44.5.4.

Reducing their direct impacts

British American Tobacco know that in order to support global efforts to combat climate change
and unsustainable resource use, their long-term targets need to remain ambitious. Which is why,
in 2016, when they hit their existing 2017 targets a year early, they immediately set new targets
to be reached by 2025. However, in line with best practice, any targets must also reflect the
changes in the scale and magnitude of their business activities. This is why, during 2018 and
following on from their acquisition of Reynolds American Inc. (RAI), they took the opportunity
to once again review their long-term targets so that they would reflect their new operations
portfolio. As a result, they undertook a full analysis of their Scope 1, 2 and 3 emissions*,
establishing a new baseline and allowing targets to be set that account for all of their operations
and supply chain. Earlier in 2019, they gained Science-Based Targets initiative’s (SBTi) formal
approval of their new targets and joined the ever-growing number of companies that have
committed to making significant emissions reductions, in line with the most up-to-date climate
science. To support us in achieving this target, they have also developed further guidance for
their sites on how to assess and increase the renewable energy used and launched their Standard
on Climate Change and Energy in December 2018. It sets out the Group’s requirements for each
site, such as having a five-year energy plan and considering carbon impact (and alternative
renewable energy sources, where possible) when renewing or buying equipment, or entering a
new power purchase contract. It also provides guidance to sites on energy sourcing options and
outlines key steps a site should consider while developing the energy plan, with a clear
preference for renewables, whenever possible. Alongside new emissions reduction and energy
targets, they have set other 2030 environmental targets for water and waste. These aims to
further reduce their impact through reduced consumption of resources, improved water
stewardship, and ensuring that waste from their operations is reduced, reused or recycled.

4.5. Approach of British American Tobacco

They work to address both their immediate environmental impacts and the likely environmental
pressures on the business in the future. This involves risk assessments, performance management
and making their operations more efficient. Environmental problems cannot be solved by one
company acting alone. They also need flexibility – what works in one part of the world might not
in another. So, they also aim to work more with local communities and in collaboration with
other international organisations
.4.5. Environmental targets of British American Tobacco:
• 30% absolute reduction of their Scope 1 and 2 CO2e emissions by 2030*
• 16% absolute reduction of hour in Scope 3 CO2e emissions by 2030*
• 30% of their energy to be sourced from renewable sources by 2030*
• 35% absolute reduction of water withdrawn by 2030*
• 15% of water to be recycled by 2030*
• 15% reduction in the total volume of waste generated by 2030*
• 40% absolute reduction in waste sent to landfill by 2030*
They have 55 factories and a further 15 green-leaf threshing sites worldwide which, along with a
large distribution fleet, account for more than 90% of their direct impacts, so this is where they
focus many of their initiatives. Examples include investing in energy-efficient technologies,
switching to less carbon-intensive fuels and renewable energy sourcing. Currently, 9.3% of their
Group energy use is from renewable sources. They’re also optimizing their logistics and fleet
with standards for fuel efficiency, engine size and emissions, as well as increasing load capacity
to reduce the number of journeys. While their manufacturing processes are less water intensive
than many industries, they understand the reality of increasing water scarcity in some parts of the
world and this has led us to expand the scope of their water risk assessments. Previously only
conducted at their strategic, high-risk sites, these assessments were completed by all their
factories and green-leaf threshing sites in 2017. They recycle or reuse waste within their
business, wherever possible. In 2018, they were pleased to achieve a 9% reduction in the amount
of waste sent to landfill per million cigarettes equivalent, compared to 2017. They also recycled
90% of their waste in 2018.

4.4.6. Working with others

Environmental problems cannot be solved by one company acting alone, so they also work in
collaboration with others. In Kenya, for instance, they are members of the Nairobi Water
Roundtable, working alongside local government, NGOs and other major companies, including
Diageo and Coca-Cola, to find solutions to water scarcity in the area.
4.4.7. Environmental management in tobacco growing
Many of the environmental impacts that are associated with growing tobacco are common across
agriculture and the only way to completely avoid them would be not to farm any crop, which is
clearly not a viable option. So, they focus on working to mitigate these inherent risks and
implement best practice environmental standards with all the farmers they work with.
Environmental criteria form a central part of the industry wide Sustainable Tobacco Programme
and their expert field technicians provide farmers with technical assistance on areas such as
sustainable soil, water, biodiversity, and forest and pest management. The benefits of this can be
seen in agrochemical usage, which is generally significantly lower in tobacco growing than other
comparable crops. Also, because wood is often used as a fuel for curing, they have programmes
in place to avoid and combat deforestation. As a result, in 2018 99% of their contracted farmers’
wood fuel came from sustainable sources.

1.3.3. Global diversity

Their continuing success is only possible thanks to the passion and dedication of more than
55,000 talented people across the globe working in their factories and offices or out on the road,
supporting farmers and retailers worldwide. The global nature of their business is reflected in
their people’s broad range of nationalities – in 2018, 147 different nationalities were represented
at management level in their company. Their diverse backgrounds and perspectives help us
succeed as a company – because having an international workforce means they are better able to
understand and meet the needs of consumers in all their markets. They also help to make BAT a
fascinating place to work because of the opportunity to work and collaborate with people from
such a wide range of countries and cultures. And in an international business like theirs there are
exciting career opportunities for people with the passion, drive and ambition to succeed in a truly
global company.

1.3.4. Innovation
Innovations in their cigarette portfolio are an important part of their focus on providing adult
smokers with a range of differentiated products to choose from. Innovations, such as new tube
filters and capsules in filters that allow the smoker to change the taste of their cigarette, account
for more than a third of all the cigarettes they sell.

