Decision

Follow-up statement: IUF and FLOC complaint to UK NCP about BAT

Updated 6 May 2022

Background

OECD Guidelines for Multinational Enterprises and the UK NCP

1. The Organisation for Economic Co-operation and Development (OECD) Guidelines (the Guidelines) are voluntary principles for responsible business conduct in areas including employment, human rights and the environment. As an OECD member government, the UK is required to maintain a National Contact Point (NCP) to promote the Guidelines and to consider complaints that multinational enterprises based in the UK, or operating there, have breached the Guidelines.

2. The UK NCP is based in the Department for International Trade (DIT). A Steering Board including members from business, trade unions and civil society has general oversight of the UK NCP. The UK NCP is independent of DIT ministers. They are advised of UK NCP decisions but cannot change or influence them.

Follow-up to final statements by the UK NCP

3. Where a final statement includes recommendations, or where an agreement between parties provides for it, the UK NCP will approach parties at a specified date to request a substantiated update on the company’s progress towards implementing the recommendations. The UK NCP then publishes a follow-up statement reflecting the parties’ responses and, where appropriate, the UK NCP’s conclusions thereon.

4. The follow-up statement is based on the information provided by both parties. It does not represent a further examination of the issues raised in the original complaint made to the UK NCP.

Find more details of the UK NCP’s process and statements.

Context

Complaint from International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF) and the Farm Labor Organizing Committee (FLOC) about British American Tobacco (BAT).

5. In 2016, IUF and FLOC made a complaint to the UK NCP alleging that BAT, a multinational tobacco company headquartered in the UK, did not meet its obligations under the Guidelines to identify and address the harmful impacts of its own operations and those of its business partners. It claimed that abuses were suffered by migrant farmworkers harvesting tobacco in North Carolina, on farms owned by Reynold American Incorporated (RAI). At the time of the complaint BAT had a 42% shareholding in RAI, which was one if its suppliers. The alleged abuses included poor pay, unsafe working practices and poor living conditions. The UK NCP decided that the complaint merited further examination and offered mediation to the parties. The initial assessment of this complaint is available on the IUF and FLOC complaint to UK NCP about BAT landing page.

6. BAT declined the UK NCP’s offer of mediation. Following its rules of procedure, the UK NCP undertook a further examination of the complaint and published a final statement in December 2019 on GOV.UK. The UK NCP found that BAT had fulfilled its obligations under the relevant provisions of the Guidelines. However, it also made several recommendations to the company in relation to new provisions on due diligence that have subsequently been incorporated into the Guidelines.

UK NCP recommendations to BAT

7. The UK NCP recommended that BAT:

I. review how it acts on the findings of the research conducted with migrant workers under the Social Responsibility in Tobacco Production (SRTP) programme

II. reassess its relationship with RAI following its acquisition of the company in 2017

III. work with stakeholders to ensure the Charter and Operating Protocols of the Farm Labor Practices Group (FLPG) are more clearly defined and that the findings established at FLPG meetings are dealt with in a timely manner so that positive outcomes are achieved for ununionised workers

UK NCP follow-up process

8. The follow-up process for this complaint started in April 2020. This was 12 months after the final statement had been shared with both parties and 6 months after its publication, due to the request by IUF and FLOC for a procedural review. In light of the COVID-19 pandemic, the UK NCP held phone calls with both parties to ask if the situation would affect their ability to provide updates. Both parties said that they were able and willing to proceed. The complainants stated that they did not want the follow-up to be delayed given the length of the overall complaint process and significance of the ongoing harms raised.

9. The UK NCP contacted both parties by email on 29 May 2020 and invited them to provide substantiated updates on the recommendations by 3 July 2020, which could be considered for the purposes of the follow-up statement. BAT contacted the UK NCP requesting an extension to the deadline. The UK NCP agreed to the request and offered the same extension to the complainants.

10. The UK NCP received an update on 10 July 2020 from IUF General Secretary, which included annexed information in the form of correspondence to/from FLOC, to support their claims (together referred to as the ‘IUF update’). The IUF update stated that BAT had not made progress towards implementing the UK NCP’s recommendations.

11. The UK NCP received an update from BAT on 14 July 2020 which outlined the steps it had taken in implementing the UK NCP’s recommendations. BAT also provided a letter from its wholly owned subsidiary, RAI including further information in support of its position.

12. This follow-up statement provides an overview of the responses given by both parties. The UK NCP has also found it appropriate to provide its conclusions on the parties’ responses, and to assess, in light of the parties’ responses whether BAT has been following the recommendations in the final statement.

