Frequently Asked Questions

GENERAL INFORMATION

What is the Smoke-Free Index™?

The Smoke-Free Index™ (the “Index”) will highlight and critically evaluate tobacco companies’ activities that either support or impede progress toward a smoke-free world (i.e., a world free of combustible cigarettes and other high-risk tobacco products1). The Index aims to be a tool to dramatically reduce the rates of disease and premature death caused by smoking by stimulating corporate action, leveraging investor influence, and providing objective, transparent information for stakeholders to make decisions. The Index will complement other important efforts – including the World Health Organization Framework Convention on Tobacco Control (WHO FCTC), increased regulation, and public pressure – that seek to reduce smoking and hold the tobacco industry accountable for its actions. The Foundation for a Smoke-Free World (the “Foundation”) is establishing the Index as one means to bring about the end of smoking in this generation.

What is the scope of “Smoke-Free”? What is the reasoning behind that objective?

We define a smoke-free world as one free of combustible cigarettes and other high-risk tobacco products. This goal is in recognition of the fact that the vast majority of the disease and premature death, i.e., harm, caused by smoking is linked to the combustion involved in smoking. Engaging and pressuring the industry to accelerate the phasing out and ultimate elimination of combustible cigarettes further supports the opportunity to prevent millions of premature deaths and to make a difference in the lives of more than a billion current smokers.

How will the Smoke-Free Index™ work? What impact will it have?

The Smoke-Free Index™ (the “Index”) will periodically compile and highlight comparable data on the world’s 15 largest tobacco companies (accounting for ~85% of global cigarette volume), evaluating whether and how they are making progress toward a smoke-free world. The Index will also profile relevant activities in 35 countries (accounting for ~85% of current global smoking sales and consumption).

By clearly articulating stakeholder expectations and publicizing companies’ activities, the goal of the Index is to stimulate competition among companies to deliver the necessary transformation of the tobacco industry, as well as enhance awareness and engagement by investors, policymakers, and others over time who can influence industry change. Distrust of the tobacco industry is well-founded but attempting to further isolate them leaves the companies to their own devices – which likely means status quo. By providing objective, transparent information, the Index will enable all stakeholders to make decisions and to hold companies accountable for their actions.

1 Includes conventional smokeless tobacco products such as chewing tobacco and snuff, but does not include snus and related reduced-risk smokeless tobacco products.

The Index will draw on similar indices and corporate benchmarks such as the Access to Medicine Index for the pharmaceutical industry, the Access to Nutrition Index for the food & beverage industry, and the Corporate Human Rights Benchmark, which have helped drive increased awareness and corporate action on key topics affecting their target industries. Drawing on these models, rather than further isolating the tobacco companies, we view the Index as one tool to create a path for them toward a smoke-free world – a path for a better society.

How does the Smoke-Free Index™ compare with other Index products?

Two models researched for application toward the development of the Smoke-Free Index™ are the Access to Medicine Index and the Access to Nutrition Index . Based on independent review of the respective index reports, we identified primary differences across the disciplines, reflecting the nature of the products and industries, along with compatibilities.

First, the design of the Access to Medicine Index takes into account that the underlying products are beneficial to society and individuals, while the Access to Nutrition Index takes into account that the underlying products may yield mixed outcomes (nutrition vs. undernutrition, obesity, etc). Tobacco products are deadly. Therefore, necessary adjustments in the design and evaluation criteria will be required in developing the Smoke-Free Index™, pending the outcome of stakeholder dialogue.

