Leaders of the Farm Labor Organizing Committee (FLOC) reportedly challenged British American Tobacco during its Annual General Meeting (AGM) in London last week over what FLOC described as human rights abuses on BAT contract farms.
In a note on its website, FLOC said that BAT, which was planning to pay US$49 billion to acquire the rest of Reynolds American, was asked about its failure ‘to be transparent and take concrete action despite numerous reports detailing human rights abuses’ on its contract farms.
This year was said to have marked the seventh year that FLOC had attended the shareholders meeting.
‘During the 2014 AGM, BAT chairman Richard Burrows claimed that there were no labor or human rights violations in the BAT supply chain,’ the note said.
‘Since then, independent research groups including SwedWatch and Human Rights Watch have published reports detailing serious human rights abuses on BAT contract farms in Bangladesh and Indonesia respectively, echoing what FLOC has been reporting for years from the fields of North Carolina.
‘In BAT’s own corporate audit report, they admitted instances of worker death by heat stroke, workers being sprayed by pesticides, and poor housing conditions, among other issues.’
After the meeting, FLOC leaders were said to have met directly with BAT executives to discuss the issues and ‘real solutions’ in more depth.
But FLOC said that while BAT had stated that it had wanted to work with FLOC to resolve issues in the BAT supply chain, human rights violations would continue until BAT agreed ‘to guarantee freedom of association and implement a practical mechanism that allows farmworkers to denounce abuses and act as their own auditors!’
Zimbabwe’s flue-cured tobacco grower prices so far this season have averaged US$2.63 per kg, up 0.8 percent on the average of the previous year, US$2.61, according to a ZBC story.
But the average price might in fact be down by 30 percent because the story said also that 29 million kg of tobacco had been sold so far this year for US$53 million, which would suggest an average price of US$1.83 per kg.
Contract sales are said to have accounted for 23 million kg of the total and auction sales for six million kg.
In total 422,000 bales were laid with 393,000 of those being sold.
In February, the Zimbabwe Farmers’ Union said it expected flue-cured tobacco prices to be ‘favorable’ this year.
The quality of the crop was said to be excellent and so grower prices, which were said by buyers to be based on quality, should be excellent also.
At that time, growers believed that prices ranging between $4.00 and $5.00 per kg would be favorable.
Such prices would allow them to break even and to continue producing flue-cured tobacco next season.
In 2015 and 2016, the average price paid to Zimbabwe’s flue-cured tobacco growers was about $2.93 per kg.
Ceylon Tobacco Company (CTC) has based its just-released annual report on the theme Beyond the Smoke to highlight its contribution to the national economy, according to a story in The Island.
CTC said in the report that it was the country’s only legal cigarette manufacturer and the second largest market capitalized company quoted on the Colombo Stock Exchange. It was the country’s largest individual tax payer, last year contributing Rs87.4 billion in excise taxes – seven percent of state revenues – to the national exchequer. And it supported 178,000 livelihoods through farming, manufacturing and retailing.
‘As an organization operating in a controversial industry, we understand the added responsibility placed on us to maintain the highest standards of corporate conduct and take pride in the sustainable and responsible way our operations are run,’ the report said.
“Given the health risks associated with our products, we understand that regulation is necessary although we urge the government to pursue balanced and evidenced based regulation which preserve the interests of adult consumers while ensuring the livelihoods of all those dependent on our industry, including over 20,000 persons involved in tobacco cultivation,” chairman Susantha Ratnayake was quoted as saying.
“Tobacco is a legal industry with an undeniable positive socio-economic impact and a major source of income to almost every government in the world.”
Despite all the challenges that had depressed CTC’s share price sharply during the year under review, Ratnayake said that the company had delivered yet another year of strong financial performance with earnings per share up by 18.1 percent to Rs67.05. Shareholders would be receiving a total return of Rs66.80 per share.
British American Tobacco Company with 83.14 percent of CTC is the dominant shareholder, but no Sri Lankans are among the Top 20 shareholders holding the balance.
A new independent study by Smithers Pira amongst major brand owners and retailers in five key European markets has shown resounding evidence of the importance of sustainability in packaging, according to a press note from Pro Carton, which commissioned the study.
Folding cartons were perceived as the most sustainable packaging but there was said to be confusion about the issue of the circular economy and what makes packaging sustainable.
“It is interesting to see how the environmental benefits of cartonboard packaging have been perceived by our target audiences and I am delighted to note that our strengths of renewability and recyclability are now well appreciated”, said Tony Hitchin, general manager of Pro Carton.
The study, which was conducted in France, Germany, Italy, Spain and the UK, was aimed at investigating the views and attitudes amongst major European brand owners and retailers in respect of sustainability in packaging and its importance to the retail business. The main fieldwork for the project comprised a series of 100 in-depth telephone interviews with leading decision makers.
