1 Welcome to the Effective Stakeholder Engagement Briefing 26 th February 2009

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Welcome to the

Effective Stakeholder Engagement

Briefing

26th February 2009

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Agenda

8.00am Arrival & Registration

8.30am Welcome address : Anthony Hyde

8.35am British American Tobacco : Verity Lawson - Stakeholder Engagement as it relates to Sustainability Reporting

8.50am Q & A

8.55am England Marketing : Fiona Tarpey & Jan England - Stakeholder Engagement - why bother and how to do it

9.10am Q & A

9.15am Bureau Veritas : Murray Sayce - Stakeholders & Assurance

9.30am Q & A

9.35am Summary and close : Anthony Hyde

10.00am Departure

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British American Tobacco

Verity Lawson

Stakeholder Engagement as it relates to Sustainability Reporting

Stakeholder Engagement at British American TobaccoVerity Lawson

Sustainability Reporting Manager

British American Tobacco at a glance

World’s most international tobacco group

business in 180 countries, over 300 brands

global market share approx.17% only international tobacco group

with a significant interest in tobacco leaf growing

over 53,000 employees

2007 financial performance £ 26bn gross turnover £ 2.9bn profit from operations £ 17bn tax contribution

WHY Does BAT carry out Dialogue?

Engagement is linked to our Strategy “ To achieve leadership of the tobacco industry through strategies focused on growth, productivity and responsibility ”.

Responsibility is fundamental to our strategy for building long term shareholder value

We cannot be responsible unless we listen and act on the concerns of our stakeholders.

Group Strategy

Engagement – HOW we do itIdentifying our stakeholders

• Persons or organisations who are impacted by our actions

• Persons or organisations who’s actions can impact us.

• The bigger the potential impact, the more important the stakeholder.

…but we often have different global and local stakeholders

Some of BAT’s key stakeholders are:

Scientists

Investors

Governments

Farmers

Employees

Suppliers

Anti-tobacco lobby

Retailers

Engagement – HOW we do it

Engaging stakeholders is often a challenge for a tobacco company

Rigorous approach

External expert guidance

Stakeholder and issues mapping

Independently facilitated dialogue

AA1000 Series

GRI Guidelines

Independent assurance

Engagement requires a fundamental shift in the way we conduct our business

Traditional

Decide

Deliver

Defend

Social Reporting

Listen

Decide

Deliver

Engagement – HOW we do it

The impact of dialogue on BAT

CSI GUIDELINES

Snus launch May 2005

Social Responsibility in Tobacco Production

Youth Smoking Prevention

Engage constructively with our stakeholders

Understand their expectations in depth

Ensure these expectations are given due consideration in our

decision making

Demonstrate with actions that we are responsive to

stakeholders’ concerns and thereby gain their trust

Provide a powerful incentive for stakeholders to support BAT

initiatives

Gain recognition that we are a responsible tobacco company

Social reporting & dialogue allowed us to…

So why did we need to change?

We made good progress, but:

Plc reporting risked lagging behind best practice

Reporting on process not performance

Comprehensive approach to issues coverage no longer meets stakeholder needs

Social reporting adding limited value to the business group-wide

2007-2008

Used stakeholder dialogue to redefine our reporting & issues…

Defining materiality

Stage one: Mapping dialogue issues level of interest to stakeholders and; current or potential impact on company

Stage two: Internal consultation Management board Function’ champions’

Stage three: External consultation CSR experts Issue experts

Stakeholder dialogue to review our conclusions Have we included the right issues? Is there anything missing? Feedback on the targets and plans

LOW MEDIUM HIGH

Low impact,high concernissues

Medium impact,high concernissues

High impact,high concernissues

Low impact,medium concernissues

Medium impact,medium concernissues

High impact,medium concernissues

Low impact,low concernissues

Medium impact,low concernissues

High impact,low concernissues

Le

ve

l o

fin

tere

st

to

sta

ke

ho

lde

rs

Current or potential

impact on Company

LO

WM

ED

IUM

HIG

H

BAT’s Sustainability Agenda

Harm reduction We will strive to bring commercially viable, consumer acceptable

reduced-risk products to market

Marketplace We will take a lead in upholding high standards of corporate conduct in

our marketplace

Supply chain We will work for positive social, environmental and economic impacts in

our supply chain

Environment We will actively address the impacts of our business on the natural

environment

People & culture We will work to ensure we have the right people in the right environment

to deliver our vision

Stakeholder dialogue

Dialogue has provided a huge amount of benefit to the business New ideas Opening doors Helping us listen and learn Highly valued across the Group

…but it wasn’t perfect Stakeholder fatigue Dialogue for reporting’s sake Asking the same questions and getting the same answers

Stakeholder dialogue

Dialogue is our unique selling point! Independent facilitation Fully assured Demonstrating responsiveness

What we need to do differently Based on business need, not reporting need Balance stakeholder expectations with business impact No more ‘shopping lists’ of expectations Use to guide reporting and inform activity, not dictate it

Objectives for dialogue…

Creating a vision Gather expectations Still valid if an issue hasn’t been the subject of dialogue in the past

How to achieve the vision? Develop targets and measures of success Get stakeholder feedback on a new approach Review strategies and activities To get advice and opinion in areas where we aren’t the experts

‘Sense check’ Are we still heading in the right direction?