Second, those two indices are financially and organizationally independent of their respective industries. With regard to management and governance structure, the Smoke-Free Index™ will be developed in concert with extensive upfront stakeholder engagement (link to interim report). The Smoke-Free Index™ team, consisting of Euromonitor and SustainAbility, are independent, third-party advisors responsible for the management and delivery of all work streams including stakeholder consultation, index research and scoring, reporting, and evaluation. The Index team will be guided by an Independent Advisory Panel (the “Panel”) composed of experts with knowledge of business and investment, corporate behavior, and public health. The Panel will provide strategic advice on governance, design, development, and promulgation of the Index. The Panel operates independently from the Foundation for a Smoke-Free World (the “Foundation”) and its charter forbids industry involvement. The Foundation has no direct authority over the Panel, and the Foundation’s pledge agreement with Philip Morris International guarantees funding while ensuring complete independence and autonomy to pursue its mission to end smoking in this generation, including undertaking activities that are critical of the tobacco industry. This independence is also explicitly codified in the Foundation’s bylaws.

Third, the Access to Medicine Index and the Access to Nutrition Index engage with industry to a degree to identify and prioritize metrics that can be feasibly collected and are material to change. The Smoke-Free Index™ will rely as much as possible on public and independently sourced information. The fact is some data will be non-public, accessed through non-disclosure agreement and protected accordingly. The companies will be encouraged to make all such data public, and transparency will in some form be encompassed by the Index scoring methodology. Therefore, data collection and verification, as well as gaining access to additional non-public information, will require direct interaction with the companies being assessed, just as there would be with any other index initiative.

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Why is this Index needed?

The global effort to curtail smoking and reduce its health impacts has resulted in material progress in recent decades, especially in developed countries and thanks to the World Health Organization Framework Convention on Tobacco Control (WHO FCTC). These efforts should and will continue. However, more than a billion people still smoke, most of whom live in low- and middle-income countries (LMICs). Seven million smokers die prematurely every year. The bottom line is, change isn’t happening fast enough.

The Smoke-Free Index™ (the “Index”) aims to complement existing efforts by monitoring, reporting, and thereby compelling the tobacco industry to change its practices and accelerate the end of combustible cigarettes and other high-risk tobacco products globally. The Index is also intended to ensure that potentially reduced-risk products are developed and marketed as responsibly as possible, not only in high-income countries (HICs) but also in LMICs, keeping the underlying public health goal of eliminating premature deaths due to smoking combustible cigarettes at the center of the effort. The Index’s key premise is that by actively encouraging and monitoring this transition, it will, over time, compel the industry players to act more quickly and more responsibly than they otherwise would. Conversely, players that do not make the necessary transition will be exposed. As a result, stakeholders such as investors and public health professionals will be better informed and able to demand necessary action.

By its nature, an index or ranking product creates a “task list” for the measured companies. We can all agree we have “tasks” for the tobacco industry so that it rectifies much of the disease and premature death it has caused. By measuring the players, all stakeholders are in a position to better guide them. This outcome has been accomplished successfully in the pharmaceutical industry through the Access to Medicine Index and in the food & beverage industry through the Access to Nutrition Index.

If investors are opting to divest tobacco stocks, why create this Index?

Not all investors embrace the divestment approach, opting instead to engage and influence controversial industries, companies, and stocks. Additionally, a growing segment of the investor community is developing and applying environmental, social, and governance (ESG) criteria in the investment process, with the aim of positively influencing company behavior. Reflecting these trends, the Sustainability Accounting Standards Board (SASB) has produced a standard for sustainability accounting and disclosure for 77 industries, including the tobacco industry. Michael R. Bloomberg served as Chair of the SASB Foundation Board from 2014 to 2018 and is Chair Emeritus. We believe an index can create value by generating new information upon which all stakeholders may become better informed, by highlighting differences across the companies within the industry based on their actions, and by creating competition among the companies for the benefit of public health.

Why do you think industry transformation can work?

What we have seen in other industries is the power of technological innovation, combined with other influences, to drive change: coal companies are shifting to renewable energy; waste management companies are shifting from dumping to recycling and reusing; and automobile manufacturers are developing electric and hybrid cars, shifting away from reliance on the

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combustion engine. This transformation can also occur in the tobacco industry. As new innovations are introduced that help people quit smoking and that separate nicotine from the combustible components of cigarettes, it is important that they are made available to all smokers.

