Sophistry (definition): the use of clever but false arguments, especially with the intention of deceiving.
When I started this weekly column with The Fifth Estate last week, I opened with an uppercut to ESG’s glass jaw.
I promised hardcore examples of applying Values to Value analysis to real companies and their sustainability or Environmental Social and Corporate Governance (ESG) reporting.
This approach derives from a thought-leadership discussion paper published over two decades ago, called Single Bottom Line Sustainability (Ecos Corporation, 2002, co-authored by Paul Gilding, Murray Hogarth and Donald Reed)*.
Values to Value shifts the emphasis from PR positioning – which dominates much ESG and Corporate Social Responsibility (CSR) reporting – to ‘value at stake’. How any given business makes money and drives growth. The risks it is exposed to from environmental and social factors. And the negative, and also positive impacts it has on value for society.
So what does that look like in practice? Let’s start with Big Tobacco global leader Philip Morris International (PMI), which strangely has become something of an ESG-world celebrity.
My opinion? If there were an award for sophistry in sustainability, this packaged nicotine giant could win it hands down!
But Big Oil would be in hot pursuit, always vying for the title. And the PR-driven tactics of both Big Tobacco and Big Oil are remarkably consistent.
If you are going to lie, lie big. Like this from PMI:
We are building PMI’s future on smoke-free products that — while not risk-free — are a far better choice than cigarette smoking. Indeed, our vision — shared by all at PMI — is that these products will one day replace cigarettes.
There are other words commonly used for smoke-free products, notably e-cigarettes, vapes, and vaping or ‘juuling.
This year Australia has started comprehensively banning these very same products, on health grounds, led by Australia’s Health Minister Mark Butler, and other countries are mobilising too.
Butler told The Guardian in February this year:
The only groups who want to regulate and sell vaping products are those who profit once kids get hooked on nicotine – Big Tobacco and tobacco retailers. Vape shops are deliberately setting up down the road from schools – it’s an industry targeting their product to kids. That’s why we are taking on Big Tobacco so they can’t continue to get a new generation addicted to nicotine.
A leading global agency on health matters, the US Centers for Disease Control and Prevention (CDC), has this to say about vapes and young people:
What are the risks of e-cigarettes for youth, young adults, and pregnant adults?
Most e-cigarettes contain nicotine, which is addictive and toxic to developing foetuses. Nicotine exposure can also harm adolescent and young adult brain development, which continues into the early to mid-20s. E-cigarette aerosols can contain chemicals that are harmful to the lungs. And youth e-cigarette use is associated with the use of other tobacco products, including cigarettes. For more information about the risks of e-cigarettes for young people, visit Quick Facts on the Risks of E-cigarettes for Kids, Teens, and Young Adults.
Such products, along with traditional “combustible” cigarettes, are incompatible with any notion of sustainability or ethical corporate behaviour.
Yet ESG (environmental social and governance) has become so intellectually corrupted that it affords legitimacy to PMI and other Big Tobacco companies.
It’s several years old now, but this is how the Harvard Business Review profiled PMI and its ESG approach, under the heading How Philip Morris is Planning for a Smoke-Free Future, gushingly summarising it thus:
Philip Morris International has recently committed itself to phasing out cigarettes and other combustible products, and to improving its performance along several ESG measures. In this interview, the company’s CEO, Andre Calantzopoulos, discusses the company’s plans, and the challenges that a “sin stock” confronts in trying to reinvent itself.
(The article was published on July 14, 2020, and Calantzopoulos is now PMI’s executive chairman of the Board.)
ESG creates space for a Philip Morris International by allowing it to compete for best in class. But tobacco and related products are a class that shouldn’t exist.
Any notion of reinvention via vapes is outrageous, because they are a highly problematic product in their own right. All PMI is doing is window-dressing the ongoing highly-profitable sale of cigarettes, by carving out an ESG-sanctioned measure of ‘social licence’, while continuing to spread nicotine addiction.
