Our Core Capital Our Business Activities and Growth Strategies The Value We Create

VISIONContinue to

achieve global growth by

providing diverse value unique

to JT

Tobacco Business

Expanding our product portfolio

to satisfy increasingly diverse

consumer needs and preferences

Pharmaceutical Business

Developing new, original drugs

to save people around the world

from disease

Processed Food Business

Realizing the future of dining

in Japan through businesses that

support our diet

Corporate governance and compliance support all of these processes p74

The external environment surrounding the JT Group p60

Business Strategy

Achieve quality top-line growth

Strengthen cost competitiveness

Enhance business foundation

Our Sustainability Strategy

The JT Group’s Three Absolute RequirementsRespect for human rights

An improved social and environmental impact

Good governance and business standards

• Cigarettes• RRP

– T-Vapor• Tobacco-Infused Vapor products• Heated Tobacco product

– E-Vapor, etc.

• Three Key Therapeutic Areas– Metabolic diseases– Autoimmune/

inflammatory diseases– Viral infection

• Frozen and ambient foods• Seasonings• Bakery products

Strategic Focus Areas for Sustainability Tobacco p26 Pharmaceuticals p28 Processed Food p28

Strategies by SegmentInternational Tobacco p42 Japanese Domestic Tobacco p46

Pharmaceuticals p50 Processed Food p52

Financial CapitalSustainable profit growth and stable cash flows are

backed by a combination of organic growth and M&A.

• Adjusted operating profit at constant FX ����������������¥600.8 billion (+0.9% year-on-year change)

• Total equity �����������������������������������������������������������������¥2,743.6 billion• FCF ����������������������������������������������������������������������������������¥404.2 billion

Human CapitalOur corporate culture respects diverse values and

generates synergy from a diverse workforce.

Social and Relationship CapitalWe have global business operations and a wide collaborative network spanning the value chain.

Manufacturing CapitalOur optimal manufacturing system and facilities

ensure superior quality and productivity supported by active capital investment.

Natural CapitalThe natural environment is vital to our sustainable growth.

Intellectual CapitalStrong R&D Capabilities

We possess a diverse portfolio of competitive brands and robust brand equity rooted in our ability to deliver

high-quality, innovative products.

Corporate Value

Achieving consolidated profit targets

Mid to high single-digit annual average growth of adjusted

operating profit at constant FX over the mid- to long-term

Enhancing shareholder returns in line with mid- to

long-term profit growth

Social ValueContributing to the sustainable

development of society through our business activities

We contribute most significantly to the following nine SDGs by

achieving specific targets in each business’s focus areas, such as

providing products and services that exceed consumer expectations,

investing in our people and building a sustainable supply chain.

R&D

Procurem

ent

Marketing

Man

ufac

turi

ng

Sales

Our Products and Services

Our Management PrinciplesThe 4S model

We strive to fulfill our responsibilities to our valued consumers, shareholders, employees and the wider

society, carefully considering the respective interests of these four

key stakeholder groups, continuously working to exceed

their expectations.

A solid financial base

Three Strengths Driving Our Global Growth

Superior brand equity

A diverse workforce

Our Value Creation Process

Our management principles pursue the 4S model. These principles guide our efforts to achieve our vision by enhancing

corporate value and creating social value. We provide a wide range of products and services while leveraging our three

strengths: a solid financial base, superior brand equity and a diverse workforce.

Shareholders

Consumers

Employees Society

• R&D expenditures ���������������������������������������������������������¥64.1 billion (Tobacco Science Research Center,

Central Pharmaceutical Research Institute, etc.)• We own three of the top 10 highest selling cigarette brands

in the world�

• Number of employees��������������������������������������������������������������61,975• Employee nationalities ��������������������������������������������������������Over 100• Certified as a Top Employer in ������������������������������������ 63 locations

• Countries/regions where our products are sold ���������������Over 130• Countries where we operate�����������������������������������������������Over 70• Directly contracted tobacco leaf growers and

tobacco leaf merchants ������������������������������������������������Over 86,500

• Capital expenditures ������������������������������������������������������¥131.4 billion• Tobacco manufacturing bases ����������������������������������� 41 factories

(29 countries)• Processed food manufacturing bases �������������������������31 factories

(all factories have achieved FSSC 22000 certification)

• Stable climate conditions����������Investment in renewable energy:Approx. US$21 million (2016–2019)