2007-2008 Dialogue Topics

2007 Marketplace Supply chain People & culture CSR/Sustainability

2008 Human rights Environment Illicit trade of tobacco products CSR/Sustainability

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England Marketing

Fiona Tarpey & Jan England

Stakeholder Engagement

why bother and how to do it

Stakeholder Engagement – Why bother? And how to do it.

26th February 2009

www.englandmarketing.co.ukwww.englandmarketing.co.uk

Who we are

Fiona Tarpey – Operations DirectorJan England – Managing Director

Independent Market Research AgencyEstablished in 1994Based in CambridgeshireExtensive experience in agriculture, environment and leisure sectorsTeam of 11 very experienced researchersMRS Company PartnerInvestors in People


Why we can talk to you

» 15 years of experience in helping many companies undertake stakeholder research

» Knowledgeable and experienced team who share their learning and understand CSR

» Use tried and tested market research techniques to achieve effective results

http://www.ukagriculture.com/farming_today/organisations/images/nfu_logo.jpg


Stakeholder Engagement

» What is it?

» A flamboyant term to describe talking to, listening to, meeting with and reporting back to stakeholders

» Who are stakeholders?

» Stakeholders are those who have an interest in what you as a company are doing - typically they are customers, employees, investors and neighbours

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Why engage with Stakeholders?

» To understand the perceptions of your company

» To confirm how well you are regarded

» Gain feedback on how you are performing

» Benchmark performance year on year

» To build trust – especially in the current economic climate!

» To give value and meaning to your CSR activity

» To give you a better understanding of the future

» To elevate your organisation above the competition to ensure long term sustainability of your activities


Why engage with stakeholders?


The process

1. Stakeholder mapping

2. Define a materiality index

3. Create a matrix

4. Undertake the engagement process

5. Analyse the results

6. Report back

7. Create a benchmark for future years


Stakeholder Mapping

Employees

Invest

ors

Media Suppliers

NGOs Academics

Government

Custom

ers


Stakeholder Mapping

» What is their relative importance?

» How important are they to you?

» How important are your activities to them?

» Devise a scale……..

1 5 10

Low Medium High


Stakeholders

» Consider your approach.........

» What do you ask them?

» Do you ask their opinions ahead of developing your strategy or after?

» Do you use their opinions to help inform your strategy?


Materiality – what are the issues?

Climate Change

Water

Supply

CO2 Flooding

Biodiver

sity

Giving

Poverty

Food Security


Materiality Index

» What is their relative importance?

» Devise a scale……..

1 5 10

Low medium high


Ranking by Importance

» Use a matrix to score importance of stakeholder group and importance of material issues

» Highest score suggests the areas on which to focus


Matrix of Importance

Current Issue

Stakeholder Group

Customers Employees Suppliers Investors Government NGOs Media Academics

Climate Change

Water Supply

CO2

Food Security

Flooding

Biodiversity

Poverty

Giving


Matrix of Importance

Current Issue

Stakeholder Group

Customers Employees Suppliers Investors Government NGOs Media Academics

Climate Change

18 18 16 18 19 15 15 15

Water Supply

14 7 8 12 12 4 6 7

CO2 20 18 16 18 19 16 16 16

Food Security

2 4 2 8 2 3 2 2

Flooding 4 8 6 4 3 8 6 2

Biodiversity 10 9 8 6 4 4 8 10

Poverty 16 9 8 7 15 4 2 4

Giving 10 16 5 6 8 8 6 5


How to talk to Stakeholders

Use conventional market research techniques

Methodology based on characteristics of stakeholder group

» Face-to-face interviews» Telephone interviews» Online/postal/touch screen surveys» Focus groups and workshops» Stakeholder panels

Results

» Analysed using market research software » Can be linked to a stakeholder management system» Conventional statistical analysis combined with qualitative analysis


Who should do the stakeholder engagement?

INTERNAL TEAM VS

EXTERNAL RESEARCH TEAM

• Knowledge of the company

• Knowledge of the issues

• Knowledge of the stakeholders

• Skills in questionnaire design• Independent and unbiased• Respondents open and honest with third party•Trained interviewers•Familiarity with capture and analysis of data•Understanding of CSR issues•Can benchmark against other organisations

• Could be biased• Lack interviewing skills• Lack experience of analysis of qualitative data

•Less knowledge of the company


Why bother?

In summary……….

» Clearer picture of who your stakeholders are

» How important they are and why

» Focus for developing your strategy

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Bureau Veritas

Murray Sayce

Stakeholders & Assurance

26th February 2009Stakeholders & Assurance

London

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Engagement is a pretentious catchall phrase that covers:

“talking with”,

“meeting with”,

“listening to”, and

“informing”

… wrapped up in the notion of transparency

• Getting involved in stakeholder engagement can appear as tricky as hooking up with someone who has just been through a messy divorce.

• The … baggage that is carried in those two words is … enough to persuade most sustainability managers to take up a monastic life.