13. In line with UK NCP procedures, a draft of this follow-up statement was shared with both parties before publication to enable any relevant factual comments to be considered by the UK NCP.

Response from the complainants: IUF and FLOC

14. The primary focus of the IUF update related to the UK NCP’s third recommendation, about the FLPG. It stated that the FLPG had not revised its scope, charter, or operating procedures as the UK NCP had recommended, nor had the FLPG served as an effective forum for any farmworkers, whether represented by a trade union or not, to address human rights violations.

15. The IUF update stated that at BAT’s annual general meeting in April 2020, BAT made the following statement about the FLPG, saying that it:

had facilitated the introduction of a uniform, comprehensive human rights due diligence process available for use by every purchaser of U.S. tobacco, a helpline available for workers to report complaints, and a substantial increase in the training and materials available to growers and workers.

16. The IUF update alleged that the FLPG had made no difference to widespread human rights violations occurring on the tobacco farms under its remit.

17. When the complaint was originally made to the UK NCP, FLOC (the co-complainant based in the USA) was a member of the FLPG. When the UK NCP held a phone call with FLOC and IUF in April 2020, the FLOC representative said that it had left the FLPG that month because it had refused to address the serious human rights violations that occurred on RAI farms. It stated that because of this, the FLPG now has no worker representation in its remaining membership, which includes tobacco companies, the U.S Department of Labor, the government of North Carolina and other non-government organisations.

18. The IUF update stated that the FLPG continues to limit itself to discussing general issues without reaching conclusions or offering any opportunities to improve the conditions of farmworkers.

19. The IUF update provided correspondence detailing a number of human rights violations that had been raised to the FLPG, for example: wage theft, intimidation, lack of field sanitation, sexual harassment, lack of transportation, and incorrect piece rate payments. It stated that neither the FLPG, nor RAI, nor other tobacco companies, including BAT, have assisted with any of the issues raised. It stated further that the FLPG still has no grievance mechanism to help resolve specific instances of human rights abuses. The IUF update alleged that workers can be ‘blacklisted’ from re-hiring if they raise such issues.

20. The IUF update claimed that when FLOC raised issues to GAP Connections (an audit firm employed by BAT to look into payment of workers’ wages) the lawyers representing the audit firm sent a cease and desist letter asking the FLOC not to engage further on the matters raised.

21. In its letter of resignation to the FLPG, which was provided to the UK NCP, FLOC highlighted the FLPG’s claims that it cannot discuss issues of grower contracts, prices, and worker wages because of anti-trust regulations.

22. FLOC stated that an FLPG working group started in 2013 to set up a grievance mechanism made no progress until 2017, when the group agreed to put out a Request for Proposals. FLOC stated that as of April 2020, no progress or decisions has been made on the establishment of a grievance mechanism.

23. The IUF update also stated that the lack of progress by the FLPG means BAT has made no progress regarding the second recommendation the UK NCP made to BAT. It claimed that RAI’s processes for managing the wellbeing of agricultural workers employed in its supply chain are not fit for purpose, and that they have not made use of the OECD Due Diligence Guidance for Responsible Business Conduct.

Response from the company: BAT

24. BAT provided a response regarding each of the recommendations the UK NCP made. BAT provided the UK NCP with a covering letter providing an update on the UK NCP’s recommendations, as well as annexed letter from RAI regarding its subsidiary RJRT.

25. In response to the original complaint, made in June 2016, BAT provided information about its approach to human rights due diligence using the SRTP programme. Later in 2016, the SRPT was replaced with the Sustainable Tobacco Programme (STP). In its response BAT said that the STP had announced that its policies were now aligned with international standards such as International Labour Organization (ILO) standards and the UN Guiding Principles on Business and Human Rights (UNGPs) and the STP policies would be updated further to align with the UN Sustainable Development Goals.

Find details of the STP on the BAT website.

26. BAT stated that AB Sustain, an agricultural supply chain management company, conducts on-site audits of tobacco farms in its supply chain every three years. They stated that R.J. Reynolds Tobacco (RJRT), a wholly owned subsidiary of RAI, last had an STP external on-site audit in September 2018. This audit led to actions including introducing mandatory training meetings with farmers, and developing labour management guidebooks regarding workers’ rights.

27. BAT said that it placed conditions on its growers to ensure workers’ housing is certified annually by the US Department of Labor and that a Worker Helpline was expanded to all tobacco farms in 2018, via the industry-funded GAP Connections programme.