• Abundant and quality water resources ����� 10,448,035 m3 water (2019) intake volume; 95% of our factories have undergone

water risk assessment• Healthy ecosystems for flora

and fauna ���������������������������������������������Switch to renewable wood; Planted 7 million trees

Our measures to reduce our environmental impact and the JT Group Environment Plan 2030 p72

CORPORATE PROFILE ABSOLUTE REQUIREMENTSFOR SUSTAINABILITY

STRATEGY FINANCIAL INFORMATION

015014 Japan Tobacco Inc. Integrated Report 2019Japan Tobacco Inc. Integrated Report 2019

VALUE CREATION

Sustainability Strategy of Tobacco Business

4 Strategic Focus Areas Aspirational Goals Targets*1 Progress*2 SDGs

Products and Services We will be a total tobacco company offering consumers an even greater choice of products by focusing on quality, innovation, and reduced-risk potential.

Reduced-Risk ProductsReduced-Risk Products (RRP) offer real benefits to consumers and society. Our responsibility as a manufacturer is to continuously develop and launch RRP that meet consumer expectations and to provide information on them. We will lead in providing the widest range of consumer choice in the RRP category.

At the end of 2019, our Reduced-Risk Product portfolio was present in 28 countries, with a choice of three tobacco vapor offerings (T-Vapor) and five types of e-cigarettes (E-Vapor).

p36

People We will be the employer of choice by investing in people.

Zero InjuriesIn line with our vision of zero workplace injuries, we will reduce injury rates by 25% by 2023 and 50% by 2030. (Baseline year: 2015).

Recordable injury rate*3 declined 31.2% from 0.72 in 2015 to 0.49 in 2019.

p18

Community InvestmentBetween 2015 and 2030 we will invest US$600 million to help make communities inclusive and resilient, with our employees contributing 300,000 volunteering hours.

Since 2015, we have invested US$300 million in our communities and employees volunteered 119,349 hours on company time.

Employer of ChoiceWe will be a certified employer of choice every year in at least 60 locations by focusing on talent management, rewards, and empowerment.

We were certified as a Top Employer in 63 locations, an increase of 5 locations from the prior year. We were also awarded with local certifications in 8 locations.

Supply Chain We will reduce environmen-tal and social risks, and enable transparent and responsible practices across our supply chain.

Greenhouse Gas EmissionsWe will reduce greenhouse gas emissions from our own operations by 35% and from our direct leaf supply chain by 40%, between 2015 and 2030.

Since 2015, we have reduced greenhouse gas emissions from our own operations by 17.4%. Greenhouse gas emissions from our direct leaf supply chain increased by 17.9%.*4

p38

Water and WasteWe will reduce water withdrawal by 15% and waste by 20%, in relation to our own operations, between 2015 and 2030.

Since 2015, we have reduced water withdrawal by 9.7% and waste by 6.3%, in relations to our own operations.

ForestryWe will replace all wood from natural forests used in the tobacco curing process of our directly contracted growers with renewable fuel sources by 2030.

Based on our 2019 sustainable tree planting activities in Tanzania, Zambia and Brazil, we estimate that we are on a path to achieve 59% renewable wood sourcing by 2026.

Agricultural Labor PracticesWe will implement our Agricultural Labor Practices (ALP) program in all sourcing countries by 2025.

In 2019, 81% of our supplying entities reported against ALP.

[58%*5 of our directly contracted growers and 98% of our leaf merchants were covered by ALP; leaf merchants data come from reporting entities only and excluding India and China.]

74% of our volumes were covered by ALP.

Supplier ScreeningWe will screen all key suppliers against environmental, social, and governance criteria by 2023.

At the end of 2019, 67% of our key suppliers were screened against ESG criteria.*6

Regulatory Environment and Illegal Trade

We will ensure the Company is included in policymaking leading to fair and balanced regulation, and enhance our cooperation with governments to combat illegal trade.

EngagementWe will always protect our ability to participate in public policy debate with the aim to achieve balanced regulation that meets societal concern and supports business growth.

During 2019, we engaged openly and transparently in public policy debate and made our views known to regulators, NGOs and other relevant stakeholders in the countries where we operate. p41

Illegal TradeWe will engage in dialogue with law enforcement agencies, with the goal to exchange intelligence regarding illegal tobacco products, in order to support the reduction of illegal tobacco products.

In 2019, our Anti-Illicit Trade team provided 1,129 intelligence reports to law enforcement agencies, and advised 2,687 law enforcement officers on counterfeit recognition. p40

*1 The above are targets for our tobacco business, except for Community Investment which is a Group-wide target. *2 Progress shown above are 2019 results.*3 Recordable injury rate = Recordable injuries/200,000 hours worked. Some data from newly acquired business have been excluded, as newly acquired business

needs 18 months to integrate the JT Group Health and Safety Standards.

