How tobacco companies discredit environmental, social and good governance criteria

The Environmental, Social and Governance (ESG) criteria taken into account for the tobacco industry give pride of place to the actions they finance to promote diversity, without taking into account the consequences of this industry on health, the economy and the environment.

Complementary to corporate social responsibility (CSR), Environmental, Social and Good Governance (ESG) criteria allow companies to be rated according to their social and environmental behavior.[1]The quality of this rating also facilitates their integration into socially responsible investment (SRI) portfolios, which select virtuous and sustainable companies to make ethical financial investments.

Over the years, ESG criteria have expanded and now give greater importance to issues of inclusion and social diversity. This trend, combined with different rating systems from one rating agency to another, has contributed to tobacco manufacturers being given ratings that defy understanding.

Imbalance of the rating system

The rating agency S&P Global thus caused some emotion by recently assigning a rating of 84 points – on a scale of 100 – to Philip Morris International (PMI), compared to only 37 points for Tesla, which produces electric vehicles.[2]Tesla was also rated lower than British American Tobacco (BAT) by the London Stock Exchange (65 points against 94), and than Altria[3] by the Sustainalytics agency.

Altria happens to fund social welfare activities (micro-financing of community businesses, promoting transgender athletes) and has a board with more women and ethnic diversity, while Tela's is mostly white men. PMI highlights funding of women-run tobacco farms, and like BAT, contributes to Bloomberg's Gender Equality Index.

The credibility of ESG criteria at stake

The evolution of this rating system is therefore accompanied by this paradox: the tobacco industry, which kills eight million people per year and causes significant environmental degradation, can ultimately find themselves valued by their social actions – even when these are only symbolic and have little to do with their economic activity. This is therefore a form of misuse of ESG criteria, which allow companies to improve their image but harm the credibility of the system.

Broadcasting advertisements aimed at LGBT audiences can thus contribute to increasing a company's rating in the name of inclusion, while the various tobacco manufacturers have been repeatedly denounced for these advertising practices which target vulnerable and already overconsumers tobacco. In an internal memo from the early 2000s that was revealed following a trial, Steve Parrish, a legal advisor to PMI, stressed that the operations then placed under the banner of CSR were intended in particular to provide a form of respectability and legal protection in the event of prosecution.

In France, criticism of the relevance of the ISR label has led the public authorities, who guarantee this label, to exclude the tobacco industry eligible companies. This decision is in line with France's commitments to the WHO Framework Convention on Tobacco Control (FCTC), the implementing guidelines of Article 5.3 of which stipulate that "not to give preferential treatment to the tobacco industry".

Keywords: ESG criteria, CSR, SRI label, rating.

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[1] ESG, ISR Label, consulted on June 19, 2023.

[2] Sibaroum A, How Tobacco Companies Are Crushing ESG Ratings, The Washington Free Beacon, published June 13, 2023, accessed June 19, 2023.

[3] Marlboro producer in the United States.