There is a well-established link between poverty and inadequate access to water, sanitation, and hygiene (WASH). Enhancing WASH infrastructure can substantially improve the well-being and livelihoods of community members.
We at Philip Morris International (PMI) are working to improve tobacco farmers’ livelihoods by mitigating the risks of human and labor rights violations. In this context, we are developing strategies to enhance access to WASH for farmers and families in areas where tobacco used in our products is grown. We believe that our investments in this space can also contribute to benefits for society, people and the environment.
PMI’s WASH program aims to enhance the quality of life for all contracted farmers supplying tobacco to PMI by ensuring access to basic drinking water by 2025 and meeting sanitation and hygiene aspirations by 2030.
Critical to reaching our objectives is a clear understanding of current risks and opportunities, which is why we integrated WASH-related assessments and interventions into PMI’s Agricultural Labor Practices Program (ALP). Our ALP program aims to achieve safe and fair working conditions on farms where PMI sources tobacco and identifies those areas where we can proactively address the needs of these communities.
Following internal assessments on PMI’s agricultural footprint, we identified three priority markets to focus our efforts on access to WASH: The Misiones region in Argentina, the Central Region of Malawi, and the Tete & Zambezia provinces in Mozambique. These were the sourcing markets where we identified the biggest gaps to achieving basic water access and where interventions could bring the highest potential positive impact.
For instance, in Malawi, access to drinking water is uneven and about 37 percent of rural households spend over 30 minutes fetching water. In Mozambique, only 67 percent of the population has access to basic water services, and only 38 percent of the population has access to basic sanitation facilities. In some areas where PMI affiliates source tobacco, communities lack basic WASH infrastructure. Finally, in Misiones, Argentina, many farmers have unprotected springs and therefore often dig wells, which pose a risk to water safety and quality.
Starting in 2019, PMI initiated interventions in Malawi and Mozambique focusing on drilling boreholes and well-protection programs. These activities aimed to shorten the distance required to access clean and reliable water sources, ensuring that all contracted farmers and their families can access drinkable water.
In Argentina, the focus was to protect local springs so that all farmers supplying tobacco to PMI could have access to water that is less susceptible to run-off contamination. Activities included the construction of spring protection and promotion of nature conservation activities around protected areas. The objective was to improve the living conditions of farmers and their families.
Measuring the impact
At PMI, we are working to integrate sustainability considerations into business decisions and seek to generate societal and environmental impacts that not only reduce our negative externalities, but can also create long-lasting, positive, and measurable value.
Impact valuation is a standardized method for measuring and valuing an organization’s impact on society, including the value created on human, natural, and social capital. We consider impact valuation a helpful tool to better understand the effect that our footprint and activities may have on local stakeholders and communities, and in parallel evaluate the effectiveness of our sustainability interventions in the long term.
As such, in 2024, PMI worked with the Valuing Impact consultancy, to apply an impact valuation and Social Return On Investment (SROI) methodology to analyze the above-mentioned investments in WASH.
Specifically, this SROI analysis helped us to:
- Assess the absolute impact of relevant investments in a consistent and comparable way
- Identify the impact drivers that contribute the most to creating societal value
- Understand the potential risks of negative impact or inefficiencies of the projects, to inform future developments and improvements
- Understand the relative efficiency of investment in projects delivering societal value, to optimize the allocation of budget and investments
- Understand and communicate the broader societal impact of PMI’s investments in these specific WASH projects
The process developed for each impact valuation builds on the process recommended by the Natural, Social, and Human Capital Protocols1, the SROI framework2 and Valuing Impact’s eQALY method3
To calculate the societal value generated by these WASH initiatives, we collaborated with Valuing Impact to analyze and evaluate the direct health and well-being benefits generated by the projects. This means measuring how the project affects the physical or psychological well-being of someone directly or indirectly. For quantifying indirect monetary impacts on well-being, such as the ones derived from wages and taxes for instance, experts use the “Health Utility of Income” method which links economic outcomes to a change of well-being (for example, hypothetically, if an employee is sick less frequently, they are often better able to maintain productivity and generate additional income).
To assess each WASH project, the following equation was used:
Output+Outcome+Additivity+Valuation Factor=Societal value
In this instance, the “Output” is the direct result of the activity (e.g., number of beneficiaries, number of springs); the “Outcome” is measured as changes to the beneficiary population (e.g., reduction of diseases, productive time saved); The “Valuation Factor” translates the outcomes into societal value by indicating the change in QALY (Quality Adjusted Life Year) per unit of outcome—for example, through the Health Utility of Income, which demonstrates that better health leads to better professional and economic opportunities; or by quantifying how access to water improves health directly, by reducing waterborne diseases—which themselves bear a cost to society. “Additivity” factors are used to assess the real change of condition from a baseline, the potential drop-off in outcomes over time and the attribution of the outcome to the funding partner (in this case, PMI).
Results overview
The focus areas of PMI’s specific WASH initiatives in Malawi, Mozambique, and Argentina were multifaceted. We worked to bridge the gap between selected farmers’ locations and essential water access in the African countries, and simultaneously to enhance access to safe drinking water while safeguarding Argentina’s water sources under stress in the Misiones region.
Using an initial financial investment from PMI of USD 4 million over five years, these projects have achieved remarkable results and reached an estimated 300,000 people.
Based on this analysis, the total societal value generated by these initiatives is positive. Over and above the initial USD 4 million investment, the combined value of these initiatives’ social and environmental impact was calculated at an overall impact value of USD 74 million (across the three markets, over a project lifetime of five years).
