日本たばこ産業（2914） – Integrated Report 2021

Integrated Report 2021Japan Tobacco Inc. Purpose of our Integrated ReportThis report consolidates important information for our stakeholders to better understand the JT Group. For detailed information, please visit our website.In this report, we integrate financial information, e.g., management princi-ple, business plan and business performance, and non-financial informa-tion, namely sustainability information that supports the JT Group’s growth in the mid to long term. The purpose of this report is to inform our various stakeholders, including shareholders and investors, of the current and future value creation story of the JT Group.Value creation storynoitamrofni laicnanfi-noNJT website SustainabilityJT website Investor Relations• Top management message• Management information• Our sustainability • Results and reports• For shareholders• IR calendar• For debt investorsstrategyrights impact• Respecting human • Improving our social • Environment• Governance and compliance• Investing in peopleDetailed informationForward-looking statements contained in this document are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve known and unknown risks and uncertainties. Actual results, performance or achievements, or those of the industries in which we operate, may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Please see “FORWARD-LOOKING STATEMENTS” at P.129 for further details. Japan Tobacco Inc.018 VALUE CREATION020 Our history022 Our value creation process024 Our value chains088 GOVERNANCE090 Message from the Chairperson092 Messages from Outside Directors094 Corporate governance102 Management structure108 Internal controlsnoitamrofni laicnaniF002 CORPORATE PROFILE004 Our management principle006 Message from the CEO012 At a glance014 Key performance indicators • Financial performance review• Non-financial performance review026 BUSINESS and SUSTAINABILITY 028 Business Plan 2022030 Sustainability034 Message from the CFO038 Message from the CSO040 060 064 Overview of tobacco business and its sustainability initiatives• Products & services• Building sustainable supply chains• Optimizing the regulatory environment and tack-ling illegal trade Overview of pharmaceutical business and its sustain-ability initiatives Overview of processed food business and its sustain-ability initiatives068 Investing in people• Health and safety072 Three absolute requirements for sustainability • Respect for human rights• Improving our social impact• Improving our environmental impact080 Risk factors084 Regulation and key laws087 Litigation112 FINANCIAL 114 11-year consolidated financial dataINFORMATION/ OTHERS116 Financial review124 Glossary of terms126 Awards and recognitions128 Shareholder information and contact informationIntegrated Report 2021001CORPORATE PROFILEThe JT Group is a leading global tobacco compa-ny operating in over 70 markets, and our prod-ucts are sold in over 130 markets.To provide an overview of the Group, this sec-tion discusses the Group management principle and vision that form its foundation for value creation, outlines its businesses, and presents key financial and non-financial performance indicators. The section also has a special section featuring a message from the CEO explaining initiatives the Group is undertaking to continu-ously deliver value. 004 Our management principle006 Message from the CEO012 At a glance014 Key performance indicators • Financial performance review• Non-financial performance review002Japan Tobacco Inc.Integrated Report 2021003Our management principleManagement principleTo pursue the 4S modelUnder the 4S model, we strive to fulfill our responsibilities to our valued consumers, shareholders, employees and the wider society, carefully considering the respective interests of these four key stakeholder groups and exceeding their expectations wherever we can.By pursuing the 4S model, we aim to achieve sustainable profit growth over the mid to long term. We firmly believe that pursuing the 4S model is the best approach to continu-ously grow our corporate value and serve our four stake-holder constituencies’ common interests.ShareholdersConsumersVISIONTo continue to be a growing global company that provides diverse value, unique to the JT Group.Based on our 4S model, our vision is to continue to be a growing global company that provides diverse value, unique to the JT Group.Our long, rich history has endowed us with three key strengths: a solid financial base, superior brand equity and a diverse workforce. To realize our vision, we plan to leverage these strengths as sources of competitiveness in our business activities. We will create a variety of products and services that meet the needs of our consumers and society, enhance the corporate value of the JT Group, and create social value that contributes to the development of a sustainable society.EmployeesSocietyThe JT Group MISSIONConsumersShareholdersThe JT Group WAYWe provide exceptional products and services that deliver value beyond fulfillment of diverse needs and preferences. To keep doing so, we will upgrade our innovation capabili-ties by leveraging our Group’s diversity.We aim to enhance shareholder returns by realizing the mid- to long-term profit growth, placing priority on striking a balance between profit growth through business invest-ments and shareholder returns.EmployeesSocietyWe aim to be an appealing, highly-esteemed company for which our employees are proud to work. While evaluating employees fairly and transparently and supporting their personal growth, we aim to foster a corporate culture that respects and embraces diverse values.In order to fulfill our responsibility as a member of society and contribute to the sustainable development of society through our business, we will work with a wide range of stakeholders and strive to resolve various issues together.To create, develop and nurture our unique brands to win consumer trust, while understanding and respecting the environment, and the diversity of societies and individuals.n Act with integrity, always putting the consumer first.n Continue to evolve while remaining committed to quality in all its aspects.n Harness the power of diversity across the JT Group.Our mission is to create, develop and nurture our unique brands to win consumer trust, while understanding and respecting the environment, and the diversity of societies and individuals through the 4S model. Our Code of Conduct and values guide the way in which every employee should act on a daily basis. We have codified these into three state-ments we call the JT Group WAY.The world in which we live encompasses diverse natural environments, societies and peoples. By embracing such diversity, we believe we can create brands that offer value to our consumers.We define a brand as all of the products, services and actions trusted by consumers and believe it is the key to forming deep bonds of trust between us and our consum-ers. Setting our brands as our most valuable management resource, we will continue to create, develop, and refine distinctive brands that win consumers’ trust.In order to achieve our mission, each and every one of us at the JT Group practices the JT Group WAY as a personal philosophy.004Japan Tobacco Inc.Integrated Report 2021005CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSMessage from the CEODriving changes on our own initiativeSince its inception, the JT Group has grown by keeping its focus on the future, an-ticipating challenges and adapting swiftly to change. I am convinced this proactive approach will