Eliminate child labor

Our goal is the elimination of child labor in the Company’s value chain.

Our commitment

At Swedish Match, we have a special focus on child labor and child risks. Swedish Match does not consent to child labor anywhere in our value chain. We are dependent on raw material from agriculture and forestry for our products. According to the ILO1), approximately 152 million children are involved in child labor worldwide; 71 percent of these children are found in agriculture. With tobacco being an agricultural product, there is a significant risk of child labor. The issue of child labor is extensive and complex; it requires commitment from us as well as from farmers, suppliers, governments and other manufacturers.

We respect universal human rights and support internationally proclaimed human rights conventions and guidelines. We recognize the role we play in respecting these rights and in making sure that they are upheld and respected for the people impacted by our business, in the areas where we operate and from which we source materials.

Assessing risk related to business integrity and human rights

We assigned external expertise to refine our previous assessment of risk related to business integrity and human rights in our value chain in 2016. This risk assessment forms the basis for our efforts to assess and mitigate specific risk in dialogue with prioritized suppliers. The risk landscape in relation to all suppliers of direct material was reassessed based on manufacturing country or origin of raw material, known category and industry risks2) as well as annual level of spending. A more in-depth social impact assessment was pursued at industry-level, to identify potential and specific human and labor rights risks for a limited number of higher risk categories of direct material.

Out of our 118 significant suppliers of direct material3) a total of 70 suppliers4) were classified as high risk based on industry risk or country of origin. The majority of resulting high risk suppliers in this assessment are suppliers of raw tobacco, the remaining part are suppliers of lighter components or finished products sourced in Asia and Africa. The results confirm our previous focus on suppliers of raw tobacco in our efforts to manage our supply chain more sustainably. The results also confirm our continued focus on child labor and child rights, with child labor and women and child risks rated as the top specific human rights risks, followed by forced labor/debt bondage, hazardous exposure to chemicals and limited access to safe drinking water/sanitation, for the tobacco category.

Supplier due diligence

In the past few years we have worked to implement systems and procedures to monitor adherence to our Supplier Code of Conduct. The monitoring is most advanced and proactive for the raw tobacco purchases for our snus products. It is more compliance-oriented for the raw tobacco for other smokeless products. The major due diligence tools for the raw tobacco supply chain are the Sustainable Tobacco Programme (STP) and associated procedures. During the year, the monitoring for direct material other than raw tobacco, has been enhanced through a group-common procedure. Our end goal within supply chain management is a proactive dialogue on prioritized sustainability issues with relevant significant suppliers of direct material.

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 regions where regulations and/or market structures add more complication). The STP is a due diligence program for sustainability aspects in tobacco growing and manufacturing. It was jointly developed by the tobacco industry in 2015; implementation started in 2016 and the first review cycle will be completed at the end of 2018. Through the STP, we assure adherence to the requirements on, for example, human rights, labor practices, health and safety, as well as environmental issues, set forth in our Supplier Code of Conduct. Our suppliers continuously perform risk assessments in relation to these requirements and establish action plans for continuous improvement, for both for our suppliers and the suppliers of our suppliers. Farmers are subject to regular training on relevant aspects of the program with the purpose of improving conditions on the farm, yields and livelihoods.

Swedish Match has 51 suppliers of raw tobacco. At present, the STP primarily covers raw tobacco for the production of snus, moist snuff and chewing tobacco. It covers 53 percent of our purchased raw tobacco volumes and 47 percent of raw tobacco suppliers.

During 2017, we have developed a plan to also include the sourcing of raw tobacco for cigars into STP. Third-party reviews under the STP are scheduled to take place in 2018.

Assessing and reviewing supplier sustainability performance

Our tobacco suppliers perform annual self-assessments with regard to adherence to the requirements in the STP, for their own part as well as for the farmers from whom they purchase. 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. During the past two years 12 reviews have been conducted by AB Sustain. The Leaf Operations department of our Scandinavia Division participated in eight of these reviews to better understand how the STP affects the work and procedures of our suppliers and to build on the review results.

Child labor and child risks

Several criteria relating to child labor and child risks in the tobacco growing and manufacturing supply chain are under assessment and review through the STP. These include, but are not limited to, employment or recruitment of child labor and performance of dangerous or hazardous tasks within the supplier facilities (tier 1); employment of children on supplying farms (generally tier 2), identification of dangerous and hazardous work on supplying farms, exposure to hazards on supplying farms for persons below the age of 18 years old , and farmer’s children helping out with light work on supplying family farms as well as their school attendance along with the identification of prompt action issues and procedures to address them.

