Human rights in our supply chain
Our goal is the elimination of child labor and other human rights violations in the Company’s supply chain.
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 from which we source materials.
Elimination of child labor is the center of focus in our efforts. We respect the rights of the child, including the right to education, the right to rest and play and the right to have the child’s basic needs met, in accordance with the UN Convention on the Rights of the Child. Swedish Match does not accept child labor anywhere in our supply chain.
Consistent with the UN Convention on the Rights of the Child and the ILO Convention 138 on the minimum age for admission to employment and work, Swedish Match adheres to the principle that the minimum age for work should be above the age for finishing compulsory schooling, which is generally 15 years of age, or 14 years according to exceptions for developing countries. If relevant national legislation has set a higher age, this age applies. Work that is likely to be hazardous or harmful to the child’s health as well as physical, mental, spiritual, moral or social development or that interferes with the child’s education shall not be performed by young workers – children between 15 or 18 years of age. In the case of family farms, children of farmers between the ages of 13 and 15 years or above the minimum age for light work as defined by the country’s law, whichever affords greater protection, can do light work on their own family’s farm, as long as it does not threaten their health and safety, or hinder their education or vocational orientation and training.
The scope of this focus area is our own production facilities and our suppliers and, for tobacco, the farmers who provide tobacco to suppliers.
Our goal is the elimination of child labor and other human rights violations in the Company’s supply chain.
- Robust systems to identify, prevent and mitigate child labor and any other human right related issues in our entire supply chain.
- 100 percent child labor free tobacco.
- 100 percent of our raw tobacco suppliers covered by STP or Swedish Match’s due diligence program.
Assessing risk related to human rights in our supply chain
We adopt a systematic approach to assess the risk related to business integrity and human rights in our value chain. The assessment is based on a combination of industry risk1) and country of origin. Out of our 118 significant suppliers2) of direct material, a total of 60 suppliers present heightened risks for human rights violations given their industry or country of origin. The majority of them are suppliers of raw tobacco, which are viewed as individual suppliers per country. More than 80 percent of these raw tobacco suppliers are subsidiaries belonging to one of the international tobacco suppliers.
With tobacco being an agricultural product, there is a known risk of human right violation in the supply chain especially related to child labor. According to the International Labor Organization, ILO, approximately 152 million children are involved in child labor worldwide; more than 70 percent of these children are found in agriculture. The risk of child labor lies within the contracted farmers that grow raw tobacco. The issue of child labor is extensive and complex; it requires commitment from us as well as from farmers and suppliers that have direct contact with farmers, other suppliers, governments and other manufacturers.
1) Classification of risk has been done based on geographical location and the Corruption Perception Index of Transparency International (CPI), cross-referenced with Maplecroft’s Human Rights Index and complemented with specific industry-related risk of human and labor rights violations.
2) A significant supplier of direct material is defined as a supplier with which Swedish Match has a significant level of spending. All suppliers of raw tobacco are included and are viewed as individual suppliers per country.
The due diligence for our supply chain
We have adopted two different approaches to due diligence in our supply chain. For direct materials other than raw tobacco and for tobacco used in wrapper for our cigars we rely on our own due diligence programs to monitor adherence to our Supplier Code of Conduct. The supply chain for tobacco for our smokefree products and for cigar filler is more complex and requires a different approach. We purchase this tobacco from international tobacco suppliers who in their turn purchase the tobacco from a large number of farmers. We estimate that every year approximately 15,000 farmers are involved in growing tobacco for our smokefree products. Most of these farms are located in developing countries. They are often small, and family owned and crops are rotated between tobacco and other agricultural products. To reach and monitor these farmers in terms of human rights impact and sustainable agriculture we have contributed to the creation of the industry-wide Sustainable Tobacco Program (STP). The cornerstones of this program are our supplier’s commitment to certain agreed themes related to basic human rights and sustainable agriculture and the large number of farm visits conducted by our suppliers’ field technicians. These field technicians visit and audit farmers for labor practice standards and crop quality, often several times per year. If a field technician finds a practice inconsistent with the supplier’s standards, the corresponding actions are taken from training to contract cancellation or non-renewal. We audit the suppliers’ efforts with the help of third parties through the STP system.
Smokefree tobacco supply chain
The STP program covers nearly all of our tobacco suppliers for smokefree products.
