advancing industry transformation

The purpose of the Foundation for a Smoke-Free World is to improve global health by ending smoking in this generation. Our task is urgent. More than a billion people smoke worldwide, and more than seven million global deaths are attributed to tobacco use each year.

In support of its mission, the Foundation’s Industry Transformation efforts focus on attaining change within the global tobacco industry and nicotine ecosystem. The Tobacco Transformation Index, which is the first action of the Foundation’s Industry Transformation initiative, aims to accelerate the reduction of harm caused by tobacco use. Specifically, the Tobacco Transformation Index will biennially evaluate 15 of the largest tobacco companies in the world on their relative progress toward harm reduction. The first Index will be published in September 2020.

Establishing a complete data set that encompasses the companies that produce nicotine-based products is a necessary precursor to developing effective policies which promote the Foundation’s purpose. The Global Trends in Nicotine reports contribute to laying the groundwork for the Foundation’s work, and represent an important step in the Foundation’s research program. Specifically, the reports identify the major players in nicotine delivery, outline their product organization and geographic focus, and quantify their output.

Many “dirty” and unhealthy legacy industries can change, and are changing, by undergoing a transformation toward cleaner activities and products. The Foundation’s work contributes to this discussion by presenting six case studies of companies that undertook significant business transformations. The six cases demonstrate varying motivations, and, as business transformation is not without risk, some of the companies performed better than others. That said, the tobacco industry sells a deadly product, cigarettes, which some consumers are rejecting. Transformation of the tobacco industry can provide an enormous and crucial acceleration to the process of eliminating combustible tobacco. The Foundation believes that the appropriate way to influence industry is indirectly through strategic partnerships. In particular, we believe the investor community is a powerful lever with which to influence company management.

The Foundation’s Industry Transformation strategy aims to attain transformation, in support of its overarching purpose. The Tobacco Transformation Index is informed by, and seeks to build upon and complement, a variety of other global initiatives and reporting frameworks relevant to tobacco control, sustainability, and corporate accountability.  The Foundation intends to complement WHO FCTC and other efforts by further examining the necessary future transformation of the tobacco industry and nicotine ecosystem, as well as by considering ways to change the core products that are responsible for preventable premature deaths and numerous diseases. The Index draws upon ideas developed by the Sustainability Accounting Standards Board (SASB) and other environmental, social, and governance (ESG) methodologies that have been applied to a diverse range of sectors. 

To accomplish this undertaking successfully, the Index team engaged extensively with stakeholders through a global series of multi-stakeholder dialogues during 2019. The sessions invited reactions and inputs regarding the feasibility and application of the Index, the specific topics it should address, and the measures necessary to ensure its research process and outputs would be perceived as objective, credible, and effective. The key takeaways and learnings have since informed the development of the Index design. The Tobacco Transformation Index encourages the development of metrics that investors and policy makers understand, value, and utilize. The Index will report all companies that impede progress in fair, verifiable, and systematic ways.

The Index is a tool to accelerate the necessary transformation of the global tobacco industry and the reduction of harm caused by tobacco use.  The Foundation believes that the forces of competition, differentiation, and constructive engagement are part of the solution, in addition to policy prescriptions. The record shows that implementation of policy strategies alone is not achieving the degree and speed in the reduction of the prevalence of cigarette smoking that is desired.

The Tobacco Transformation Index’s key premise is that by actively encouraging and monitoring the transformation, it will over time incentivize the tobacco companies to act more quickly and more responsibly than they otherwise would. Conversely, players that do not make the necessary transition rapidly enough will be exposed. As a result, all stakeholders will be better informed and able to demand necessary action.