The self-assessment results show that, suppliers and farmers are close to a 100 percent compliant with the criteria related to child labor and child risks. In general, there is a large discrepancy between results from supplier self-assessments and third party reviews. This is often related to insufficient evidence available for verification by the third party auditor. For example, 92 percent (11/12) of reviewed suppliers state that they have identified which work would be considered dangerous or hazardous on supplying farms (not to be performed by children below the age of 18 years old). The results of the third party reviews show that this could be verified through evidence for 83 percent of reviewed suppliers (10/12). Bridging the gap and improving the results of the third party reviews versus self-assessments will be in focus in the continued dialogue over the years to come. In 2018, after the completion of a full review cycle, we will have formed a new baseline to continue our efforts from.

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 relationships and to pursue a proactive dialogue, including follow-up on action plans. The proactivity and structure in this dialogue varies between the inflows of raw tobacco to Swedish Match. In 2017, we have worked to systemize, and structure documentation on, this dialogue in a consistent way for raw tobacco covered in STP. We have defined a procedure on how to interpret, take action and follow up on STP results. This will be implemented on a larger scale in 2018.

ECLT Foundation

Swedish Match is a member of and represented on the board of the ECLT Foundation – Eliminating Child Labour in Tobacco Growing. This involvement provides us with a platform to continuously keep the issue high up on the agenda, exchange experience and knowledge within this field, and follow projects to tackle the issue on the ground. As an ECLT Foundation member, Swedish Match has signed a Pledge of Commitment (the Pledge). The Pledge is a sector-wide agreement to uphold robust policy on child labor, conduct due diligence and provide for remediation consistent with the United Nations Guiding Principles on Business & Human Rights. This action reinforces our policies and practices and aligns with international best practices established by the International Labor Organization (ILO). For more information on ECLT Foundation and the Pledge, see the ECLT Foundation’s website, www.eclt.org.

PLAY program

In complement to our due diligence we have initiated support to an after-school project in the Philippines during the year. This is a project under Universal Leaf’s Let’s PLAY Program, providing after-school activities in selected communities where children have been observed to participate in harvest activities, giving children an alternative to working and allowing them to thrive in new activities. Along with conducting interesting alternative activities and improving the quality of the children’s health and education, the objective is also to increase awareness of parents, teachers and community leaders on child labor prevention. This project complements other activities, implemented by this supplier, to mitigate the risk of child labor. Swedish Match’s engagement in this project will complement our own efforts to manage our supply chain sustainably. It will also provide us with enhanced understanding of conditions on the ground in areas from which we source raw tobacco.

Direct material other than raw tobacco

The due diligence for direct materials other than raw tobacco builds on our Supplier Code of Conduct. At present this process primarily covers tier one suppliers. The tier one suppliers are continuously screened for compliance and risk in relation to ethical business practices, including child labor issues. In addition to this, we encourage our suppliers to develop their own supplier standards and monitoring procedures.

During 2017, we have developed and started implementation of a group-common procedure, including self-assessment and desktop screening, to assess supplier adherence to requirements set forth in our Supplier Code of Conduct. Swedish Match has 67 significant suppliers of direct material other than raw tobacco. A total of 31 suppliers have been assessed, this includes the 19 suppliers associated with the highest risk in the human rights risk assessment as well as nine suppliers that have not signed our Supplier Code of Conduct (in reference to having their own Code of Conduct). Based on the assessment results, individual action plans for improvement, including for example third party review, will be developed and included in the continued dialogue with the suppliers in 2018.

Supply chain management20172016
Total number of significant suppliers of direct material1181361)
Raw tobacco
Number of raw tobacco suppliers2)5161
Share of raw tobacco supplies included in STP, %5359
Number of self-assessments performed by raw tobacco suppliers2426
Number of third party audits performed on raw tobacco suppliers during the 2016–2018 review cycle128
Number of farms visited by Swedish Match Leaf Operations123122
Direct materials other than raw tobacco
Number of high risk suppliers of direct material other than raw tobacco19N/A
Number of assessments performed on suppliers of direct material other than raw tobacco31N/A

1) Restated due to refined data collection.

2) Raw tobacco suppliers are viewed as individual suppliers per country. All raw tobacco suppliers are classified as high risk regardless of country of origin.

 

1) International Labour Organization.
2) Classification of risk has been done based on geographical location and the Corruption Perception Index of Transparency International (CPI), cross-referenced with Maple Croft’s Human Rights Index and complemented with specific industry-related risk of human and labor rights violations.
3) A significant supplier of direct material is defined as a supplier with which Swedish Match has an annual spend of above 400,000 USD. Suppliers below spend limit that belong to an industry classified as high risk in relation to business integrity and human rights violations have been included regardless of spend, this includes all suppliers of raw tobacco.
4) This includes all suppliers of raw tobacco regardless of country of origin.