continue to lead the JT Group towards more sustainable mid- to long-term growth, further supported by organizational reforms and cultivating a work-ing environment where each and every employee can initiate changes on their own. Knowing the business environmentThe JT Group’s business environment remains difficult to predict because of changes in the international political situation, and risks related to exchange-rate fluctuations, as well as the persistent impact of the pandemic and the subsequent changes in consumer behavior and operations by businesses around the world.It is undeniable that all our business segments currently face, and will continue to face, increasingly challenging en-vironments. The tobacco business continues to experience tighter regulations and higher taxes, combined with in-creasing demand for reduced-risk products (RRP), especially heated tobacco sticks (HTS). Meanwhile, the pharmaceutical business is facing higher hurdles for new drug approval and growing pressure to lower prices, while the processed food business is facing rising costs for personnel, distribution and raw materials. In addition, digital technology is constantly progressing, consumer preferences and behaviors are evolving with increasing awareness of sustainability and ESG priorities, and the needs and expectations among our shareholders, as well as society at large, are changing. Amid these major, rapid global trends, it is vital that we drive initiatives proactively rather than react passively. 2022 is also marked by the unprecedented crisis of the war in Ukraine. I would like to express my sincere condolences to those who have tragically lost loved ones in the war, and to the many others who have had to face devastating difficul-ties, such as having to leave everything behind in order to seek safety. I sincerely hope that peace will return soon. While the JT Group’s first priority is the safety and security of our employees and their families, we are also working hand in hand with international and local aid organizations to establish relief programs and provide immediate help to those affected. We will continue to closely monitor the situ-ation and prioritize our employees and their families’ safety, while extending all possible support to those in need, taking all necessary decisions to address the changing situation in accordance with our Group’s management principle, which is to pursue the 4S model. Masamichi TerabatakeRepresentative Director and President,Chief Executive Officer006Japan Tobacco Inc.Integrated Report 2021007Note: The word, consumers, used in the context of the tobacco business means adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country. CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSMessage from the CEODriving changes on our own initiativeThe JT Group has always marked its growth by taking matters in its own hands, adapting swiftly and imple-menting strategic initiatives. An example of such growth is represented by our tobacco business, where we made large-scale acquisitions, like those of RJRI and Gallaher; expanded geographically into emerging markets; enhanced equity, mainly for global flagship brands; and continuously allocated resources to increase presence in the expanding RRP category. More recently, based on the anticipated, long-term business environment, and in order to increase profitability and strengthen our competitiveness in the tobacco business, we announced in February 2021 that we had refined our investment prioritization to two key categories – HTS and combustibles – and were introducing initiatives to strength-en the tobacco business operating model, including those aimed at combining the existing tobacco businesses and strengthening competitiveness in the Japanese market.The road leading to the combination of the tobacco businesses took many steps. In the tobacco business, we formerly ran our Japanese-domestic and international tobacco businesses separately, which presented challenges for us when formulating and executing a globally uniform strategy, as well as when striving to ensure effective alloca-tion of global resources. These challenges were especially apparent in the circumstances we faced to strengthen com-petitiveness in the RRP category. I believed it was urgent to establish an operating structure without divisional borders between Japanese-domestic and international operations, or between JT and JTI, to allow speedy decision-making under unified management. Additionally, for the JT Group to follow through on its customer-first policy and maintain sustainable growth, we needed a structure enabling us to effectively and efficiently offer products and services that exceeded consumer needs and expectations. Faced with these challenges, after taking charge as CEO, I worked to unify teams for R&D initiatives and RRP manage-ment both in Japan and abroad, led the transformation of our international tobacco business, and relocated the JT head office building in Tokyo. Through these initiatives, the Group has been reinforcing our foundation and sharpening our global competitiveness.As a result of these initiatives, we kicked off January 2022 with our new operating model, built around a unified, global tobacco business, for the JT Group to further grow and evolve into a truly global company. With this step, the tobacco business headquarter function has been consol-idated at the headquarters in Geneva, creating a simpler business operation structure, optimal for accelerating speed through efficient, effective decision-making. I firmly believe that this will enable us to strengthen our competitiveness in the growing RRP category, mainly in HTS, by leveraging and allocating global resources in a prioritized and timely man-ner with a global perspective, as well as building a system to maximize the value we offer our consumers. Furthermore, going forward, we also plan to share and deploy best practices on a global basis in a more energized and timely manner. In respect to the Japanese market, operations will continue under the global operating model, with Japan set as one of our key markets.In preparation for the global tobacco business, in the Japanese market we determined that it is imperative that we increase competitiveness to further enhance value to our consumers in an environment where overall business vol-ume has shrunk amidst growing uncertainty. As a result, we have executed initiatives conducive to overcoming antici-pated challenges identified in this changing environment. Over the past few years, we have undertaken a number of initiatives, sometimes requiring difficult decisions, such as reforming the sales organization, closing some production sites, implementing a voluntary retirement program, and reducing the total domestic tobacco cultivation area.Leaving no stone unturned, we also reorganized the Corporate function. In addition to fulfilling an administrative role, this institution acts to identify and address mid- to long-term management issues. It is designed to be an organization facilitating inter-division collaboration without the constraints of divisional walls, generating high-quality output that addresses issues identified by the JT Group.The most important factors in these kinds of reform are for each employee to understand the goals, and correspondingly change their awareness and behavior to be-come the ones initiating change. Consequently, every mem-ber of the Board of Directors, including myself, is actively communicating with employees about the background and intent of the reform initiatives