Leaf supply chain - Raw material sourcing

Tobacco leaf sourcing

Tobacco leaf sourcing is a key part of our supply chain, and a critical component of future business growth. We work closely with our directly contracted growers and third-party leaf merchants to enhance security of supply and leaf provenance. This provides greater flexibility when responding to changing market requirements.

In 2020, we worked with more than 76,000 directly contracted tobacco leaf growers in Bangladesh, Brazil, Ethiopia, Japan, Malawi, Serbia, Tanzania, Turkey, the U.S., and Zambia. Contracting leaf growers directly enables us to produce a customized crop, while improving growers’ productivity, leaf quality and leaf integrity. The direct contracting model also allows us to maintain verifiable provenance and traceability of leaf supply.

How do we work with leaf merchants?

Every year, we purchase approximately 50% of our planned leaf requirements from leaf merchants. The volume of leaf sourced from each established sourcing country varies from year to year, depending on the quality and volumes required. In most cases, our leaf merchants source the tobacco leaf directly from contracted growers. This means that there is a direct contract between the leaf merchants and the growers, and that the grower receives advice on crop management and good labor practices from the leaf merchant.

In some countries, leaf can be sourced in a different way, for example at auction. This can make it challenging to determine the provenance of the leaf and implement Agricultural Labor Practices. In these cases, we work with the leaf merchants and other stakeholders (e.g. the Indian Tobacco Board in India) to find a way to implement a robust and relevant supply chain due diligence process. Although we source leaf from more than 30 countries, the vast majority still comes from eight key global suppliers. We work closely with these suppliers to ensure good practices.

Sustainable agriculture

As well as securing the long-term supply of quality tobacco leaf for our business, we want to create shared value for both our growers and our business. We do this by providing extension services, including crop inputs in specific origins aimed at increasing grower productivity, while trying to improve our social and environmental impact. By enabling growers to become more productive and efficient in the way they grow, harvest, and cure tobacco leaf, we support them in becoming more profitable and to use resources in a more responsible way.

All of our leaf suppliers are expected to follow Good Agricultural Practices (GAP). The concept of GAP is to produce a quality crop while protecting, sustaining, or enhancing the environment with regard to soil, water, air, and animal and plant life.

In addition to GAP, the majority of our directly contracted growers are also required to follow our Minimum Agronomic Standards (MAS). These growers are contracted to grow tobacco under our stewardship. In return, they receive credit for prescribed crop inputs as well as dedicated extension service provision from our Agronomy Technicians. This support includes recommendations delivered through a scheduled visitation program for the duration of the crop cycle. Contracted large-scale commercial growers do not require dedicated extension service provision from us.

These farming practices are not limited to tobacco. We encourage growers to use seasonal crop rotations, i.e. growing complimentary crops such as maize, groundnuts, or soya on the same land in alternate seasons. The benefits of this are extra income, improved food security, and soil conservation.

We continually look to improve our understanding and methods of tobacco farming and have made significant investments in this regard. We have Agronomy Development & Extension Training (ADET) facilities in Brazil and Zambia that explore ways of improving productivity and leaf quality in tobacco farming. Both provide relevant, applied research and development activities, such as trials on topics like crop management, soil fertility, improvements in curing barn efficiency, production cost savings, mechanization, and agroforestry. Validated trial outcomes are passed on to growers through our extension service provision. ADET facilitates the provision of training and extension services for our growers in order to promote optimal grower productivity, quality, and leaf production integrity. Our investment in research and development also involves partnering with leading international academic institutions to develop innovative new ways of producing tobacco.

Agricultural Labor Practices (ALP) and Leaf Supply Chain Due Diligence (SCDD)

Our Agricultural Labor Practices (ALP) are based on the International Labour Organization’s conventions and recommendations. The program consists of three pillars: tackling child labor, respect for the rights of workers, and ensuring workplace health and safety.

