Generational Change
Human rights and the environment are at the core of Universal’s social and sustainability goals.
By Timothy S. Donahue
There are numerous moving pieces in the sustainability puzzle. Many global enterprises now see environment, social and governance (ESG) programs and sustainability issues as urgent business matters. Strong corporations realize that managing ESG programs effectively enables the company to build trust and long-term value in an ever-changing business environment.
According to experts, sustainability, as a part of a company’s ESG standards, must be a corporate strategy and is critical for a business to stay competitive.
Being an agricultural company, Universal Corp., the world’s largest supplier of leaf tobacco, must be ultra-aware of the impacts of environmental issues such as climate change and the social supply chain risks that it encounters. Universal understands the need to adapt to survive. It has been a lesson learned throughout the company’s long history.
Founded in the late 1800s, Universal incorporated in 1918 and was listed on the New York Stock Exchange in 1927. The company has survived the stock market crash of 1929, two world wars and two pandemics.
Early on, Universal’s environmental programs were traditionally focused on reducing carbon dioxide emissions centered around efficiency and cost savings. Today, those early efforts have evolved into a variety of policies and practices that are designed to enhance the resilience of Universal’s infrastructure and its supply chains.
This is now referred to as ESG, the corporate governance and investment framework. Sustainability is the relationship between a company and the environment. ESG encompasses a set of standards for Universal’s socially conscious investors to screen potential investments, including sustainability.
According to Airton Hentschke, senior vice president and chief operating officer for Universal, the company considers a science-based and evidence-based approach to its sustainability practices. Universal is concerned about climate change and how it will impact its footprint in the future.
“We have set emissions targets that were approved by the Science-Based Target Initiative, and we are in the process of formalizing our approach to reduce emissions. We are looking into the future for pathways to net-zero emissions,” he explains. “Engagement throughout the supply chain has made the most impact in reducing emissions. Engagement allows us to align expectations from our customers through to our farmers and supply chain partners.”
Hentschke says that the evidence is clear that Universal must contribute to emission reductions to build sustainability and support a thriving planet. “Universal relies on the communities we operate within and attempts to address the root causes of social and environmental issues in these communities,” says Hentschke. “We believe in being a responsible and sustainable corporate citizen and will continue to implement practices with the intention of benefitting our diverse global stakeholders.”
Challenges lie ahead. Universal operates throughout the world and impacts thousands of people every day. The company operates in more than 30 countries, employing a multicultural and multinational workforce. Universal’s global operations face unique challenges in each of their operating environments related to local social dynamics and traditions, according to Karen Hall, director of sustainability at Universal. She says that ESG is a collection of numerous programs, such as Universal’s corporate human rights policy, which extends equitable expectations to all its operations and to its suppliers.
“We support our local teams so that they can focus on their communities and supply chain and address risks and opportunities as they arise. One example is in Brazil where we needed a larger workforce than the adjacent community could fulfill, so we contracted buses to bring workers from rural regions to our operation,” Hall explains. “A risk and opportunity were addressed here. The risk was a labor shortage, and the opportunity was to engage and employ a rural workforce that would not have had access to these jobs without our support.”
Facing the Issues
Experience makes a difference. The Universal team is skilled at identifying risks and opportunities in communities where it contracts tobacco. Its farmers are the most important segment of Universal’s supply chain operations. Universal is involved in the Sustainable Tobacco Program (STP), an industry-wide initiative jointly developed by tobacco manufacturers and experts to assure standards in agricultural practices as well as environmental management and key social and human rights matters.
In 2020, the STP made changes to better address eight core issues: governance, crop, climate change, human and labor rights, livelihoods, natural habitat, soil health and water.
Universal has been supportive of the STP from the program’s inception. Lea Scott, vice president of agronomy for Universal, said the STP provides an alignment across the tobacco industry under a cohesive set of standards and best practices.
“It’s positive for all stakeholders from investors to smallholder farmers. The new program has several strengths, including aligning common goals and focusing on continuous improvement,” says Scott. “With any new program, we are working through implementation with the aim of continued improvement and transparency.”
Prior to 2020, Universal took a risk-based approach to addressing issues in its operations and supply chain. The company would implement programs that addressed mainly key risks in particular regions. Its Agricultural Labor Practices (ALP) program, for example, sets global expectations, such as no child labor, fair worker renumeration and no forced labor in the tobacco supply chain.
“In regions where a specific risk has been identified by our farmer monitoring, we tailor programs to address these risks. In the United States and Europe, for instance, we have worker interview programs to engage farm workers and monitor their treatment while in other regions we have child labor programs that focus on removing identified root causes of child labor,” says Scott. “The new STP in 2020, along with ALP, better highlights Universal’s efforts and the commitment we put into addressing the identified risks. It has also reinforced the unity and commitment within the industry to addressing human rights violations in the tobacco supply chain.”
