British American Tobacco

“Adding value to our supply chain and the environment”

Ian Mercer and Adam Ritchie

            Despite its controversial market British American Tobacco has profited for over a century dating back to 1902, when the UK’s Imperial Tobacco Company formed a joint venture with the American Tobacco Company.  Due to rapid expansion into the markets of India, Europe and East Africa, cigarette sales exceeded $10 Billion per year in 1920 (BAT - Who We Are).  British American Tobacco has continued this trend of exponential growth, producing in 46 factories located in 41 countries and available in 200 markets worldwide.  In the year 2013 BAT employed over 57,000 people, and sold 676 billion cigarettes (BAT – Global to Local).

            Nothing is more critical to the success of British American Tobacco than its sustainability.  With ever increasing demand for agricultural products, it is vital that the company’s footprint on the land and environment it utilizes is minimal. To support this initiative, the company owns no farms of their own, as their suppliers consist of over 100,000 smallholder farms worldwide that produce leaves for manufacturing (BAT – Supply Chain).  Suppliers are required to improve their environmental responsibility through British American Tobacco’s Social Responsibility in Tobacco Production program. This program sets a minimum environmental performance level, promoting resource conservation and sustainability. The responsibility program also sets standards on child labor regulations and working conditions for farmers and hired employees.

A major focus of British American Tobacco (BAT) is business to business relationships with not only suppliers but also retailers who sell their products.  This emphasis on being a high quality supplier allows customers to receive products where they want them, when they want them, and at the right price and quality. Selling to a wide variety of customers ranging from large retail to independent shop owners, British American Tobacco must be able to meet the needs of every retailer with the highest efficiency. Among its customers, 9 key retailers are managed at a global level, these include, 7-Eleven, BP, Carrefour, Chevron Texaco, Couchetard, Exxon Mobil, Shell, Tesco and Wal-Mart (BAT – Working with Retailers). Cross integration of companies’ goals is a major focus, as BAT engages with upper level management to understand global strategies and identify potential areas of cooperation between firms. This not only cuts cost but increases efficiency at every level of supply chain, benefiting customers, consumers and the company.

British American Tobacco has a large focus on corporate responsibility and sustainability in its supply chain strategy.  “Minimizing our Impact” is one of British American Tobacco’s core supply chain goals. (BAT Supply Chain)  The corporation attempts to achieve this goal by strongly pushing every division within its supply chain to operate under this same mindset of minimizing their impact on the environment.  In essence, British American Tobacco has created a culture of devoted suppliers and employees who all share this same goal of sustainability.  The three underlying aims of this supply chain strategy as laid out by the corporations website consist of; “taking a more long-term approach to managing the sustainability impacts of their supply chain on the environment and the impact the environment may have on their supply chain, further developing tools to enable informed decision making, and addressing the impacts of their supply chain through collaboration with suppliers and stakeholders.” (BAT Supply Chain)  Brisith American Tobacco also strives for continuous improvement within its supply chain through both the Environmental Sustainability Assessment (ESA) as well as the Business Enabler Survey Tool (BEST).  The ESA tool is used “to compare environmental impacts associated with the development of new products, components, and packaging.” The BEST tool “assesses suppliers’ sustainability performance and provides a framework for continual improvement.” (BAT Supply Chain)  Overall, British American Tobacco clearly wants to ensure the end consumer is aware that the company has a vested interest in sustainability, ultimately strengthening their corporate image. 

The largest threat to the industry is tobacco trafficking and counterfeit products. Data suggests that up to 660 billion cigarettes are smuggled every year, which equates to 30 billion Euros of tax evasion worldwide (BAT – Tobacco Trafficking). Along with financial deterrents, smuggling also puts the consumers of these products at risk. Most trafficking involves near replica products created by criminal gangs with the potential to be sold to underage consumers. Counterfeits can put you at a greater risk for health complications, containing higher levels of carbon monoxide and tar, along with other contaminants. This not only puts consumers of the products at risk but also the integrity and reputation of the company. To combat this potential risk, BAT works with suppliers to develop an industry wide security system to secure the supply chain. This is done by tracking products throughout the supply chain using a digital tax verification produced by the Digital Coding and Tracking Association. By working with law enforcement and partnering with the World Health Organization, BAT hopes to minimize the amount of counterfeit products and eliminate potential risks associated with the black market (BAT – WHO Protocol).

                                                    Videos
Illegal Cigarettes: Who Pays the Price: http://youtu.be/cX-k1i0QOag

Sustainable Agriculture at BAT: A Day in the Life: http://youtu.be/HXgeocdxM4Y

Sources

http://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO9EBKZR?opendocument&SKN=1

http://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DO52ADCY

http://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DO9DELU2?opendocument&SKN=1

http://youtu.be/cX-k1i0QOag

http://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6TNKVW?opendocument&SKN=1

http://www.bat.com/group/sites/uk__9d9kcy.nsf/vwPagesWebLive/DO6ZYC4S?opendocument&SKN=1

http://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DO6ZXP2Z