As part of our continuous improvement approach, the ALP program allows us and our suppliers to identify potential labor challenges on tobacco farms and help improve labor practices on the tobacco farm. Being an integral part of the supply chain due diligence process, it also contributes to the social aspects of grower communities and supports sustainable agriculture overall. Whether we source tobacco directly from growers or through tobacco leaf merchants, our contracted suppliers are committed to implementing our ALP.

Our Leaf Supply Chain Due Diligence process (SCDD) is based on a five-step framework - Identify, Prioritize, Respond, Measure, and Communicate and Report, while our ALP program helps us to identify issues on tobacco farms on a daily basis. This process follows the Guidance on Responsible Agricultural Supply Chains provided by the Organization for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization (FAO), as well as recommendations by the International Labour Organization. It also follows the UN Guiding Principles for Business and Human Rights.

Due Diligence
  • Leaf Production Technicians

    Although 2020 was a very challenging year, we continued to roll out our leaf supply chain due diligence program. For example, we undertook a grower livelihoods assessment in Zambia; continued working with our suppliers in India who have formed a sustainability committee to drive industry change; and onboarded new suppliers to our online reporting platform. At a global sectorial level, we redeveloped a due diligence platform with other manufacturers, leaf merchants, subject matter experts and service providers. This allowed us to create a revised Sustainable Tobacco Program based on a five-step framework – Identify, Prioritize, Respond, Measure, and Communicate and Report. We strongly believe that this will drive positive industry change and better protect rightsholders.

    Vuk Pribic,
    Director, Leaf Supply Chain Due Diligence, JT International

  • Leaf Production Technicians

    ALP forms part of Agronomy Technicians’ farm visits. The technicians visit the farm of every single contracted grower several times per year, according to clear visitation plans with assigned farms. For example, during the last crop season, our Agronomy Technicians made more than 340,000 visits to our directly contracted growers.

During these visits, the Agronomy Technicians provide technical advice on crop management and discuss good labor practices. In cases where they identify labor-related issues, they report their observations directly into our dedicated ERP system. Depending on the nature of the issue, the Agronomy Technicians may also provide recommendations to the grower.

These observations are then analyzed and prioritized by the local country management. This enables the selection of the right improvement measures to address root causes and respond to the adverse impacts in the most appropriate way. We track the effectiveness of the response using KPIs, internal evaluation, assessments, and on-site investigations. We also consult relevant stakeholders, such as government authorities, civil society, members of affected communities, workers’ organizations and workers.

Our main objective at present is to align all our processes with the five-step framework. To ensure a streamlined and consistent approach, we aim to find synergies between our supply chain due diligence and the ALP program with the Sustainable Tobacco Program (STP).

We are facing a number of complex challenges. These include issues that are difficult for Agronomy Technicians to observe, such as how to identify discrimination in smallholder farming, or how to optimize our process to deal with an extreme breach (if one is found) to ensure that both potential victims and rapporteurs are protected.

Extreme breaches include the worst violations of workers’ rights, such as slavery, forced labor, human trafficking, violence, or severe physical, mental, or sexual abuse. These can be difficult for an Agronomy Technician to identify and address – especially if the issue is associated with criminal activity. Responding to extreme breaches therefore requires care and, in many cases, support from the police and/or other authorities or non-governmental organizations.

It is essential to have a management process setting out how to respond to an extreme breach, to ensure that action is taken promptly and appropriately when indicators are observed. We expect each supplier to have a management process incorporating three elements: protection for the victim and rapporteur, a clear escalation route, timeline, and remediation plan, as well as access to specialist support.

Read more on ALP in our booklet

Achieving Reduction of Child Labor in Support of Education (ARISE)

Our flagship program ARISE – Achieving Reduction of Child Labor in Support of Education – has been committed to tackling child labor in our tobacco growing communities since 2011. The program is forging real sustainable change by implementing robust solutions to prevent child labor.

In 2020, we restructured ARISE and set up a new advisory committee to ensure the smooth implementation of the program around the world.

Representatives in the countries where we grow our tobacco leaves are now responsible for managing local partnerships, assessing projects, and implementing local activities. This approach allows us to maximize efficiency, strengthen our relationship with growers, and harmonize the program with other relevant community projects.

