British American Tobacco's Socially Responsible Smoke Screen

Let's Be Sensible

Not surprisingly, BAT argues that an international convention on tobacco control would undermine the "self-determination" of national governments and would not "constitute sensible regulation." Like other industries fearful of government regulation, it has turned to voluntary reforms as a strategy for fending off mandatory ones.

Part of that strategy involves inviting the tobacco industry's most committed opponents to join it in dialogue. In BAT's foreword to the social report, Managing Director Paul Adams wrote that the company was "seeking ways that may enable the more reluctant amongst them to discuss their views with us, however critical."

Away from public gaze, other BAT executives put the issue more bluntly. A video CD, titled "The Challenge of Change," was distributed to BAT's Australian staff in late 2001 and later leaked to the public. The video featured comments by Brendan Brady, then-director of corporate and regulatory affairs for BAT Australasia.

According to Brady, the company's social responsibility program was designed to help BAT regain control of the tobacco agenda. "Even those people who are trying to put us out of business are stakeholders," he said. "We need to know what they are thinking, we need a license to operate in the future. We need to be able to plan five years or ten years out, and we can't do that unless we understand what people expect of us as a business ... We've got to set our own agenda and be pro-active."

"Do you think the people who are really [on the] anti side of the debate ... actually want to engage with us?" asked Gary Krell, BAT's managing director for Australasia.

"If we find people who don't want to talk to us, then I believe over a period of time we can effectively embarrass them into talking to us," Brady replied. "We can ensure they come to the table eventually with their problems about the industry or their problems about tobacco or whatever."

Scoping the Study

In mid-2000 BAT turned to the London-based EQ Management--a niche PR consultancy on corporate responsibility--to advise it on developing its first social reporting process.

On its web site, EQ Management describes BAT as a multinational company "vilified more than most" that "needed to demonstrate a serious commitment to change in order to retain its legitimacy to operate."

In terms of dollars spent, BAT's social responsibility consultation certainly represented a serious commitment. EQ Management, whose core staff consists of only two people, received approximately £350,000 (US $547,000) for its work on the BAT social reporting project. BAT money accounted for the bulk of EQ Management's income during the eighteen-month contract that ran until June 2002.

The auditing company Bureau Veritas also collected a nice paycheck for its role in the social reporting process. Bureau Veritas, which was hired to verify the social reporting process and meetings, disclosed in BAT's final report that it earned approximately £650,000 (slightly more than US $1 million) over a one-year period.

In September 2000, EQ Management undertook a "scoping study" for the social report, selecting thirteen BAT subsidiaries for review. The subsidiaries were chosen to represent a cross-section spanning developed and less-developed countries, tobacco-producing and tobacco-consuming countries, and different levels of "business regulation."

Neither the scoping report nor its summary are publicly available. According to EQ Management's Malcolm Guy, "The full report, for reasons of confidentiality, is never made public, nor disclosed to the client themselves. ... It can form part of the audit trail and will be made available to the verifier if they wish to see it."

After a few hiccups in which some initially-selected subsidiaries opted not to participate, BAT and EQ Management finally settled on fourteen countries: Argentina, Australia, Brazil, Germany, Hong Kong, Hungary, Malaysia, Russia, South Africa, Sri Lanka, Uganda, the United Kingdom, the United States, and Zimbabwe.

Same BAT Channel

Publicly, BAT insisted that its plan for seeking input would let stakeholders discuss any issues they wanted, without steering the discussion to fit company priorities. "Our process in the first cycle did not seek to pre-determine the issues or areas of the business covered, so that stakeholders would be able to raise whichever topics they saw as priorities. The agenda in each country has been led by local stakeholder interest," BAT claimed.

A different picture appears, however, in a "social reporting process diagram" published by BAT's Sri Lankan subsidiary, Ceylon Tobacco Company (CTC). One of the first steps in the process was to "select and prioritize issues and scope" before even commencing the first "dialogue" meeting. Tellingly, BAT omitted this step from the same diagram as it appears in BAT's global social report.

BAT identified three overarching theme areas for the social reporting process--"risk information and understanding," "risk reduction" and "business integrity." Under these framework themes BAT identified six core issue areas that all its participating subsidiaries should "adopt as topics for discussion in stakeholder dialogue."

