When it comes to tobacco and Philip Morris International, actions speak louder than words
Do the facts match the rhetoric?
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We write in response to the recent article on RI by Michael Krzus regarding Philip Morris International (PMI) and their statement of Corporate Purpose. These are fine words from the company, but are they not hypocritical?
If, since 2016, PMI says it has “the aim of completely replacing cigarettes as soon as possible”, why then would they launch a new tobacco brand, Philip Morris Bold, in Indonesia in 2018? (1)
PMI says that: “Regulators can decisively accelerate the industry’s transformation toward, and the speed at which adult smokers switch to, smoke-free products by implementing risk-proportionate regulations and taxation for all nicotine-containing products and by providing smokers with accurate information. PMI is committed to engaging transparently with regulators.”
Should we not ask whether the facts match the rhetoric? Why, if you are trying to encourage smokers to give up, and you seek to cooperate with regulators, would you bring over a dozen legal challenges against proposed packaging legislation (including graphic health warnings and plain packaging), point of sale advertising bans, and bans on additives and flavourings in tobacco products?
All of these initiatives are part of the only UN treaty for public health - the UN Tobacco Control Treaty (WHO FCTC) - signed by those same governments that are implementing the suggested measures to protect the health of their populations, deter youth from starting to smoke, and help persuade those individuals already smoking to give up.
In its 2018 annual report, PMI claims “…the company is committed to providing less harmful alternatives to the hundreds of millions of adult smokers who would otherwise continue to smoke…”
Is that why PMI purchased a Costa Rican tobacco company in 2018? (2)
Again, according to PMI: “In 2019, the company’s smoke-free products were already commercialised in 52 markets and represented 18.7% of PMI’s global revenue….”. (3)
So 81.3% of PMI’s revenues do not come from their so called ‘smoke-free’ products, but from the established harmful core tobacco product.
In May 2019, PMI CEO André Calantzopoulos reassured shareholders: “Our combustible tobacco portfolio remains the foundation of our business.”
Little has changed 12 months later. PMI’s annual report 2019 states (released May 2020) “….for as long as significant legitimate demand for combustible tobacco exists, PMI will continue to sell such products responsibly and seek to maintain our leadership position internationally. In doing so, we will continue to focus our combustible product innovation strategy on fewer and more impactful initiatives, while consolidating and simplifying our portfolio.”
In the report, PMI noted: “Our total shipments, including cigarettes and heated tobacco units, decreased by 2.0% in 2019 to 766.4 billion units. We estimate that international industry volumes, including cigarettes and heated tobacco units, were approximately 5.1 trillion units in 2019, a 0.9% decrease from 2018.”
It continued: “We estimate that our reported share of the international market (which is defined as worldwide cigarette and heated tobacco unit volume, excluding the United States of America) was approximately 15.1% in 2019, 15.2% in 2018 and 15.1% in 2017.”
In late March 2020, authors from McKinsey & Company wrote in a piece, titled: Demonstrating corporate purpose in the time of the coronavirus, that: “The magnitude of the coronavirus crisis confronts corporate leaders with the economic challenge of a lifetime. It also demands of them a moment of existential introspection: What defines their company’s purpose - its core reason for being and its impact on the world? Those who have carefully honed a sense of company purpose will find a foundation and set of values that can guide critical and decisive action.”
Annually 8 million people die due to tobacco. This number repeats and grows annually. PMI currently has a self-stated 15% share of this market. To date (May 12th) Covid-19 has claimed 287,670 lives.
In the words of Dr Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization, at the launch of the Tobacco-Free Finance Pledge (to date 129 Signatories representing over USD$8 trillion in AUM): “The truth is, if tobacco were a deadly virus, we would invest millions in developing vaccines to prevent it or drugs to treat it. Instead, the world invests billions of dollars in rewarding an industry that destroys human health and causes untold suffering. Every dollar invested in a tobacco company is an investment in death and disease.”
The Danish Institute for Human Rights, (commissioned by PMI to do a human rights assessment in September 2016 ) stated in May 2017: “Tobacco is deeply harmful to human health, and there can be no doubt that the production and marketing of tobacco is irreconcilable with the human right to health. For the tobacco industry, the UNGPs (UN Guiding Principles on Business and Human Rights) therefore require the cessation of the production and marketing of tobacco.”
But PMI says: "We embed respect for human rights in our culture so that human rights principles govern the way we work with employees, suppliers, consumers and the communities where we operate."
With regards to product development, PMI also says: “Currently, PMI’s smoke-free portfolio comprises platforms that heat tobacco, vaporize nicotine-containing liquids or essentially contain only nicotine, all without combustion. Their development and manufacturing follow high standards of quality and consistency. The scientific evaluation to substantiate their harm reduction potential compared to cigarette smoking is based on rigorous pre-clinical and clinical assessments and sophisticated systems toxicology. The results are publicly available, are peer-reviewed and have been submitted to numerous regulatory authorities, including the U.S. Food and Drug Administration (FDA).”
So why is there no mention of the fact that on January 25, 2018 the FDA rejected PMI’s request to market IQOS (I Quit Ordinary Smoking - heated tobacco product) as a reduced-risk product? The Philip Morris International share price closed 2.8% down on the news. (4)
And earlier this month, an article in the Journal of the American Heart Association entitled Alterations in Vascular Function Associated With the Use of Combustible and Electronic Cigarettes, concluded: “Our findings suggest that e‐cigarette use is not associated with a more favorable vascular profile. Future longitudinal studies are needed to evaluate the long‐term risks of sustained e‐cigarette use.” (5)
Who to believe?
The largest group of stakeholders for most companies are consumers – and up to 2 in 3 die prematurely from tobacco when consuming the product exactly as intended. (6) This is not a sustainable business without recruiting more individuals to a harmful product that is overwhelmingly likely to cause their premature death.
In 2019, opposite one of Asia’s biggest dance festivals was the Marlboro Penthouse giving PMI the chance to promote its cigarettes to 90,000 mainly young attendees. Throughout the festival there were Marlboro signs. How is that consistent with PMI acknowledging that “Smoking causes serious disease, and the best way to avoid the harms of smoking is never to start, or to quit.”? It is well known that youthful and underage smokers take up tobacco due to thecommunication of tobacco’s supposed lifestyle enhancing features. Many remain users due to the addictive nature of nicotine - a known toxin. Tobacco and nicotine consumption are rarely habits commenced later in life. Neither are beneficial to health, both are dependent on manufacture and marketing of tobacco, which is in contravention of the UNGP’s.
PMI’s statement of Corporate Purpose may be cleverly crafted prose, but does it pass even the most basic scrutiny?
It is time to recognise that it makes no sense to invest in a declining business, which is experiencing loss of credit availability across Europe, and is an increasing future risk to investors and society via its significant measurable negative impact on global health and externalised costs of approximately $1.5 trillion a year.
Actions speak much louder than words.
Alan J Brown is the former Chief Investment Officer at Schroders and a former Governor of the Wellcome Trust
Dr Rachel Melsom, MBBS, BSc, is the Director UK and Europe at Tobacco Free Portfolios
Tobacco Free Portfolios is co-hosting a global High-Level webinar in collaboration with the UNEP FI and the UN-backed Principles for Responsible Investment on 7 May, 2020: 08:00 EST |13:00 BST | 14:00 CEST | 22:00 AEST