The ARISE Advisory Committee consists of relevant stakeholders in our international tobacco business, external partners, and other experts. Its purpose is to ensure the implementation and development of the program, by identifying issues relating to child labor in the leaf supply chain and other operations.

Moving forward, we will embed the ARISE program within the ‘Respond’ element of our SCDD process Identify, Prioritize, Respond, Measure, Communicate and Report. We will also integrate data requirements for child labor into our existing leaf monitoring system, Leaf Point.

Read more about the ARISE program.

External recognition

We were categorized as a ‘leader’ by the Global Child Forum in their latest study, conducted in collaboration with the Boston Consulting Group. This benchmark report analyzes just under 700 of the world’s largest companies and how they are safeguarding children’s rights as part of their business value chain.

We are proud that the study recognizes the concrete actions we have taken to embed respect for children’s rights in our supply chain, notably through our flagship child labor elimination program ARISE.

ALP progress update

Target

AGRICULTURAL LABOR PRACTICES

We will implement our Agricultural Labor Practices (ALP) program in all sourcing countries by 2025.

Progress


Towards the 2025 ALP target 2020 Progress
100% of our supplying entities to report on ALP 87% of our supplying entities reported against ALP
100% of our growers to be covered by ALP 58% of our directly contracted growers and 92% of our leaf merchants' growers were covered by ALP
100% of tobacco leaf volumes to be covered by ALP 76% of our volumes were covered by ALP

We made significant progress over the last few years. Here are a few examples of how we did it:

  • Reporting improvements
    In 2020, we launched a new online reporting platform for ALP. This enables us to process data faster and with greater accuracy.

  • More suppliers reporting
    We have onboarded more leaf merchants to ALP reports. Together with our activities in countries such as Bangladesh, Ethiopia, India, and Indonesia, this brings us closer to reaching our ALP target: to implement ALP in all sourcing countries by 2025.

  • Sustainable Tobacco Program (STP)
    Our international tobacco business is one of seven global manufacturers participating in the STP Steering Committee. STP is a risk-based program, a collaborative platform to enable continuous improvement in relation to supply chain due diligence. It is also an impact driven program. The aim is to improve the sectors environmental and social footprints, to contribute towards the United Nations Sustainable Development Goals (SDGs) and to enable transparent communication of responsible practices across the supply chain. Since 2019, we have been working with leaf merchants, external subject matter experts, and various organizations and service providers to further develop STP. One of the key themes is “Human and Labor Rights”. We completed pilot self-assessments on this subject in 2020. In 2021, STP is planning its first on-site reviews.

  • Progress in Indonesia
    By 2017, all of the leaf merchants we were purchasing leaf from in Indonesia were reporting on ALP, with almost 100% of our grower base included in our leaf merchants ALP observations.
    In 2018, we acquired new business in Indonesia and extended our supplier base, not only for leaf but also for Rajangan tobacco and cloves. We are planning to carry out a leaf supply chain impact assessment in 2021. This was initially scheduled for September 2020 and has been postponed due to COVID-19. We have also onboarded new suppliers who historically have not reported data to us.

  • Progress in India
    Following a Human Rights impact assessment in India, where more than 500 people in the tobacco sector were interviewed (led by consultancy company “twentyfifty Ltd.” ), leaf merchants have established a Sustainability Committee, under the Indian Tobacco Association, to drive change on a sectorial level against mapped priorities. We are working in collaboration with our leaf merchants and other manufacturers in this process.

  • ALP roll-out in Ethiopia and Bangladesh
    Next, we are planning to implement ALP in Ethiopia and Bangladesh. In Bangladesh, we have already begun the impact assessment that will lead to an ALP pilot in 2021.

Historical data

Our target is to implement ALP in all sourcing countries by 2025. In this journey, the sourcing base is changing year on year due to new acquisitions or closures, demand to supply impact, climate change, etc. In spite of these changes, we have made progress in 2020, and we have a clear plan to further continue the progress in 2021: we will continue onboarding new suppliers, start implementing ALP in the newly acquired businesses in Ethiopia and Bangladesh, continue supply chain due diligence process in India… A credible, impactful implementation of our programs and processes requires time and efforts, and we accept no compromises.

