In December 2021, Pyxus launched its ESG framework as a considerably more focused approach to sustainability. Tobacco Asia talked to company president and c.e.o., Pieter Sikkel, about it.
Pieter Sikkel is president and c.e.o. of Pyxus International, Inc. since March 2013, and previously served as president from December 2010 through February 2013; executive vice president for business strategy and relationship management from May 2007 to December 2010; and as regional director of Asia from May 2005 through April 2007. Sikkel is a member of the board of directors since November 2011 and served as chairman from August 2018 to February 2020. Sikkel originally joined the company in 1983 and held various positions in South Korea, Philippines, and Thailand before becoming country manager of China, serving from 1991 until 1999 when he became regional director of Asia.
Tobacco Asia (TA): In a tobacco sector context, could you please briefly define what “ESG” is beyond merely being an acronym for “environmental, social, governance”?
Pieter Sikkel (PS): ESG started as a way for investors to assess the non-financial performance of potential investments. It has since transformed into a framework used by varying stakeholders – from customers to employees – to measure a business’ ethical impact and approach to sustainability. This includes businesses in the tobacco sector.
TA: Why are these key three pillars – environmental, social, and governance - bundled together and what is their interaction with one another in the tobacco sector context?
PS: Today’s stakeholders want to see more than financial success from a business. They expect companies to operate with integrity and a purpose. These three key areas – environmental, social, and governance – provide a link between a company’s strategy and its overarching purpose. For example, at Pyxus our purpose is to transform people’s lives so that together we can grow a better world. To achieve this, we must account for externalities and the broader impact of the decisions we make every day.
TA: Would it be correct to say that an ESG framework encompasses certain measures under the broader term of “sustainability”?
PS: An ESG framework indeed supports a company’s overarching sustainability strategy. For example, at Pyxus, we have three sustainability pillars: minimizing environmental impact; supporting people and communities; and [conducting] ethical and responsible business. [But] our ESG framework goes a step further by identifying relevant focus areas under each pillar and meaningful, measurable goals to drive positive change and create long-lasting impacts.
TA: Pyxus’ ESG framework was launched in December 2021. But, the company of course looks back at a much longer legacy of sustainable tobacco production. So, considering that, what is different under your ESG strategy that you haven’t done or pursued previously in terms of “sustainability”?
PS: Pyxus has been incorporating sustainable practices into our operations for as long as I can remember. From helping farmers transition to sustainable fuel sources to planting millions of trees worldwide, we are quite proud of our sustainable initiatives to date. That said, we saw the opportunity to connect our business strategy with our purpose to transform people’s lives so that together we can grow a better world, thus helping to advance progress on key global issues.
TA: Let’s get back to these three key pillars, starting out with “environmental”. Exactly what are you trying to implement under the “environmental” pillar and how does that differ from what you have done before?
PS: We rely on natural resources to operate our business and have a responsibility to our stake-holders to minimize our negative impact on the environment. Our sustainability strategy has historically addressed this issue broadly, but with the incorporation of our ESG framework, we now have five clearly defined environmental focus areas and six measurable goals, including achieving net zero value chain emissions by 2050.
TA: Let’s do the same exercise for the “social” pillar. What exactly are you trying to accomplish under it and how does that differ from the past?
PS: We have always had a goal of supporting the people we work with and the communities in which we operate, and there are countless ways to achieve this. Our ESG framework, however, identifies five key focus areas and eight goals to strive toward achieving, allowing us to deliver greater stakeholder value. For example, one of our focus areas is providing support to farmers in improving their livelihood and well-being. We know that ensuring that this occurs is critical because child labor and other social and environ-mental issues may result from farmers that make an insufficient living income.
We are focused on helping farmers achieve a decent standard of living through appropriate training in good agricultural practices and the opportunity for crop diversification. Through our ESG framework we have set a goal to maximize 100% of contracted farmers’ income potential by 2030 to support the socio-economic well-being of the agricultural communities where we operate. Having this established target allows us to execute initiatives that will ultimately have the greatest impact.
TA: Lastly, the “governance” pillar and the same question: what precisely are you doing and how does it differ from your past initiatives or programs?
PS: At Pyxus, we strive each day to operate responsibly and ethically in every action that we take, which is why our third sustainability pillar focuses on governance. Our ESG framework identifies two focus areas and two goals that we are working toward achieving. For example, we have set the goal of 100% of eligible employees completing assigned compliance courses within the assigned period. While this has always been a goal of ours, the difference now is that we will be publicly reporting against our targets, increasing stakeholder transparency, and holding us accountable year-over-year.
TA: Looking at the ESG framework as a whole, in which focus areas do you anticipate achieving the greatest – and measurable – impacts?
PS: Our company is well positioned to achieve our ESG goals, but we recognize this will not happen all at once. In order to best position success, our ESG framework is supported by a robust governance and implementation structure, which we have based on an annual cycle of continuous improvement. This allows our business to identify and overcome challenges as they arise, prioritize local-level initiatives, and leverage the leadership and skill sets of our employee base, while holding us accountable for year-over-year progress.
TA: Are there any markets in which Pyxus is active and where the implementation of the ESG strategy is more urgent than in others?
PS: Our ESG framework is based on topics that our stakeholders – both internal and external – have recognized as important. We recognize that Pyxus has a diverse global footprint with varying issues, priorities, and requirements. That is why we have implemented a robust governance structure, which supports the integration of our global ESG framework across the business while committing our resources to high-priority projects at the local level.
TA: Pyxus reportedly aligned its ESG strategy with the United Nations Sustainable Development Goals, or SDGs. A few words about that, perhaps? What are those goals and how do they match up with Pyxus’ initiative?
PS: We have indeed aligned our approach with the United Nations’ Sustainable Development Goals, which are calls to action to address global challenges. Each focus area outlined in our ESG framework aligns with one or more of the SDGs. For example, our focus area of reducing negative impacts on the environment aligns with SDG 13, the aim of which is to take urgent action to combat climate change and its impacts. There is evidence that businesses that operate sustainably and in support of the United Nations’ SDGs, while also reporting transparently about their progress, can deliver stronger growth and returns for all stakeholders. And Pyxus looks forward to supporting the missions of the United Nations’ SDGs as we move forward in our journey to grow a better world.