2.2.2. Developing the Supply Chain Supplier Relations

1. Competitive Orientation

The view that negotiations between buyer and seller is a zero-sum game. Often used when a firm
represents a significant share of the supplier’s sales or many substitutes are available. Example:
WalMart

2. Cooperative Orientation

The view that the buyer and seller are partners. Includes sole sourcing. Often used with
strategically important and/or high value-added components. Example: McDonald’s

3. Mixed strategy

Seeks to combine the advantages of the competitive orientation (e.g. low prices) with the
cooperative orientation (e.g. few suppliers). Example: Toyota

2.2.3. THE OBJECTIVE OF A SUPPLY CHAIN

The objective of every supply chain should be to maximize the overall value generated. The
value (also known as supply chain surplus) a supply chain generates is the difference between
what the value of the final product is to the customer and the costs the supply chain incurs in
filling the customer’s request.

Supply Chain Surplus = Customer Value – Supply Chain Cost

The value of the final product may vary for each customer and can be estimated by the maximum
amount the customer is willing to pay for it. The difference between the value of the product and
its price remains with the customer as consumer surplus. The rest of the supply chain surplus
becomes supply chain profitability, the difference between the revenue generated from the
customer and the overall cost across the supply chain.

2.2.4. DECISION PHASES IN A SUPPLY CHAIN

Successful supply chain management requires many decisions relating to the flow of
information, product, and funds. Each decision should be made to raise the supply chain surplus.
These decisions fall into three categories or phases, depending on the frequency of each decision
and the time frame during which a decision phase has an impact. As a result, each category of
decisions must consider uncertainty over the decision horizon.

I. Supply Chain Strategy or Design:

During this phase, a company decides how to structure the supply chain over the next several
years. It decides what the chain’s configuration will be, how resources will be allocated, and
what processes each stage will perform. Strategic decisions made by companies include whether
to outsource or perform a supply chain function in-house, the location and capacities of
production and warehousing facilities, the products to be manufactured or stored at various
locations, the modes of transportation to be made available along different shipping legs, and the
type of information system to be utilized.

II. Supply Chain Planning:

Companies start the planning phase with a forecast for the coming year (or a comparable time
frame) of demand and other factors such as costs and prices in different markets. Planning
includes making decisions regarding which markets will be supplied from which locations, the
subcontracting of manufacturing, the inventory policies to be followed, and the timing and size
of marketing and price promotions optimize performance.

III. Supply Chain Operation:

The time horizon here is weekly or daily. During this phase, companies make decisions
regarding individual customer orders. At the operational level, supply chain configuration is
considered fixed, and planning policies are already defined. The goal of supply chain operations
is to handle incoming customer orders in the best possible manner. During this phase, firms
allocate inventory or production to individual orders, set a date that an order is to be filled,
generate pick lists at a warehouse, allocate an order to a particular shipping mode and shipment,
set delivery schedules of trucks, and place replenishment orders.

2.2.5. PROCESS VIEWS OF A SUPPLY CHAIN

A supply chain is a sequence of processes and flows that take place within and between different
stages and combine to fill a customer need for a product. There are two ways to view the
processes performed in a supply chain.

1. Cycle View of Supply Chain Processes

The processes in a supply chain are divided into a series of cycles, each performed at the
interface between two successive stages of a supply chain. All supply chain processes can be
broken down into the following four process cycles, as shown in Figure 2-2:

• Customer order cycle

• Replenishment cycle

• Manufacturing cycle

• Procurement cycle

Each cycle occurs at the interface between two successive stages of the supply chain. Not every
supply chain will have all four cycles clearly separated
 Figure 2-2: Cycle View of Supply Chain Processes

2. Push/Pull View of Supply Chain Processes

The processes in a supply chain are divided into two categories depending on whether they are
executed in response to a customer order or in anticipation of customer orders. Pull processes are
initiated by a customer order, whereas push processes are initiated and performed in anticipation
of customer orders. All processes in a supply chain fall into one of two categories depending on
the timing of their execution relative to end customer demand. With pull processes, execution is
initiated in response to a customer order. With push processes, execution is initiated in
anticipation of customer orders based on a forecast. Pull processes may also be referred to as
reactive processes because they react to customer demand. Push processes may also be referred
to as speculative processes because they respond to speculated (or forecasted) rather than actual
demand.
 Figure 2-3: Push/Pull Processes for Supply Chain

1.2.6. COMPETITIVE AND SUPPLY CHAIN STRATEGIES

A company’s competitive strategy defines, relative to its competitors, the set of customer needs
that it seeks to satisfy through its products and services. For example, Wal-Mart aims to provide
high availability of a variety of products of reasonable quality at low prices. Most products sold
at Wal-Mart are commonplace (everything from home appliances to clothing) and can be
purchased elsewhere. Competitive strategy targets one or more customer segments and aims to
provide products and services that satisfy these customers’ needs.

1.2.7. Strategic Management of the Supply Chain

1. Efficient Supply Chains
The purpose of efficient supply chains is to coordinate the flow of materials and services so as to
minimize inventories and maximize the efficiency of the manufacturers and service providers in
the chain. Efficient supply chains work best when demand is predictable and products/services
are stable. Example of competitive priorities: low cost.
2. Responsive Supply Chains
The purpose of responsive supply chains is to react quickly to market demands by positioning
inventories and capacities in order to hedge against uncertainties in demand. Responsive supply
chains work best when demand is unpredictable, new product introduction is frequent, and
product variety is high. Examples of competitive priorities: development speed, fast delivery,
customization, volume flexibility.
3. In addition
Innovations in information technology and other practices are facilitating the integration of the
supply chain for greater efficiency and responsiveness and enabling “orchestrated” networks.