The Human and labor rights theme in the new STP, together with the Livelihoods theme, addresses components which are fundamental to the well-being of people involved with the production of tobacco. Topics under assessment and review include child labor, fair treatment, freedom of association, income, work hours and benefits, modern slavery, and safe working environment. These themes align with the United Nations Guiding Principles on Business and Human Rights and contributes to six UN Sustainable Development Goals.1) The due diligence cycle under the new STP is described in the Annual Report 2020, page 56.
1) UN Sustainable Development Goals: Goal 1: No poverty; Goal 2: Zero hunger; Goal 5: Gender equality; Goal 8: Decent work and economic growth; Goal 10: Reduce inequalities; and Goal 16: Peace, justice and strong institutions.
Cigar tobacco supply chain
For the tobacco used as wrapper for our cigars, we source from a limited number of suppliers and farms. The largest supplier accounts for more than 90 percent of total purchases and the locations of the farms are more concentrated than our smokefree raw tobacco farms. Thus, we believe it is more efficient to run our own due diligence program, the Cigar Leaf Audit Program. Nearly all of our cigar leaf tobacco volumes are monitored through this program.
The Cigar Leaf Audit Program is founded on Swedish Match’s sustainability focus areas which are mapped to relevant principles and criteria used within the STP. The continuity of compliance with the requirements in the program is verified annually by requiring suppliers to complete a self-assessment as well as providing supporting evidence to answers provided. The self-assessment covers Swedish Match’s sustainability focus areas. Documentation is reviewed and opportunities and non-conformances detected will be added to the supplier’s risk reduction plan and followed up in dialogue with the supplier, on site, to define necessary actions going forward.
For the tobacco used in the body of our cigars as filler, we source from one global supplier, with farms located all over the world. We believe we can deliver more impact through industry leverage when performing the due diligence, and our tobacco filler supplier is thus required to participate in STP.
Direct material other than raw tobacco
Swedish Match sources direct material other than raw tobacco from a wide range of suppliers and regions. The majority of our significant suppliers are located in the US and Europe. The due diligence primarily covers tier one suppliers1). The tier one suppliers are continuously screened for compliance and risk in relation to ethical business practices, employment and labor practices, including child labor. In addition to this, we encourage our suppliers to develop their own supplier standards and monitoring procedures.
Our risk assessment of current and future suppliers combines both industry risk and country risk. The suppliers classified as high-risk are suppliers of lighter components or finished products primarily sourced from Asia.
All of the high risk suppliers are required to perform a self assessment. Based on the assessment results, further dialogues are initiated. Third party audits are conducted on suppliers based on their risk score and cover ethical business practices, employment and labor practices. The audit generates a report, including a corrective action plan which is followed up by the auditor. Immediate action is taken in case the audit report includes major exceptions on legal and/or regulatory compliance on matters audited.
1) Suppliers referred to here are suppliers who provide products directly to Swedish Match, without middlemen or other manufacturers.
Swedish Match is a member of and represented on the board of the ECLT Foundation – Eliminating Child Labour in Tobacco Growing Foundation. The foundation is committed to pursuing collaborative solutions for children and their families that combat the root causes of child labor in tobacco-growing communities. Founded in 2000, this multi-stakeholder initiative brings several stakeholders from different parts of the tobacco industry together toward a common goal. Since 2011, the ECLT Foundation has supported over 920,000 children, farmers and families in the fight against child labor and are currently active in projects in Guatemala, Indonesia, Malawi, Mozambique, Tanzania and Uganda.
Our 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. For more information on the ECLT Foundation, see www.eclt.org.
The “Let’s PLAY” After School Program
In complement to our due diligence we have supported an after-school program in the Philippines. 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 complements our own efforts to manage our supply chain sustainably. Learnings from participating in the program also provide us with enhanced understanding of conditions on the ground in areas from which we source raw tobacco.
- Launch of the new STP – a digital, risk focused and impact-oriented due diligence program.
- While the number of our farm visits and third party audits decreased due to COVID-19, we followed up digitally when possible, and our suppliers continued to conduct their own site-visits in the countries wherever allowed.
- Worked collaboratively with our major cigar raw tobacco supplier to shift the procurement to a country where the risk of violations against human rights is deemed lower.
- Swedish Match terminated an agreement with one of its suppliers due to findings of non-compliance with the Supplier Code of Conduct.