Ninety-six percent of respondents said that the use of sustainable packaging was important to their business, and 52 percent said that it was either ‘very important’ or ‘critical’.
“The top criteria for packaging to be considered ‘sustainable’ were (i) that it is a recyclable material (29.2 percent), (ii) that it uses renewable & abundant materials (19.6 percent), (iii) that it uses minimal lightweight materials (15.5 percent), (iv) that is has a low environmental footprint (8.2 percent) and (v) that it is biodegradable or compostable (5.1 percent)”, Adam Page, global director reports and consultancy, Smithers Pira, was quoted as saying.
A summary of the study The Importance of Sustainability in Packaging can be found at: www.procarton.com.
The focus on harm reduction makes tobacco companies even more attractive investments.
By Stefanie Rossel
While social responsibility is a fairly recent concept in business, awareness of responsible corporate behavior has risen rapidly. Companies have widely accepted the idea. According an EY study, sustainability reporting has become “business as usual.” More than 80 percent of Fortune 500 companies address sustainability on their websites.
Today, sustainability strategies are driven by business objectives, rather than ethical ones. Company leaders believe sustainability adds value to their organizations and helps them identify and mitigate risks.
Sustainable investing has been booming in the past few years. In its most recent report, the Forum for Sustainable and Responsible Investment valued the 2016 U.S. market for sustainable, responsible and impact investing at $8.72 trillion, or one-fifth of all investments under professional management—a 33 percent increase since 2014.
“It is very important for investors that tobacco companies have a corporate social responsibility strategy in place,” says a senior consumer analyst with a London-based investment bank. “Clients are more interested than ever in environmental, social and governance [ESG] topics. If we can point to such an effort, there’s a lot of approval and interest from customers.”
While there is no single, agreed definition of what makes an investment “sustainable,” there are funds that explicitly exclude tobacco from their portfolios, treating it as a tainted sector, similar to firearms, alcohol, fast food or gambling.
But this could be about to change. According to a Wall Street Journal report, the increasing amount and availability of data on ESG factors means that investors can judge companies individually, rather than having to eliminate whole sectors based on their members’ shared characteristics.
Erik Bloomquist
Aware of their reputation, the major international tobacco companies have long implemented responsible business strategies. “Once you have ‘got over’ the actual product, you will find that tobacco companies are very sustainable with regard to their business model and economics in general,” the analyst says. “Moreover, they have strong cash flows, are well run and feature strong brands. They are also mindful of externalities and thinking about the future. What’s more is that the tobacco industry has successfully gone through some kind of existential threat which other industries such as sugar, for example, may still experience. Hence, the image of the tobacco industry with investors is actually quite good.”
As tobacco companies seek to reduce the health impact of smoking, the tobacco “taint” may lessen. Philip Morris International (PMI) has bet the company’s future on smoke-free products that present lower risks than cigarettes. British American Tobacco (BAT) has invested more than $1 billion in its next-generation product business. In February 2013, it became the first tobacco company to publish a dedicated harm-reduction report; in 2017 it released its third report of this kind, describing the company’s reduced-risk product portfolio, the current state of harm-reduction science and its plans for the future.
“The development and adoption of reduced-risk products as key parts of PMI and BAT’s portfolios are tectonic shifts in how the firms see their business developing in the future,” says tobacco analyst Erik Bloomquist. “This change in products over time will do a great deal to enhance the image of tobacco firms and, more importantly, their actual sustainability over many years.”
Adding value
BAT has been a pioneer in publicizing its good corporate citizenship efforts. “We have been producing sustainability reports for over 15 years,” says Jennie Galbraith, head of sustainability and reputation management at BAT. “This is a clear demonstration of our commitment to transparency and maintaining an ongoing dialogue with external stakeholders.”
The company conducted its first detailed materiality assessment 10 years ago. “This assessment was instrumental in sharpening our agenda and taking us from a broad approach that included numerous socially responsible and philanthropic projects to focusing on the core issues of harm reduction, sustainable agriculture and farmer livelihoods, and corporate behavior, as well as embedding the principle of shared value across our day-to-day business practices,” says Galbraith. “There is an added reputational benefit to doing this, but for us it’s all about building a strong business for the future. Over the years we’ve seen firsthand how considering sustainability and shared value can enhance our approach.”
Jennie Galbraith
There are various frameworks to evaluate the sustainability performance of a company. The most widely cited and followed among them is the Global Reporting Initiative and the Dow Jones Sustainability Index (DJSI). The latter ranking is based on research by Swiss investment group RobecoSAM and concentrates on best-in-class companies across all industries. It provides an integrated assessment of economic, environmental and social criteria with a strong focus on long-term shareholder value. There are global, regional and country DJSI benchmarks. Following RobecoSAM’s yearly rating, best-performing companies are included in the indices, whereas those that don’t meet the thresholds are removed.