28. Regarding the second recommendation, BAT stated that in 2017 it became the sole-shareholder of RAI. Since then, it has supported the alignment of RAI’s processes for managing the wellbeing of agricultural workers employed in its supply chains with international best practice standards.

29. BAT stated that it considers RAI’s processes consistent with the OECD Due Diligence Guidance and was fit for purpose. In its response to the UK NCP, BAT included a letter from RAI which highlighted that its collaborative involvement in multi-stakeholder groups and its due diligence processes help it to manage the wellbeing of workers in its supply chain.

30. Regarding due diligence policies, processes, management systems and contracts, RAI said that they made the decision to adopt the BAT Standards of Business Conduct which are aligned with what RAI described as ‘relevant ILO conventions’, the UNGPs and the Universal Declaration of Human Rights. They highlighted the helpline available for workers to ask questions and raise grievances.

31. Regarding due diligence risk assessments, RAI stated that RJRT based its risk assessment on issues raised in the report that FLOC authored with Oxfam in 2011.^{[footnote 1]} RAI highlighted that the report recommended that companies include workers in audits in its assessment processes, a recommendation it says RJRT has taken forward.

32. RAI stated that collaborative industry and multi-stakeholder groups are essential to overcome the practical limitations of companies conducting human rights due diligence on their own. It stated that whilst the STP was an important component, it also uses GAP Connections and the FLPG for audit work and remedial programmes.

33. RAI stated that the industry-funded GAP Connections audit programme operates on a 3-year cycle, in which growers have a full on-site assessment. RAI stated that 20% of workers are interviewed away from growers about human rights issues and working conditions and that monitoring is conducted in the following years.

34. In response to the third recommendation, BAT stated that it believed that the multi-stakeholder approach achieved the most effective and most widely adopted outcomes. BAT stated that efforts of both BAT and RAI to drive change have resulted in new transparency tools and revisions to the Charter and Operating Protocols to address the issues raised by the UK NCP. BAT claimed that during 2020 FLPG plenary meetings, decisions were made to improve the transparency and accountability of its functioning including changes to its Charter, but they provided no evidence of this to the UK NCP.

35. The letter from RAI stated the Charter now expressly provides that there will be an annual review to ensure that the Charter and Protocols suitably account for present workstreams and are consistent with best practice for multi-stakeholder initiatives.

36. RAI stated that the FLPG has prepared resources on best practices to inform and assist growers in establishing a human rights due diligence system on farms and has promoted best practices for growers on preventing exploitative child labour. They claim that the FLPG makes it easier for farmers to do what the OECD asks of multinational enterprises: embed due diligence into the operations policies and contracts.

37. RAI stated that it continues to collaborate with industry and stakeholders to pilot an enhanced grievance mechanism under the FLPG including the Request for Proposals process that is ongoing.

UK NCP conclusions

38. The UK NCP notes there are significant differences in the responses it received from both parties. BAT claim that industry funded multi-stakeholder initiatives such as the STP and the FLPG are effective in enabling it, and its wholly owned subsidiary RAI, to put the UK NCP’s recommendations into practice. IUF and FLOC claim that these initiatives lack meaningful engagement with impacted workers, or their representatives, and that there has been very little concrete action to improve the conditions of migrant tobacco workers since either the Oxfam report in 2010 or the IUF/FLOC complaint to the UK NCP in 2016.

39. The main conclusion the UK NCP draws from the responses from both parties is that not all the recommendations set out in the Final Statement of December 2019 have been implemented effectively and that there are still a number of issues which need to be addressed by the company.

BAT’s implementation of recommendations

1. BAT to review how it acts on the findings of the research conducted with migrant workers under the SRTP programme.

40. The final statement found:

It is not always clear how the information gathered under the SRTP programme BAT contributed financially and in which it participated, is used effectively to improve working and living standards for migrant workers.

The UK NCP recommends that BAT participate in procedures to address the issues identified in the interviews with workers. These procedures should be time bound and subject to quality inspections by an independent third party to ensure that they are fit for purpose.

BAT should also affirm its commitment to the monitoring process by examining the findings of the research and publishing a schedule of activity to correct the identified issues.

41. Regarding the first recommendation, the UK NCP notes considerable time has passed since the specific worker interviews conducted by SRTP in 2015/6. The UK NCP also notes that the SRTP has evolved into the STP, a tobacco industry funded programme managed by consultants, AB Sustain. The UK NCP also notes that a large part of BAT’s response was concentrated on the efforts of one of RAI’s subsidiaries, RJRT.

42. The UK NCP accepts that some efforts have been made by BAT to act on the findings of the audits. However, the limited role allowed by workers and their representatives to participate in due diligence audits means that it is difficult to see how these represent meaningful engagement in line with the OECD Due Diligence Guidance.

