Triple Bottom Line Analysis of Tobacco Industries

Economic Perspectives
Long Term Survival of the Industry
Bangladesh being one of the largest tobacco consuming countries in the world, it is certain that the
tobacco industry here is profitable enough. Now the subject in question is, if the industry has a future
potential or not.

Although the tobacco cultivation has no immediate production benefit to the

development of countrys economy, the only department that gets benefited is the National Board of
Revenue by receiving Tax and VAT.
British American Tobacco Company stands top among the vat paying companies. This company
introduces itself, The BAT contributes more than Tk. 12000 million to government annually large private
sector tax payer. The BAT has been presented as investment success in the web site of The Bangladesh
Board of investment (BOI), based in the Prime Ministers office. In 2005, ten companies contributed a
sum of Tk. 49,180 millions as VAT. Out of which BAT contributed the highest of Tk. 18,520 millions. On
the other hand, bidis are taxed at a much lower rate, with the effective rate reduced even further by taxing
them based on an artificially determined tariff value rather than actual retail price. Excise taxes
typically account for 70% or more of retail price and total taxes typically account for more than 3/4 of
retail price. As a result, cigarette prices in Bangladesh are among the lowest in the world and bidis are
even cheaper. In addition, real cigarette prices have been falling in recent years and increases in real
incomes over the past decade have made tobacco products increasingly affordable. Hence, the industry
has an increasing demand of its products in the long run as well as profitability.

Impacts on Economic Framework

Though contribution of tobacco companies to the national economy is considerably higher compared to
the other relative industries, but, in some countries, some tobacco giants are also accused of tax evasion.
For example, in Thailand, the worlds most popular tobacco products manufacturing giant Phillip Morris
International (PMI) carried out a billion dollar baht tax evasion scheme, avoiding paying the Thai
government 68 billion baht in tax revenue during 2003-2007.
Moreover, British American Tobacco, one of Britains biggest companies, has been accused of bribing
senior politicians and civil servants in a bid to sabotage anti-smoking laws in several African countries.

So, these kinds of tax evasion and bribery practices by the tobacco industry players lead to long term
unsustainable outcomes which act as barriers to swift functioning of diversified markets and economic
development schemes as a whole.

Environmental Perspectives
Although the tobacco industry contributes significantly in providing employment and raising GDP of any
economy, but they bring out some detrimental effects on the environment as well. In a recent research in
Bangladesh, it has been found that, illegal logging of government forests for wood used in tobacco curing
is accounts for excessive deforestation. In addition to th e destruction of forest resources, tobacco
production is responsible for the displacement of food and other economic crops in Bangladesh. Unlike
many food crops, tobacco production offers no replenishment to the soil or to other parts of the farm
ecosystem. So, the biomass left after tobacco harvest is of no food value to livestock and poultry and the
soil itself cannot be used for producing other crops in the short run.
Additionally, as a mono-crop, tobacco plants are vulnerable to a variety of pests and diseases, which
require the application of large quantities of chemicals. These chemicals afterwards flow to the river and
cause water pollution. These are some of the environmentally unsustainable practices followed by tobacco
industries all over the world. So, they should undertake necessary sustainable measures to change the
current business practices.

Social Perspectives
Tobacco companies should apply high standards everywhere they operate and set clear and measurable
targets to help them improve the impact they have on the world around them. In this assignment we will
highlight the social approaches to sustainability adopted by two of the leading multinational tobacco
companies in the world; Phillip Morris and British American tobacco.
Phillip Morris engages in programs around the world to improve the working and living conditions in
tobacco growing communities. Their programs range from providing farmers the basic skills to develop
their business, access to clean water, and improving quality and access to education to their children.
As a responsible Company, another tobacco giant British American Tobacco Bangladesh (BATB) believes
that the business has a major responsibility in helping society to achieve the necessary sustainable social

progress. BATB has stepped forward with the the Poraho initiative which has installed 34 plants to
remove arsenic and toxic elements from groundwater. These plants provide pure drinking water for
around 100,000 people daily. They have also undertaken a project to install Solar Home Systems in
remote areas of Chittagong Hill Tracts for free.
Among the negative impacts, some of the tobacco brands target teenagers as their primary target group for
consumption. They should not do so and promote tobacco products by any means of advertising or
influences.