THE SOCIAL REPORTING PROCESS

WHAT IS SOCIAL REPORTING?

It is reporting on social, ethical and environmental performance, in a similar way to reporting on financial performance. It helps companies to be more transparent and, through listening and responding to stakeholders, to embed the principles of corporate social responsibility in their businesses and to make better decisions in line with changing expectations in society. British American Tobacco's social reporting process follows internationally recognised standards, is based on independently-run stakeholder dialogue and both our process and our Reports are independently assured. The aim is a high standard of objectivity and quality in our reporting.

WHY ARE WE DOING SOCIAL REPORTING?

We seek to demonstrate that tobacco and corporate social responsibility are not contradictory and we believe that social reporting can be a valuable way of helping us to define and demonstrate good corporate conduct and responsible stewardship of products that are legal but pose risks to health. Stakeholder dialogue conducted in EU countries like Germany, Hungary, Poland or Cyprus indicates that many stakeholders welcome this and see it as a positive step forward.

WHAT DOES SOCIAL REPORTING WORK IN PRACTICE?

Entry plan

British American Tobacco prepares a map of its stakeholders and assesses what issues are of importance to stakeholders.

Understand

British American Tobacco invites a wide range of stakeholders to independently facilitated dialogue sessions, where they have an opportunity to express their opinions, views and expectations. These are recorded in their entirety. British American Tobacco is represented at the dialogue sessions by senior managers who support the discussion with factual information about current policy and practices.

Decide

British American Tobacco then prepares responses to stakeholders' expectations and where possible, makes commitments with regard to future activities and business decisions. British American Tobacco's commitments should be measurable and tangible in order to demonstrate that the company takes stakeholders inputs seriously.

Deliver

British American Tobacco publishes an externally verified social report which includes a summary of the dialogue process, stakeholders' expectations, company responses and commitments.

The most important part of the delivery stage is of course fulfilling the commitments that have been made. Different parts of the company are involved in this process and a system for monitoring and reporting is put in place to ensure the follow-up on the commitments.

BRITISH AMERICAN TOBACCO'S GLOBAL APPROACH TO REPORTING

We began international social reporting in 2001-02 to help us embed the principles of corporate social responsibility (CSR) throughout the Group. Reports have been published annually since then and in April 2009 we published the second Sustainability Report for British American Tobacco p.l.c.

Our social reporting has also allowed us to meet greater demands for corporate transparency and to continue improving our management decision-making through understanding changing expectations in society.

We follow a rigorous approach, involving:

• Governance: Group CSR performance is monitored through a Board CSR Committee and local and regional audit and CSR governance committees;
• International reporting: Our companies around the world engage in dialogue and both British American Tobacco p.l.c. and local companies produce regular reports;
• Standards: We follow the AA1000 Standard and Global Reporting Initiative (GRI) Guidelines;
• Assurance: Rigorous external verification is applied to all our reports;
• Dialogue: Our reporting is based on independently-facilitated stakeholder dialogue;
• Management support: Local social reporting and CSR managers are appointed across the Group and we hold international social reporting training and CSR workshops.

In 2001-02, our companies in 14 countries took part in social reporting. This has expanded and, at year end 2008, our companies were producing Social Reports covering 35 countries, and a European Union-level Social Report has also been published. All the reports are independently verified and are based on independently facilitated stakeholder dialogue. The reports follow the AA1000 Standard and GRI Guidelines.

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