The issues selected for discussion included consumer information, "combating under-age smoking," "responsible marketing," the promotion of "sensible" regulations, and demonstrating good "corporate conduct and accountability." The list overlapped almost exactly with the priority issues identified by BAT in its "voluntary" proposals submitted to the WHO Framework Convention on Tobacco Control.

While BAT went to pains to proclaim the process as open to all, its in-country social report managers used a "stakeholder classification mapping" system to determine who would be invited.

BAT considers this mapping system "proprietary" and has not made it publicly available, but some of the details can be found in the social responsibility report published by BAT's Sri Lankan subsidiary. CTC's Looking Beyond: Social Report 2001 says it sought stakeholders who were "deemed to have a high business impact" across a spectrum of views ranging from "sympathy," "neutrality" to "hostility," and whose were considered to have a high, medium or low "degree of flexibility" with respect to tobacco issues.

An accompanying colored chart indicates that "hostile" stakeholders were expected to either have a low or medium level of "flexibility' but would be substantially outnumbered by those classed as "neutral" and "sympathetic" participants.

Advice on developing the mapping system was provided by the Tarrance Group, a Virginia-based PR and polling company with a long history of working for tobacco clients including Philip Morris and Brown and Williamson, a BAT subsidiary. The Tarrance Group also has numerous Republican Party candidates on its client list as well as nongovernmental organizations including the National Rifle Association, the League of Conservation Voters and the Wilderness Society.

William Stewart, a Tarrance vice president, worked as worldwide consultant to BAT "on matters pertaining to stakeholder research, social responsibility, and corporate brand management." The Tarrance web site says Stewart helped Brown and Williamson "define their corporate image and regain the public trust" following the landmark legal settlement in 1998 between the tobacco industry and US Attorneys General.

Don't Smoke, Kids

BAT has been working for some time to counter the popular perception that it targets children. In May 2001, Broughton discussed the issue at the BAT's annual meeting in London, where he pledged to "cooperate extensively with governments, parents, teachers and NGOs [non-government organizations] in programs to prevent under-age smoking."

This sort of promise rings hollow with Simon Chapman, professor of public health and community medicine at the University of Sydney and editor of the Tobacco Control Journal. Chapman has studied the tobacco industry's sponsorship of youth anti-smoking programs and considers them a sham.

"They have the temerity to continue to run fairly expensive campaigns all around the world that say, 'Hey, smoking is an adult custom, we don't want kids to smoke,'" Chapman says. "Of course that sort of stuff actually incites kids to smoke. It says, 'this is how you look grown up, use this product,' and it is very, very attention-getting."

Support from this interpretation can be found in the tobacco industry's own internal documents, millions of pages of which are now publicly available thanks to lawsuits against tobacco companies. In one such document, for example, BAT subsidiary Brown and Williamson states that it "will not support a youth smoking program which discourages young people from smoking."

A 1991 document from the US Tobacco Institute--to which Brown and Williamson belonged--was equally candid: "The youth program and its individual parts support the Institute's objective of discouraging unfair and counterproductive federal, state and local restrictions on cigarette advertising, by ... seizing the political center and forcing the anti-smokers to an extreme."

When confronted with these documents, BAT's Brendan Brady demurs: "What they were thinking or doing at that time, who knows? What I can say now is that everything we do in relation to preventing youth smoking is entirely genuine."

Responsible Marketing

In September 2001, BAT joined Philip Morris and Japan Tobacco in adopting an international voluntary code for marketing. According to a BAT news release, these new "globally consistent international marketing standards" represented a "raising of the bar" and established "a benchmark for the industry world-wide."

Simultaneously, however, global financial market analysts responsible for assessing corporate profit prospects were reassured that the new guidelines wouldn't adversely affect BAT's sales volumes. According to a leaked memo from a tobacco analyst for Credit Suisse Group, the voluntary initiative was simply a way "to improve the tobacco industry's image."

"By pro-actively setting new international tobacco marketing standards, the multinationals could be trying to counter a number of proposals that the WHO has been working on to curb the amount of cigarettes that are consumed on an international level," the memo reassured investors.

