tobacco Bangladesh is


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already focusing on reducing wastes,promoting recycling, reducing waterconsumption, using raw materialsefficiently, improving soil's nutrientcomposition, introducing alternatives toagricultural chemicals and wood fuels intobacco growing, reducing dependence on

fossil fuels, and limiting atmosphericemissions.

We manage the country's largest privateafforestation programme and distributemore than 3.5 million saplings annually. Inthe last two decades, we have distributedand planted more than 42.5 millionsaplings. Most of these are located in thetobacco growing areas of Kushtia,Rangpur, Manikganj and Chittagongincluding the developing areas of Lama and

Alikadam in the Chittagong Hill Tracts. Wehave been given recognition by thegovernment for our well managedafforestation programme. The recognitioncame through the Prime Minister's awardgiven to us in 1993, 1999 and 2002 for ourcontributions to the country'safforestation programme.

British American Tobacco Bangladesh isone of the four operating companies in theBritish American Tobacco group, chosenunder the global initiative of BATBiodiversity Partnership, to formulate alocal biodiversity strategy and toimplement a portfolio of conservationactivities. The principal aim of this 'globalthinking, local implementation' is todevelop a replicable model for corporatebiodiversity conservation based on 'bestpractice' examples derived from the pilotinitiatives undertaken by these fouroperating companies of British AmericanTobacco.


NChange plantation plan and plant morefruit and timber producing trees andherbal trees

NPlant more trees than destroyed fortobacco curing

NPlant quick growing species around Lamato take care of curing and environment

NGo further in the deep area of the hillsand take lease of land for plantation. Alsotake tobacco cultivation to the interior

NGovernment to impose through law thatall tobacco manufacturers undertakeafforestation programme. Ministry ofAgriculture can monitor implementation

NExpand the tree plantation programmeof BATB to cover more area

OUR RESPONSE

NWe are conscious of the need for abalance between fast growing trees andfruit, timber and herbal trees. So far ourafforestation programme incorporatingmainly fast growing trees has helped toensure that we have wood fuel reserveexceeding our requirement in the tobacco

growing area of Kushtia, which isevidenced by stable price of fire wood inthe region. However, to build further onour current achievements we havedeveloped a biodiversity conservationstrategy which seeks to achieve a balancebetween fast growing trees and fruit,timber and herbal trees.

NOur afforestation programme in the Lamaand Chokoria region received the First Prizeof Prime Minister's Tree Plantation Award in1999. However, we recognise that wood fuel

is scarce in the Lama and Chokoria regionand as such have accelerated ourafforestation drive in the region.

AFFORESTATION


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NWe are already encouraging tobaccocultivation and tree plantations in theinteriors of Khagrachhori and Bandarban.We are also distributing free saplings to

hill owners and lessees, to encourage largescale commercial afforestation on thebarren hills. We do not take lease of landsdirectly, nor do we have plans to do so asit is not feasible.

NAny initiative to make afforestationmandatory for tobacco manufacturers hasto be initiated by the government. We arealready heavily involved in afforestationand we will communicate this expectationto the government.

NIn addition to our existing tobacco

growing areas, we are encouraging treeplantation in areas outside the tobaccogrowing belt. For the last few years wehave been distributing saplings in Sylhet,Khulna, Dhaka, Pabna and Tangail.

NIn addition to our current environmentalprogrammes we will strive to ensure thatour operational activities abide by the bio-diversity conservation principles. As thelargest corporate body in the country, wealso aim to effectively act as adevelopment partner for biodiversity

conservation.

WHAT WE WILL DO

NWe will conduct a bio-diversityassessment of our operating areas basedon which specific improvements in ourafforestation programmes will be designedand implemented.

NWe will continue an acceleratedafforestation programme in the

Chittagong Hilltracts in Lama and Alikadamregion.

NWe will further explore tobacco growingand commercial afforestation in theinteriors of Bandarban and Khagrachhori.

NWe will raise awareness and

understanding of the biodiversity issueswithin and outside the company.


NUse alternatives to wood fuel like jutestick and dhoncha stick.

OUR RESPONSE

We meet 70% of our wood fuelrequirements through alternatives likepaddy straw, sugar cane bagasse, jutesticks, dhoncha sticks, mustard stalk, etc.We encourage all our 14,000 registeredtobacco growers to use alternate fuelsources in tobacco curing. We seek toensure efficient and sustainable use ofwood fuel as far as practicable.

