Numerous sustainability challenges in the tobacco industry

The Council on Ethics initiated a partnership with a European pension fund, a special tobacco project, to gain better insight into how companies in the tobacco industry work with sustainability issues. All companies owned by the European pension fund or one of the AP Funds in the Council on Ethics, about a dozen, have been analyzed and have provided the Council on Ethics with insight into the strengths and weaknesses regarding companies’ preventive work. This analysis is based on information from the public domain.

WHO’s convention on tobacco control

International conventions to which Sweden is a signatory, are essential instruments in the Council on Ethics’ work of ensuring that the AP Funds address environmental aspects and ethical dimensions in their operations. The World Health Organization’s (WHO) Tobacco Control Convention, which came into force in 2005 and was adopted by Sweden the same year, is such a convention.
The convention aims to protect current and future generations from the devastating health, social, environmental and economic consequences of tobacco use and exposure to tobacco smoke. This will be achieved by providing a framework for the signatories’ implementation of tobacco control measures at national, regional and international level, with the purpose of continually and significantly reducing tobacco use and exposure to tobacco smoke. The convention also highlights the fact that tobacco is more than just a health issue. Tobacco also causes poor working conditions and negative consequences for the environment in tobacco-producing countries

Where is tobacco produced?

The largest tobacco producers are located in China, the United States, India, Brazil and Turkey, with production on the increase in Africa as well. Many of these countries are classed as high-risk in terms of corruption, pollution of the environment, and human and labour rights violations.

Tobacco company policies

The initial analysis indicated that the environment was the area for which most companies had guidelines in place. Virtually all companies had guidelines in place, although certain environmental aspects were missing in the guidelines of some companies. Almost all companies had guidelines for responsible marketing. Policies on anti-corruption and lobbying were also in place for almost all companies, but in principle no company had guidelines that covered everything.

Sustainability guidelines relating to requirements for subcontractors were also common, but many of the companies were lacking here too regarding certain aspects of sustainability.

Tobacco companies’ follow-up and action programme

The situation was worse regarding the existence of follow-up and action programmes. Just half of the companies had such programmes in place, and in most cases many areas had been neglected. The fact that the implementation of guidelines is the weakest point is not unique to the tobacco industry, but that does not make it any less important.

Key issues for the industry

With the analysis as a starting point, the European pension fund and the Ethical Council wrote letters to all the companies. The letters were then followed up with telephone meetings.

On the whole, the practice of using child labour is a challenge faced by all tobacco companies. Discussions with all companies therefore touched on how they were working to eliminate child labour from tobacco plantations. Many companies referred to their participation in the industry initiative, ECLT15, which was set up to tackle this very issue. It was positive to hear that in addition to the initiative, several of the companies were also pursuing their own work to reduce child labour in their own supply chains.

Another area, which was discussed with the companies, was how they work on implementing sustainability guidelines and how they follow up the process. The Council on Ethics was pleased to hear that many of the companies appeared to have got to grips with the matter and that several of them have now engaged the services of external consultants to monitor their progress. This increases opportunities for the company as well as for external stakeholders to gain a clear picture of the situation for each individual company.

The Council on Ethics notes, however, that there are still major differences in how far companies have come in their work, and that only a few are well-equipped to handle the sustainability challenges they are facing. The Council on Ethics will therefore continue to follow up the work of tobacco companies in the area of sustainability and conduct discussions with them regarding how they can improve.

Why is this investor initiative important?

  • Tobacco is largely grown in countries that are considered high-risk in terms of corruption, environmental degradation and violations of human rights and labour rights.
  • Companies should be proactive and have policies and functioning management systems in place to minimise the risks mentioned above.