Fn 2016, Philip Morris International (PMI), one of the world’s leading tobacco company, proudly announced its quest to be the first tobacco company to commit to a smoke-free future. They presented a plan to move away from cigarettes and other combustible tobacco products towards healthier, smoke-free alternatives to nicotine delivery. The company committed US$1 billion of funding over 12 years for this accomplishment.

They committed to bring at least 40 million of its adult customers to stop smoking and switch to healthier alternatives by 2025. PMI called this strategy a dramatic decision.

This decision seems to be impressive to a centenary tobacco producer, trying now to reinvent itself with electronic alternatives (the electronically heated tobacco system, IQOS) to serve nicotine-addicted costumers. However, doubts remain. Can investors and the other stakeholders trust and bet in a company whose alternatives keep harming the society around?

Other industries are also facing these similar challenges of “the need of a profound reinvention”, and good examples of positive and proactive moves can be found in Oil & Gas, Textiles and Automobile. Companies operating in these industries need to reinvent themselves not only to keep their license to operate but also to remain profitable. Toyota, for example, claimed to transform themselves “from an automotive to mobility company” whose mission is to “manufacture human happiness”. BP, the oil giant, committed to be carbon neutral in 2050 and announced a new purpose of “reimagining energy for people and our planet” while helping “the world get to net zero” with cleaner alternatives for energy. Patagonia is adopting a new business model for one of the most polluting industries in the world (textile), offering its clients the option to repair or buy second hand clothes from the brand.

These companies are changing their business models, not only because this is the best for the planet and its people, but also because these are the business models of the future, and the best for their bottom lines. The business case for action is very clear to this sort of companies.

In the case of Philip Morris, the company is changing the product, but still, just mitigating the harm it is causing and not bringing a positive solution - since the electric alternatives are still harmful to human health.  As the company mentions, they “believe that new, potentially less harmful products are a better alternative for adult smokers”. IQOS sort of represents for Philip Morris what renewables do for Oil&Gas – an alternative route to remain in the business. But with a difference: it is less harm not no harm. In this case, even if the company walks its talk, is there a future for an industry whose fate is to hurt human health?

Is there a long-term business case, based on business model adaptations for the tobacco industry? Or will these companies need a real dramatic transformation, bigger than these shy steps they are carefully undertaking? From the strategic and Responsible Business point of view this becomes something like: “Can the tobacco industry, building on their human resources, competences, and processes become some sort of “chewing” industry (often exaggerations bring clarity to the argument)?” Or all which is available for them is to carry on producing less harmful products?

Several industries are quickly moving to the new paradigm by serving human needs and reinforcing their business models, hand in hand with societal prosperity. Some others will just reactively contain their damages and possibly fade out as their market vanishes.

Only the ones able to disrupt with the past and have a clear long-term strategy will be able to prosper and make a real contribution to their shareholders and society. In the words of Henry Ford: “If I had asked people what they wanted, they would have said faster horses”. What is the car for the tobacco industry?

Have a great and impactful week!

Filipa Pires de Almeida
Project Manager and Researcher
Católica Lisbon School of Business and Economics

This article refers to edition #66 of the "Have a Great and Impactful Week" Newsletter.
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