Tobacco Industry ESG Thematic Report, 2023

Environmental, Social, and Governance (ESG) in the Tobacco Industry

The ESG risks associated with the tobacco industry are vast and severely impact health and environmental factors globally. The effects of the industry are mostly greenwashed, which is one of the hidden tactics used by the industry. The industry's causes, effects, and impacts will continue to be discussed and analyzed further in this report.

Further, when assessing the lifecycle of tobacco products, it begins with the initial stages of tobacco product production, including growing and drying. Among the negative effects of this process are deforestation, soil degradation, biodiversity loss, pesticide usage, and adverse health impacts on farmers. The next stages of the tobacco product's lifecycle, such as manufacturing and distribution, also contribute to emissions. Resources such as water, wood, and carbon fuels are also used in the production process, often in an unsustainable way. Health effects such as cancer, heart disease, stroke, lung problems, diabetes, and many more are associated with production.

ESG impact of the tobacco Industry - Social impact (Human Rights Impact)

Tobacco smoke has an adverse impact on health which can lead to the death of around 8 million people each year. A Framework Convention on Tobacco Control (FCTC) helps address this problem by protecting present and future generations from the devastating health, economic, social, and environmental effects of smoking tobacco and using tobacco products. Along with the right to life and health, tobacco products violate children's rights, including their right to be protected against child labor in tobacco production (child labor is on the rise and is adversely affecting the mental and physical health of children working in these industries). Among these issues is the violation of women's rights, which involves passive smoking's impact on pregnancy.

SDGs Linked to Tobacco Industry

Sustainable Development Goals (SDGs) are essential for the industry because they prevent fatalities and non-communicable diseases globally. To start with the several SDGs related to the industry: SDG 3 (which contributes to ensuring healthy lives and promotes wellbeing among all ages) is linked to the industry in that tobacco has detrimental effects on health, so reducing the health risks associated with it will reduce the health risks. The cultivation of tobacco directly competes with the production of food crops in many countries, thus addressing SDG 1&2 (ending poverty and hunger). Food crops can feed a larger number of people if they are given priority over tobacco crops.

The time has come for the world to adhere to the following SDGs such as SDG 17 (Global partnership to prevent tobacco). Our education program on sustainable development will use tobacco as an example in promoting tobacco and smoking prevention while assisting in achieving SDG 4 (Provide learning opportunities for all). SDG 8 (creating work opportunities for all) Secondhand smoke kills nearly half of the world's population every year due to its health effects. Almost half of them, 433,000 people, die due to secondhand smoke exposure at work. This figure represents 20% of all deaths worldwide that are caused by occupational diseases and injuries. To achieve SDG 3.4, smoke-free workplaces are an invaluable component of tobacco control. Achieving SDG 6 ensures that water and sanitation are available to all and managed sustainably. A cigarette butt is made up of a filter and residue tobacco. It contains over 7,000 toxic chemicals, some of which leach out into the environment. As per the analysis, it has been observed that half of the fish die when one used cigarette butt is added to a liter of water.  Lastly, SDGs 14 and 15 are some of the links that need to be aligned with tobacco to help in preventing further impact.

ESG Challenges

The key challenges for the tobacco industry can be derived from the fact that labor exploitation is a serious concern. Poor management of farmers' activities and children working in hazardous conditions violate human rights standards. Furthermore, in the supply chain for countries like Zambia, where tobacco farming is prevalent, farmers typically earn less than they would if they were growing another crop. As a result of the high labor demands on these farms and the farmers' low earnings that cannot support adult labor, child labor practices are very common.

Newer products, such as e-cigarettes and heated tobacco, are said to be less harmful than the traditional ones, but when assessed this may pose even greater environmental harm. These wastes contaminate waterways and soil, and they endanger wildlife with plastic, lead, and mercury that are involved in their production. This impacts the environment in a negative manner. It is imperative to know that one of the reasons that tobacco use has increased is the lack of standardization of ESG standards followed by industry giants. This is because they have unsustainable methods of working. There have also been allegations from law firms that two tobacco manufacturing giants have earned profits from the exploitation of child labor on tobacco farms. This adds further depth to the concerns.

Growth of the Tobacco Market

In 2021, the global tobacco market was worth USD 849.9 billion and is expected to grow at a compound annual growth rate (CAGR) of 2.4% between 2022 and 2030. It is also evident in the research that the industry is facing critical issues due to the rising number of smokers in developing regions. 

Key Companies in this theme

    • Scandinavian Tobacco Group A/S

    • Swedish Match AB

    • Altria Group, Inc.

    • KT&G Corp.

    • Imperial Brands

    • Philip Morris Products S.A.

    • British American Tobacco

Scope of the Tobacco Industry ESG Thematic Report: 

    • Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape

    • Key insights on infrastructure developments and ESG issues affecting the theme

    • Identify key initiatives and challenges within the industry

    • Identify ESG leaders within the industry

    • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process

    • Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment

Key Benefits of the Tobacco Industry ESG Thematic Report:

    • Developing a comprehensive understanding of macro-economic, Policies & Regulations and innovations affecting the sector, globally

    • Key insights into Infrastructure developments and ESG issues affecting the theme

    • Identifying ESG risks and opportunities to business among leading players in the industry

    • Obtaining a clear and relevant understanding of company actions, progress, and impact and find opportunities for investment