*4 The main reason for the increase in GHG emissions from our direct leaf supply chain is the increased volume sourced from Zambia and Tanzania, both of which use wood for curing that currently is predominantly non-renewable. We expect that the impact of initiatives to reduce leaf-related emissions will be seen from 2022 onwards, with curing barn upgrades and the increase in proportion of renewable wood used for curing in Zambia and Tanzania.

*5 The decrease from 96% in 2018 to 58% in 2019 is due to new acquisitions. *6 Results for our international tobacco business.

CORPORATE PROFILE VALUE CREATION ABSOLUTE REQUIREMENTSFOR SUSTAINABILITY

FINANCIAL INFORMATION

027026 Japan Tobacco Inc. Integrated Report 2019Japan Tobacco Inc. Integrated Report 2019

STRATEGY

Non-Financial Performance Review

RRP

At the end of 2019, our RRP portfolio was present in 28 countries, with a choice of three tobacco vapor offerings

(T-Vapor) and five types of e-cigarettes (E-Vapor).

Anti-Illicit Trade

We provided information to law enforcement that led to:

70+ counterfeit tobacco factories and storage

locations raided

3.2 billion+ illegal cigarettes seized

ARISE*

6,186 children off farms and into schools through the

ARISE program

*Achieving Reduction of Child Labor in Support of Education

Compliance

99.7% of our employees in our Japanese operations

completed online training on the Code of Conduct.

30,000 employees attended training on our Code of

Conduct in our international tobacco business.

Learn more about our non-financial data scope annotations at JT.com.

Any data without annotated scope in this report covers the entire JT Group including subsidiaries.

Community Investment

50 (USD MM) invested in our communities

10,256 employees volunteered 33,055 hours

on company time

3,640 employees spent 22,841 hours of their own time

taking part in volunteering activities

Dow Jones Sustainability Indices

We are very proud to be listed in the Asia-Pacific Dow Jones Sustainability Index for the

sixth consecutive year, moving up to second place in the tobacco industry.

Highlights include:

• Improved scores and ranking across all economic, environmental and social dimensions

• Industry leader in the social dimension, with full scores in Corporate Citizenship and

Philanthropy and Social Reporting

• Perfect scores of 100 also in Environmental Reporting and Climate Strategy

• In the economic dimension, we scored 100 in Materiality

• Recognized with SAM Bronze Class 2020 ranking and as a SAM Industry Mover

2020 for the first time

See The Sustainability Yearbook 2020 for more details.

Environment

We strive to further reduce environmental impacts, focusing on the most significant environmental risks and opportunities for

our business and stakeholders. Learn more about our Environment data at JT.com.

Note: The data have been restated in line with our recalculation policy. Learn more about our calculation methodology at JT.com.

Human Rights

We completed 9 Human Rights Impact Assessments in

high-risk countries.

Human Resources

Our international tobacco business was certified as a Global Top

Employer for the sixth consecutive year. We were certified as a

Top Employer by the Top Employers Institute in 63 countries

around the world. In Japan, JT was selected as a “White 500”

company and achieved Gold status in the Pride Index Report of

Japanese employers for the fourth consecutive year.

Agricultural Labor Practices

Of all the entities that provided us with tobacco leaf, either

directly or through leaf merchants,

81% reported against Agricultural Labor Practices.

GHG Emissions in Our Value Chain in 2019(CO2e thousand tons)

Sco

pe

3

Water Withdrawal (Thousand m3) Waste Generated (Thousand tons)

Combined Scope 1 and 2 GHG Emissions(CO2e thousand tons)

This year, we regained our spot on CDP’s prestigious “A List” for climate

change, putting us in the top 2% of companies achieving A list status. We are

also very proud to have achieved A list status for water security and to be

recognized as a leader in supply chain engagement, both for the first time.

CORPORATE PROFILE VALUE CREATION ABSOLUTE REQUIREMENTSFOR SUSTAINABILITY

FINANCIAL INFORMATION

059058 Japan Tobacco Inc. Integrated Report 2019Japan Tobacco Inc. Integrated Report 2019

STRATEGY

Improving Our Environmental Impact

CDP A List and Supplier Engagement Leader

Since 2010 we have reported on our environmental impact to

CDP, a leading external ratings agency and climate research

provider. This year we regained our spot on CDP’s prestigious

“A List” for climate change (press release in January 2020),

having done so previously in 2016. We are also very proud to

report that we are included in the CDP A List as a global leader

on water security for the first time (press release in February

2020) and recognized as a global leader in engaging our supply

chain in addressing climate change.

