Exclusive Insights from Cheryl K. Olson Sc.D.

Where are we with ESG? Environmental, social and governance issues, that is. In the April issue of Tobacco Reporter, Cheryl Olson turns her attention to sustainability and the nicotine product industry. While cigarette litter is still a concern, things are much more complex today.

“Tobacco companies are in a uniquely strange position when it comes to ESG issues. On one hand, multinationals like PMI and BAT win accolades for health-promoting actions to address climate change,” says Olson.

On the other? As David Sweanor of the University of Ottawa told her, “Clearly, from an ESG standpoint, the big issue has to be that cigarettes are killing 8 million people a year. Not the carbon costs.”

Sweanor notes that some countries’ regulations, including the US Tobacco Control Act of 2009, in effect impede industry from acting ethically. Unless a company invests millions of dollars to get a modified risk claim pre-authorized by the FDA, it can’t educate the American public about nicotine product relative risks. Making obviously true statements about reduced or absent toxic substances, or even quoting the findings of academic studies, are forbidden.  

“Companies that only sell non-combustion products could do a great job, saying we’re like a great new form of energy that replaces carbon. But they are not allowed to tell people about it,” says Sweanor. “How can they act in an ethical way that coincides with the interest of shareholders when it’s illegal?”

Olson also talked with Pieter Vorster, managing director of Idwala Research Ltd., about why industry websites are switching their emphasis from ESG to sustainability. “I think the sustainability label is a bit broader than ESG,” says Vorster. “For me, from an investor perspective, sustainable would be, how long can this business exist? How long can it grow?”

This emphasis on sustainable performance, he notes, may lead investors to root for industry to transform to lower-risk nicotine products. The latter can also be a reason for ethical investors not to shun the tobacco sector. Rather, Vorster says, they can “encourage companies to change, as with the oil industry, and invest in the least bad ones.”