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ALTRIA SEEN IN DIFFERENT LIGHT
OPENNESS AND FLEXIBILITY DEFINE COMPANY'S CORPORATE PHILOSOPHY
For the Altria Group Inc. and its operating companies - Kraft Foods, Philip Morris USA and Philip Morris International - "look out" doesn't mean to duck. These days, "look out" implies a commitment to openness and flexibility, helping Altria better align itself with the environmental, social and financial expectations of its many stakeholders.

But it wasn't always that way. As recently as the mid to late 1990s, learning to listen to society resulted in many hard-learned lessons, some of them painful.

"Anyone who followed the tobacco industry would probably agree that things could have been done a bit - well, a lot - differently," says Jay S. Poole, Altria's vice president, agricultural and environmental strategy.

For years in the face of the public's mounting concern with the sale and use of tobacco products, Philip Morris USA carried on as if nothing was wrong. Its standard response to media inquiries was "No comment," which spoke volumes.

That attitude - the company's unwillingness to listen to its critics or work together in search of solutions - was counterproductive. Society was changing. But PM USA didn't appear to be. By the time the company noticed, it was mired in a host of legal challenges, not the least of which was a 40-state lawsuit against domestic tobacco companies.

"It finally struck us," says Poole. "PM USA had to change and had to change quickly, or society was going to revoke its 'charter' to operate as a business in this country."

Because Altria's operating companies are some of the world's largest buyers of agricultural commodities, agriculture seemed like a good place to make a difference and become more collaborative. The example of the relationship building with agriculture is indicative of how the corporation now approaches issues of stakeholder concern.

Beginning in 1997, Katherine Trent, Altria's director of agricultural relations, worked with Poole and others to establish Shared Solutions(SM), Altria's agricultural corporate initiative (see sidebar). The goal was to work with agriculture to meet the new demands of a changing global marketplace and evolving societal expectations.

"For a long time, we and everyone else in food production, processing and distribution were navigating through a familiar and well-understood environment," says Trent. "As long as food was cheap and tasted good, most consumers didn't care what went on behind the scenes. Each link in the food chain pretty much did its own thing."

Today, society's expectations of agriculture and the companies who buy agricultural products as ingredients are greater than that. Society wants to know how agricultural products are grown and how that production impacts the environment, human rights, fair/free trade, biotech, and food safety and security. Consumers and other stakeholders want the food industry and its agricultural supply chain to take responsibility for more than just producing good-tasting food.

"Altria's Shared Solutions program is evolving to meet those demands," says Trent.

"It's no longer legislators or regulators calling all the shots and setting policy," Poole says. "The impetus to change can and does come from consumers, attorneys, the media and activist organizations. The end-run around the regulatory and legislative processes has caused more than a few companies to dramatically rethink - almost overnight - how they do business.

"It's as if you're driving down a road and a tree branch suddenly falls in your path. You don't ask: 'Is this supposed to be there?' Change jumps in front of you, and you have to make a hard right turn."

With a new willingness to listen to criticism, companies making these turns can be seen throughout business.

For example, a major fast-food chain recently banned an antibiotic used in poultry production because there is evidence - albeit highly controversial - that the use of some antibiotics in meat and poultry production create antibiotic-resistant bacteria, which could cause illness. The chain's decision had an immediate effect on the industry. In just a few days, four of the top five poultry producers eliminated the use of the antibiotic without the government ordering them to do so.

Changes in legislation or regulations would have taken months, perhaps years. By then, who knows how much damage the fast-food operator would have sustained in the eyes of its stakeholders.

Last July, Kraft, seeking to avoid its own hard right turn, announced a series of initiatives to address the issue of obesity, while strengthening the alignment of its products and marketing with society's demands. These commitments, which are global and supplement a variety of actions the company is already taking, are focused in four areas: product nutrition, marketing practices, consumer information, and public outreach and dialogue.

An advisory council of experts representing diverse stakeholder viewpoints is helping Kraft structure its ongoing response to obesity and develop policies, standards, measures and timetables for implementing those commitments.

Today, Altria's companies are open to hear what society expects of them.

"Our commitment to openness extends beyond what is mandated by legislation and regulation," Poole says. "We've found that when you 'look out' and engage with your stakeholders, you hear different, valid perspectives. And when that kind of listening is guided by a quest to find shared solutions, you discover new ideas that are not only good for society and the environment but also for business."

The progress Altria has made during the past several years prompted Chairman and CEO Louis Camilleri to write in the latest annual report, "Some critics seem focused on attacking our motivations rather than our actions, while others are beginning to recognize that we are listening and taking positive steps. I view this as a healthy sign of progress in a long-term effort where we have much to do and much to learn." AM



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