we have been undertaking, so that this knowledge permeates our workforce. By helping each employee become more adaptive to change through these initiatives, we are in turn strengthening the JT Group as an organization. Just as we have been initiating change and overcoming challenges promptly through our strong leadership, we will promote behavioral changes and secure sustainable mid- to long-term growth.Business Plan 2022As announced in February 2022, Business Plan 2022, our three-year business plan, marks the continuation of our fundamental pursuit of sustainable mid- to long-term profit growth. More specifically, we remain committed to achiev-ing mid to high single digit average annual growth in adjust-ed operating profit at constant FX over the mid to long term. We also expect to steadily grow both profit and shareholder returns in line with our shareholder-return policy. The key to achieving these objectives lies in growth of the tobacco business, which is the core driver of the JT Group’s profit growth. Consequently, we will continue to focus on investing our management resources intensively for top-line growth and increasing profitability, designating HTS and combustibles as our top-priority categories. We see that the HTS segment provides the largest potential for sustainable profit growth within the RRP category, which we expect, with anticipated demand increases in this category, to become a strong pillar for our future growth. While the RRP category is our top investment priority in terms of future sustainability of the JT Group, we project nonetheless that combustibles will remain the tobacco industry’s biggest category through the coming decade. Therefore, we will also support efforts to continue increasing combustibles’ top-line contribution, while enhancing their profitability through lower costs and higher efficiency.Moving on to our mid-term projections and goal, we project that HTS share in the tobacco industry as a whole will increase from the current 15% to about 20% by the end of 2027. Within this environment, the JT Group announced, in February 2022, its ambition to achieve HTS segment share in the mid-teens across our key markets by the end of 2027, and by doing so, reach break-even in the RRP business. Having said this, in considering developments in the war in Ukraine, we have decided to suspend the launch of Ploom X in the Russian market, which was planned for 2022, and are review-ing our global launch plans to optimize the future development of Ploom X by being flexible and ensuring a state of readiness. Needless to say, it is clear that RRP will be of significance in the industry; we expect that they will continue to gain increased attention and traction with consumers as these products have the potential to reduce the health risks associated with smoking by offering solutions that do not involve burning tobacco and produce no smoke and less odor. They thus significantly reduce not only the potentially harmful constituents in smoke generated from burning tobacco leaves, but also the inconvenience to non-smokers. However, all in all, we believe that tobacco consumer needs are diverse and require a broad range of choices, ensuring that every consumer can find a product offering a high level of satisfaction. To that end, the JT Group continues to expand product categories to meet global changes and improve the product value of all tobacco products.Moving on to the pharmaceutical and processed food businesses, while they will continue to face a challenging business environment, their role of supplementing profit 008Japan Tobacco Inc.Integrated Report 2021009CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSenvironmental initiatives thus far, and contribute to the shift to a decarbonized society, the JT Group has revised its goals for energy consumption and greenhouse gas emissions in our Environment Plan 2030. We will further enhance and expand our initiatives to achieve carbon neutrality by 2030, and net zero for the entire value chain by 2050.Concerning our responsibility to society, we have been conducting human rights due diligence assessments to overcome challenges across our supply chain. Furthermore, we have published the Group’s first Human Rights Report. Our social initiatives are multifaceted, including a new Group goal to increase our proportion of women in management to 25% by 2030, while recognizing that it is desirable that this should eventually come to exceed 40%.ConclusionAmid a business environment in which we are experiencing major, rapid global change, I believe it is important for us to take a fresh look at the value the JT Group offers to society, the reason for our existence, and the essence that has been, and will continue to be, at our core. In 2020, we created D-Lab within the Corporate research and development division, to explore opportunities beyond the existing scope of business. Today, D-Lab has various projects underway to strengthen our business portfolio, including new businesses. As such, we will keep striving to demonstrate to our con-sumers, shareholders and wider society they can entrust the JT Group to deliver “moments of pleasure” in the 20 to 30 years to come.Lastly, I would like to stress my commitment to assuring the growth of the RRP category as top priority on my agenda, and I look forward to continuing to update you on what the future holds for the JT Group.Message from the CEOgrowth for the JT Group remains unchanged. In the phar-maceutical business, we will continue to enhance the value of products already introduced and still in development, as well as cultivating in- and out-licensing opportunities to reinforce our business foundation. In the processed food business, we will follow through on existing initiatives, such as allocating more resources to high-value-added and high-priced products, mainly in our core frozen and ambient food business, in order to promote a high-quality top-line increase leading to sustainable profit growth.Lastly, we will continue allocating management resources to, and prioritizing investment in, businesses delivering sustainable profit growth, particularly the tobacco business, the core driver of the JT Group. We will also aim to increase returns to shareholders through mid- to long-term profit growth while maintaining a target payout ratio of about 75%*, and to achieve that objective, we will continue our efforts to grow adjusted operating profit at constant FX.