Research Index Accuses Largest Tobacco Companies of Failing to Advance Harm Reduction and Save Lives.
A maiden research index has accused 15 largest tobacco companies of not making substantive progress in phasing out cigarettes and other high-risk tobacco products and transitioning smokers to reduced-risk alternatives so as to save lives.
Described as the first index, The 2020 Tobacco Transformation Index ranked the world’s largest 15 tobacco companies (accounting for nearly 90 per cent of global cigarette volume) on their relative performance, commitment, and transparency to deliver material progress in supporting tobacco harm reduction.
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It assessed tobacco companies’ activities from 2017-2019 related to: strategy and management, product sales, capital allocation, product offer, marketing, and lobbying and advocacy.
The index was based on an assessment of 35 key indicators over the period 2017-2019 with the aim of updating its analysis every two years.
Based on the index overall rankings, Swedish Match, which divested its cigarette business in 1999, ranked first followed by Phillip Morris International, British American Tobacco, Altria, Imperial Brands, Japan Tobacco, KT&G, ITC Limited, Swisher International, Tobacco Authority of Thailand, Vietnam National Tobacco, Gudang Garam, Djarum, Eastern Co., and China National Tobacco Corporation.
The report noted that overall progress in reducing smoking and the use of toxic smokeless tobacco products globally remains frustratingly slow, saying to accelerate progress, new strategies and tools are needed to complement ongoing tobacco control efforts.
A concerted effort to transform the global tobacco industry via a strategy of tobacco harm reduction could reduce users’ current health risks and eventually help them to quit entirely, the index posited.
Speaking on the research endeavour, President of The Foundation for a Smoke-Free World, Derek Yach, said: “Inspired by the success that indexes focusing on other sectors have demonstrated, the goal of the Tobacco Transformation Index is to stimulate external pressure and the industry competition needed to take combustion out of the cigarette market, accelerate change, and lower the unnecessary disease, death, and misery it causes so many people.
“Society and large institutional investors such as banks and pension funds, which represent 85 per cent of investment in publicly traded tobacco companies, have the leverage to push tobacco company management to drive measures that greatly improve health.
“The tobacco companies are still spending a significant amount of their marketing budgets on high-risk products and, while a handful have increased their focus on youth access prevention, the impact of these policies is still unclear.
“This first Tobacco Transformation Index reinforces that this industry is at the beginning of a long journey. True progress will come when we see all tobacco companies phase out their combustible cigarette businesses.
For this to be possible, governments need to implement smarter regulations that support the transition, and WHO should actively support tobacco harm reduction.
“Bans, such as The Union’s call to prohibit the sale of e-cigarettes and heated tobacco products in low-medium income countries (LMICs), are not the answer and only impede progress.”
A small group of tobacco companies had made public commitments to harm reduction and backed them with significant investments, but majority of largest companies had not made such commitment to tobacco harm reduction.
With 1.3 billion tobacco users in the world, of which eight million die annually from tobacco-related diseases, Yach said the stakes for global health are high, explaining that adult cessation and tobacco harm reduction could reduce deaths within the next two decades.
The Tobacco Transformation Index published this week was made possible with funding from the Foundation for a Smoke-Free World based in New York.
In 2019, 13 of the 15 tobacco companies in the Index generated at least 95 per cent of net sales value through high-risk tobacco products including cigarettes.
In 2019, Swedish Match’s sales of reduced-risk products accounted for 44 per cent of its net sales, followed by Philip Morris International at 19 per cent, and British American Tobacco and KT&G at five per cent each.
Over the period of 2017-2019, eight of the 15 companies allocated 10 per cent or less of research and development and capital investment expenditures to reduced-risk versus high-risk products.
During the Index’s review period of 2017-2019, several companies, including British American Tobacco, Japan Tobacco, Philip Morris International, and KT&G Corp, made acquisitions of primarily cigarette businesses. These acquisitions were frequently focused on LMICs)l, where smoking rates are highest.
The index explained that among the six companies who made public commitments to harm reduction, between 30 per cent and 55 per cent of their marketing budgets were still devoted to high-risk products including cigarettes.
It stated that nine of the world’s 15 largest tobacco companies were found to have no active commitment to tobacco harm reduction and/or announced targets to increase the production and sales of high-risk tobacco products.
Among this group are 100 per cent government-owned enterprises like: China National Tobacco Corporation, Vietnam National Tobacco Corporation, and the Tobacco Authority of Thailand.
Other companies such as Eastern Tobacco Co. (51 per cent), Japan Tobacco (33 per cent), and ITC Ltd. (24 per cent) have partial government stakes.
China National Tobacco Corporation, the world’s largest cigarette manufacturer and marketer, controls about 44 per cent of global cigarette market share.
A new research report, “Contradictions and Conflicts,” by international business and corporate governance scholar Daniel Malan, finds that nearly 50 per cent of the global combustible cigarette market is controlled by World Health Organisation Framework Convention on Tobacco Control (FCTC) signatory governments that also own tobacco companies.
Recalled FCTC is designed to reduce supply and demand for tobacco and improve public health. Of the six companies with some degree of state ownership in the Index, five are in the lower half of the rankings. If state-owned tobacco companies were to embrace tobacco harm reduction, they could have significant impacts on the health of their citizens, while addressing long term fiduciary needs healthily.
Tobacco Companies Focusing Reduced-Risk Product Efforts on Higher-Income Countries
Companies that offer reduced-risk products are mostly targeting their efforts on selected high-medium income countries, where overall smoking rates are lower and cigarette sales are already declining. Three large multinationals – British American Tobacco, Japan Tobacco, and Philip Morris International – collectively offer reduced-risk products in 15 of the high-medium income countries in the 2020 Index scope of 36 countries. However, their reduced-risk alternatives reach just three low-medium income countries (LMICs).
Foundation for a Smoke-Free World is an independent, US non-profit 501(c)(3) private foundation with the mission of improving global health by ending smoking in this generation.
The Foundation strives to achieve its mission by focusing its work on three core pillars: Health, Science, and Technology; the Agricultural Transformation Initiative; and Industry Transformation.
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