Company commitments to harm reduction are supported with limited targets

Most companies with commitments to harm reduction integrate them into overall business strategy and management systems by setting targets, assigning responsibilities, and defining performance incentives.

Only four out of the six companies expressing commitment to tobacco harm reduction – British American Tobacco Plc (BAT), Japan Tobacco Inc (JTI), Philip Morris International Inc (PMI) and Swedish Match AB (Swedish Match) – set specific performance targets in areas such as investment, sales, and conversion rates. None of the companies have set specific, timebound targets as to when high risk products will account for a lower percentage of their tobacco sales, than reduced-risk products. JTI sets goals around investment, targeting USD1 billion across 2018 to 2020, while BAT and PMI have targeted both sales and user conversion rates. BAT has targeted reduced-risk revenues reaching GBP5 billion by 2023-2024 and consumers of non- combustibles growing to 50 million by 2030. In comparison to BAT’s total company revenue in 2019, GBP5 billion would represent 19%. PMI targets its smoke-free shipment volumes reaching 250 billion by 2025, projecting declines in its combustible products to 550 billion, making reduced-risk products 45% of its sales. This is also aligned to its global goal for 40 million adult smokers switching to its ‘smoke-free’ products by 2025, with 20 million of these users in non-Organization for Economic Co-operation and Development (OECD) countries.

Establishing firm, time-bound targets to cease sales of high-risk products and responsibly offering reduced-risk alternatives signals a deeper commitment and a higher likelihood of performance that will contribute to tobacco harm reduction. However, most of the companies in the index do not currently demonstrate this level of ambition.

All six companies with harm reduction strategies assign responsibility for them at a senior level. For example, BAT appointed a Director of New Categories to its management board, with end-to-end responsibility for driving growth, innovation, brand building, and consumer insights for reduced-risk products. In addition, the majority claim to have structures set up to prioritize the development of reduced-risk products. For example, since 2017 PMI has realigned its operating segments by grouping ‘smoke-free’ products and related ecosystem development, as well as scientific substantiation, under a new Science & Innovation function. BAT took the step of changing its reduced-risk business from being a separate entity to integrating it into its existing geographic operations, under the pretext that it facilitates it becoming core to its operations and utilizing the company’s full resources.

A number of companies reference reduced-risk product performance being part of remuneration incentive evaluations for senior leaders, but only PMI and Imperial Brands Plc (Imperial) state a specific percentage (20%) that is applied to reduced-risk products. Despite this, incentives also remain linked to sales of high-risk tobacco products, which is at odds with tobacco harm reduction.

Establishing firm, time-bound targets to cease sales of high-risk products and responsibly offering reduced-risk alternatives signals a deeper commitment and a higher likelihood of performance that will contribute to tobacco harm reduction. However, most of the companies in the index do not currently demonstrate this level of ambition.

For a complete list of sources and references, download the full Index Ranking report.

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