- Continued co-funding of the “Let’s PLAY” After School Program in the Philippines.
- A digital platform implemented Group wide to facilitate the management of our significant and high risk suppliers and third party auditing.
Due to travel restrictions following COVID-19, the number of physical farm visits by Swedish Match decreased during 2020 and follow-up visits were conducted digitally when possible. Meanwhile, our suppliers continued to conduct their own site-visits when situations permitted in local markets. For instance, in 2020 one subsidiary of our major supplier alone visited each of their 17,000 farmers in the country where we source tobacco. The supplier also contracted a third party to verify the findings from the own conducted site-visits. The third party assessments covered 10 percent of the farmers and were done through unannounced random visits.
More than 95 percent of our raw tobacco volumes are included in STP or in Swedish Match’s due diligence program. During the two-year development of new STP, the process of self-assessments and third party reviews were paused. The new STP was launched during the fourth quarter in 2020. The first cycle of self-assessment from our suppliers is expected to be completed during 2021. Under the new STP, the human and labor right theme is supported by specific goals and performance indicators, which are based on numeric data collected and consolidated through the technical platform. This will facilitate us to measure and track the progress from our suppliers in a more systematic way as well as to improve the transparency in our future external communication.
For the purchases of raw tobacco for cigars, our primary suppliers have been audited by a third party in 2018 and 2020 within our Cigar Leaf Audit Program. Based on the result, all suppliers audited were provided a risk reduction plan based on non-conformities identified in the audit. Swedish Match conducted follow-up reviews in 2019 and 2020 and dialogue with the suppliers is ongoing. In 2020 verification has been conducted digitally.
In 2020, the ECLT Foundation remained committed to strategic investment and collaborative efforts to support children, farmers and families in areas where tobacco is grown. During the year, ECLT also provided urgent relief funds to raise awareness about COVID-19, provide masks and other needed health supplies, support families, and keep children connected with their studies during school closures.
For the third consecutive year, we co-funded the “Let’s PLAY” After School Program by supporting three elementary schools in selected communities in the Philippines to mitigate the risk of child labor. Despite the outbreak of COVID-19, the overall objectives of the program were met. Assessment of the program has shown an increased community awareness of the tobacco industry fight against child labor as well as no incidences of child labor in the areas of the after-school activities during the conduct of the project.
For direct material other than raw tobacco, the number of high risk suppliers increased in 2020 as the identification methodology was refined to reflect a renewed classification of sub-categories by industry risk, leading to an even lower tolerance for what is considered a high risk supplier. The third party audit of high risk suppliers were also postponed due to COVID-19 and will be resumed as soon as the situation returns to normal.
|Supply chain management1)||2020||2019||2018|
|Total number of significant suppliers of direct material||118||109||110|
|Number of raw tobacco suppliers2)||43||43||37|
|Share of raw tobacco volumes sourced from international tobacco suppliers3)||93||N/A||N/A|
|Number of farms visited by Swedish Match||47||138||119|
|Share of raw tobacco volumes included in STP or in Swedish Match’s due diligence program, %3)||97||N/A||N/A|
|Number of self-assessments performed by raw tobacco suppliers||5||1||334)|
|Number of third party reviews performed on raw tobacco suppliers||1||0||384)|
|Direct materials other than raw tobacco|
|Number of significant suppliers of direct material other than raw tobacco||75||66||73|
|Number of high risk suppliers of direct material other than raw tobacco||17||15||22|
|Number of self-assessments performed on significant suppliers of direct material other than raw tobacco3)||11||9||4|
|Number of third party audits performed on high risk suppliers of direct material other than raw tobacco||0||5||N/A|
1) Data 2018 excludes facilities acquired in 2017 and 2018; Swedish Match Denmark (previously V2 Tobacco), House of Oliver Twist, and Gotlandssnus.
2) Revised due to further analysis. Raw tobacco suppliers are viewed as individual suppliers per country.
3) New KPIs added in 2020.
4) Self-assessments and third party audits conducted under the old STP.
- Review the results from the first cycle of self-assessment under the new STP and perform third party assessments on the subsidiaries of our suppliers that are located in geographies where there is an elevated risk of non-compliance with the high standard set by STP.
- Continued third party audits of high risk suppliers of direct material other than tobacco and actions on potential findings.