Historical data

Find out more about how we plan to achieve this target, below.

100% of our supplying entities to report on ALP

Progress so far: of all the entities that provided us with tobacco leaf, either directly or through leaf merchants, 87% reported against ALP in 2020.

Supplier Entities Reporting

100% of our growers to be covered by ALP

Progress so far: in 2020, 58% of our directly contracted growers and 92% of the growers supplying through our leaf merchants were covered by ALP. The decrease for the growers supplying through our leaf merchants from 98% in 2019 to 92% in 2020 is due to new suppliers reporting, who have not implemented ALP yet.

Growers covered by ALP

100% of tobacco leaf volumes to be covered by ALP

Progress so far: In 2020, 76% of our volumes were covered by ALP.

We have made several new acquisitions in recent years, including in Ethiopia, Bangladesh, Indonesia, and the Philippines. These will be approached on a case-by-case basis, as we need to understand the local market, culture, and challenges before putting in place the necessary programs.

We will implement our ALP program in both Bangladesh and Ethiopia towards the end of 2021, following the completion of a supply chain impact assessment in 2019 (Ethiopia) and 2020 (Bangladesh) as a part of our supply chain due diligence process.

In 2020 we also onboarded to ALP reporting new suppliers in Indonesia.

Volumes covered

Implementation of Agricultural Labor Practices in Japan

We have a long-standing relationship with growers in Japan. Following a 2017 pilot study, the Agricultural Labor Practices program was fully implemented in 2018. As a result, we carried out farm visits and questionnaires to address labor issues on tobacco farms. Throughout 2019, our JT Agronomy Technicians continued to meet growers to provide feedback and offer advice.

In 2020, we also carried out customized surveys for different production regions. Based on our findings and observations, we will continue to make improvements.

Our farm practices in Japan

  • JT Farm

    The purpose of the JT Farm is to increase growers' productivity by developing new, more efficient cultivation methods, or by establishing cultivation methods for new varieties.

    Since 2019, we have also been developing a driverless trial vehicle to support growers in applying Crop Protection Agent and transporting tobacco leaf in the field.

    JT Farm is currently assessing the productivity of our cultivation methods for new varieties in Japan’s climatic conditions and gathering samples for testing purposes. We hope to expand the new varieties to production areas as soon as possible.

  • Enhanced curing and baling

    We are implementing a new curing process for burley tobacco at present, which can reduce working hours by 15%. This method also helps to prevent the contamination of non-tobacco related materials during green leaf baling. By the end of 2020, 6% of burley tobacco growers had adopted this new process. We will continue to scale up this practice in 2021 and beyond.

Collaboration with growers for sustainable leaf production in Japan

In Japan, the number of tobacco growers and the land dedicated to tobacco cultivation have been shrinking. There are various reasons for this, including older generations going into retirement, younger generations choosing to pursue less physically demanding jobs, and a lack of progress in farming methods. As a result, many growers feel anxious about the future of their agricultural activities and are investing less in tobacco leaf production.

In 2019, Japan Tobacco and Japan Tobacco Growers’ Association discussed various new initiatives to ensure the sustainability of tobacco leaf sourcing and meet the market’s needs. Launched in 2020, these initiatives included the provision of tailor-made support for individual farms, and gathering and sharing the best practices of more experienced growers.

We hope that these activities will help growers to implement more efficient production methods, which in turn will strengthen the foundations of their operations and secure a more sustainable future for tobacco leaf production in Japan.

Supporting and communicating with growers in 2020

When COVID-19 struck in 2020, we quickly had to find alternatives to our usual practice of visiting growers at regular intervals. Here are a few examples of how we adapted:

  • Where practical, our field Agronomy Technicians provided growers with technical support via phone or video call, instead of face-to-face.
  • Our Agronomy Technicians also helped to raise awareness among growers of COVID-19 secure working practices, such as self-isolation, hand washing, and social distancing.
  • In our international tobacco business, we launched a new online tool for processing grower contracts remotely, and supported growers with marketing.
  • We helped to print and distribute COVID-19 educational materials in tobacco-growing communities.