*To be in the range of approximately ±5%.Toward mid- to long-term growth Pursuing the 4S model to provide higher value to stakeholdersChange in the social and business environments is acceler-ating, notably in terms of awareness of sustainable business practices as part of ESG considerations. I believe that a proactive and committed contribution to the development of society, through operations based on pursuing the 4S model, is essential to the long-term growth of the JT Group. To realize this ambition, we have identified, based on the 4S model, a set of priority issues (materiality) for our business and a wide range of stakeholders, and used these to focus our sustainability strategy. We made it standard practice to involve the Board of Directors, and myself as CEO, in setting the goals for our sustainability strategy, and discussing and managing specif-ic measures for achieving those goals, which we are firmly committed to deliver on. Since 2020, we have been holding regular Sustainability Advisory Forums, chaired by our CSO and involving representatives of JT Group businesses and functions, to discuss sustainability issues. Additionally, as we believe our proactive participation in the sustainability man-agement process is essential, we made the Sustainability Management Division independent of other Corporate groups in January 2022, when we also reorganized our Corporate function. Sustainability at the JT GroupIn 2021, we continued to actively undertake initiatives based on our sustainability strategy. With ESG interest growing every year in the business world, we understand it is partic-ularly important to reinforce the foundation of ESG, which is governance. To that end, we reflect our efforts to evolve corporate governance not only in our dialogue with stake-holders, including the capital markets, but also in appropri-ate responses to social demands related to governance, and analysis of the assessment of Board effectiveness, among other factors. What we have learned from these processes is reported to the management team and Board of Directors, whereupon, after conducting the necessary discussions, it has led to measures for improvement. Examples include a revision of the director tenure policy and the disclosure of information related to our integrated report. We are also reviewing the KPI related to executive remu-neration in order to strengthen the commitment from management to deliver sustainable profit growth for the JT Group, and to reflect a multifaceted performance scorecard using not only financial indicators, which measure current business performance, but non-financial indicators as well.Going forward, we will continue to enhance corporate gov-ernance based on dialogue with all our stakeholders, as laid out in our management principle of pursuing the 4S model.As for the environment, climate change is a pressing chal-lenge requiring worldwide attention. To further enhance our 010Japan Tobacco Inc.Integrated Report 2021011CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSAt a glanceThe JT Group is a leading global tobacco company operating in over 70 markets and our products are sold in over 130 markets. In addition to the tobacco business, we are developing pharmaceutical and processed food businesses.Revenue (2021)Number of employees (As of December 31, 2021)Processed foodbusiness 6.3%Others 0.1%Processed foodbusiness 8.8%Others 1.8%Global business foundationThe Group’s tobacco business has the third largest sales volume in the world* and includes three of the top ten global-selling brands in its product portfolio.The Group has a global manufacturing footprint and aims to manufacture quality tobacco products that secure consumers’ trust. As of the end of 2021, the Group operates six factories in Japan (four manufacturing tobacco and two tobacco-related factories), and 33 factories in 28 other countries (including tobacco-related factories). * Excluding China National Tobacco Corporation2,324.8 (JPY BN)55,381employeesLocation of Factories related to Tobacco Manufacturing(As of December 31, 2021)n Factories manufacturing finished goods n Other tobacco-related factoriesPharmaceuticalbusiness 3.5%Tobaccobusiness 90.1%Pharmaceuticalbusiness 2.4%Tobaccobusiness 87.0% Tobacco BusinessThe tobacco business, headquartered in Geneva, Switzerland since 2022, manufactures and offers tobacco products all over the world.Its key markets include Japan, the Philippines, Taiwan, Italy, Spain, the U.K., Romania, Russia, and Turkey, with leading brands in combustibles, such as Winston, Camel, MEVIUS and LD, as well as in RRP (Reduced-Risk Products), * such as Ploom and Logic.* RRP (Reduced-Risk Products): Products with the potential to reduce the risks associated with smoking. Pharmaceutical BusinessThe pharmaceutical business focuses on the R&D, manufacturing, and sale of prescrip-tion drugs, concentrating on three specific therapeutic areas: Cardiovascular, Renal and Metabolism (CVRM); immunology; and neuroscience. Its products include CORECTIM® Ointment 0.25% and CORECTIM® Ointment 0.5%, Riona® Tablets 250mg and ENAROY® Tablets 2 mg • 4 mg, among others. Processed Food BusinessThe processed food business handles the frozen and ambient food business, mainly for frozen noodles, packaged cooked rice, and frozen okonomiyaki (Japanese savory pan-cakes); the seasonings business, focusing on seasonings including yeast extracts; and the bakery business through bakery chain outlets, mainly in the Tokyo metropolitan area.Major products include Reito-Sanuki-Udon (frozen noodles), Takitate-Gohan (packaged cooked rice), and the and the HIMAX (yeast extract seasoning) in particular.SwitzerlandGermanySwedenRussiaRussiaPolandSerbiaRussiaUkraineRussiaCanary IslandsGreeceTurkeyRomaniaIranJordanKazakhstanBangladeshBangladesh MyanmarTaiwanPhilippinesIndonesiaEgyptSudanEthiopiaTanzaniaMalawiCanadaU.S.Dominican RepublicJapanBrazilFactories39 factoriesTobacco business Processed food business 5 factories*There are no factories in the pharmaceutical business.012Japan Tobacco Inc.Integrated Report 2021013CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERS(JPY BN)2,4001,8001,2006000(JPY BN)8004002000Key performance indicatorsFinancial performance reviewRevenue2,139.72,216.02,175.62,092.62,324.8JPY2,324.8BN11.1% YoY increaseDespite continued market share growth and positive price effects in the international tobacco business, consolidated revenue de-creased for two consecutive years through 2020, mainly as a result of negative foreign-exchange effects, growth in the Japanese RRP (Reduced-Risk Products) market and a continued downtrend in the Japanese market as a whole. In 2021, consolidated revenue grew 11.1% year on year to 2,324.8 billion yen, driven mainly by positive foreign exchange effects in addition to robust market-share growth and buoyant overall demand in the international tobacco business.Profit(JPY BN)400392.4385.7348.2338.5310.3JPY338.5BN9.1% YoY increaseProfit decreased from 2017 through 2020, mainly as a result of a decline in operating profit and increasing financial costs net of financial income. In 2021, however, profit grew 9.1% year on year to 338.5 billion yen by virtue of operating profit growth.2017201820192020202120172018201920202021Adjusted operating profitFree cash flowDividend per share22.9% YoY increase on constant FX basisJPY610.4BN (reported basis) 25.4% YoY increaseAdjusted operating profit on a reported basis declined in both 2019 20and 2020, mainly as a result of negative foreign-exchange effects in the international tobacco business and reduced revenue in the Japanese-domestic tobacco business. In 2021, adjusted operating profit increased 25.4% to 610.4 billion yen, boosted mainly by revenue growth and positive foreign-exchange effects in the inter-national tobacco business. AOP at constant FX grew 22.9% year on year to 598.4 billion yen.