Our value chain
The value chain for our products includes research and development of new and refined products, raw material sourcing and production, processing at suppliers, manufacturing at Swedish Match’s facilities, transportation and distribution between the various value chain stages, and sales through distributors and retailers (customers) as well as consumer use and final disposal of products.
A value chain perspective helps Swedish Match to identify how it can best manage its impacts and create maximal value. The following section identifies the Group’s sustainability risks related to the value chain and how they are managed. It also identifies the degree of Swedish Match’s influence along the value chain, and the value created for the Company and the society.
Raw materials/Supplier
Ability to influence: Medium
The main direct materials for Swedish Match are raw tobacco, timber, nylon and lighter components, as well as packaging material such as cardboard, plastics and metalized films. For raw tobacco, the Company primarily sources from major global suppliers. The top six of these suppliers account for more than 90 percent of the total raw tobacco purchased annually. These suppliers have local entities which contract individual farmers seasonally. For direct material other than raw tobacco, Swedish Match sources from a wide range of suppliers and regions, the majority of which are located in the US and Europe. The focus is to safeguard sustainable supply, ensure Swedish Match’s standards and to develop supplier capacity to improve their sustainability performance, which actively promotes our ambitions throughout our supply chain. This requires careful assessment and selection of suppliers.
Risks
- Supply interruptions due to severe weather conditions caused by climate change.
- Potential connections to social, ethical and human rights violations.
- Supply interruptions due to unethical business practices in our supply chain.
How risks are managed
- Source materials from different parts of the world.
- Apply a risk-based approach to mitigate environmental, ethical, and human rights risks among direct suppliers as well as further up in the supply chain.
- Audit suppliers to safeguard standards.
- Provide training and drive improvement initiatives.
- Identify alternative sources of supply.
Generating value
We generate value by promoting universal norms, supporting human rights and raise environmental, labor, and economic standards – particularly in low-cost countries. By doing so, we also continue to build trust and reduce associated business risks.
Factory/Warehouse/Office
Ability to influence: High
Swedish Match manufactures snus, nicotine pouches, moist snuff, chewing tobacco, cigars, matches and other fire related products, as well as lighters at 16 facilities – in Sweden, the US, the Dominican Republic, Denmark, the Netherlands, the Philippines, and Brazil.
Within our focus areas we are committed to reducing our environmental footprint, maintaining high ethical standards and providing equal opportunities.
Risks
- Prolonged disruptions in production caused by severe weather related to climate change.
- Negative impact due to social, ethical and human rights violations.
- Unethical behavior due to weak governance.
- Violation of safety regulations at our facilities.
How risks are managed
- Perform climate risk assessments as part of the annual ERM process.
- Establish loss prevention and continuity planning program.
- Apply relevant environmental management systems.
- Conduct periodic inspections of major facilities by an independent third party.
- Provide governance systems and training to reinforce sustainability policies.
Generating value
Swedish Match creates value by contributing to the economic development in areas where our offices and production sites are located, retaining talented employees and preventing associated financial and reputational damage related to accidents and unethical behavior.
Transport/Distribution
Ability to influence: Medium
For the Swedish and Norwegian market, Swedish Match has its own distribution company, SMD Logistics. In other parts of Europe, products are distributed primarily through third party distributors. Distribution for the US market is primarily via third parties. Lights products utilize a wide network of distributors worldwide.
Risks
- The transportation fleet is GHG emission intense.
- Violation of safety regulations at distribution companies.
How risks are managed
- Choose more efficient and modern transportation solutions.
- Set fuel efficiency and emissions reduction targets.
- Provide governance systems and training to reinforce sustainability policies.
Generating value
As transportation is the fastest growing source of fossil-fuel CO2 emissions, at Swedish Match we continuously work towards a shift to low carbon solutions and encourage our logistic suppliers to do so.
Customer
Ability to influence: Low
The primary sales channels for our products are convenience stores, tobacconists, gasoline stations, and supermarkets. Other channels include bars, restaurants, airports, and ferries, along with e-commerce, and our own dedicated stores in various markets.
Risks
- Failure by our customers to comply with our “Adult only Tobacco and Nicotine” policy.
- Limited opportunity to influence decision-making at the points-of-purchase.
- Corruption and bribery activities.
How risks are managed
- Improve trade and point-of-purchase communication by educating retailers to prevent underage use of tobacco and other nicotine containing products.
- Provide mandatory training for relevant employees on anti-corruption and bribery.
- Terminate supply to customers who fail to meet our ethical standards.
Generating value
Promoting transparency and reinforcing our focus on public health improvement strengthens our brands and builds consumer loyalty.
Consumer
Ability to influence: Low
Our products are intended for adult consumers only. A large part of our smokefree consumer base seek less harmful, discreet, and enjoyable alternatives to cigarettes. Product quality and safety are of utmost importance.
Risks
- Misalignment between consumer perception and actual product attributes, resulting in an adverse change in consumer behavior.
- Unclear consumer communication which jeopardizes reputation.
- Negative impact on the environment due to post consumer littering.
How risks are managed
- Provide transparent information to consumers.
- Keep up proactive approach to product safety with GOTHIATEK® and MATCHTEK® quality standards.
- Incorporate more sustainable practices with regard to product packaging.
- Highlight public health and sustainability aspects in consumer communications.
Generating value
Swedish Match believes that society needs to develop pragmatic and effective harm reduction strategies for the tobacco and nicotine area to help reduce the adverse health, social and economic consequences of tobacco and nicotine use. The primary goal of harm reduction should be to reduce the negative consequences of tobacco use without requiring total abstinence from nicotine. In this context, Swedish Match’s smokefree products can play an important and constructive role.