Where appropriate, we did continue to visit our growers in person, following all of the relevant health and safety guidelines set out by the World Health Organization (WHO) – for example by wearing masks, using hand sanitizer, and keeping a safe social distance. We also took additional safety measures, such as installing partitions and checking visitors’ temperatures at our leaf buying stations in Japan, and strictly managing grower movement and attendance at all our buying stations.

Protecting our employees and their families, our tobacco growers and their communities will always be one of our top priorities We will continue to make every effort to sensitize communities to COVID-19 preventive measures, working in partnership with local governments and other organizations.

We engaged with our leaf merchants throughout 2020 to better understand how they are addressing COVID-19 related challenges, and how they are supporting their growers, communities and employees. We held online meetings with our key suppliers and received their feedback on concrete actions and plans. In our regular ALP/SCDD reporting we included a separate section dedicated solely to COVID-19 challenges and efforts, and we shared a summary of best practices with all of our leaf merchants.

Engaging with our stakeholders

Working in collaboration with internal and external stakeholders has been key to the progress and success of the Agricultural Labor Practices program.

Our relationships with directly contracted growers produce tangible results, thanks to regular farm visits, dialogue, and training. Local and global meetings with leaf merchants enable us to identify where additional training, mechanisms, and processes are needed to manage labor risks. Engaging with local government agencies in the countries where we operate enables us to address fair and safe labor conditions in specific locations. For example, we have been successfully engaging with the Indian Tobacco Board to make progress in the area of labor rights in India.

Our international tobacco business is an active member of the Sustainable Tobacco Program (STP) and chair of the STP Steering Committee, consisting of industry peers. STP is an industry-wide platform enabling businesses to collaborate on human rights, environmental issues, and other sustainability challenges, and to drive sustainable agriculture through a continuous improvement process. 2019 was a year of reform for STP, as it was restructured around the five-step framework: Identify, Prioritize, Respond, Measure, and Communicate and Report. The aim of this change is to put in place a robust supply chain due diligence process with a focus on impact.

In 2018, we became part of the pilot project on Guidance for Responsible Agricultural Supply Chains. This initiative was run by the Organization for Economic Co-operation and Development (OECD) in conjunction with the Food and Agriculture Organization of the United Nations (FAO). By participating in this project, we have been able to share our own experiences, broaden our understanding, and benchmark against others. The OECD-FAO Guidance for Responsible Agricultural Supply Chains, published in 2019, presents the key findings of the pilot, lessons learned, good practices, and challenges in implementing supply chain due diligence shared by the participants. It also sets out recommendations and next steps for companies and policymakers to follow in the agricultural sector.

Case study

Crop Protection Agent management

We have adopted Integrated Pest Management (IPM) principles in all of the origins in which we directly contract tobacco growers, this allows us to better manage pests and diseases. Crop Protection Agents (CPAs) are only ever used as a last resort, where bio-pesticides and other alternative controls have proved ineffective.
A recent example of IPM principles being applied successfully is in Ethiopia, where some of our growers had been suffering yield and quality losses, resulting in a substantial impact on their income. This was caused by a virus called “bushy-top” which is transmitted by insects. Our Agronomy Technicians observed and investigated the issue, which led to a review on the crop protection practices being applied locally. An alternative solution based on IPM principles was found, including the use of carefully selected low hazard CPAs. Once this was applied, the disease was eradicated in the following crop. This allowed our growers in Ethiopia to realize their crops full potential in relation to yield and quality, which also increased their income.

All of our contracted growers and their workers must be trained and demonstrate proficiency in CPA storage, handling, application, personal protective equipment usage and safe disposal. When supplying our contracted growers with CPAs, we always select the lowest toxicity option available and we do not allow them to use any Highly Hazardous Pesticides (HHPs) Criteria 1 (WHO Hazard Class 1a and 1b). We have also worked hard to remove HHPs from our entire leaf supply chain, and we will achieve this by the end of 2021.