Companies compete with one another and are therefore interested in the actions of their peers. The Smoke-Free Index™ (the “Index”) will help to expose and quantify the differences across companies in the tobacco industry to compel even the worst actors to become “less bad.” To be clear, the objective of the Index is to highlight the journey from “bad” to “less bad,” not to reward in any manner the sale of deadly products. Lives can be saved by influencing even the worst companies toward transformation and by demonstrating to them how the “less bad” players are able to operate. In this manner, the Index can stimulate positive competition and diffuse best practices among companies to accelerate the transition to a smoke-free world.

In addition, the power of the Index relates to it being a long-term tool. Company managers know that their actions will be evaluated and highlighted for all stakeholders on a regular basis. The Index is not a “one-shot” report but will have multiple iterations to follow. As a result, the Index will expose company behavior in comparison to policies and public statements over time, thereby better enabling accountability.

Do you know what data will be used to underpin the Smoke-Free Index™?

Through independent third-party research and analysis, the Smoke-Free Index™ (the “Index”) will provide both quantitative and qualitative evidence of how companies are addressing industry transformation. We anticipate the collection and compilation of verifiable metrics on the following factors:

● Revenue and volume of combustible vs. non-combustible nicotine products

● Research and development and other capital investments supporting combustible vs.

non-combustible products

● Responsible marketing (including policies, procedures, and violations)

● Performance over time

● Performance in LMICs vs. HICs

● Public policy and market influence

Specific topics and indicators are being developed through a robust multi-stakeholder consultation process, and all data will be collected and verified by independent third parties. The Index design information will be disclosed publicly at the start of the development phase, and a detailed methodology summary will be published along with the release of the Index.

What types of people/companies/organizations are being invited to the listening seminars and consultations in preparation for the Smoke-Free Index™ (the “Index”)?

We are engaging with a wide range of experts across several disciplines, including investors, academics, tobacco control experts, and health advocates. The purpose of these consultations is

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to explore and strengthen the Index’s theory of industry transformation; to identify and prioritize the specific topics the Index should address; and to inform the measures necessary to ensure the research process and outputs of the Index are objective, credible, and effective.

Will this Index purely be a tool to compare companies? How do you anticipate investors using this tool?

An objective of the Smoke-Free Index™ (the “Index”) is to leverage investor and market influence to encourage innovation for the benefit of public health. The Index will be a comparative tool designed to stimulate action by companies, as well as to inform investors and other stakeholders with an interest in seeing the industry change. The Index is not an investment product.

The Index will provide value to investors with respect to several trends. First, not all investors embrace the divestment approach, opting instead to engage and influence controversial industries, companies, and stocks. Second, a growing segment of the investor community is developing and applying environmental, social, and governance (ESG) criteria in the investment process, with the aim of positively influencing company behavior. Therefore, investors should perceive value in data that help them to disaggregate the companies, even in a “dirty” industry such as tobacco.

To the extent the Index is a source of information on relative company behavior over time – i.e., “bad” and “less bad” – it can be a tool to drive differentiation in the investment process. Managers of public companies have a fiduciary responsibility to maximize shareholder value. As they perceive some investors directing capital based in part on the ratings and rankings over time, they are incentivized to alter their behavior. Some non-public entities may perceive reputational pressure over time, although admittedly others may not.

Is the Smoke-Free Index™ an effort to “re-legitimize” the tobacco industry, or otherwise paint it in a positive light?

No. The tobacco industry created a global health crisis and then tried for decades to cover it up. Its poor reputation is well-deserved, and stakeholders have every right to be distrustful. But those facts alone will not lead to the end of the smoking epidemic. Indeed, to the extent we allow the tobacco companies to be responsible for changing themselves without external influence, we become responsible for maintaining the status quo.