Its 2023 annual report, in which it integrates its ESG reporting, in accordance with world’s best practice, makes this clear if you read the right bits. Its 2023 versus 2022 results state:
Total international industry volume for cigarettes and heated tobacco units (HTUs) decreased by 1.6 per cent. Our total cigarette and HTU shipment volume increased by 1.0 per , to 738.2 billion units, representing a third consecutive year of volume growth for PMI. Total cigarette and HTU market share increased by 0.6 percentage points, to 28.3 per cent of the international market.
So PMI’s cigarette sales are growing within a slightly shrinking total market, and it’s raking in profits from harming people and burdening health systems. Yet PMI very successfully leverages its self-designed ESG content to skew reporting of its business performance, as this PMI write-up in the Financial Times demonstrates, including meaningless prattle about “ensuring that cigarettes are relegated to history”.
How’s this bit?
The preparation of PMI’s 2023 integrated report considered guidance of international standards and frameworks, including the Global Reporting Initiative (GRI), the UN Global Compact (UNGC), the UN Sustainable Development Goals, and the IFRS Foundation—including use of its SASB Standards, Integrated Thinking Principles, and Integrated Reporting Framework.
Considered guidance? Wow, that’s rigorous!
In my opinion, any thought that PMI’s reporting is acceptable is null and void, unless it brings the human health equivalent of Scope 3 carbon emissions into its financial equation, and takes full responsibility for its social pollution and toll on people/society.
Anything else that PMI says or does about carbon neutrality, plastic waste reduction, or anything else is largely irrelevant, and just greenwashing.
Of course that’s not how Calantzopoulos saw it in the Harvard Business Review article:
My argument to those who say “You can’t believe them, you can’t trust them” is the following: I don’t think we will have a second chance as a company. If all the things we’ve done to move toward a smoke-free future were not true, as some claim, then we would be doomed. Why would I engage my company in a multibillion-dollar transformational exercise if I didn’t believe that it was the right thing to do? Even more importantly, how can you refuse people the chance to access a product that is better for their health?
Its corporate spin chutzpah is breathtaking. PMI is buying time. The answers to his presumably rhetorical questions are appallingly simple. ESG is allowing PMI qualified respectability while it continues to profitably proliferate deadly cigarettes across the world, year after year, and then claims virtue by introducing a new delivery mechanism for addictive nicotine.
The only people for whom vaping can be “better for their health” are those who Big Tobacco has caused to become addicted in the first place, via its cigarettes.
If ESG can’t outright reject Big Tobacco and its big lies, then ESG itself needs to be rejected!
FOOTNOTE: Single Bottom Line Sustainability revisited
Over 20 years ago a team at pioneering corporate sustainability strategy firm Ecos Corporation published a seminal discussion paper. Then a relatively new trend for the business sector globally, corporate sustainability was kicked off by the UN’s historic Rio Earth Summit in 1992 followed by the landmark Kyoto Climate Summit in 1997.
We argued then – counter-intuitively to many, and controversially for some – that for-profit businesses doing sustainability needed to focus on the financial value at stake for them from environmental and social factors. Both harms and benefits, and risks and opportunities, rather than any moral, ethical or feel-good imperatives to be better corporate citizens.
We also warned that many businesses were confusing the then emerging fad of sustainability reporting with actual meaningful action on being more sustainable, advice which was largely ignored as PR spin-doctors stepped in. This has consequently spawned a generation of relative inaction and greenwashing, much of it under the banner of ESG, undermining credibility and helping to foster denialism and backlash.
For any who think this is excessively harsh criticism, “wise in hindsight”, or too woke in the modern parlance, just look at the state of the planet. Especially the existential threat of global heating spiralling out of control, with the clear and present danger of the collapse of natural and human systems, already far exceeding the worst scientific projections from two decades ago.
Approaching sustainability with a laser-like focus on value, both for shareholders and society, is more important than ever today.