Environmental issues, such as climate change, are of increasing societal concern. Our operations impact the environment through resource usage, emissions and waste generation, as do most industries. The environment also has a direct influence on our business. We all need to address environmental issues and, as a global organization, we recognize that we have a key role to play in reducing our impacts, not only from our own operations but across our value chain.

By implementing sustainable business practices, we are able to conserve resources, reduce waste, manage costs and meet growing consumer demand for more sustainable products – bringing benefits to both the environment and our business.This approach is explained in the JT Group Environment Policy.

Learn more about our approach to environment on JT.com.

Transition our operations to net zero carbon energy supply.

*1 Baseline year for all targets is 2015. Target year is 2030 unless stated otherwise. The overall plan is to be reviewed every five years.*2 The main reason for the increase in GHG emissions associated with our purchased goods and services is leaf related emissions rise due to increased leaf volume sourced from Zambia and

Tanzania, both of which use wood for curing that currently is predominantly non-renewable. We expect that the impact of initiatives to reduce leaf-related emissions will be seen from 2022 onwards, with curing barn upgrades and the increase in proportion of renewable wood used for curing in Zambia and Tanzania.

Live barns in Malawi.*4

*3 ISO 14001 and ISO 50001, are the internationally recognized standards for environmental management systems and energy management systems, respectively. These standards do not prescribe absolute performance requirements. Rather, they provide us with a framework to help build effective management systems that deliver continual improvement in environmental and energy performance.

*4 Learn more about Live barns at JTI.com.

Reduce our greenhouse gas emissions to support the Paris Agreement on global climate change with the aim of achieving net zero carbon emissions from our operations.

Support global water stewardship by reducing our water withdrawal and by encouraging water risk management in our supply chain.

Ensure a sustainable wood supply for our product supply chains and further contribute to forest conservation and rehabilitation.

Further reduce the environmental impacts of waste associated with our processes and products.

We will double the proportion of renewable electricity that we use to 25% by 2030 and 100% by 2050.

We will reduce greenhouse gas emissions from our own operations by 32%.

We will reduce emissions associated with our purchased goods and services by 23%.

This will be achieved through a 40% reduction from our direct leaf supply chain and reductions in our non-tobacco materials, such as packaging.

We will reduce water withdrawal associated with our tobacco business by 15%.

To better understand water risk and use in our supply chain, by 2022, we will implement a water risk management process in our manufacturing supply chain.

To further focus our efforts on sustainable forest management, by 2020, we will have assessed the drivers for deforestation and forest degradation in communities where we source tobacco and developed action plans for improved wood resource use, forest conservation, and forest rehabilitation.

We will replace all wood from natural forests used in the tobacco curing process of our directly contracted growers with renewable fuel sources.

We will reduce waste associated with our tobacco business by 20%.

By 2020, we will have targets and action plans relating to the appropriate use and responsible disposal of materials, including plastics, used in our products and packaging.

13.9%

-14.3%

+ 9.0%*2

p27

p27

p27

p27

Energy

Target Progress in 2019Objective

The JT Group Environment Plan 2030*1

In 2019, we launched the JT Group Environment Plan 2030,

which sets objectives and targets that address our key

environmental risks and opportunities in relation to three focus

areas: Energy and Emissions, Natural Resources and Waste.

Our GHG emission reduction target was approved as a

science based target (SBT) by the Science Based Targets

initiative (SBTi).

JT Group Environment Management

In our more complex operations, we align our approach to

environmental management with internationally recognized

standards – ISO 14001 and ISO 50001.*3 In our smaller and

less complex operations in Japan, we have implemented our

own “JT Green System,” which promotes a simple and

consistent approach.

To objectively review our approach to environmental

management and our overall performance, we use external

disclosures and ratings agencies, such as CDP and the

Dow Jones Sustainability Indices (DJSI). In 2019, we

improved our rating in DJSI’s environmental dimension and

achieved the maximum score in Environmental Reporting

and Climate Strategy.

Water

Waste

Forestry

Emissions

CORPORATE PROFILE VALUE CREATION STRATEGY FINANCIAL INFORMATION

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ABSOLUTE REQUIREMENTSFOR SUSTAINABILITY