First, the Smoke-Free Index™ (the “Index”) will help to increase knowledge about what the tobacco companies are doing, where they are doing it, and how they are behaving over time. Greater knowledge helps all stakeholders in driving change toward stopping the tobacco companies’ deadly policies and practices. Second, from a management perspective, the adage is “what gets measured gets done.” The Index provides a roadmap for monitoring and reporting on change over time – company by company. Bad actors are identified; less bad actors are not congratulated but can become examples for the worst performers to learn from. Third, while the tobacco industry is viewed as the enemy of public health, if we want to make progress toward a smoke-free world, we should learn more about its players. The Index is a structured way to learn more about the tobacco industry and the individual companies.

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The goal of the Index is to complement existing regulatory, public pressure, and other efforts to encourage tobacco companies to end the production and sale of combustible cigarettes, which are responsible for the vast majority of the harm associated with tobacco use. The Index will report in fair, verifiable, and systematic ways all who either support or impede progress.

Will it be necessary to engage with tobacco companies for this Index?

Yes. The Smoke-Free Index™ (the “Index”) will rely as much as possible on public and independently sourced information. But some of the necessary data will be non-public, accessed through non-disclosure agreement and protected accordingly. The companies will be encouraged to make all such data public, and transparency will in some form be encompassed by the Index scoring methodology. Therefore, data collection and verification, as well as gaining access to additional non-public information, will require direct interaction with the companies being assessed, just as there would be with any other index initiative.

Article 5.3 of the World Health Organization Framework Convention on Tobacco Control states: “In setting and implementing their public health policies with respect to tobacco control, Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry in accordance with national law.” This is also good practice for any index or benchmarking effort. Accordingly, Euromonitor International and SustainAbility, the independent third-party partners responsible for developing the Index, will document and report all interactions with tobacco companies and industry groups during the Index development and data collection process. Additionally, all information provided by the companies will be independently reviewed before being incorporated into the Index.

How will you engage with the industry?

The industry engagement process will be defined and publicly disclosed after completion of the expert stakeholder consultation process that is currently under way. At the outset, this engagement will involve formal outreach to the target companies to inform them of the Smoke-Free Index™ (the “Index”) initiative and gain their feedback on effective procedures for collecting and managing requested data. Once procedures are established and validated by the Independent Advisory Panel, the Index team will make formal requests to the companies for data, as well as for verification of data collected from other sources. The Independent Advisory Panel will provide strategic advice on governance, design, development, and independent oversight of the index-making process. The Index team will document and report all interactions with tobacco companies and industry groups during the development and data collection process.

Because the Foundation for a Smoke-Free World (the “Foundation”) is funded by Philip Morris International, isn’t the Index subject to a conflict of interest?

There is no tobacco industry influence on the Foundation’s work, including the Smoke-Free Index™. The Foundation’s pledge agreement with Philip Morris International guarantees funding while ensuring the Foundation’s complete independence and autonomy to pursue its mission to end smoking in this generation, including undertaking activities that are critical of the tobacco industry. This independence is also explicitly codified in the Foundation’s bylaws.

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With respect to the Smoke-Free Index™ (the “Index”), the tobacco industry had no influence in initiating the program, has not directed any action or decision-making, and will not be allowed to tip the scales in any manner. In addition to the Foundation’s legally established independence that keeps its work free from tobacco industry influence, it is also working with third parties and undertaking extensive consultation with experts and other stakeholders to define the focus and methodology of the Index. Foundation personnel will not be involved or otherwise direct in any manner the Index-making process. The Independent Advisory Panel (the “Panel”) will ensure the lack of industry and Foundation influence throughout the process. The Panel will publish its report on the Index process and execution, along with recommendations for the future, upon completion of the first edition of the Index. Therefore, the Panel will provide yet another layer of review and guidance to further ensure the transparency, intellectual rigor, and independence of the Index.

How does the Smoke-Free Index™ relate to the work of tobacco control?

