The Ethical Side of Big Tobacco

Altria, Philip Morris, and Universal have a lot to answer for when it comes to global health, but they are pouring money into charitable causes.

Mar 1, 2014 at 10:00AM

Tobacco companies are without a doubt some of the best-managed companies, and all of them offer generous cash returns to shareholders. Nevertheless, many investors will stay away due to the ethical implications. However, Altria Group (NYSE:MO), Philip Morris International (NYSE:PM), and Universal Corp (NYSE:UVV) are trying hard to change their image.

Using scale for good causes
Philip Morris has its own charitable giving division, and over its history the company has given hundreds of millions of dollars to good causes. Philip Morris was also the first company in the world to recognize the issue of domestic violence, setting up an awareness campaign to increase recognition.

The number of people Philip Morris has helped is actually truly humbling. The company donates $30 million annually to charitable causes. This does not seem like much, but this cash is deployed strategically. The company uses its global footprint to remove many of the barriers than can be involved with cross-border, non-profit organizations.

In total, during 2011, 3.5 million people were affected by Philip Morris' giving. This figure includes the provision of new homes for nearly 1 million people, food aid for 1.1 million, new jobs for 145,000 people, and clean water for 300,000 people.

What's more, one of the great advantages of Philip Morris' giving is that cash is used in the most productive way possible. Unlike many charities, the company does not throw money at projects. Additionally, Philip Morris is able to leverage its global administration network to help good causes more effectively.

For example, the company's charity administrators learned of an organic method for increasing rice yields during a visit to Indonesia; they introduced it to partners in the Philippines, who subsequently adopted it. This kind of integration is not possible with localized charities and non-government organizations, which tend to lack inter-communication.

Investing for the long term in a different way
Elsewhere, Universal is working on improving living standards and the education of its tobacco suppliers. Universal provides training to farmers, constructs wells and water-supply systems, and provides education to maintain these systems. Furthermore, the company is teaching more efficient methods of farming, reducing the need for human labor, increasing output, and promoting food security.

So far, Universal has constructed 29 primary schools and numerous health clinics across Africa. Now, these are long-term beneficial and will prove to be extremely helpful to the populations of these countries, especially when considering food security and health. This goes a small way to undoing some of the damage that big tobacco has done to the world over the years.

Back in the US
Altria, too, has given hundreds of millions of dollars to charity over the past 10 years. Actually, this figure, according to Altria, is approximately $1.1 billion in cash as well as in-kind contributions. The sort of development programs Altria is involved in have more to do with culture and progress, such as environmental development projects, arts centers, and youth education. Additionally, the company aims to match any employee charitable contributions. Altria also assists in running non-profit organizations; its employees provided more than 30,000 hours of volunteer service throughout 2012.

All in all, tobacco companies are trying hard to offset investor concerns regarding the ethical implications surrounding their businesses.

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Rupert Hargreaves owns shares of Altria Group and Universal. The Motley Fool owns shares of Philip Morris International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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