（%）3025151027.426.9585.3 595.5600+111.5598.4+12.0610.4515.923.7487.023.300.02017201820192020Businessmomentum2021 at constant FXFX2021調整後営業利益率(JPY)16012080400503.9482.0404.215015415414000.088.178.669.714063.9105.672.6JPY482.0BNJPY21.9BN YoY decrease2017201820192020202120172018201920202021配当性向（連結）JPY140Until 2019, we had been increasing our dividend per share every year. Based on the change in our shareholder returns policy, we paid total dividends of 140 yen per share for 2021.In terms of free cash flow, the cash-generating capacity of our businesses is stable. In 2021, free cash flow decreased 21.9 billion yen to 482.0 billion yen, largely because of non-recurrence of the cash inflow a year earlier from the sale of the former JT head office Please see at P.29 for details of our resource allocation policy, including our building.shareholder returns policy. （%）1007550250014Japan Tobacco Inc.Integrated Report 20210153002001000(JPY BN)6004503001500CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSKey performance indicatorsNon-financial performance review2021 sustainability highlightsWe continuously revisit the material issues of our Group, while striving to achieve our aspirational goals. Summarized here are some of our sustainability achievements and progress. It is paramount that we continue to monitor and report on our strategy, initiatives, goals, and progress. By assessing the impact, not only on our Group but on our value chain as whole, we wish to create shared value for our planet and the communities in which we operate.As a global organization, we recognize that we have a key role to play in reducing our environmental impact – not only in our own business operations, but across our value chain. We will continue to measure performance across a range of environmental topics and set ourselves targets along the way.JT Group environmental performance dataAmong other initiatives, we plan to achieve based on the JT Group Human Rights Policy. It 3313064,000We announced our commitment to To coincide with the 10th anniversary accelerate our efforts to reduce green-of the United Nations Guiding house gas (GHG) emissions across the entire value chain and achieve net zero GHG emissions by 2050. We aim to be carbon neutral for our own operations by 2030.Principles on Business and Human Rights, we have published our first Human Rights Report. The report explains our approach to human rights’ due diligence this by increasing the proportion of renewable also identifies nine salient human rights issues electricity that we use. and the steps we are taking to remedy them.4Read more on P. 76.4Read more on P. 73.Corporate governance is one of the key priorities of our Group and we work proactively to fulfill this requirement. In our latest Corporate Governance Report, we introduced a skills matrix for the Directors and Members of the Audit & Supervisory Board. For the sustainable growth of our Group, we are introducing an ESG-related index for director remuneration, starting from FY2022.In 2021, JTI received EY’s Global Equality Standard certificate, as one of the first multinational companies in the world. EY’s GES is one of the first worldwide Diversity & Inclusion (D&I) certifications measuring equal opportunities and equal pay in the workplace.4Read more on P. 68.GHG emissions Scope 1 and 2(CO2e thousand tons)GHG emissions Scope 3(CO2e thousand tons)7,3315,8125,473378378347359201920202021201920202021 Scope 1 Scope 2 Water withdrawal(Thousand m3)12,000Waste generated(Thousand tons)10,83510,77710,50010,69010,41110,2279,8561401341331341331271241,00075050025009,0006,0003,00008,0006,0002,0000160120804004Read more on P. 88.016Japan Tobacco Inc.20152016201720182019202020212015201620172018201920202021Integrated Report 2021017CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSVALUE CREATIONThe JT Group enhances corporate value by pro-viding a wide range of products and services that meet the needs of consumers and society. At the same time, the Group creates social value that contributes to the sustainable develop-ment of society.This section illustrates the value-creation pro-cess that the JT Group has been pursuing by enhancing the value chain based on strengths honed over its entire history. 020 Our history022 Our value creation process024 Our value chains018Japan Tobacco Inc.Integrated Report 2021019Our historyic growth and M&A.The JT Group has achieved sustainable growth by globalizing and diversifying its businesses through both organ-The three strengths underpinned by our history and accomplishmentsSolid financial baseSuperior brand equityDiverse workforce• Sustainable profit growth backed by combination of organic growth and M&A• Ability to generate stable cash flows underpinned by profit growth• High brand equity through continuous investment in MEVIUS, our leading brand in Japan, as well as in Winston, Camel, LD and other global brands acquired through M&A• Strong R&D and innovative product develop-ment capabilities• Corporate culture that respects diversi-ty and leverages it into value creation process• Group that maximizes synergies generated from diversityJPY338.5BN1949 Japan Tobacco and 1985 Japan Tobacco Inc. established1994 JT goes public on Tokyo Stock 2007 JT acquires Gallaher Group Plc (U.K.)2021 Ploom X (HTS) launchedSalt Public Corporation founded1985 Food and pharmaceutical businesses Exchange1957 HOPE launched1969 Seven Stars launched1977 MILD SEVEN launchedestablished1993 Central Pharmaceutical Research 1998 JT acquires majority stake in Torii Pharmaceutical Co., Ltd.Institute established1999 JT acquires RJR Nabisco Inc.’s non-U.S. 2008 JT acquires majority stake in Katokichi Co., Ltd. (currently TableMark Co., Ltd.) tobacco businessand Fuji Foods Corporation JT conducts tobacco business acquisi-2015 JT acquires E-Vapor company, Logic Technology Development LLC2016 JT acquires Natural American Spirit’s non-U.S. tobacco business2016 Ploom TECH (Infused*) launched 2016|2018tions, notably in the Philippines, Indonesia, Russia and Bangladesh 2019 Ploom TECH+ (Infused*) and Ploom S (HTS*) launched1999 JT acquires Asahi Kasei Corporation’s food business, including Asahi Foods and seven other subsidiaries2013 MILD SEVEN is renamed MEVIUS2022 JT starts new business operating model by combining former Japa-nese-domestic and International tobacco businesses1970s and earlierOrigins of the modern Japanese tobacco industryJapan Tobacco and Salt Public Corpora-tion, under the authority of the Ministry of Finance, lays the foundation of the Japanese tobacco industry.1985–Privatizing and creating the base of the current business portfolioThe public corporation privatizes under the name Japan Tobacco Inc., founding the tobacco, pharmaceutical and processed food businesses, which persist to this day.1994–Stock listing and challenges for globalizationJT goes public aiming to be a multilater-al and international company with tobacco business at its core.Through M&A, JT obtains the world’s leading brands and a global business foundation and grows to become the third largest global tobacco company.2007–Strengthening our position as a global tobacco companyBy accelerating our global expansion, JT obtains a diverse workforce and foster its financial base.020Japan Tobacco Inc.2015–Providing new value by address-ing increasingly diverse consumer needs and preferencesJT strengthens the international tobacco business through both geographical expansion driven by M&A and organic growth in the existing markets, and provides a wide range of product choic-es, including RRP (Reduced-Risk Prod-ucts).2021–Redefining our investment prioritization among tobacco categories and strengthening business operating modelJT allocates management resources especially towards HTS* and Combusti-bles to strengthen its competitiveness and profitability aiming for its sustain-able growth. By utilizing global resourc-es at large with the combined tobacco business, JT endeavors to globally provide products and services exceed-ing consumer needs and preferences.