Case study

Promoting Good Agricultural Practices

Our Minimum Agronomic Standards (MAS) include practices that contribute to water and soil conservation, such as mulching to decrease water evaporation, reservoirs for seedling production, the use of box ridges to capture rainwater within the field and reduce runoff and erosion. Also, we encourage growers to use seasonal crop rotation and practice minimum tillage.

The Target Crop Calendar that forms part of MAS stipulates that tobacco seedlings are planted at a preferential period in the crop year so that the maximum plant water requirement is most likely to correspond with consistent and adequate rainfall, reducing the need for extraction of local water supply for irrigation.

Case study

Grower clubs in Zambia

In Zambia, we have an established network of approximately 693 grower clubs. Each club is formed of 10 to 20 growers and led by a chairman.

The aim of the clubs is to bring growers closer together and create more effective dialogue. The clubs allow continuous communication and engagement on a variety of topics such as farmer finance, Agricultural Labor Practices, Minimum Agronomic Standards, and other best practices.

In 2020, we piloted a training on financial literacy with 500 chairmen and selected model farmers to help ensure the financial health and stability of contracted growers, their families and communities. The expectation is that the trained chairmen will take on training and mentorship role for their pool of growers.

Frequently asked questions about how we source raw materials

Q: Which markets do you source tobacco leaf from? Which markets are the biggest contributors?

A: We source approximately 50% of our tobacco from directly contracted growers in the following countries: Bangladesh, Brazil, Ethiopia, Japan, Malawi, Serbia, Tanzania, Turkey, the U.S., and Zambia. The other 50% is sourced through third-party leaf merchants from a variety of countries such as India, Indonesia, Italy, Spain, and Zimbabwe, but also from some of the countries where we directly contract growers. Although the main sourcing base is stable, the volumes and sourcing countries, and therefore the suppliers, may vary from year to year.

Q: How many Agronomy Technicians do you employ? Are the visits to the farms announced in advance? How frequently do you visit each grower?

A: In 2020, JT Group employed 647 Agronomy Technicians. The visits to our directly contracted growers are based on a visitation plan for each country, with assigned farms, and these can be announced or unannounced. During the visits our Agronomy Technicians provide technical advice on crop management and discuss and observe against good labor practices. The number of visits may vary slightly from country to country, but on average our growers are visited 7-9 times each crop cycle.

Q: What happens if Agricultural Labor Practices are not observed? Have you experienced cases where contracts had to be terminated?

A: If a contracted grower does not show any sign of commitment to meeting the ALP standards, or continually disregards agreed improvement measures, we may decide not to renew their contract for the following crop year. Our growers are only re-contracted based on performance – which includes compliance with contract conditions. For example, in 2020 we achieved a 95% re-contracting rate in Malawi, which clearly indicates that our grower base is predominantly made up of long-term partnerships.

Our approach to sustainable agriculture is to be grower-centric and thus support the grower and grower communities to apply good agricultural practices in a responsible manner. ALP is not a compliance tool, but a continuous improvement program. As such, the ALP program is an integral part of our strategy, with a focus on improving labor practices at farm level.

Q: How are you responding to media reports on the problem of child labor on tobacco farms?

A: We follow a five-step continuous improvement cycle: Identify, Prioritize, Respond, Measure, and Communicate and Report. If child labor is highlighted within the identification and prioritization stages of this process, then appropriate response programs are developed in that particular country/region in order to address the issue. We have implemented a number of programs to address the root causes of child labor in a variety of countries in which child labor is a particular risk, such as our flagship child labor eradication program ARISE (Achieving Reduction of Child Labor in Support of Education). Our leaf merchants also have a number of their own programs in place to address child labor.

We do not wait for media reports to make us aware that child labor is a particular problem in a given country or region. If the issue is identified as a priority, then targeted response programs should already have been put in place as per our five-step framework. In the past, we have shared these responses and any outcomes arising from them with media outlets or NGOs who raised concerns of child labor in a particular country. This has been done many times before and any dialogue we had with such parties has been made available on our web site.