Let the Dialogue Begin

In April 2001--just prior to the public announcement of the social reporting project--EQ Management participated in a series of "dialogue skills" training workshops for BAT's "Social Reporting Project Managers" in South America, Africa, Europe and Australia. This included hiring actors to play the role of critics challenging BAT's policies and actions. EQ Management was also involved in further workshops for BAT Managers in December 2001 and March 2002.

BAT's Sri Lankan subsidiary, Ceylon Tobacco Company, described subsequent local training including "building self-confidence and clearing inner obstacles" and "learning to foster quality relationships."

In the US, Brown and Williamson turned to the Weber Shandwick PR firm to advise it on appropriate participants for meetings slated to occur in Baltimore, MD; Cape Girardeau, MO; and Oakland, CA. Brown and Williamson claims that participants were not screened for their views on tobacco.

BAT experienced mixed success in its efforts to recruit "independent" facilitators to oversee the stakeholder meetings. The company sought to entice wary stakeholders to participate by recruiting facilitators with high personal credibility from professions including "media personalities," "heads of non-government organizations involved in social research" and "religious leaders." Individuals who agreed to facilitate included the following:

In the UK, BAT contracted Durham Ethics, a business consultancy involving Charles Yeates and David Jenkins, the former Bishop of Durham.
In Australia, BAT hired Laurel Grossman from the Melbourne-based Centre for Stakeholder Research (CSR) which describes its role as helping reconcile "differences and encourage mutual development and growth, which will, in the long term lead to a sustainable future." Grossman founded and works for Reputation Measurement, which publishes an annual survey assessing the public reputations of Australia's top 100 companies. Grossman issued the stakeholder invitations for the meetings in Australia but hired Susan Halliday, the country's recently-retired Federal Sex Discrimination Commissioner, to facilitate the meetings. "As someone who is concerned, very concerned about the increase in youth smoking, especially among women, this is one way that I could contribute to the issues that currently haven't been put inside the company for assessment," Halliday explained.
In Argentina, BAT hired "well-known academic and TV/radio commentator" Nelson Castro, as well as a nongovernmental organization specializing in conflict resolution--Fundación Cambio Democrático.
In Hungary, BAT hired Viktor Klausmann, described as a "well known TV presenter" in BAT's global report.
In Uganda, a "consumer protection official/media executive" was hired.
In Zimbabwe it was a former High Court judge.

Once hired, BAT's "independent" facilitators championed the company's decision to prepare a social report. In the UK, Durham Ethics invitation pleaded with skeptical invitees: "With so much at stake for those, here and abroad, who the tobacco industry harms, should dialogue not at least be tried?"

The letters of invitation stressed that any issues could be raised. Furthermore, they emphasized, BAT had promised to respond in writing to all issues identified. Its response to all the issues would then be the focus of a discussion at the second meeting and incorporated into the final report. To cap it all off, they said, the whole process would be verified by a global audit company, Bureau Veritas.

Secret Honor

Tobacco control activists from around the world discussed the company's proposal for dialogue via e-mail, but most concluded that it was better to avoid the process. "If BAT does not admit any past wrongdoing ... why should critics simply wipe the slate clean and ignore 40 years of the most terrible mendacity?" ASH wrote later in its analysis of BAT's social report.

In the eyes of BAT executives, this unofficial boycott undermined the credibility of the process. In the United States, Brown and Williamson abandoned a second round of dialogue meetings. "Our policy maker dialogue is at an embryonic stage," it glumly reported.

In Australia, there was friction between BAT's PR firm, Jackson, Wells & Morris (JWM) and the Centre for Stakeholder Research. "I wish we could have run the stakeholder process, though that's not our particular skill ... we were just asked to work with the company that was running it which was very hard to do as consultants don't always get on well together," JWM partner Keith Jackson said. Shortly after the first dismally attended dialogue meetings, CSR's role was brought to an end.

Controversy surrounded the process on other issues too. While the initial invitations talked about accountability and transparency, the meetings were held under the "Chatham House" rule requiring participants not to disclose who attended or the specifics of what was said by individual participants. No minutes of the meetings were published, and even the number of people attending was secret. Regarding the meetings in Australia, all Grossman would say was that a "medium to small number of stakeholders" participated.