* Infused: infused tobacco capsules, HTS: heated tobacco sticksIntegrated Report 2021021ProfitCORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSOur value creation processOur management principle pursues the 4S model. This principle guides our efforts to achieve our vision by enhancing corporate value and creating social value. We provide a wide range of products and services through business activities leveraging our three strengths: a solid financial base, superior brand equity and a diverse workforce.Our core capitalOur business activities and growth strategiesOur products and servicesThe value we createOur managementprincipleTo pursue the 4S modelWe strive to fulfill our responsibilities to our valued consumers, shareholders, employees and the wider society, carefully considering the respective interests of these four key stakeholder groups, continuously working to exceed their expectations.ShareholdersConsumersEmployeesSocietyFinancial capitalSustainable profit growth and stable cash flows are backed by a combination of organic growth and M&A.• Adjusted operating profit at constant FX . . . . . . . . . ¥598.4 billion (+22.9% year on year change)• Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥2,886.1 billion• FCF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥482.0 billion (2021)Intellectual capitalStrong R&D CapabilitiesWe possess a diverse portfolio of competitive brands and robust brand equity rooted in our ability to deliver high-quality, innovative products.• R&D expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥65.0 billion (2021) (Tobacco Science Research Center, Central Pharmaceutical Research Institute, D-LAB, etc.)• We own three of the top 10 highest-selling combustible brands in the world.Human capitalOur corporate culture respects diverse values and generates synergy from a diverse workforce.• Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,381• Employee nationalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over 100• Certified as a Top Employer in . . . . . . . . . . . . . . . . . 66 countries (2021)Social and relationship capitalWe have global business operations and a wide collaborative network spanning the value chain.• Markets where our products are sold . . . . . . . . . . . . . . . . . Over 130• Markets where we operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over 70• Directly contracted tobacco leaf growers and tobacco leaf merchants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over 76,000 (2021)Manufacturing capitalOur optimal manufacturing system and active capital investment ensure superior quality and productivity. Our system provides markets with products in an efficient and timely manner.• Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . ¥100.9 billion (2021)• Tobacco manufacturing bases. . . . . . . 39 factories (29 countries)• Processed food manufacturing bases . . . . . . . . . . . . . . . . . 28 factories (all factories have achieved ISO22000 or FSSC22000 certification except one that began operation in 2020)Natural capitalThe natural environment is vital to our sustainable growth.• Water resources . . . 9,856 thousand m3 of water withdrawal (2021)• Forest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Planted 9 million treesOur measures to improve our environmental impact P. 76Corporate governance supporting all of these processes P. 88The external environment surrounding the JT Group P. 80*Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country. Business strategyAchieve quality top-line growthStrengthen cost competitivenessEnhance business foundationDR &Three strengths drivingour global growthmentProcureSolidfinancial baseDistribution/SalesSuperiorbrand equityDiverseworkforcegnirutcManufaMarketingSustainability StrategyThe JT Group’s three absolute requirementsRespect for human rightsAn improved social and environmental impactGood governance and business standardsTobacco BusinessExpanding our product portfolio to satisfy increasingly diverse consumer* needs and preferencesCorporate valueAchieving consolidated profit targetsMid to high single digit annual average growth of adjusted operating profit at constant FX over the mid to long termImproving shareholder returnsBy realizing sustainable profit growth over the mid to long term through business investments• Combustibles – Cigarettes – Fine cut tobacco (FCT)• Reduced-Risk Products (RRP) – Heated tobacco products (HTP) – E-Vapor, etc.Pharmaceutical BusinessDeveloping new, original drugs to save people around the world from disease• Three key therapeutic areas – Cardiovascular, Renal and Metabolism (CVRM) – Immunology – NeuroscienceProcessed Food BusinessRealizing the future of dining in Japan through businesses that support our diet• Frozen and ambient foods• Seasonings• Bakery productsSocial valueContributing to the sustainable development of society through our business activitiesWe contribute most significantly to the following nine SDGs by achieving specific targets in each business’ s focus areas, such as providing products and services that exceed consumer expectations, investing in our people and building a sustainable supply chain.VISIONTo continue to be a growing global company that provides diverse value, unique to the JT Group.022Japan Tobacco Inc.Integrated Report 2021023CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSOur value chainsssenisuBoccaboT ssenisuB lacituecamrahP ssenisuBdooFdessecorP StrengthsInitiatives to maintain/upgrade strengthsPriorities and actions to achieve themInitiatives tomaintain/upgradestrengthsPriorities and actions to address themStrengthsInitiatives to maintain/ upgrade strengthsPriorities and actions to achieve themR&DProcurementManufacturingMarketingDistribution/Sales• 5 R&D centers covering scientific research, technology & product development • Consumer-driven R&D focusing on what matters most to consumers*• 1,364 IP filings, 90+ innovation partnerships with third-party players• Leaf supply diversified across vertically integrated operations and third parties• Reliability of leaf supply regardless of weather or market fluctuations• Full compliance with regulations; assurance of leaf integrity and origin• 39 factories across our footprint, out of which six produce RRP• State-of-the-art equipment and manufactur-ing processes• Industry-leading quality standards for all our products• Strong brand equity, notably Winston, Camel, MEVIUS & LD• Consumers* at center of our offerings: we provide freedom of choice and superior quality• Full compliance with local regulation in all countries where we operate• Sales in 130+ markets• Tailored RTC* on market-by-market basis• Motivated salesforce with strong ties with trade*Route to consumer• Moving from “site-based” teams to “outcome-based” global teams• Enhancing cascading in R&D of consumers* related data and analytics• Protecting innovation with sound Intellectual Property (IP) strat-egy• Continuously balancing risk mitigation and sourcing flexibility • Advanced planning and inventory management for uninterrupt-ed manufacturing• Increasing emphasis on social and environmental sustainability of supply• Constantly reviewing and optimizing our manufacturing footprint• Ongoing capital expenditures to increase our RRP production capacity • Kaizen approach for all our manufacturing processes• Continued investments behind our GFB and in building Ploom brand• Nurturing consumer-centricity mindset across entire organization• Additional internal initiatives as self-regulation and Code of Conduct• Regularly assessing entries in new markets / chan-nels considering present and future profitability• Optimizing RTC* based on evolving environment• Strengthening relationships with key distributors and tobacconists*Route to consumer• As RRP (Reduced-Risk Products) industry innovation cycles get shorter, JTG is implementing initiatives to accelerate the development of new RRP platforms• As JTG exposure to RRP grows, we are