Corporate Citizenship – Summary Assurance Statement

Imperial Tobacco Group (ITG) commissioned Corporate Citizenship to provide external assurance on its Corporate Responsibility (CR) Review 2009. The assurance provides the reader with an independent, external assessment of the Review and, in particular, with how it corresponds with the AA1000 standard. It is intended for the general reader and for more specialist audiences who have a professional interest in ITG’s sustainability performance.

The Scope of our Assurance

ITG has chosen to use the AA1000 assurance standard (AA1000AS) 2008. Our assurance is a Type 1 and the level of assurance offered is moderate as defined by AA1000AS (2008).

ITG is responsible for the contents of the report, Corporate Citizenship for its assurance. A detailed note of our assurance methodology appears in our full statement published at www.imperial-tobacco.com.

Opinion and Conclusions

In our opinion ITG’s CR Review 2009 reflects the principles of AA1000 (2008). In our commentary we provide information on the Company’s performance against these principles and provide feedback that can help the Company and its stakeholders identify where its reporting can be strengthened in future.

Commentary

The Review follows a similar structure to previous years and focuses on the issues that have previously been identified as key to the Company’s management of corporate responsibility. The Review does include two important positive developments: Commissioning this external assurance to the AA1000 standard; and the creation of a stakeholder panel, facilitated by Corporate Citizenship, which provided feedback on an earlier draft of the Review. Specific comments in relation to the three principles of AA1000 are identified below.

Inclusivity

ITG has defined its main stakeholders as those that have a financial interest in the Company. The Review articulates different ways in which the Company has taken steps to manage its impacts and engage with different stakeholders through, for example, employee forums, or working with suppliers through the Social Responsibility in Tobacco Production (SRiTP) initiative.

The Company also acknowledges that it has an impact on, and a responsibility towards, a wider range of stakeholders. It reports on a number of processes that address issues such as youth smoking prevention and broader community investment activity.

The Review highlights two challenges that ITG faces in engaging with stakeholders. First, as a tobacco producer, the Company’s ability to participate in discussion with certain groups (e.g. governments and other agencies) on issues around the production, sale and distribution of its product is increasingly limited. Future reports will be strengthened by providing more specific detail on the concrete steps that it takes to lead on, and be part of the solution to, issues around its product, how it engages with key stakeholders on relevant issues and the results it achieves.

Second, the Company acknowledges that it must do more to engage with groups that are critical of the tobacco industry and to ensure that its response to their views is reported. The Review provides a robust defence of the interests of smokers and it will be interesting to read how the Company addresses instances where these conflict with those of other stakeholder groups.

Materiality

ITG has undertaken an extensive process to identify the issues that are of most relevance to its social and environmental performance, which it has covered in detail in previous reports. It is encouraging that it has now aligned these with its risk register so that the two are complementary.

Future reports would benefit from greater detail on the systems the Company has in place to gather intelligence on emerging issues, for example the formal system that requires country managers to identify and report issues of relevance to corporate responsibility objectives.

For most external audiences the subject of smoking and health is a key issue for the tobacco sector. The Review is explicit in stating the Company’s position; that no cigarette is safe.

However, there are two issues around smoking and health that ITG covers in other communications (e.g. its website), but which are largely absent from its Review. These are environmental smoke (passive smoking) and the issue of smoking and addiction. Both topics should be covered in more depth in future reports.

Responsiveness

It is particularly encouraging that ITG’s commitment to CR is formally reported to and discussed by the Board. We are also encouraged that there is substantial evidence that it has established a range of systems and processes to effectively manage and address its core issues.

The Company has developed a set of performance indicators around its non-financial reporting and has embedded a comprehensive data gathering system to collect performance information in these areas.

In reporting its engagement on specific issues around its management of CR there are several examples where the Company’s approach is substantiated by specific actions it takes, such as its involvement in SRiTP and the Eliminating Child Labour in Tobacco Foundation (ECLT).

However, there are also a number of instances where the Company’s reported response to particular issues is to state a position or a belief about anticipated consequences of an action (on the possible impact of display bans or a ban on vending machines, for example) with limited or no evidence to substantiate the claim. Future reports should include or refer readers to sources of, ideally independent, information that can help them develop an informed opinion on the issue in question.

Conclusion

Overall we have found much to be commended in the Review, particularly with regard to the process the Company has gone through to identify its key issues and the systems it has implemented to manage these. We are also encouraged by the steps the Company is taking to increase its engagement with wider stakeholders, through the stakeholder panel, for example.

In this commentary we have highlighted specific areas for improvement regarding the Company’s reporting and we look forward to seeing how these are reflected in future reports.

Corporate Citizenship
London

February 2010