CR reporting – stakeholder engagement

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CR reporting - best practice in assurance

► Challenge CR strategy and performance Governance and risk Doing the ‘right things’ and in the right way

► Focus on understanding / response to material issues Sector specific issues and ‘Hot topics’ Confidence in robustness of systems and data

► Value protection to value creation From business and CR perspective Assurance process to promote performance improvement

► Strategic / forward looking Overview of CR strategy and reporting Identification of future vision and challenges

► Greater reassurance to stakeholders on management of priority issues and enhanced credibility

How stakeholder engagement/feedback is used

Stakeholder panels/stakeholder perspectives

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Of the G250

0

10

20

30

40

50

60

70

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engagem

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identify

s/h

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s/h

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feedback

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s/h

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s/h

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feedback I

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% %


► Key to building trust and external credibility

► Stakeholders increasingly included in identifying issues

► Identifying and prioritising stakeholders + transparency over who is engaged

Stage further..:

of which 65% ‘better understand s/holder expectations’

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• a principles-based, open source framework for quality stakeholder engagement

• a robust basis for designing, implementing, evaluating and assuring the quality of stakeholder engagement

Stage further..:


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External Review Committees & Expert Panels

• 3rd successive year to assess Sustainability Report and process

• express views as individuals, not on behalf of respective organisations

• 3 main questions:

• has the company selected the most important topics ?

• how well has report dealt with these topics / responded to stakeholders ?

• did Shell give sufficient information and access to do this ?

• to encourage innovation and leadership on sustainable development & CR :

• advising on key areas of strategy and performance

(objectives, targets, performance, policy, stakeholder relationships & governance)

• independent scrutiny of BT’s understanding of critical societal issues; and

• advising on new or significantly altered report content.

….review, evaluate, scrutinise and recommend

Stage further..:

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An approach used for assurance of GSK, 2007/8 – Access to Medicines

• Interviews with external stakeholders to evaluate Materiality and Responsiveness

• Has material information (around subject matter) been included ?

• Does the information help with informed opinions and decisions ?

• Is the Company responding to issues / concerns & adequately communicating this ?

• Is information clear, understandable, timely and accessible ?

• Stakeholder selection based on:

• Nature, activities & objectives of stakeholder (PPP, investor, NGO, research…)

• Area of concern (R&D, preferential pricing, voluntary licensing…)

• openness to collaboration / practicality of engagement.

• Standing and credibility

assurance – stakeholder inclusion

Preference also given to groups/ bodies quoted in the Report, to include in the process elements of text verification.

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• Private-Public Partnerships

• Responsible investors

• Governmental Organisations

• Non Governmental Organisations

And other groups were approached:

• Research bodies

• Industry groups and associations

• Patients’ and consumers’ groups / associations

• Others

assurance – stakeholder inclusion

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GSK Case study – “what they said…”• ‘GSK a leading organisation on vaccines…’

• ‘PPPs can be very positive if set up well…’

• ‘GSK understands relevance of business model in LDCs’

• ‘compares favourably to peers…’

• ‘[GSK] is at the frontline of R&D for DDW…’

• ‘positive response to tiered vaccine model…’

• ‘Tearing Down the Barriers is good approach…like idea of dual branding…’

• ‘[GSK] keeps us well informed…’• ‘There is no global access policy or strategy obviously in place’

• ‘Would like to see KPIs on % invested in R&D on DDW’

• ‘What is [GSK’s] real contribution to PPPs?’

• ‘Cheapest prices still may be very high’

• ‘Need to negotiate a model where …increased transparency over price’

• ‘Need innovative approach to IP. Is tighter IP always necessary?’

• ‘Need increased transparency on lobbying’

• ‘Feel aggressively marketed to as a buyer of product’

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Issues to manage togetherassurance – outcomes

Opinion:Feedback from indicates that GSK is performing well in

relation to vaccines; differential pricing; PPPs….

illustrates a partnership approach to healthcare and…

Provides information on direct impacts

Statement

Main benefits include:

• increased visibility amongst important and sometimes ‘difficult’ audiences

• enhanced and ‘unfiltered’ evaluation against AA1000 Principles

• direct sampling of external perceptions / feedback on subject specific CR activities

• through corroboration can accelerate the verification of factual information

• helps to form assurance conclusions AND to inform future reporting approach / content

• more robust forum to discuss issues of concern independently / anonymously

• enhanced process credibility, transparency and reputation recognition

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Issues to manage togetherassurance – learnings

• Willing participation and positive feedback

• Importance of cross-representation

• Independence of the process enables greater inclusivity

• Confidentiality and the offer of unanimity to gain buy-in

• Can build relationships with key s/holder groups

• Demonstrate commitment and alignment with the AA1000AS

• Need for ongoing communication to maintain levels of trust

• Planning time / adequate information to optimise interview process

Other considerations

• Can be done a scale to suit the assurance engagement

• Consider informal /confidential feedback process to reporting organisation

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Thank you for attending

Have a safe journey

Documents

1 Welcome to the Effective Stakeholder Engagement Briefing 26 th February 2009