WHAT WE WILL DO

We will increase the use of alternatives towood fuel and provide the information inour social report next year.


NUse urea instead of Ammonium Sulphateand Potassium Sulphate as fertilisers

NReduce the price of fertiliser

NEstablish a large scale modern factory torecycle the garbage from Dhaka andproduce compost fertiliser

ALTERNATIVES TO WOOD FUEL

FERTILISERS


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OUR RESPONSE

NWe use potassium sulphate which isrecommended by Bangladesh AgricultureResearch Council (BARC). We alsorecommend balanced use of fertilisers inthe cultivation process.

NFertilisers in Bangladesh are producedand imported by the government and priceis fixed by the government. We buy thebest available non-adulterated fertilisersfrom the government in bulk and supply atcost price to our farmers on a no-interestdeferred payment basis. This ensuresavailability of fertilisers locally ataffordable prices.

NIn the growing areas, we provideinstructions on how organic waste of thehomestead can be converted to compost

in pits. Farmers are finding this low costalternative very useful.

NThough we cannot take responsibilityfor the waste management of the entireDhaka city, in response to stakeholderexpectations we will explore theavailable options of waste managementin our operation.

WHAT WE WILL DO

We will explore the available options ofwaste management for incorporation in

our areas of operation.


NConduct research for overcoming soil

imbalance problem.

NAfter years of tobacco cultivation when

soil loses fertility, organise alternative

employment for affected farmers.

NIdentify crop pattern, which will recover

the soil quality.

NTrain all farmers on soil fertility and

provide logistic support.

NRelocate tobacco cultivation to remote

hilly areas.

NConduct further research for using

tobacco to produce organic herbicide.

OUR RESPONSE

NAs stated previously we do not believetobacco growing causes any imbalance insoil fertility. Tobacco growing itself leadsto crop rotation and residual fertilisers,which actually improves soil fertility. Thisis evidenced by the increased yield overthe years for both tobacco and othercrops. However, we will conduct soil

quality tests in the tobacco growing areasfrom time to time to determine the soilfertility status.

NTobacco growing in the country hasbeen going on for the last 30 years andthere is no indication of loss in soil fertilityin the growing areas. Another evidence ofthis is that farmers do grow other crops intobacco growing areas.

NWe try to ensure that soil fertility issuesare properly addressed within the existing

cropping pattern. Our recommendationfor crop rotation is: tobacco - greenmanuring - paddy/jute - paddy.

NFarmers are regularly trained on the useof balanced fertilisers. Our farmers havealready taken up soil fertility programmei.e. green manuring and compost makingand these will be further developed in thefuture.

NResearch on producing organic herbicideusing tobacco is going on in the developedworld. Once any success is achieved, we

will pilot it to see the impact on our crops.

SOIL CONSERVATION


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WHAT WE WILL DO

NFollowing our biodiversity strategy we

will improve our current usage patterns in

the land use and supply chain mechanismsof the company.

NIn compliance with Bangladesh

Agriculture Research Council (BARC) soil

fertility guidelines, we will continue our

monitoring of soil fertility status in our

growing areas.


NEstablish a smoke and waste

management system in the curing barns

NChimneys to be made tall so that gas will

be emitted high in the air

NStudy the extent of pollution caused by

tobacco production

NCreate a proper waste product

management system in the factory

OUR RESPONSE

NThe tobacco curing barns are generally 10to 12 feet high with the chimney aboutanother two feet higher. Hence, any smokeresidue from the wood-fuel burning isemitted high in the air at about 12-14 feet.The residual ashes are used as fertilisers.

NEvery year we obtain a clearancecertificate from the Department of

Environment (DOE). This certificationtestifies that we are abiding by allenvironmental laws and regulationsrelevant to our operations. Recently a

study was conducted jointly by DOE,Cantonment Board, DOHS and scientistsfrom Dhaka University. No evidence of anysignificant environmental impact on theimmediate neighbourhood of our cigarettefactory was reported. However,recommendations made on making furtherimprovements are being currentlyimplemented.

NWe have a global policy onEnvironmental Health & Safety (EH&S)practices that aims at achieving a high levelof EH&S standards. The standards includethe issue of waste management in ourGreen Leaf Threshing plant and Dhakafactory. A bio-filter plant was set up in1996 at a cost of Tk 6 crore to reduce theimpact of tobacco smell and residue fromour Dhaka Factory. This is the only one ofits kind in Bangladesh for any industry andis recommended by the DOE as bestpractice in connection with environmentalpollution control.