Some documents leaked out anyway. In Uganda, a local journalist obtained a summary of the "dialogue" meetings held there. "Long term threats to the tobacco industry from the likes of the WHO and the World Bank through their tobacco-hostile policies could possibly be eroded by carefully considering the reputation management initiatives and [corporate] giving and communities," the minutes stated.

According to leaked minutes of the first UK dialogue, facilitator David Jenkins called BAT's social reporting project a "risky but essentially hopeful" exercise.

The minutes also include some surprising remarks from Mervyn Pedelty, the Chairman of the Advisory Committee on FTSE4GOOD index (the UK ethical investment index). Pedelty held out the possibility that BAT might one day be considered a company that ethical investors could support. "We aspire towards a situation where we can more readily distinguish between the 'best performers' and the 'rest' in any industry--including tobacco," he stated.

Real Responsibility

Pedelty's tender sentiments contrasted strangely with the realities that kept intruding on BAT's efforts to reconstruct its image. While its hand-picked stakeholders chatted in comfortable conference rooms, the company suffered a major legal setback in Australia, where a lawsuit brought by dying smoker Rolah McCabe reached a climactic conclusion. On March 25, 2002, Victorian Supreme Court Justice Geoffrey Eames rejected BAT's defense arguments and ruled that the company was responsible for paying AU$700,000 in damages to McCabe (US$378,000).

In his decision, Eames found that BAT had deliberately destroyed internal company documents relevant to the lawsuit "with the deliberate intention of denying a fair trial to the plaintiff, and the strategy to achieve that outcome was successful. It is not a strategy which the court should countenance."

BAT had destroyed the documents based on advice from an attorney who warned of "the danger which the documents posed to the defense of future litigation." Moreover, its policy of destroying documents had been developed for global application, suggesting that other tobacco victims' cases around the world may have also been compromised. The Eames judgment therefore reverberated around the world. In late August 2002 lawyers from the US Department of Justice interviewed McCabe's attorneys to examine whether the destruction of documents could have affected cases launched by smokers against BAT's US subsidiary.

The ruling also had a fatal effect on BAT's dialogue process in Australia. "We are on hold at the moment until we get some clarity on the legal situation and then we might be in some position to produce some sort of response back to stakeholders in some sort of interim way," said John Galligan, BAT Australia's Director of Corporate and Regulatory Affairs.

In early December 2002 the Victorian Court of Appeal unanimously found in favor of BAT on every point of its appeal. The Court of Appeal judges found it "was surely not surprising" that BAT destroyed the documents to avoid the "magnitude, expense and complexity" of discovery. They rejected the suggestion that BAT's motive was to frustrate plaintiffs' cases.

While BAT was delighted with the decision, the family of McCabe--who died from lung cancer in late October--has announced that they will appeal the decision to the High Court of Australia. If the High Court upholds Eames original decision, the company may be rendered virtually defenseless in new cases in Australia

Details, Details

BAT claimed that its social responsibility report was drafted in accordance with the Global Reporting Initiative (GRI), a set of voluntary guidelines on social and environmental reporting developed by a coalition of business, government and non-profit groups.

"It was hoped that these standards would help BAT adopt an approach that would be credible with a skeptical public," stated EQ Management, the company's consultant.

The GRI has been criticized, however, by activist groups who warn that their voluntary nature lets companies pick and choose which guidelines to follow. This was indeed exactly what BAT did. The GRI guidelines say that the "society" section of corporate reports should contain information on "consumer health and safety." One of the core indicators, the guidelines state, is "existence and description of policy for preserving customer health and safety during the use of reporting organization's products and services."

If BAT had complied with this component of the GRI guidelines, its social responsibility report would have included the approximate one million people expected to die prematurely each year for the next three decades from using its products--a figure that Action on Smoking and Health derives from World Health Organization estimates. "This is the most important impact of its products and should be estimated in its social reporting," says ASH Director Clive Bates.

BAT's social report disclosed that three of its employees had been killed and 37 involved in serious accidents during 2001, but omitted any estimate of the number of people who had been killed or seriously affected by consuming its products.

In fact, BAT only used half of the special indicators recommended by GRI, ignoring the rest. Since the guidelines are voluntary, of course, there is no penalty for this sort of selective noncompliance.

