The Index is a tool to accelerate the transformation of the global tobacco industry and the reduction of harm caused by tobacco use. Specifically, the Index monitors tobacco companies’ activities with respect to:
By monitoring and critically evaluating tobacco companies’ behavior, including actions that either support or impede tobacco harm reduction, the Index provides objective, transparent information to all stakeholders and incentivizes companies to act more quickly and responsibly than they otherwise would.
Every two years starting in September 2020, the Index ranks the world’s 15 largest tobacco companies, accounting for approximately 85% of global cigarette volume, on their relative progress in supporting tobacco harm reduction. This ranking and supporting analyses help stimulate innovation and competition among companies and equip all stakeholders with valuable information for understanding and engaging with them to drive change.
The Index is supplemented by Country Fact Sheets profiling relevant policy and related conditions in 36 markets, accounting for approximately 85% of current global sales and consumption of cigarettes. The objective of the Country Fact Sheets is to help contextualize and, over time, more deeply analyze companies’ relevant activities in these markets.
The Index draws on the example set by other tools – such as the Access to Medicine Index for the pharmaceutical industry, and the Access to Nutrition Index for the food and beverage industry – which have helped increase awareness and drive corporate action on key topics affecting their target industries. It also builds upon the key tobacco-related topics and measures identified by other disclosure frameworks, such as the Sustainability Accounting Standards Board (SASB) Tobacco Standard.
The Tobacco Transformation Index™ was funded by grants made by the Foundation for a Smoke-Free World, an independent, U.S. nonprofit 501(c)(3) private foundation with the purpose of improving global health by ending smoking in this generation. The Foundation is funded by PMI Global Services Inc. The Foundation’s Certificate of Incorporation and Bylaws preclude influence from PMI Global Services Inc. or any other tobacco company on the Foundation’s activities or funded research. The research partners that produced the Index are supported by a management & governance structure, which includes third-party advisors and an Index Advisory Panel.
The Tobacco Transformation Index™ is predicated on the forces of competition, differentiation, and constructive engagement.
More than a billion people in the world smoke today and most either refuse or struggle to quit. Therefore, in addition to cessation, the Foundation supports the strategy of tobacco harm reduction. This approach includes minimizing, as much as possible, the health consequences of nicotine consumption, partly through developing alternative and reduced-risk products. In this endeavor, industry transformation can play a crucial role.
In the absence of an established, internationally standardized classification of tobacco products based on risk, the Foundation for a Smoke-Free World commissioned a scientific literature review to identify a relative risk assessment for all products in scope. The table below summarizes a working classification for the purposes of the first edition of the Index.
The relative risk hierarchy developed is based on a systematic review of previous scientific studies of the health risk associated with nicotine products. A total of 320 studies were reviewed in detail to extract data and assess the level of risk for each product type. The products were analyzed in terms of their toxin emissions and epidemiological data, which were combined on a scale from 0 to 100 (low to high risk) to derive a combined risk score for each product. Additional details on the relative risk assessment are available in the publication “Nicotine Products Relative Risk Assessment: A Systematic Review and Metanalysis.”
The potential for change in the tobacco industry is evident for several reasons.
The Index provides both quantitative and qualitative evidence of how companies are addressing tobacco harm reduction. In particular, the Index incorporate the collection and compilation of verifiable metrics on the following factors:
The Index is a comparative tool designed to stimulate action by companies, as well as to inform investors and other stakeholders with an interest in industry transformation. For investors in particular, the Index adds value in several ways.
First, while some investors have chosen to divest from the tobacco industry, others opt to engage and influence the companies. Over time, the Index provides information and insight to support this approach, and also serves as a platform for ongoing debate about what path industry transformation should take.
Second, a growing segment of the investor community is developing and applying environmental, social, and governance (ESG) criteria in the investment process, with the aim of positively influencing company behavior. Therefore, investors gain value from data that help them to better understand and track companies’ activities. This is true even in a controversial industry such as tobacco.
Third, to the extent the Index is a source of information on relative company behavior, it can be a tool to inform differentiation in the investment process. Managers of public companies have a fiduciary responsibility to maximize shareholder value. As they perceive some investors directing capital based in part on the ratings and rankings, they will be incentivized to alter their behavior.