Currently, government implementation of the World Health Organization Framework Convention for Tobacco Control (WHO FCTC) guidelines is the primary method to tackle the public health crisis related to smoking. The Smoke-Free Index™ (the “Index”) seeks to complement these efforts by further examining the necessary future transformation of the tobacco industry and nicotine ecosystem.

The Foundation for a Smoke-World (the “Foundation”) launched a global consultative process to develop the Index. The Index will, over time, rigorously assess and evaluate the performance of tobacco companies as it relates to the delivery of a smoke-free world. The Index team has conducted candid discussions with our supporters and critics alike to ensure transparency. The first Index will be made public in the middle of 2020, with multiple iterations to follow.

As the Foundation shares common goals with organizations such as Tobacco Tactics and the Southeast Asia Tobacco Control Alliance, vocal critics of the Foundation and its work, we welcome opening a constructive dialogue with their leadership toward achieving the common goal – improving global health by ending smoking in this generation.

Why were Euromonitor International and SustainAbility selected to work on the Smoke-Free Index™?

The Foundation for a Smoke-Free World issued a request for proposals in 2018 seeking qualified research organizations to develop and implement the first Smoke-Free Index™ in mid-2020. Applicants were evaluated based on a number of criteria, including prior experience, global research capabilities, demonstrated quality assurance and oversight processes, cost, and timeline. An important requirement was also to be independent from tobacco and e-cigarette companies.

● As an independent, global market research company with more than 40 years of

experience, Euromonitor International was selected to execute this research based on the criteria.

● As an independent think tank and advisory firm with more than 30 years of experience,

SustainAbility was selected to design and facilitate a global stakeholder engagement program and oversee the development of the Index’s governance mechanisms.

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How will the Index project be managed?

Euromonitor International and SustainAbility have been appointed to work in collaboration to support the development of the Smoke-Free Index™ (the “Index”), serving as third-party independent advisors to the Foundation for the Smoke-Free World (the “Foundation”).

Euromonitor International will produce the Index for the Foundation, acting as a trusted third-party data provider to accurately and objectively populate the Index with information consistent with the Foundation’s objectives and the extensive stakeholder engagement process. As an independent company, Euromonitor International will conduct its research without bias or prejudice. In more than 8,000 consulting projects, Euromonitor International’s consultants have demonstrated their independence, producing unbiased research across multiple industries.

SustainAbility is convening and gathering critical input from stakeholders around the world and supporting the development of governance structures and committees to oversee the creation of the Index. SustainAbility’s role is to support the development of a robust, credible, and transparent process.

What is the governance structure for the Index?

The Smoke-Free Index™ (the “Index”) initiative is convened, funded, and initially overseen by the Foundation for a Smoke-Free World (the “Foundation”). The Foundation is therefore responsible for overall governance in line with its bylaws and strategic plan. The Foundation is also responsible for review and approval of major investment decisions related to the Index.

Euromonitor and SustainAbility (the “Index team”) are independent, third-party advisors responsible for management and delivery of all project work streams, including stakeholder consultation, index research & scoring, reporting, and evaluation.

Additionally, the Index team will be guided by an Independent Advisory Panel (the “Panel”) composed of experts with knowledge of business and investment, corporate behavior, and public health. The Panel will provide strategic advice on governance, design, development, and promulgation of the Index. In addition, the Panel will provide relevant subject-matter expertise and advice on the development of the Index methodology and data collection and verification procedures.

The Panel operates independently from the Foundation and without any industry involvement. SustainAbility will provide resources and secretariat services to the Panel. Euromonitor and SustainAbility will carry out their work independently of Foundation, with clear milestones and deliverables agreed upon in advance with the Foundation. For practical purposes, the Foundation anticipates that the initial management and governance structure illustrated in Chart 1 will remain intact through the first release of the Index. The Index is a long-term program with the intention for multiple, periodic iterations to follow the initial report in mid-2020. As part of its governance remit, the Panel may make recommendations for alternative governance structures, including funding mechanisms, for consideration going forward.

