How much transformation should the Tobacco Transformation IndexTM take into account?
Among the many initiatives of the Foundation for a Smoke Free-World, is the creation and launch of the Tobacco Transformation IndexTM in September 2020, after almost one year of consultations and design methodology. The index is a tool evaluating and scoring the efforts of the tobacco industry in diversifying away from cigarettes and other harmful products. It assesses the 15 largest tobacco companies in the context of 36 countries, across six categories of company activity (i.e.: strategy and management, product offer, product sales marketing, capital allocation, and lobbying and advocacy), each of which is further sub-categorized, for a total of 35 indicators. The index aims at becoming the reference, trusted, comprehensive and accessible tool to assess and provide a measure of the actual progress away from the most harmful forms of nicotine delivery by the tobacco industry, in the belief that a good understanding of companies’ actions will accelerate the transformation of the global tobacco industry and the reduction of harm caused by tobacco use.
The good news is that, in the relatively short time since its launch, the index is already inducing industry transformation. Indeed, in September 2021 Swedish Match AB announced the plan to spin off its cigar business (currently representing 28% of its revenues) to become an entirely smoke-free company dealing mostly with oral tobacco and nicotine products (such as: snuff, chewing tobacco, etc). As the Index measures the extent to which companies are taking actual steps toward reducing consumption of high-risk products, Swedish Match announced divestment could materially change the Index’s assessment of the company’s efforts in embracing harm reduction. However, the spin off’s actual impact on overall harm reduction remains ambiguous at best, as it will affect merely the ownership of Swedish Cigars’ most popular cigar brands rather than their availability to consumers. Moreover, it is also possible that the brands subject to the spin-off would ultimately be acquired by entities falling outside the scope of the Index altogether (e.g., privately held companies, private equity group, etc.), without a clear incentive to reduce harm and outside of the scope of the Index’s measurements.
However, none of these considerations should be understood as a loophole to the Index’s effectiveness. The index aims at providing a comprehensive measure of companies’ actions towards harm reduction, therefore a detailed assessment of the effects of divestments on consumers and products availability at present falls outside the scope of the Index’s mission. In terms of consequences, the example of the Swedish Match spin off practice could result in a net benefit for harm reduction if for instance the overlap between Swedish Match’s high-risk product and lower-risk product users is so small as to leave little potential to drive harm-reduction products among the former, or if the acquirer of the cigar business does not manage to retain customers which move to reduced risk products. That kind of assessment necessarily requires a whole other level of analysis than the Index provides, and is therefore best left to other circumstances.
Nevertheless, the Index is still a work in progress towards the best version of itself able to accelerate -as much as possible- the reduction of harm caused by tobacco use. With that in mind, Swedish Match’s proposed divestment does provide a good opportunity to reflect on possible ways to improve the Index’s effectiveness in providing a reliable synthetis of tobacco industry transformation, which is also scored, reflected in the very name of the Index, even though the Index is relatively recent it is already been reviewed by the Foundation project team with the purpose of making it even more accurate and detailed in the quantity of information it delivers. One of the main objectives is precisely to focus more on the tactics (such as divestments) being employed by each company to analyze discrepancies between the company’s stated commitment to harm reduction with their actual behavior. This appears as an extremely ambitious task, impossible to achieve without companies’ full disclosure and overall great transparency, conditions which might prove more difficult to meet in the case of private and state-owned companies, – relevant, if not dominant, players in several large markets.
Another mighty goal of the Index is to integrate companies and country datasets to create more accurate comparisons of companies’ performance in individual markets in the context of regulation, consumer preferences, and other factors shaping the character of individual markets. This is crucial, as companies’ behaviors (i.e., the Index core focus) never occur in a framework that companies wholly and solely create by themselves, rather such behaviors adapt to a government-imposed regulatory environment that is on the overall much more impactful in influencing consumers attitudes and shaping patterns of consumption. This is evident wherever there is a regulatory ban on one or more reduced risk products category, which ban cannot be lawfully circumvented by companies. Currently, the Index is still in its early stages and its focus is primarily on companies, and rightly so. But if the ultimate objective of the Index is to assess Transformation overall, then evaluating the impact of regulations is crucial, by giving due weight to consumer access and attitude towards products as influenced by government intervention, however difficult these might be to measure in an objective manner.
The goal of transforming the tobacco landscape is ambitious, thus it comes as no surprise that the measures of such transformation, such as the Index, are equally ambitious. The index is up to the challenge and its scope will probably be expanded already in its next updated release, scheduled for late 2022. Meanwhile, we ought not underestimate the impact the Index already has, as well its ability to create and raise awareness and foster positive change toward a harm-reduction approach, while acknowledging and incentivizing the transition to less harmful products from the most dangerous ones. Switching from a “quit-or-die” mindset to a pragmatic harm-reduction approach is without a doubt the first but also the most concrete step to take against the smoke epidemic and towards a truly smoke-free world. And the Index is an important part of that.