The Index encompasses publicly traded multinationals and the largest state-owned and privately held tobacco companies, which are commonly overlooked by tobacco control. While these companies are not subject to investor influence in the same way as publicly traded companies, the Index may affect them in other ways. For example, some may seek to keep pace with other industry players, and some may face pressure from other stakeholders with an interest in industry transformation. Realistically, the progression of influence offered by the Index will likely start with the multinationals, then move to the major state-owned companies. Research identifies the conflicts and contradictions associated with government ownership of tobacco companies.
No. The tobacco industry created a global health crisis and tried for decades to cover it up. Its poor reputation is well-deserved, and stakeholders have every right to be distrustful. But those facts alone will not lead to the end of the smoking epidemic. Indeed, to the extent we allow the tobacco companies to be responsible for changing themselves, we risk maintaining the status quo.
First, the Index helps to increase knowledge about what the tobacco companies are doing, where they are doing it, and how they are (or are not) changing over time. Greater knowledge supports all stakeholders in driving change toward stopping the tobacco companies’ deadly policies and practices.
Second, from a management perspective, the adage is “what gets measured gets done.” The Index provides a means to monitor and report on company change over time. Bad actors are identified; less bad actors are not congratulated but can become examples for the worst performers to learn from.
Third, companies should be held accountable. The Index reports in fair, verifiable, and systematic ways all that either support or impede progress, and it does not shy away from criticizing companies based on the data.
It is true that some companies are already undertaking some of the activities called for by the Index, but their actions do not represent the pace or scale of change needed. The Index addresses this by monitoring and comparing the activities of all the major players, with the aim of catalyzing systemic change across the industry.
Furthermore, even if companies agree in principle with this agenda, the Index seeks to incentivize them to act more quickly and responsibly than they otherwise would. By evaluating relevant performance and activity in multiple areas, the Index helps identify and disseminate best practices, while providing information to further influence and hold companies accountable.
Tobacco control policies, propelled in part by implementation of the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC), have helped deliver important progress in reducing cigarette consumption in a number of countries. Although the Index takes a market-based approach, the underlying goal of both initiatives – reducing the preventable disease and premature death associated with tobacco use – is the same. Therefore, the Index seeks to complement ongoing tobacco control efforts.
The Foundation believes that innovation and consumer demand for alternative products are part of the solution, in addition to sound policy prescriptions. The record shows that policy strategies alone are not achieving the desired rate or degree of reduction in the prevalence of tobacco use. Technological disruption is now well underway in several parts of the tobacco industry, and lessons from several countries demonstrate the power of consumer demand for alternative products in driving reduced consumption of high-risk products, particularly cigarettes – for example, e-cigarettes in the United Kingdom, heated tobacco products in Japan, and snus in Sweden and Norway.
The tobacco industry does not influence the Foundation’s work, including with respect to the Tobacco Transformation Index™. The Foundation’s Pledge Agreement with PMI Global Services Inc. provides for annual charitable gifts from PMI to the Foundation, with PMI having no influence over Foundation’s activities. Indeed, the Foundation’s Independent Research Agenda, as articulated in its Bylaws, and as is incorporated into the Pledge Agreement with PMI, specifically requires that the Foundation not take into account the potential impact of its research on the image of the tobacco industry or any other industry or commercial entity.
With respect to the Index, the tobacco industry had no influence in initiating the program, has not directed any action or decision-making, and did not influence outcomes in any manner. In addition, the Index was prepared by third-party research partners who convened and engaged in extensive consultation with experts and other stakeholders to define the focus and methodology of the Index. Finally, Foundation personnel were not involved with handling any data or directly scoring the companies in the Index.
In September 2018, the Foundation issued a request for proposals (RFP) to develop and implement the Tobacco Transformation Index™ (at that time, named the Smoke-Free Index). After careful consideration, the Foundation awarded two grants in January 2019, and the program was initiated in February 2019. Euromonitor International was awarded lead responsibility for index process design, research and analysis, and reporting. SustainAbility was awarded lead responsibility for stakeholder engagement, development and facilitation of an Index Advisory Panel, and post-publication project review.
The Index initiative is convened, funded, and overseen by the Foundation for a Smoke-Free World. The Foundation is responsible for overall strategic direction and governance in line with its bylaws and strategic plan.
