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Philip Morris International Inc. (PMI) is a multinational corporation inthe cigarette and tobacco manufacturing industry, and the parent company ofwell-recognized cigarette brand, Marlboro. Headquartered in New York, USA, thecompany’s products are sold in over 180 countries around the world. With theaddictive and conceivably deadly effects of tobacco use, the company is highlycontroversial and thus meticulously scrutinized using corporate social responsibilitystandards under the public eye.  As our society evolves in recognizing the importance of creating a sustainablefuture, this report serves to analyze three negative externalities that are aresult of the industry and evaluate PMI’s ability to form goals that encapsulateshared value to ease the tension between traditional business operations andsocietal interest.  In analyzing the effectiveness of PMI’s goals for sustainability, thefollowing criteria along with a SMART (Specific, Measureable, Achievable,Relevant, Time-Bound) analysis will be used:1)   Addressesthe root of the problem2)   Beneficialfor all stakeholders (investors, management, society, etc.)3)   Attainable Under the UN sustainable development goals that represent idealisticfuture goals, PMI has committed to adopting these objectives as an integralpart of their business model.

For the purposes of this report, respective tothe order of presented externalities,  the three goals of focus are:1)   Good healthand well-being2)   Responsibleconsumption and production3)   Peace,justice, and strong institutions Externality #1: Effectsof Second-Hand Smoke on Bystanders The most apparent externality of a tobacco manufacturer is the healthrisk associate with smoking cigarettes – both for the individual user and victimsto second hand smoke. According to an article published by HealthLink BritishColumbia, two thirds of burning cigarette smoke in an open area can be inhaledby bystanders, and exposure for 8-20 minutes can trigger reactions linked toheart disease and stroke.  In recognizing the fatality of smoking cigarettes, PMI has set targetsto directly tackle the root of the problem and strive for a smoke-free futureby replacing their products with less harmful alternatives. In evaluating the efficiencyof this goal, the company has been explicit in setting an attainable target. By2025, PMI hopes to reduce tobacco usage by 30% in relation to statistics from2010 meaning there will still be roughly 950 million smokers (adjusted forpopulation growth). The population projection breakdown and businesstransformation metric can be shown through the charts below.               PMI has invested over USD$3 billionsince 2008 and plan to invest another $1.7 billion on research and development toinnovate their two smoke-free product lines.

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The heated tobacco products heattobacco instead of burning it thereby emitting a nicotine vapour less thetoxins that result from cigarette smoke, and the sans tobacco product line usesan electronic chemical process to create a nicotine vapour. By 2025, they want30% of their volume to come from smoke-free products.  At the rapid rate of the company’s research and development effortscombined with their 10-year projection, the company has been specific and hasaddressed the relevance of their project. Their objectives are looselytime-bound with attainable and measureable metrics. While their ultimate visionis to replace cigarettes and harmful product entirely, the leading cigarettecompany has set realistic incremental targets to achieve a tobacco-free utopia.If PMI is serious about continuing involvement in this initiative, they wouldbe engaging in multi-stakeholder engagement to benefit all stakeholders for thegreater good of society.

The company could generate new profit from their innovativeproduct lines or move towards becoming a research and development institution.  Externality #2: Water Usagein Production of Cigarettes             To evaluate a corporation’sfinancial, social, and environmental sustainability, companies today mustestablish a triple bottom line approach to meet the demands of theirstakeholders. In 2010, PMI was responsible for emitting 7.4 million tonnage of greenhousegases in contributing to deforestation, water scarcity, climate change, and wasteproduction.  The company recognizes that global tobacco crops are rain fed, so thereis an alignment of interest to contribute to water stewardship. The company wasable to reduce manufacturing water consumption by 24% between 2010-2015. WhilePMI has historically made impressive progress, the company has not explicitly setany measurable goals or timeline to quantify their anticipated progress.

It isstated in their sustainability report of 2016 “we PMI seek continualreduction in our water use across manufacturing facilities and focus onachieving improvements in water efficiency, conservation, and reusing orrecycling water where possible”.  In relation to other industries, water does not play an integral role intobacco product manufacturing, therefore PMI’s water usage has the potential tobe reduced to net zero if the company commits to this initiative. PMI’s goalsto conserve and reuse water lack specificity and structure. While the companyis on the right track in tackling a major issue that would be beneficial foreveryone, this idealism cannot be achievable unless outspokenly pursued.  Externality #3:Illicit Tobacco Trade             The production, exchange, and possessionof tobacco that fail to comply with legislation contribute to organized crime andis referred to as the illicit tobacco trade. Illegal cigarettes are one of themost profitable and frequently traded goods for organized crime groups and canbe connected to cases of corruption, terrorism, and related crime. These globaltrades undermine governments by decreasing tax revenues by USD$50 billionannually and disturbing the efficacy of taxes to reduce smoking.              This externality is unique to thetwo previously discussed because of the economic and social alignment thatincentivizes all stakeholders involved.

PMI has funded a project called PMI IMPACT to combat global illicittrade. The company has vowed to fund the initiative with USD$100 million forthree rounds. Supported by an independent council of seasoned corporateexecutives, the organization selects 32 university research projects that aimto combat illegal trade and related crimes in the European Union.              On the front end, PMI has invested morethan USD$100 million in over 700 tracking centres spread over 130 countries totrace their products 


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