adapting our de-vice-procurement strategy to be more resilient in case of disruptions• Given growing importance, expanding our capabilities in areas of digital, advanced analytics and B2C• Looking to enhance our e-commerce capabilities in markets where it is legal for nicotine and tobacco productsStrengths• Develop of innovative drugs• Conduct responsible detailing activities• Improving R&D efficiency through concentration of resources in targeted disease domains• Promoting efficient and expeditious clinical development through coordination among domestic and foreign R&D sites • Proactively pursuing opportunities to out- and in-license compounds• Formulated internal standards based on guidelines on ethical drug detailing activity issued by Ministry of Health, Labour and Welfare• Thoroughly complying with said standards through training of Torii Pharmaceutical’s medical sales reps• To support the Paris Agreement on global climate change, we are accelerating the pace of our environmental impact reduction initiatives• Ability to stably manufacture high-quality pharmaceuticals• Formulated guidelines to verify conformity between drugs’ approved specifications and actual manufacturing processes• Continuing annual inspections of contract manufacturing plants based on guidelines• Add more research themes and expedite progress• Develop proprietary drug-discovery technologies• Continuously monitor in compliance with laws/regulations• Continue above initiative• Proprietary yeast, processing and freezing technologies• Ability to develop high-value-added products that meet consumer needs and preferences• Stable, cost-competitive sourcing of high-quality ingredients (extensive supplier network and inspection program)• Management systems that ensure stable, efficient (low-cost) manufacturing of high-quality food products based on food safety management• Sales force capable of proposing products that meet consumer needs with an extensive product lineup• Develop new products tailored to consumer needs based on market/competition research and analysis• Develop new technologies and production methods through external collaborations• Verifying ingredients’ safety based on quality specification certifications submitted by suppliers• Monitoring main ingredients’ pesticide residue content and periodically inspecting ingredient production plants in accord with applicable laws/regulations and our own standards• Inspecting source farms’ soil and water quality, verifying crop conditions, checking pesticide management practices, and inspecting livestock and fish farms• Mandatory certification of compliance with ISO 22000 or FSSC 22000 international food safety standard across all JT-affiliated plants and contract manufacturing plants globally• Verifying end products’ compliance with pesti-cide content and other safety standards through monitoring inspections• Reducing contamination risk by establishing and complying with food defense guidelines• Develop high-value-added products that meet consumer needs and preferences – Develop new products that take into account environmental impact and sustainability• Strengthen supply chain to enable sourcing of safe, high-quality ingredients – Building a sustainable supply chain by fostering transparent relationships with suppliers and taking human rights and environment into account when sourcing ingredients• Manufacture safe, high-quality food products – Building optimal production systems that ensure efficiency and product quality • Install energy-efficient equipment to reduce environmental impacts – Pursuing transition to clean energy• Propose products and promote sales strategies in response to increasingly diverse consumer needs and trends – Proposing products personalized to consumers’ individual preferences and lifestyles*Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country.024Japan Tobacco Inc.• Top-market-share* products/brands (Sanuki Udon, Gottsu-umai) *Fuji Keizai Co., Ltd. Foodstuff Marketing Handbook 2022: Vol. 2, 3 2020 results• Market insight based on communication with consumers (identification of consumers’ increasingly diverse needs/preferences, e.g. by using fan sites.)• Conducting consumer-centric market analysis to develop product proposals that add new value• Building more brand equity through product line expansion and effective sales promotion• Stepping up marketing/sales activities that prioritize highly-profitable products• Expanding in-store product selection and gaining preferential display locations through aggressive sales approach targeted primarily at supermarkets and convenience stores• Strengthening communication with consumers through online disclosure of product information and labeling of products with production location, main ingredients’ place of origin, and contact information for consumer inquiries/feedback • Improving safety visibility through traceability of inspection/audit results across the entire value chain from raw material sourcing through production, processing, distribution and sales• Strengthen sales capabilities and disclose infor-mation to reassure consumers – Disclosing more information, e.g. on website and product packaging• Stably supply consumers – Building an optimal logistics network that maximal-ly utilizes in-house logistics (in response to Japa-nese government’s logistics-reform initiative)Integrated Report 2021025CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSBUSINESS and SUSTAINABILITYThis section covers the JT Group’s mid- to long-term business and sustainability strategies and initiatives in that context. Here our CFO and CSO explain Group cap-ital policy, financial strategy and the principles for sus-tainability that together sustain Group value creation.028 Business Plan 2022030 Sustainability034 Message from the CFO038 Message from the CSO040 060 064 Overview of tobacco business and its sustain-ability initiatives• Products & services• Building sustainable supply chains• Optimizing the regulatory environment and tackling illegal trade Overview of pharmaceutical business and its sustainability initiatives Overview of processed food business and its sustainability initiatives068 Investing in people• Health and safety• Respect for human rights• Improving our social impact• Improving our environmental impact072 Three absolute requirements for sustainability 080 Risk factors084 Regulation and key laws087 Litigation026Japan Tobacco Inc.Integrated Report 2021027Business Plan 2022Every year the JT Group publishes a three-year rolling business plan, reflecting the changing operating environ-ment, including economic trends, geopolitical risks and the competitive landscape. We will achieve sustainable profit growth by investing in our businesses, maximally leveraging our resources on a Group-wide scale and transforming ourselves even in a drastically changing operating environment.