Child labor is a major concern for Universal. Seventy percent of child labor is estimated to occur in agriculture, mainly taking place in family subsistence and commercial farming. While there have been significant advances made in tackling child labor, in recent years the progress has slowed and has been uneven across regions. According to the United Nations, the number of children in child labor has declined by an estimated 19 million since 2000.
Universal is committed to an industry that works in unity and alignment on human rights issues, including child labor, according to Hentschke. Universal, along with other major transnational tobacco companies, has been involved with the Eliminating Child Labour in Tobacco-Growing Foundation (ECLT), a Swiss-based nonprofit organization dedicated to eliminating child labor since its inception in 2000.
The ECLT focuses on regions where child labor is at higher risk for occurrence and where local stakeholders are willing to engage in programs, explained Hall. The ECLT functions as a link between industry and local stakeholders like government and nongovernmental organizations so that programs are designed in sustainable and impactful ways.
“Universal believes that children should grow and have access to educational opportunities that are not impacted by labor requirements at home,” says Hall. “While technology has been beneficial in understanding the extent of child labor, understanding root causes does more to benefit children and reduce the risk. When we understand why children work at a young age in various regions, we can address the underlying cause. For example, in Africa, we found that mothers and children in some areas had to walk a long distance for access to clean water.
“Based on a geographic information system analysis of existing boreholes and water access, we drilled and repaired boreholes to increase water accessibility. Technology helped reduce the risk of child labor, but the root cause needed to be identified for the appropriate technology to be implemented.”
Being Transparent
Universal has a variety of projects all over the world that reinforce its commitments to environmental, social and financial sustainability. Hall says programs and projects are most effective when they engage a variety of stakeholders and address motivators of an identified risk or issue.
“Effective programs not only mitigate the issue but also educate, have strong community participation and contribution and are the basis of sustainable change and improvement,” she says. “Programs with these characteristics have the potential to result in real cultural change.”
Another example of Universal’s unique commitments is its Village Savings and Loan (VSLA) project in Malawi. In this program, Universal subsidiary Limbe Leaf Tobacco Company works with an NGO to bring financial literacy to the region’s growing areas. The program focuses on teaching women how to manage money and how to invest. The VSLA addresses several social issues, including women’s empowerment, child labor and farm livelihood.
Words mean little in sustainability and other ESG goals. Without openness in failures and successes, the impact of any efforts is greatly reduced. Hall says that the key to managing ESG issues effectively is transparency. Universal uses the services of an outside law firm to conduct an independent benchmark assessment of its various compliance policies.
Scott adds that Universal’s operational and supply chain practices are routinely assessed, and its global operations work together to provide the data and resources used by third-party groups and stakeholders to verify the company’s practices. STP has also been a great resource to highlight the adequacy of Universal’s programs.
“While the tobacco industry continues to effectively work together, we are increasingly utilizing third-party assessments. For example, we are engaging NGOs to conduct Human Rights Impact Assessments to support our social programs,” Scott says. “We will utilize the results from these assessments to refine our programs and further improve our local actions as well as share this feedback with other regions in our supply chain.”
Hall says that, internally, Universal believes its ESG and sustainability goals are aligned with global best practices and meet stakeholder expectations; however, the company is always looking forward. She said that preparing for the unexpected is a necessity to ensure that in 2050, the goals that Universal is creating now will come to fruition.
“It might be costly now, but what’s the cost really going to be like in the future? And how much do we invest in people right now and [in] social programs right now?” Hall asks. “But how far will that investment take us if we don’t also do what we need to as an industry to reduce our climate impacts?”
Universal will continue to adapt to changing expectations and conditions. It is difficult to predict what will change, but if the current climate situation does not improve, Hall says the world will continue to see increasing changes to global weather patterns. Universal intends to be mindful of these changes and will use data and resources to adjust its operational programs and practices as needed.
Hall adds that the company will also build resilience through continued variety in development, agricultural practices and communications with Universal’s grower base. Farmers, Hall says, are the most important link in Universal’s supply chain, and the environment is the major concern for them.
“We will need to monitor the environmental and social situations in our supply chain and continue to have diverse global sourcing to mitigate any future unforeseen issues that may arise. We will take the lessons learned from the past century—especially the last decade—and apply them to the future,” says Hall. “No supply chain will be perfect, but Universal intends to have programs and practices in place that help us manage and mitigate risk to the benefit of our all of our stakeholders and global customers.”
