Sourcing raw tobacco

Swedish Match sources raw tobacco from global suppliers (such as Alliance One, ITC and Universal Leaf) and not directly from tobacco farmers.

Farms are generally in tier two with some exceptions in areas where regulations and/or market structures add more complication. The Sustainable Tobacco Programme (STP) is our major tool to assure compliance with the requirements set forth in the Supplier Code of Conduct. The STP is a system for self-assurance and third-party review of sustainability aspects in tobacco growing and manufacturing. Building on the previous SRTP, among other programs, this new STP was developed in 2015 and has been implemented during 2016.

Through the STP, we assure adherence to our requirements on, for example, human rights, labor practices, health and safety, as well as environmental issues. Our suppliers continuously perform risk assessments in relation to these requirements and establish action plans for continuous improvement, for both them and for their suppliers. Farmers are subject to regular training on all aspects of the program with the purpose of improving conditions on the farm, yields and livelihoods. At present, the program primarily covers raw tobacco for the production of snus, moist snuff and chewing tobacco. It covers 59 percent of our purchased raw tobacco volumes and 67 percent of our raw tobacco suppliers.

Our target is to have raw tobacco for our cigars completely included in the STP by 2020. This process was initiated in 2016 and we expect the first reviews to take place in 2017. With all of our raw tobacco purchases in the STP, we will have a solid basis for assuring more sustainable sourcing.

Performing due diligence

Our tobacco suppliers perform annual self-assessments on adherence to the requirements in the STP, for their own part as well as from the farmers they purchase from. This forms the basis for dialogue between our leaf operations departments and suppliers, as well as for the third party review. Our suppliers’ field technicians train and assist farmers in their daily work to assure compliance with the STP requirements and to optimize crop yield. The field technicians continually monitor farm operations. If matters require immediate attention, actions will be taken to resolve the matter.

On a three-year basis, suppliers are audited and rated by a third-party auditor, AB Sustain. In 2016, eight reviews were conducted by AB Sustain on suppliers at local level, in accordance with the STP. The Leaf Operations department of our Scandinavia Division participated in four of these reviews to better understand how the STP affects the work and procedures of our suppliers and to build on the review results.

Conducting dialogue with suppliers

Our Leaf Operations departments evaluate risk and tailor the continued dialogue on the basis of self-assessments, third party reviews and resulting action plans for improvement. Suppliers and farmers are visited on a yearly basis to strengthen the relationships and ­pursue a proactive dialogue, including follow-up on action plans.

The structure of this dialogue varies between the inflows of raw tobacco to Swedish Match. During 2017, we will continue our work to systemize the dialogue, and towards a more coherent way of working for all of our tobacco purchases. We will develop clearer and more consistent guidelines on how to interpret and take actions on the STP results. We will also collect more specific information to allow for tracking of KPIs and communication on progress towards a more sustainable sourcing of raw tobacco.