Impact of incorporating ethical considerations into the strategy of tobacco companies

The tobacco industry is one of the most controversial industries. The wide range of health

problems associated with the use of tobacco products has damaged the reputation of all

companies operating in the tobacco industry. Companies now have to try to improve their

reputation by acting ethically and responsible, but at the same time not lose sight of their goal

of maximizing profits and satisfying their shareholders. (Świątkiewicz & Michalski, 2013)

In this essay I will consider to what degree tobacco companies actively incorporate ethical

considerations into their business. First, I will examine different considerations and actions that

can be taken by tobacco companies to act more ethical. Then I will analyze whether and how

these affect the company’s profitability and how their implementation can affect the company’s

image and reputation.

Most tobacco companies make great efforts to implement ethical consideration into their

strategy. One example is British American Tobacco, one of the world’s largest cigarette

producers. British American Tobacco implements ethical considerations from a variety of

fields into their strategy. In addition to the ethical considerations about society on which this

essay will focus, the company also engages in ethics regarding the natural environment and

their employees. (Wołowiec&Skrzypek; 2022)

Regarding the society, British American tobacco has helped to finance about 130 different

projects in more than 70 different counties aimed at discouraging young people from smoking.

The company clearly speaks out against the sale of cigarettes to juveniles below the age of 18.

The prevent minors from smoking British American tobacco teaches store owners how to

refuse to sell tobacco to underaged teenagers and donates signs to shop owners clearly stating

that tobacco products will not be sold. To inform about the relevant laws regarding the sale of

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tobacco the company offers information booklets and brochures that clearly inform about the

laws and consequences of selling tobacco to minors. Apart from that British American tobacco

also organizes educational programs and produces information films for parents and teachers,

advising them on how to react if they see children smoking or buying tobacco, and juveniles

on how to react when their peers offer them tobacco. (Wołowiec&Skrzypek; 2022)

Furthermore, British American tobacco gives financial support to research project that

investigate the health risks of smoking and how to cure health problems related to the

consumption of tobacco. Currently British American tobacco is financing a lot of research to

develop products that are less harmful than conventional cigarettes. Apart from that British

American tobacco gives also financial support to the Institute for Science and Health that does

independent research on the effects of smoking and investigates healthier alternatives to

smoking cigarettes. (Wołowiec&Skrzypek; 2022)

Something that all the above efforts have in common is that they cost money. For a company

that is profit orientated one might think that this type of investment hinders the company to

implement its core strategy: making as much profits as possible. For the short term this is true

but in the long term all these efforts can payoff very well: the company’s image will improve,

and, in some cases, people prefer to buy from a company that actively engages in ethical

matters. (Świątkiewicz & Michalski, 2013) Apart from that it can be important for a business

to implement ethics to be recognized as a reliable business partner. (Sroka&Lőrinczy; 2015)

However ethical implantations can also be a threat for the business: when deciding on how to

allocate the available resources there can always be conflicts about on what to spend the

recourses. If a company decides to allocate some of their resources to the implantation of ethical

considerations, they will always have opportunity costs: the profit, the resources could generate

if they were invested for another purpose. Apart from that there might be conflicts between the

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different stakeholder of the company because of resource allocation. For instance, some

shareholders might prefer that money is invests back into the business to generate more short-

term profits while other shareholders or the top management prefer to invest in the implantation

of ethical considerations to profit from the advantages stated above. (Świątkiewicz &

Michalski, 2013)

But even after deciding to invest in ethical projects there are more potential threats to the

business. If a company engages in ethics it hast to make sure that the implementation is done

in the right way. Poor implantation can make the project seem untrustworthy and in the worst-

case severely damage the company’s credibility and reputation. (Świątkiewicz & Michalski,

2013) Especially tobacco companies and companies from other controversial industries need

to be very careful when implementing ethical consideration. Due to the bad reputation of the

industry, it can very easily seem like the company only engages in ethics because they want to

increase their revenue and don’t care about the actual ethical matters. Another difficulty

tobacco companies face when implanting ethical consideration is that it can seem like they just

want to distract the public from their questionable activities. The ethical efforts can also be

misunderstood in that the public feels that the firm is only acting ethically because they feel

obligated to do so because the negative effects of their business on society require

compensation. (Świątkiewicz & Michalski, 2013)

In conclusion on can say that British American tobacco is an example of a tobacco company

that actively engages in ethics on the hand by informing about the risks of tobacco and helping

to prevent minors from smoking and on the other hand by financing research regarding the

effects of tobacco consumption and healthier alternatives to cigarettes. As pointed out above

implanting ethical measures can be very beneficial for companies but especially companies

operating in the tobacco industry have been very careful when implementing their ethical

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considerations. For the example of British American tobacco every ethical effort they took was

well thought out and most probably mainly driven by financial considerations in the hope for

an increase in profits and to build trust with their stake holders. (Świątkiewicz & Michalski,

2013)

References:

Sroka, W., & Lőrinczy, M. (2015). The perception of ethics in business: Analysis of research results.

Procedia Economics and Finance, 34, 156-163.

Świątkiewicz, O., & Michalski, M. (2013). Praxeological and Ethical Limits for Incorporation of Ethics

and CSR into a Corporate Strategy and Operational Activities.

Wołowiec, T., & Skrzypek-Ahmed, S. (2022). The impact of the ethical instruments on the company’s

social image. A case of British American Tobacco Polska. And practical aspects of CSR

implementation by foreign investors, 61.

Italized names

Philipp morris buying health companies

Structure -> only referring to BAT

Sources -> enough? it is not from a journal