BAT: Prioritising Supplier Diversity and Ethical Sourcing

Global supply chains face unprecedented pressures from multiple directions.

British American Tobacco (BAT) is pioneering a new approach to supply chain management, combining digital innovation with sustainable practices to navigate an increasingly complex landscape. 

Revealing how the multinational corporation is future-proofing its operations, Chief Operating Officer Johan Vandermeulen points to a triple threat of emerging challenges – beginning with geopolitical instability.

“With the number of conflicts, trade barriers and new regional alliances increasing rapidly, a flexible and responsive global sourcing model is no longer a 'nice-to-have' but a strategic imperative," Johan asserts. 

The second major challenge centres on mitigating environmental impact, as nations struggle to limit global warming to 1.5°C, per the Paris Climate Agreement.

BAT has responded with ambitious targets, aiming to achieve a 50% reduction in Scope 1, 2 and 3 emissions by 2030 compared to 2020 levels, while working towards net zero across its value chain by 2050.

The third challenge – and opportunity – lies in AI. 

"With one trillion devices expected to be connected to minimal latency technology, development in this space will be a game-changer for our business and our people," says Johan. "We have a responsibility to transform the future of work and redefine the roles humans and machines play in our business."

Harnessing digital innovation

BAT's response to these aforementioned challenges has been comprehensive, with digital technology at the core of its strategy. 

The company has developed sophisticated supply chain control towers equipped with real-time tracking and predictive analytics capabilities – an investment that proved particularly valuable during recent global disruptions.

"BAT managed to avoid the worst of these disruptions, with our digital platforms such as P44 giving us visibility of deep sea containers, air and a good portion of our in-market road transport," Johan notes. "Using AI/ML to accurately predict time of arrival, we know near real-time where our goods are, which lets us react quickly in case of delays and supply risks.”

Meanwhile, the organisation’s Supply Chain Risk platform, coupled with Everstream Analytics, provides comprehensive intelligence on potential risks ranging from port congestion to geopolitical developments. This technology-driven approach has transformed how BAT thinks about supply chain resilience.

Championing supplier diversity

Supplier diversity plays a crucial role in BAT's risk management strategy, encompassing both direct product suppliers and indirect service providers across IT and facilities management. 

The company's approach is governed by a comprehensive Supplier Code of Conduct, which aligns with the UN Guiding Principles on Business and Human Rights.

Johan highlights: “Our suppliers are valued business partners and we believe that, by working together, we can raise standards, drive sustainable practices, create shared value and build ‘A Better Tomorrow’ for all.”

BAT employs a multifaceted evaluation process that ensures potential suppliers are assessed through an inclusive lens.

But its commitment to supplier diversity goes beyond mere compliance. The business actively monitors existing suppliers' adherence to their code, conducting regular reviews and investigations when necessary. It’s a proactive approach that ensures its supplier network remains both diverse and accountable.

Sustainable practices and ethical sourcing

Environmental responsibility and ethical sourcing are central to BAT's strategy. 

The company's commitment to responsible sourcing is evidenced by its comprehensive due diligence strategy, with 10-15% of sourcing criteria dedicated to assessing sustainability and ethical practices.

“Our due diligence strategy takes a risk-based approach, prioritising those suppliers with higher sustainability risks, bearing in mind a number of factors such as their location or sector,” Johan continues. 

This is underpinned by BAT’s internal expertise, as well as external risk databases, like Maplecroft. It also works with leading ESG experts including Ecovadis, Sedex and the Responsible Business Alliance.

BAT has set an ambitious target to have all high-risk product materials and indirect suppliers undergo at least one independent labour audit within a three-year cycle by 2025. 

“We’re proud to report that we have already achieved 88% of this target, 13% ahead of our 2024 goal, underscoring our dedication to responsible sourcing practices,” Johan adds. 

Building for the future

Looking ahead, BAT is developing what Johan describes as a "multi-category asset-lite global supply chain." 

It’s an approach that involves strategic industry collaborations and the adoption of new manufacturing technologies to optimise investments while expanding into new categories.

The firm has made significant investments in sustainable operations, from renewable energy to AI-driven utility systems. Recent pilot programmes exploring sustainable aviation and marine fuels demonstrate BAT's commitment to pioneering environmental solutions.

"Our supply chains are evolving to become more responsive and synchronised," Johan explains. "This is adding value far beyond traditional boundaries and enabling us to become more competitive, commercially successful and to excel in delivering sustainable value for our business."

To read the full article in the magazine, click HERE.

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