* The content of this section is based on the information disclosed in February 2022.Roles and targets of each businessTobacco BusinessThe tobacco business, the core and driver of the JT Group’s profit growth, aims to grow at a mid to high single digit CAGR over the mid to long term of AOP at constant FX.Operating environment outlook 2022-2024Uncertainties are expected to increase due to COVID-19, changes in consumer behavior caused by the pandemic and risks of global economic stagnation, in addition to changes in international political conditions, exchange rate fluctua-tions, and other factors.In accordance, there is a necessity to:• Monitor changes in the business environment such as pan-demic-driven governmental tax increases to secure finan-cial resources, and tighter, more complex regulations• Consider uncertain geopolitical risks, such as economic sanctions or political unrest in some marketsRRP (Reduced-Risk Products)– Continued demand increase especially for HTS (heated – Intensified competition and regulatory developments in – Uncertainty in device procurement due to global semi-tobacco sticks)leading marketsconductor shortageCombustibles– Continued downtrading and industry volume decrease in leading markets– Profit pool likely to expand through pricing opportunitiesGroup profit targetMid- to long-term targetConsolidated adjusted operating profit (AOP) at constant FX growth rate of mid to high single digitOutlook 2022-2024Annual average growth of a mid single digit rate despite significant investments towards RRPSupplemental note: Why we use adjusted operating profit at constant FX as the primary index for performance management• Adjusted operating profit is used to show, in a readily understandable way, our business performance for the cur-rent fiscal year, excluding any effects of amortization costs related to acquisition(s) in the previous years.preciation costs, which vary with the business investment in a given year.• In order to more clearly illustrate the strength of our busi-nesses themselves, we adopt the figures at constant FX, • Previously, adjusted EBITDA had been used as an index for performance management, but to better manage business thereby disregarding possible exchange rate fluctuations which can move upward or downward significantly over investment and returns, starting with the 2014 Business the short term due to factors not directly related to our Plan it was replaced with adjusted operating profit, as the businesses, such as geopolitical risks.latter does not require the addition of amortization and de-Strategy of Tobacco Business• Prioritize investment of management resources towards HTS and combustibles – Combustibles to remain the largest category over the coming decade – In RRP, HTS to be highest potential for sustainable profit growth• Strive to fulfill following goals by the end of 2027 (when the HTS segment is estimated to represent 15% – 20%*1 of the total tobacco industry): – Drive segment share for HTS in the key HTS markets*2 to the mid-teens level – Reach break-even*3 in the RRP category• Enhance investment in the HTS category to win more support from consumers*4 to: – Expand geographically (e.g., Russia and Europe) – Continue to improve products – Reinforce our strategic capabilitiesPlease refer to Overview of tobacco business and its sustainability initiatives (P. 40) for more details.*1 On a basis of revenue, excluding revenue in China*2 Japan, Russia, U.K., Italy*3 Global basis (assumes existing geographic footprint and the current expansion plan)*4 Adult consumers. Minimum legal age for smoking varies in accordance with the legislation in each country. Pharmaceutical Business/Processed Food Business The pharmaceutical and processed food businesses aim to complement the JT Group’s profit growth• Pharmaceutical business: Focus on R&D investments toward next-generation strategic prod-ucts and maximize the value of each product• Processed food business: Ensure sustainable profit growth through quality top-line growthResource allocation policyResource allocation policy based on the 4S model• Prioritize business investments*1 for sustainable profit growth in the mid to long term• Strike a balance between profit growth through business investments and shareholder returnShareholder return policy – Aim to enhance shareholder returns by realizing the Group’s mid- to long-term profit growth, while maintaining a strong financial base*2 – Target a dividend payout ratio of about 75%,*3 a competitive level*4 in the capital markets – Consider implementing a share buy-back program, mainly taking into account the Group’s financial outlook of the respective year and mid-term capital needs*1 Investment towards the growth of the tobacco business is our highest priority. Pursue growth of AOP at constant FX through quality top-line growth*2 The Group will maintain a strong financial base that secures stability in case of changes in business envi-ronment such as economic crises and flexibility enabling expeditious responses to business investment opportunities*3 To be in the range of approximately ±5%*4 We monitor the shareholder return trends of Fast-Moving Consumer Goods companies which have a stakeholder model similar to our 4S model and have realized strong business growth028Japan Tobacco Inc.Integrated Report 2021029CORPORATE PROFILEVALUE CREATIONGOVERNANCEBUSINESS and SUSTAINABILITYFINANCIAL INFORMATION / OTHERSSustainabilityOur material issuesTo help the JT Group to grow, and to build a sustainable future as a member of the society in which we operate, we have identified a list of high-priority material issues. Our materiality is based on the JT Group’s management principle, the 4S model. In 2015, we performed a materiality assessment covering the entire Group for the first time. We selected our material issues through interviews with our internal and external stakeholders.Since we first selected our original material issues, exter- nal circumstances and the business environment in which we operate have changed. In 2021, we began updating the Group’s materiality framework by revisiting and identifying our material issues. With this in mind, external and internal stakeholders are being consulted to prioritize our new materiality topics. In updating our materiality, there are several issues we are paying particular attention to: the rise and growth of RRP (Reduced-Risk products); the increasing global awareness to combat climate change; impacts of the COVID-19 pandemic, the progress of information technology; greater diversity in the workplace; regulatory trends such as the revision of Japan’s Corporate Governance Code, to name but a few. We also recognize the importance of creating new shared value, together with our stakeholders. Taking these factors into consideration, as well as the ESG issues facing our Group, we will set out our new materiality.The JT Group’s materialityhgHiimudeMlsredohekats lanretxeot ecnatropm IEnvironmentalimpacts ofproductsAnti-competitivebehaviorWorkplacehealth and safetyTax practicesInformationsecurityBeing aresponsibleemployerCollaborationsandpartnershipsContributionsto societyCorporategovernance andtransparencyProduct safetyand productresponsibilityProductinnovation andintellectualpropertyResponsiblemarketingAnti-briberyand corruptionEmployeedevelopmentand talentmanagementPolitical andregulatorydecision-makingprocessesLaws andregulationsSupply chainmanagementEnvironmentRespectinghuman rightsLitigationIllegal tradeEquality anddiversity inthe workplaceMediumHighImportance to the JT GroupValue chain boundariesOur supply chainOur CompanyOur customers and consumersOverview of the sustainability strategyThe JT Group’s sustainability strategy is based on the 4S model, our management principle, and encompasses our materiality analysis. The foundations of our sustainability strategy, which apply across the Group, are outlined below. Three absolute requirements for sustainabilityIn 2021, we updated our JT Corporate Governance Policy and the Group Environment Plan 2030, which includes a commitment for a net zero target.Respect for human rightsWe are committed to respecting An improved social and environmental impactWe are committed to protecting the Good governance and business standardsWe are committed to promoting human righ