Interestingly, while companies on their websites boast about their rankings in the DJSI, the importance of such indices to investors appears to be overrated “We do not follow these indices, so it is hard for us to opine, but generally they are little followed by investors,” says the senior consumer analyst. “Or investors may look at them, but only as a first resource—i.e., a kind of minimum standard before doing further work along their own criteria. So if companies are removed, it should have little impact.”
The only tobacco company to feature in the DJSI European Index, BAT has been listed for 15 consecutive years. “This means that BAT scored in the top 20 percent of over 600 European companies assessed, maintaining the same overall score as last year (83 percent) and scoring better than the industry average in 16 out of 17 sections of the assessment,” says Galbraith. “Our associate company Reynolds American replaced us in the World Index with a 4 percent higher score than us due to the weighting of certain categories where our global footprint raised challenges for our scoring versus that of Reynolds.”
According to Galbraith, the company’s high scores across so many categories reflect the quality of management across all key areas of the business and its comprehensive and globally consistent focus on sustainability issues.
Human rights
Nevertheless, good corporate governance remains an ongoing exercise. BAT recently increased its focus on one of the biggest challenges for the tobacco industry, human rights in supply chains.
“Our global agricultural supply chain is a vital part of our business, and we’ve long been aware of the importance of protecting human rights in this area,” explains Galbraith. “As a company, we take this very seriously, and addressing human rights risks is a core element of our new sustainable agriculture and farmer livelihoods program. From an industrywide perspective, the new Sustainable Tobacco Programme builds on our long-standing Social Responsibility in Tobacco Production program and is bringing together best practice to strengthen standards for suppliers across the tobacco leaf supply chain. This is an excellent example of collaboration and shows how different parties can come together to make a difference for the common good.”
In addition to its work with leaf suppliers, BAT has also been making strides across its wider supply chain. “For example, in 2016, we rolled out our new Supplier Code of Conduct, which sets out the minimum standards we expect all our suppliers to adhere to, including specific human rights criteria,” says Galbraith. “We’ve also been working over the last year to strengthen due diligence and introduce human rights risk assessment for all 70,000-plus suppliers outside of our agricultural supply chain. We welcome the U.N. Guiding Principles on Business and Human Rights, and legislation such as the U.K. Modern Slavery Act, as they provide a much clearer road map for companies to follow.”
Portugal’s Supreme Court of Justice has ordered the country’s competition regulator to set up an inquiry into the Portuguese subsidiary of Philip Morris International, Tabaqueira, according to a Portugal News story.
The ruling followed allegations by the Portuguese Tobacco Wholesalers’ Association (APAT) concerning the ‘abuse of dominant position and abuse of economic dependency’ by Tabaqueira.
The APAT said the court’s decision was in line with its request that the Supervision and Competition Court make the Competition Regulator set up an inquiry into Tabaqueira for what the APAT considered to be anti-competitive behaviour in the tobacco distribution market.
The case began in 2011, when APAT and its members presented a complaint to the European Commission against Tabaqueira ‘for abuse of dominant position and abuse of economic dependency’.
The complaint is said to have centred around what APAT saw as the ‘unilateral decision by Tabaqueira in its favour to crush the wholesalers’ margins and other abusive practices regarding discrimination between means of payment’.
The World Health Organization says that more than one in four deaths of children under five years of age are attributable to unhealthy environments.
In a press note issued today about two new reports, the WHO said the five main causes of death in children under five years of age were linked to the environment.
‘Every year, environmental risks – such as indoor and outdoor air pollution, second-hand smoke, unsafe water, lack of sanitation, and inadequate hygiene – take the lives of 1.7 million children under five years,’ the press note said, citing the reports.
‘The first report, Inheriting a Sustainable World: Atlas on Children’s Health and the Environment reveals that a large portion of the most common causes of death among children aged one month to five years – diarrhoea, malaria and pneumonia – are preventable by interventions known to reduce environmental risks, such as access to safe water and clean cooking fuels.
‘A companion report, Don’t pollute my future! The impact of the environment on children’s health, provides a comprehensive overview of the environment’s impact on children’s health, illustrating the scale of the challenge. Every year:
570,000 children under five years die from respiratory infections, such as pneumonia, attributable to indoor and outdoor air pollution, and second-hand smoke.
361,000 children under five years die due to diarrhoea, as a result of poor access to clean water, sanitation, and hygiene.
270,000 children die during their first month of life from conditions, including prematurity, which could be prevented through access to clean water, sanitation, and hygiene in health facilities as well as reducing air pollution.
200,000 deaths of children under five years from malaria could be prevented through environmental actions, such as reducing breeding sites of mosquitoes or covering drinking-water storage.