43. BAT claimed that GAP Connections conducts “independent” audits, but the governance of GAP Connections appears to be tobacco industry led and funded.^{[footnote 2]} The IUF update therefore raised concerns about whether workers can safely raise grievances through it.

44. The UK NCP recommends all companies ensure workers and their representatives, across their supply chain, are safe from retaliation when raising concerns.

2. BAT to reassess its relationship with RAI following its acquisition of the company

45. The final statement found:

Following the acquisition of RAI by BAT in 2017, it became a wholly owned subsidiary of BAT. The UK NCP therefore recommends that BAT ensure that RAI’s processes for managing the well-being of agricultural workers employed in its supply chain are fit for purpose. If it has not already done so, the UK NCP recommends that BAT use the OECD Due Diligence Guidance for Responsible Business Conduct for this purpose.

46. Regarding the second recommendation, BAT demonstrated that it has encouraged RAI to implement policies in line with the OECD Due Diligence Guidance. However, the IUF update stated that the lack of meaningful stakeholder engagement and the lack of concrete action by the FLPG meant they could not be seen to be aligned with the guidance. The OECD Due Diligence Guidance states that “Meaningful stakeholder engagement is important throughout the due diligence process.” Stakeholders should include those who are impacted by a specific activity, which in this case means case workers, employees (including under informal arrangements within supply chains), worker representatives and trade unions.

47. The UK NCP recommends, as per the OECD Due Diligence Guidance, all companies ensure they implement meaningful stakeholder engagement with workers and their representatives in conducting due diligence on human and worker rights.

3. BAT to work with stakeholders to ensure the charter and operating protocols of the FLPG are more clearly defined and that the findings established at FLPG meetings are dealt with in a timely manner so that positive outcomes are achieved for ununionised workers

48. The final statement found:

The UK NCP notes that the Charter and Operating Protocols for the FLPG it has seen, and which are dated 2015, indicate that many of the processes are still at a preliminary stage and are not clearly defined.

While the UK NCP agrees that the FLPG can act as a vehicle for dialogue with migrant workers and therefore lead to an improvement of working and living standards for them, the UK NCP considers that it can only do so if the FLPG conducts itself in a proactive and transparent way. This includes establishing a clear process to address the issues identified during the meetings on a timely basis, if it has not already done so.

49. Regarding the third recommendation, the UK NCP notes that FLOC has raised a number of human rights violations that do not appear to have been resolved and that, as the FLPG stated that it cannot deal with grievances, it has therefore left the group. The UK NCP has not seen evidence that the FLPG has achieved positive outcomes for workers. As in recommendation 2, under the OECD Due Diligence Guidance, multi-stakeholder initiatives should have meaningful stakeholder engagement with stakeholders such as worker representatives and trade unions.

50. The UK NCP notes that at present, the FLPG does not have a functioning grievance mechanism to hear human rights issues that are raised. The UK NCP understands that there are ongoing efforts to establish an effective grievance mechanism as part of the FLPG Request for Proposals but as of April 2020 no decision has been made on these.

51. The UK NCP encourages all companies to ensure that any new grievance mechanism meets the core criteria as set out in the Guidelines of ‘legitimacy, accessibility, predictability, equitability, compatibility with the Guidelines and transparency’, is ‘based on dialogue and engagement with a view to seeking agreed solutions’. Any grievance mechanism should not be used to undermine the role of trade unions in addressing labour-related disputes.^{[footnote 3]}

52. The UK NCP notes that BAT stated that the FLPG Charter and Operating Protocol have been updated, however it has not seen evidence of this and therefore cannot determine the extent to which the FLPG is operating in a proactive and transparent way. As FLOC have left the FLPG it appears that there is currently no meaningful stakeholder engagement with worker representatives or trade unions.

53. The comments of the UK NCP Final Statement of December 2019 related to the FLPG therefore remain relevant and reminds all companies to conduct human rights due diligence and engage meaningfully with stakeholders.

Other issues

54. The UK NCP reminds all multinational companies that the OECD Due Diligence Guidance requires them to undertake meaningful engagement with all stakeholders impacted by companies’ activities including workers, their representatives and trade unions.

1. FLOC, and Oxfam. ‘A State of Fear: Human Rights Abuses in North Carolina’s Tobacco Industry.’ Last modified 2011. ↩

2. https://www.gapconnections.com/who-we-are/governance. ↩

3. OECD Guidelines, Chapter IV, paragraph 46. ↩