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The Panel will serve in an advisory capacity, and as such it will not have Index-making authority other than adopting positions and making recommendations. Authority on program implementation matters addressed by the Panel remains with the Index team. The Foundation provides project funding and arbitration upon request, and has no direct authority over the Panel. The Panel will publish its independent report on Index process and execution, along with recommendations for the future upon completion of the first edition of the Index.

Chart 1. Initial Management & Governance Structure

Foundation for a Smoke-Free World (FSFW)

Euromonitor Intl. SustainAbility

Independent Advisory Panel

SustainAbility: Project delivery including stakeholder engagement, establishment of the Independent Advisory Panel, and governance

FSFW: Project funding and arbitration upon request. Initial plan in keeping with Foundation bylaws and strategic plan; review and approval of major investment decisions

Independent Advisory Panel: Expert review and advice on Index design, data collection, research methodology, verification, scoring, reporting, stakeholder engagement, and governance

Euromonitor: Project delivery including index design, data collection, research methodology, verification, scoring, and reporting

Funds & ResourcesAccountabilityWorking relationshipFlow of advice from panel & information from the parties

Public Report

ABOUT EUROMONITOR INTERNATIONAL

Who is Euromonitor International?

Euromonitor International is the world’s leading provider for global business intelligence and strategic market analysis. With more than 40 years of experience in market research, Euromonitor International provides strategic intelligence on industries, companies, economies, and consumers around the world. Euromonitor’s independent view of the business environment, competitive landscape, and industry growth drivers help validate strategic priorities, redirect assumptions, and uncover new opportunities. On-the-ground research analysts around the world leverage their knowledge of the local market, fluency in the local language, and access to the best research sources. Beyond strategic research, Euromonitor International is committed to supporting charitable causes through its Corporate Social Responsibility program. Euromonitor International is a signatory to the United Nations Global Compact.

What’s Euromonitor International’s methodology?

Euromonitor International utilizes a multi-sourced methodology to ensure all the best qualitative and quantitative tools and approaches are used to help its clients meet their research objectives. The company’s multi-sourced methodology helps Euromonitor gather more data and insights,

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while concurrently allowing Euromonitor to cross-check the information with inputs from multiple sources to improve data quality.

For example, Euromonitor uses trade interviews with knowledgeable industry sources extensively, leveraging these open-ended discussions to have “full and frank” exchanges across competitors, suppliers, distributors, and customers. These discussions provide both critical data and deeper qualitative insights that have helped establish Euromonitor’s reputation as a trusted resource across industries and geographies.

The company’s on-the-ground research network of 1,000+ field-based analysts observe markets first-hand, using their cultural and linguistic fluency and established local networks of contacts to enhance Euromonitor’s global coverage. Along with industry experts, Euromonitor International also has a dedicated modelling and analytics team holding a number of PhDs and master’s degrees in advanced modelling techniques.

In addition, Euromonitor International uses a standardized approach to data collection and category definitions, ensuring results are internationally cross-comparable across multiple countries and continents.

ABOUT SUSTAINABILITY

Who is SustainAbility?

Founded in 1987, SustainAbility’s mission is to inspire and enable business to lead the way to a more sustainable economy. Through its hybrid think tank and strategy consultancy model, the company supports the transformational business leadership necessary to shift to a more sustainable way of life. For more than 30 years, SustainAbility’s diverse global team has worked with many of the world’s largest corporations, combining strong business acumen, expert facilitation skills, and deep knowledge of sustainability issues and trends across a wide range of sectors. Offices for SustainAbility are in London, New York, and San Francisco.

As a think tank, SustainAbility plays a leading role in shaping and interpreting the ever-evolving business sustainability landscape. Its influential research spans topics as diverse as climate change, the future of globalization, access to food and health care, energy security, lobbying, governance, supply chains, and corporate accountability.

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