british american tobacco p.l.c. sustainability report 2011 - Sustainability at Souza Cruz

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Sustainability Report 2011

Souza Cruz is involved in the entire production cycle, from working with tobacco leaf growers and processing tobacco, to the manufacture and distribution of cigarettes. Its approach to sustainability therefore covers every area of the business.

Tackling the illegal tobacco trade

It is estimated that illegal tobacco products make up more than 28 per cent of the total Brazilian market. High taxes on tobacco products, light penalties for smuggling, long national borders that are difficult to police and the sheer size of the country all contribute to the problem.

An inquiry by the Brazilian Congress found that there are approximately 360 illegal brands in the country, some of which are smuggled from Paraguay.

Souza Cruz supported the Brazilian Internal Revenue Service in implementing its System for the Control and Tracking of Cigarettes. This enables Government authorities to monitor the volumes of tobacco products manufactured in the country to ensure all taxes and duties are paid. In this way, it helps tackle the issue of tobacco products being manufactured and sold in the country without being declared to the authorities, to evade tax. But it does not address smuggling, which remains a major challenge for Brazil.

Souza Cruz was also one of the founding members of the Brazilian Institute for Ethics in Competition. To help keep competition fair, the Institute encourages political, legal and moral practices across all industry sectors. It also undertakes specific projects in individual industries, including raising public awareness of the negative impacts of illegal tobacco.

Sustainability at Souza CruzWorking with retailers

Souza Cruz sells its products through 300,000 retailers and encourages retailers to adopt responsible practices.

For example, in 2007, the company sponsored the establishment of the Responsible Retailing Development Centre by the Dom Cabral Foundation. It generates expertise, develops management tools and implements projects to enhance standards of conduct in retail management.

Souza Cruz makes the Centre’s outputs accessible to its retail partners, for example in the company’s magazine for retailers, at events and through its activities. Topics covered include taxation, illicit trade and environmental initiatives.

Following the Centre’s development in 2010 of the Fundamental Principles of Responsible Retailing, which includes guidelines for retailers to enhance their responsible business practices, in 2011 the Centre established the Responsible Retailing Compact to help align these guidelines with retailers’ business strategies. In 2011, the Centre also continued to build upon its research with projects focused on the 10 biggest retail companies in Brazil and their uptake of the voluntary international standard ISO 26000 Guidance for Social Responsibility.

With its retailers spread across the country and many of them very small outlets, it can be challenging for Souza Cruz to engage with them on sustainability issues – not only because of the geographical distance, but also because what works for larger retailers may not be viable for smaller ones. However, it is hoped that momentum will build and retailers will see the benefits as the company demonstrates its long-term commitment to sustainability.

The company works to address the issue of youth smoking, through supporting a youth smoking prevention (YSP) campaign delivered by national retail trade associations. The campaign aims to raise retailer awareness of the minimum age law of 18 for the sale of tobacco products in Brazil. Retailers are given YSP point-of-sale materials and the company’s Trade Marketing & Distribution teams discuss the importance of youth smoking prevention and provide guidance on verifying a customer’s age.

Sustainable agriculture

Working directly with nearly 30,000 tobacco farmers contracted by Souza Cruz, the company has the opportunity to promote sustainable farming practices in Brazil and help to improve the lives of farming communities.

The company has a long-standing sustainable agriculture programme. It focuses on addressing the environmental impacts of tobacco growing and contributing to successful farming communities by tackling child labour, enhancing farmers’ livelihoods and improving working conditions. The programme is delivered by the company’s team of over 220 leaf managers and technicians who engage individually with contracted farmers, as well as through partnerships with local organisations such as SENAR, the national service for rural learning. Some examples of the programme’s initiatives are detailed below.

Several of Souza Cruz’ projects are aimed at avoiding farmers’ use of wood from natural forests as a fuel for curing tobacco.

Farmers are provided with financing to either plant seedlings to meet their future fuel needs or to buy firewood from legal sources. In 2011, more than six million seedlings were planted and over 1,000 farmers benefited.

In 2011, Souza Cruz signed an agreement with the Association of Tobacco Farmers, SindiTabaco (the Tobacco Industry Union in Brazil), the Brazilian Institute of Environment and Natural Resources and the Ministry of the Environment to eradicate deforestation in the Atlantic Forest region. Under the agreement, the region will be monitored by satellite and joint projects will be implemented to raise farmers’ awareness of the issue and encourage sustainable wood sourcing along with other areas of environmental best practice, such as responsible chemical use.

Since 1984, the Planting Corn and Beans after Tobacco Harvest programme, as part of an agreement between Souza Cruz and the Rio Grande do Sul state, has aimed to stimulate and support crop rotation to help generate higher incomes through the distribution of maize seeds. In 2011, the agreement was once again signed in the state of Rio Grande do Sul, as well as in the state of Santa Catarina, to distribute seeds to farmers, with the Secretaries of Agriculture and Farmers and Agriculture Federations, in the areas. Such seed distribution also takes place in the State of Paraná, coordinated by its Secretary of Agriculture, which the company hopes to support through a signed agreement in 2012.

The company’s leaf managers and technicians also work with contracted farmers to preserve soil and water through their soil master plan, which contains guidance on a wide range of issues including farm planning, soil analysis, direct and minimum tillage, crop rotation and protection of river basins.

Tackling child labour

Since 2002, Souza Cruz has administered an Extended School Day programme to help tackle child labour, which is validated by the Souza Cruz Institute, a charitable organisation set up by the company. The programme includes investment for rural schools to enable them to provide extra-curricular activities, so that children spend their time in education and not working on farms.

In 2008, the company signed a Term of Commitment with Brazil’s Ministry of Labour. This establishes measures to help protect children and adolescents in rural areas, for example, by monitoring school attendance and promoting best practice health and safety standards for farmers. Originally focused on the State of Rio Grande do Sul, in 2011, it was extended to all the states where Souza Cruz operates.

Through the Growing Up Right programme, a partnership between the Tobacco Industry Union and the Brazilian Leaf Farmers Association, the company works with external partners to raise awareness of child labour issues and deliver education projects. Growing Up Right’s projects focus not only on children, but also on adolescent labour. In 2011, this was a particular focus of several campaigns, such as plays, seminars, training for field staff, pamphlets and other media used to raise awareness among farmers, local authorities and other stakeholders that can support the objectives of the programme.

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