Featured case: PMI’s Vision of a Smoke-free Future:
Can a Tobacco Company Be Sustainable

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The case

Who – the protagonist

Andre Calantzopoulos, the CEO of Philip Morris International (PMI).

What?

PMI, who produce Marlboro cigarettes, is the world’s biggest publicly listed tobacco company by sales.

Why?

Andre’s ambition was a radical plan to shift to ‘smoke-free’ products in more than 180 countries around the world.

In a 2018 sustainability report, Andre asserted that a tobacco company can only be sustainable if it’s providing healthier alternatives for customers.

$6 billion was subsequently spent on research, product, and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding.

Where?

PMI organised the Stakeholder Meeting in Lausanne, Switzerland, to win over sceptical stakeholders on its smoke-free business transformation.

When?

The meeting took place in 2020.

Key quote

“We are taking every step possible to completely replace cigarettes with better alternatives for the adult smokers who would otherwise continue smoking, addressing challenges across our value chain and seizing opportunities to add value to society.” – Andre Calantzopoulos.

What next?

Convincing important stakeholders that a tobacco company could be part of the solution to rid the world of cigarettes by offering better alternatives was always going to be a tall order.

For example, the United Nations, World Health Organization, regulators, public health advocates, and some sustainable investors said that there was no safe level of use of e-cigarettes and no opportunity for effective engagement with tobacco companies.

So, what could PMI do in order to be successful in phasing out cigarettes if stakeholders were not willing to engage? What did PMI need to do to prove themselves and their strategy at the Stakeholder Engagement Meeting?

 
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PMI’s Vision of a Smoke-free Future: Can a Tobacco Company Be Sustainable
Ref IMD-7-2118

Teaching note
Ref IMD-7-2118-T

The authors

author

Vanina Farber and Natalia Olynec

Vanina discusses what an emotive subject this is and shining the light on an industry that is blacklisted from taking part in stakeholder conversations.

Initial reaction

Vanina said: “We haven’t explicitly polled students about their smoking habits in class. However, we did find that students who had a family member affected by a smoking-related illness, or lung cancer, had strong initial reactions and were less willing to consider a tobacco company as sustainable. We also had students who had entered the new IQOS shops and were surprised that the first question IQOS employees asked was whether or not they were a smoker since the product was only recommended for smokers. 

“The difference in approaches tends to be between those who see sustainability as mitigating negative impacts and those who believe sustainability is regenerative, meaning in this context that having a ‘good’ product matters.”

Playing on emotions

Natalia commented: “We chose this topic in particular because it is an emotive topic. We found that students were extremely focused and engaged throughout the case. Since the topic is quite controversial, nearly all students already have an initial bias towards the case objectives. We play with that passion to challenge them to consider all points of view.

“In the beginning, there is such a gut reaction among students, but then, when we get to the more technical aspects of materiality and stakeholder engagement, they need to focus and put into practice the tools they learn in their MBA. It was even difficult for us to write this case. We had to control our own biases.

“In class, we ask students to step away from their emotional lens and put themselves into the shoes of a specific stakeholder. As a result, students have to balance their own personal perspective with that of the assigned stakeholder. We’ve found that this forces them to think critically and justify their responses in class.”

talking strategyTalking strategy

Vanina added: “The tobacco industry is controversial. We liked the idea of focusing on a company that operates in an industry that is blacklisted from taking part in many stakeholder conversations. The case forces students to consider what sustainability strategies firms with harmful products models can adopt to transform. Or more critically, can a company that produces harmful products or services even have a sustainability strategy?

“Similarly, by using such a stark example of sustainability, we hope that students see how learnings from the case translate into other industries and business sectors. It is a good stepping-stone for discussions about other industries, such as fast fashion, fast food, or the fossil fuel industry.”

Improving the case

Natalia concluded: “We were able to secure a video interview with the CEO of PMI after the case was published.

“So, we have plans to develop a multimedia element to the case to bring it to life. We believe that multimedia content that can be accessed online provides students with a richer learning experience, especially in the current climate where more and more teaching will be done via an online platform.”

About the authors

Vanina Farber is elea Professor for Social Innovation at the Institute for Management Development (IMD).
e vanina.farber@imd.org
tw @vaninafarber

Natalia Olynec Head of Sustainability at the Institute for Management Development.
e natalia.olynec@imd.org
tw @Natalia_O

 

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