WHAT WE WILL DO

We will make available information onstudies conducted to analyse pollutionlevel in our factory to stakeholders whoare interested.

PRODUCT WASTE AND FACTORYEMISSIONS


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take up such

economic activities

which would createmore employment

opportunities

2.2.b CORPORATE CITIZENSHIP

Six main themes emerged:

NOur role as a development partner

NCorporate sponsorships and poverty

alleviation

NSupport to tobacco farmers

NSupporting health programmes

NSupport to education programmes

NEliminating child labour

www.bat.com

Stakeholders expressed that they were

aware of the contributions being made by


specially its contribution to the

government in excise revenue, which

constitutes a big portion of the total

excise revenue earnings of the government

of Bangladesh. Their suggestion was thatwe take up such economic activities which

would help the company to diversify and

create more employment opportunities.

Stakeholders listed a number of

expectations regarding the role of British

American Tobacco Bangladesh in corporate

social responsibility which are wide and

varied.

OUR POSITION

We take our commitment to be a

development partner of Bangladesh

seriously and believe that good corporate

citizenship is a commitment of business to

contribute to sustainable economic

development. We work with employees,

business partners, the local community and

society at large to improve the quality of

their lives and livelihood.

We have always conducted our business

responsibly in the country. We workclosely with our business partners,

providing them with skills and expertise

which they apply not only to develop their

own businesses, but also to expand their

areas of operation thus leading to

employment generation.

However, our corporate citizenship has a

much wider reach. We are involved, through

various projects and initiatives, in improving

the environment, supporting philanthropic

organisations, promoting art and cultureand assisting with disaster relief.


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STAKEHOLDER DIALOGUECORPORATE CITIZENSHIP CONTINUED

40

We are keen to engage in constructivedialogue with our stakeholders to help usidentify how we can improve ourcorporate social initiatives even further.


NGradually shift business from tobacco tomore socially acceptable products which isnot harmful for society

NContribute in fruit and vegetablepreservation

NDiversify towards tourism and agro

processing

NInvest in agro based industry like juteproducts, sugar, edible oil, and sunflower

NTake over Sugar Mills Corporation,Adamjee Jute Mills and other loss makinginstitutions including Biman on profit sharebasis

NInvest more in human resourcedevelopment

NProduce cigarettes for export and notfor domestic use. Also produce good

quality tobacco for export

OUR RESPONSE

NOur core business is tobacco and we shallcontinue building the value of our businessin a responsible manner in line with ourstakeholders' concerns. Should a proposalwhich both complements our business andassists in the development of Bangladesharise, we shall explore the opportunity.

N

We have no expertise in running jutemills, sugar mills and airlines operations.We appreciate the confidence shown in

our management but do not expect to getinvolved in these ventures.

NBritish American Tobacco Bangladeshcontinues to play a significant role inhuman resource development of thecountry. We offer world class humanresource development trainings for ouremployees. Last year alone approximately650 of our management and non-management employees attended 30managerial and 156 technical trainingprogrammes on a wide variety ofdisciplines. As a result many of ourmanagers are employed in BAT groupcompanies in different parts of the worldwhile many former managers are holding

top positions in other reputed companiesof Bangladesh. We also provide trainingprogrammes to people outside ourcompany. For example:

- We offer a 12-week internshipprogramme for students of leadingbusiness schools in Bangladesh andBangladesh University of Engineering &Technology. Last year alone 45 studentsattended our internship programme.

- Our Managers offer lectures on variousmanagement topics in different business

schools- We provide marketing skills developmentprogramme for BRAC

- We run management developmentprogrammes which are attended bymanagers of other business houses

NWhile we will explore the opportunityfor exporting cigarettes, we arecommitted to satisfy the demands of ourconsumers in the domestic market. IfBritish American Tobacco Bangladeshwithdrew from the cigarette business the

demand for cigarettes would notdisappear; it would simply be satisfied byother manufacturers.

OUR ROLE AS A DEVELOPMENTPARTNER


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www.bat.com

WHAT WE WILL DO

NWe will extend our support in the area of

human resource development further:

- We will increase the number of

opportunities for managers of

Documents

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