Euromonitor and SustainAbility are third-party advisors responsible for developing the Index. SustainAbility leads the effort related to stakeholder engagement, development and facilitation of an Index Advisory Panel, and post-publication project review. Euromonitor International is responsible for Index process design, research and analysis, and reporting.
The Index Advisory Panel is composed of experts with knowledge of business, investment, and corporate behavior. The Panel provides strategic advice on governance, design, and promulgation of the Index and issued a public report on its assessment of and recommendations for the process going forward.
Index Management & Governance Structure
The Panel operates independently from the Foundation and without any industry involvement. It serves strictly in an advisory capacity. As such, it does not have any formal decision-making authority other than adopting positions and making recommendations. Authority on program implementation matters addressed by the Panel remains with the Foundation and the Index development team. The Panel published its report on Index process and execution, along with recommendations for the future, upon completion of the first edition of the Index.
In the future, the Panel will be supplemented by an Expert Review Committee that will advise on technical matters associated with the Index.
The Foundation for a Smoke-Free World issued a request for proposals in 2018 seeking qualified research organizations to develop and implement the first Tobacco Transformation Index™ (known then as the Smoke-Free Index). Applicants were evaluated based on criteria including prior experience, global research capabilities, demonstrated quality assurance and oversight processes, cost, and timeline. An important requirement was also to be independent from tobacco and e-cigarette companies.
Euromonitor International, a global market research company with more than 40 years of experience, was selected to oversee index process design, research and analysis, and reporting.
SustainAbility, a think tank and advisory firm with more than 30 years of experience, was selected to design and facilitate a global stakeholder engagement program, oversee the development of an Index Advisory Panel, and lead a post-publication project review.
Euromonitor International is the world’s leading provider for global business intelligence and strategic market analysis. With more than 40 years of experience in market research, Euromonitor International provides strategic intelligence on industries, companies, economies, and consumers around the world. Euromonitor’s independent view of the business environment, competitive landscape, and industry growth drivers help validate strategic priorities, redirect assumptions, and uncover new opportunities. On-the-ground research analysts around the world leverage their knowledge of the local market, fluency in the local language, and access to the best research sources. Beyond strategic research, Euromonitor International is committed to supporting charitable causes through its Corporate Social Responsibility program. Euromonitor International is a signatory to the United Nations Global Compact.
Euromonitor International utilizes a multisourced methodology to ensure all the best qualitative and quantitative tools and approaches are used to help its clients meet their research objectives. The company’s multisourced methodology helps Euromonitor gather more data and insights, while concurrently allowing Euromonitor to cross-check the information with inputs from multiple sources to improve data quality.
For example, Euromonitor uses trade interviews with knowledgeable industry sources extensively, leveraging these open-ended discussions to have “full and frank” exchanges across competitors, suppliers, distributors, and customers. These discussions provide both critical data and deeper qualitative insights that have helped establish Euromonitor’s reputation as a trusted resource across industries and geographies.
The company’s on-the-ground research network of 1,000+ field-based analysts observe markets first-hand, using their cultural and linguistic fluency and established local networks of contacts to enhance Euromonitor’s global coverage. Along with industry experts, Euromonitor International also has a dedicated modelling and analytics team holding a number of PhDs and master’s degrees in advanced modelling techniques.
In addition, Euromonitor International uses a standardized approach to data collection and category definitions, ensuring results are internationally cross-comparable across multiple countries and continents.
Founded in 1987, SustainAbility’s mission is to inspire and enable business to lead the way to a more sustainable economy. Through its hybrid think tank and strategy consultancy model, the company supports the transformational business leadership necessary to shift to a more sustainable way of life. For more than 30 years, SustainAbility’s diverse global team has worked with many of the world’s largest corporations, combining strong business acumen, expert facilitation skills, and deep knowledge of sustainability issues and trends across a wide range of sectors. Offices for SustainAbility are in London, New York, and San Francisco.
As a think tank, SustainAbility plays a leading role in shaping and interpreting the ever-evolving business sustainability landscape. Its influential research spans topics as diverse as climate change, the future of globalization, access to food and health care, energy security, lobbying, governance, supply chains, and corporate accountability.