Asked about the omissions, BAT advisor Malcolm Guy gave a noncommittal response. "We wouldn't choose to stipulate to any organization what they should do," Guy said. "What they choose to report against they have to be accountable for and open to criticism if people think they are not complete ... if people feel these indicators haven't been covered in sufficient detail there are channels open to people to request further indicators are added."

In addition to BAT's bad-faith implementation of the GRI guidelines, the company also selectively picked and chose from the recommendations provided by stakeholders who participated in company-sponsored dialogues. In Malaysia, for example, stakeholders recommended that the company "consider eventual cessation of all marketing (i.e. advertising and promotion) efforts of cigarettes--even to adults."

For the company, however, this was an unacceptable suggestion. "The suggestion to stop marketing directly to consumers is currently beyond our responsible marketing targets," they bluntly responded.

BAT Malaysia's report could not even admit that nicotine is addictive, describing it as "a naturally-occurring substance in the tobacco plant which is thought to have a mild stimulant effect." The Malaysia report also used weasel words to avoid acknowledging the devastating health effects of the tar created when tobacco is burnt, stating merely that tar "is thought to be related to some of the health risks associated with smoking."

"They have left out the most important characteristic of nicotine which is its addictive properties," said Mary Assunta, the media officer for the Consumers Association of Penang in Malaysia. "It looks like business as usual for BAT. What they are actually saying is that we are not going to change."

BAT's subsidiary in Argentina, Nobleza Piccardo, reacted in similar fashion when confronted with "unreasonable" demands from its stakeholders, who demanded that Nobleza Piccardo should quit the manufacturing of toxic cigarettes in 10 years."

"Tobacco is a legal product. No government or serious activist group has proposed a total ban," the company responded.

And In the End

BAT's completed social responsibility report was released with less fanfare than the company had hoped. Just prior to its release, Action on Smoking and Health released its own scathing critique of BAT's social responsibility, titled "British American Tobacco--The Other Report to Society."

ASH also encouraged journalists to critically scrutinized BAT's claims, effectively setting a standard against which the BAT report would be judged. What had originally been planned as a major announcement to strut BAT's "socially responsible" credentials, instead became a low-level launch in the company's London offices before a handful of invited reporters and staff.

To craft Broughton's launch speech--part apology for past behavior, part promise to listen and change--BAT turned to its head of Corporate Communications, Fran Morrison. Prior to March 1999, Morrison worked for Shell Information Services (SIS), a now-defunct wing of the global oil behemoth that cleverly touted itself as a re-birthed corporation after public outrage over its role in Nigerian human rights abuses and its unsuccessful attempt to dump the obsolete Brent Spar oil drilling platform in the Atlantic ocean.

Broughton admitted that many organizations critical of the tobacco industry--"particularly most health and scientific stakeholders"--had boycotted its review process. Nevertheless, BAT said it was pleased that its framework "was broadly validated by stakeholders."

Notwithstanding the glaring deficiencies in both the process and BAT's final report, the company managed to impress the Dow Jones Sustainability Index (DJSI)--an index of stock exchange listed companies that claims to track performance of "the leading sustainability-driven companies." The DJSI is a joint project between the Dow Jones company and the Zurich-based Sustainable Asset Management (SAM), a sustainability research company whose web site claims that it is "financing change."

DJSI was so impressed with BAT's social report that in September 2002 it announced the company had been included in its 2003 index. In order to conclude that BAT deserved inclusion, however, SAM's summary analysis of BAT relied on the controversial "best of sector" approach, under which "ethical" indexes opt to include companies embroiled in controversy as long as they are judged to perform better than their rivals within the same economic sector. Under this standard, any industry, no matter how venal and corrupt, is deemed by definition to have "ethical" practitioners.

SAM's summary stated that BAT "has an excellent overall sustainability performance compared to the industry average, and is clearly positioned among the best in its industry ... BAT's performance in the social dimension is outstanding compared to its industry, especially in external stakeholder relationship management and public reporting."

ASH's Clive Bates responded that he was astonished at SAM's "gullibility." In his own analysis of the BAT report, Bates could find little change that could be attributed to the social reporting process.

"On all the issues that really matter the social report is either cosmetic, evasive or deceitful," he stated. "It's certainly artful PR, but no one should regard this as an insight into this company's place in the world."