200,000 children under five years die from unintentional injuries attributable to the environment, such as poisoning, falls, and drowning.
There was no mention in the press note about the effects of poverty on small children.
British American Tobacco has said that it might close its South African cigarette plant if plans to ban branded tobacco packaging are implemented, according to a story by Thembisile Dzonzi for Bloomberg News.
BAT’s Heidelberg factory is situated south of Johannesburg.
The proposed ban would threaten the financial viability of the Heidelberg operation, Joe Heshu, BAT’s head of external affairs in Southern Africa, said in an e-mailed response to questions from Bloomberg.
Standardized packaging threatened the closure of the factory and posed a threat to the viability of the legal tobacco industry in South Africa, Heshu said.
The move would make it harder to distinguish licit cigarettes from black-market cigarettes and “the illegal market will benefit from having a cheaper product,” he added.
South Africa is cracking down on industries and products viewed as harmful to consumers, including through a planned tax on sugar-sweetened beverages, which Finance Minister Pravin Gordhan said last month would be implemented later this year.
In his budget speech, Gordhan announced higher taxes on tobacco and alcohol products.
Iggesund Paperboard’s parent company, the Holmen Group, has been placed on the Global 100, an index of the hundred most sustainable corporations in the world. Holmen ranks 21 and is apparently the only company from the forest industry on the list.
The Global 100 list is announced each year at the World Economic Forum in Davos, Switzerland.
The index has been published by the Canadian analysis firm Corporate Knights since 2005, and is based on an overall assessment of how a company handles issues concerning resource management, employees and financial management. Almost 5 000 companies took part.
“We are both proud and pleased to be on the Global 100 list as one of the most sustainable companies in the world,” said Lars Strömberg, director of sustainable and environmental affairs at Holmen. “Holmen has taken a focused approach to sustainability issues for many years now. Being recognised and ranked highly by leading analysts is an acknowledgement of this work.”
Meanwhile, Henrik Sjölund, president and CEO of both Holmen and Iggesund Paperboard, said the Global 100 ranking was the result of dedicated work and the strategic choices and investments the company had made for the future, which had reinforced its sustainability profile. “There is no doubt that the forest has good prospects as a raw material, especially amid a transition to a bio-economy in which products made from fossil raw materials are being replaced with renewable alternatives,” he said.
In a press note, Iggesund said that being included in the Global 100 was especially important for it because the company’s products, Invercote and Incada, were targeting the high-end packaging segment where a good track record in sustainability was a valuable asset.
“We have been ranked high on indices like the UN Global Compact Index, Carbon Disclosure Project, and now the Global 100,” said Johan Granås, sustainability communications manager at Iggesund Paperboard. “To repeatedly be acknowledged by these well renowned indices clearly shows that we are among the most sustainable companies in the world and is a recognition of the holistic and long term approach that characterizes our sustainability work.”
PDL Cigarette Papers has inaugurated a new biomass boiler at its Papeteries des Vosges (PDV) site in Laval-sur-Vologne, France.
With 6.5 MW of power, the boiler can produce up to 10 tons of steam per hour and will supply enough steam to meet more than 50 percent of the PDV’s demands. The rest will be provided by two gas boilers which have been operating since December 2013.
The new boiler comprises a wood storage facility that can hold up to 1,000 cubic meters of wood, allowing it to run on its own for 3.7 days. Each year it will be supplied with 20,000 tons of untreated and unfinished wood, wood chips and residue from sawmills, including bark. All wood will be sourced from local industries.
Using this renewable energy will reduce the firm’s carbon dioxide output by 8,000 tons per year. The project cost €8 million ($10.9 million), € 2.3 million of which was provided by the French Agency for Environment and Energy Management.
The construction of this new wood-fueled boiler is in keeping with PDL Cigarette Papers’ sustainable development approach and energy conservation efforts, which have been in place for several years now.
“Our new biomass boiler means that we can honor our sustainable-development commitments while monitoring the changes in energy prices, therefore reducing costs as well as our carbon footprint,” says Bruno Delesque, PDL Cigarette Papers’ sales and marketing director. “Prior to this, Papeteries des Vosges sourced its steam from the neighboring industrial site, which operated on natural gas. Using wood seemed to be an optimal solution as a source of renewable energy.”
In January 2013, PDL Cigarette Papers started a biomass boiler at its Papeteries du Léman facility. The investment has decreased greenhouse gas emissions by 32 percent over the year in comparison with 2012.
A new independent study by Smithers Pira amongst major brand owners and retailers in five key European markets has shown resounding evidence of the importance of sustainability in packaging, according to a press note from Pro Carton, which commissioned the study.
Portugal’s Supreme Court of Justice has ordered the country’s competition regulator to set up an inquiry into the Portuguese subsidiary of Philip Morris International, Tabaqueira, according to a Portugal News story.
