One of BAT’s first steps was to initiate dialogue with its stakeholders. However, only 34 of 167 invited stakeholders attended the UK sessions, with no representatives from the education sector, think tanks or anti-tobacco groups. “Those who didn’t come felt that being involved would give us respectability,” acknowledges Payne.

Lobby groups are also understandably concerned with the European advertising ban, which outlaws tobacco ads in magazines, newspapers and billboards. The ban went into effect in the UK in February 2003 and is expected to be rolled across the European Union by 2005. Tobacco sponsorship of global sporting events such as Formula 1, will also be banned in 2006. This will lead tobacco companies to seek growth in the developing world where there are less restrictions and where 800 million of the 1.1 billion smokers in the world live.

In Sri Lanka, BAT’s subsidiary employed young women to drive around in Players Gold Leaf cars and jeeps, handing out free cigarettes. Similarly, in Malaysia, the Rothmans Dunhill brand sponsors major national football tournaments.

Cynics are understandably doubtful of the motives of the tobacco industry’s turnaround. ASH’s Bates is convinced that BAT’s social reporting is a cosmetic strategy designed to distract from its core business. “It appears to be making concessions when it’s not really,” he says.

Julian Oram, a senior researcher at the think tank New Economics Foundation (NEF), points out that less controversial industries, which escape the radar of lobby groups, may be performing unknown atrocities. “This is not to exonerate BAT but it has acknowledged that it’s in the limelight and has to work at this.”

A recent corporate social responsibility (CSR) report, Smoke and Mirrors, by Addison, a marketing consultancy, discovered that only 7 percent of the FTSE 100 are approaching CSR in a logical, consistent way, despite the fact that 76 of the FTSE 100 had CSR sections and 40 had separate social reports.

Corporate social responsibility and increasing shareholder value are not always natural bedfellows. The 25 companies outside the FTSE4Good index performed 13 percent better in terms of financial turnover than those within its enclaves.

Jo Johnston, a senior analyst in the sustainable futures team at Morley Fund Management, admits that: "Tobacco companies have been great financial performers over the last few years. But it’s making money out of a product that kills people."

So to what extent has BAT’s social report impressed the sustainable investment community? It was admitted onto the Dow Jones Sustainable Index last year and simultaneously cited as one of the 10 worst corporations of 2002, by Multinational Monitor. It has not earned enough colors to be included in the FTSE4Good Index.

Morley Fund Management’s Socially Responsible Investment team analyzes companies to judge whether they are suitable for investment in its Sustainable Future Funds. Sustainability is ranked from A to E, with A representing sustainability and E signaling that the business is “fundamentally in conflict with sustainable development.” Management and strategy are rated from one to five. One shows excellence in vision and development, five shows “the company is hostile to this concept.” Before BAT published its social report it was ranked as an E3 by the SRI team, while its competitors Gallaher and Imperial were ranked as E4s.

Johnston says BAT could be upgraded to an E2. But she is less impressed with its joint venture with the military regime in Burma, its involvement in North Korea and that its human rights training program has only just begun. "At best we could move a tobacco company to a D rating but we only invest in A, B or C."

Reading the content on tobacco manufacturer’s websites you’d be forgiven for thinking they were a wholly owned subsidiary of the public health service. Nothing could be further from the truth. If the tobacco industry is prevented from using CSR as a smokescreen for the damaging nature of its products, its increased sense of responsibility should be encouraged. It does not, however, have to be applauded.    

[19-May-2003]