The numerical results are depicted in the table below (Table 1).
Table 1 - Summary of societal value, cost, and beneficiaries (direct and indirect)
*Includes estimations of direct beneficiaries in the case of Argentina when data was missing. For the estimation, the average of four family members per farm was considered.
** Considers the total costs of the projects and the total beneficiaries.
When breaking down the combined total societal value per initiative, we observe a range of differences between the markets assessed. Notably, the interventions in Mozambique stand out, accounting for the highest value with 69 percent of the total societal value (equivalent to USD 50 million). In many areas of Malawi and Mozambique where PMI affiliates source tobacco, communities lack basic WASH infrastructure. This results in higher vulnerability to waterborne illnesses, especially among children under five, leading to significant health impacts and reduced productivity for adults. Women and children spend extensive time fetching water, which could otherwise be used for education and income-generating activities. As such, Mozambique emerges as the most efficient project, boasting an impressive SROI of 1:26. In practical terms, this means that for every dollar invested, a positive SROI of USD 26 is realized in Mozambique.
On the other hand, Argentina exhibits a lower SROI at a ratio of 1:0.2. Argentina is a country with large water resources, reaching 80 percent of piped water coverage across the country. In Misiones, many farmers have unprotected springs and dug wells, which could lead to waterborne diseases and other health issues, given that water is exposed to contamination from external sources, including bacteria, viruses, or chemicals. In this instance, the higher cost of the spring protection construction per beneficiary led to a lower SROI. Nevertheless, this investment was important because of the impact it had on reducing diseases that are linked to unsafe water consumption, and the avoided household cost to have clean water at home.
Overall, these results guide us on how to improve the efficiency of our investments in projects that aim to deliver societal value; help us identify which improvements can be implemented to minimize the cost for the beneficiaries; and ultimately support us in making decisions that can help to increase the SROI by optimizing allocation and investments.
Drivers of impact
The below list dives deeper into what changes drove the positive impact across these projects:
- Disease reduction: WASH initiatives primarily create positive societal value by reducing WASH-related diseases. There is a higher potential for reducing WASH-related deaths and diseases in African countries compared to Argentina, as they experience more instances of such issues. Investing in better access to WASH can support public health benefits in tobacco growing communities, for example by helping to prevent water-related illnesses. Reduced frequencies of illness can help to improve well-being and enhance productivity, eventually contributing to potential economic growth, and social development.
- Access to drinkable water and cost reduction: In Argentina, access to drinkable water significantly lowers costs for farmers, representing the second most significant impact driver. Access to drinkable water reduces farmers’ costs by eliminating the need for some water-related expenses, including buying drinkable water. This cost reduction allows farmers to invest in better seeds, fertilizers, and equipment, leading to healthier crops and higher yields.
- Productive time saved and income potential: Productive time saved in Argentina contributes to positive societal value (6 percent) due to higher income potential. This differs from Malawi and Mozambique, where working hours have less value due to a lower hourly rate. For the farmers, the time saved translates into increased income. This positively impacts livelihoods and economic growth.
- Valuing ecosystem services and negative impacts: Ecosystem services such as quality and biodiversity in Argentina are conservatively valued due to limited data availability. The negative impacts reported stem from spring protection construction, which involves material production, transportation, and financial implications for farmers due to their participation in construction costs.
The data in table 2 outlines the specific contributions that each of these drivers made to the overall societal value depicted in table 1.
Table 2 - Relative contribution of each impact pathway to the total societal value (in percent)
These results illustrate that investments in WASH-related initiatives can have additional social benefits over and above the initial financial contribution, which can be an important element to consider in future projects and investments.
Recommendations and learnings
At PMI, we seek to apply a data-driven and transparent approach to our sustainability initiatives. Understanding the societal impact of our sustainability efforts helps us to better understand the value of our investments, as well as what to prioritize and where to focus potential future initiatives.
In the projects in scope of this analysis, we can see that their effectiveness differs depending on the implementation context, and that there are further opportunities for widening positive impact through these and additional initiatives.
Specifically in Malawi and Mozambique, we continue to focus on the ongoing maintenance of constructed boreholes. Such maintenance is essential for continued functionality and access. UNICEF reports that, due to improper maintenance, similar projects often decline in impact by 30-50 percent within two to five years.4 In addition to ongoing maintenance, we plan also to actively engage with local communities to enhance the upkeep of the constructed boreholes, minimizing issues and ensuring long-term sustainability.
In Argentina, we plan to explore opportunities to identify more affordable solutions and generate a positive cost-benefit impact. When it comes to the protection and sustainability of farmers’ springs, we plan to explore using alternative local materials, including recycled materials as well as identifying low-tech solutions.
In addition to the above, across all three initiatives, we plan to focus on increasing data collection processes. Additional data will help us to better quantify impacts related to disease reduction, time saved due to better health, and productivity gains flowing from implementation of WASH initiatives. In addition, we aim to explore opportunities to monitor relevant records on school attendance among children, document farmers’ household practices related to water access, and uncover any additional new productive activities carried out by beneficiaries, particularly women.
Looking ahead
Leveraging impact valuation and SROI methodologies for our sustainability projects help us identify potential inefficiencies and tradeoffs. SROI methodologies also support us in understanding how our interventions contribute to societal value and create positive impact.
We believe that such knowledge can support stronger business decision-making and could enable us to focus efforts and resource allocation on areas with the best returns for both business and society.
Moving forward, we see these kinds of approaches as helpful complements to informing future investments and programs, while we continue working to understand—and account for—pressures on society and the environment.
*Methodology notes
1. Reduction of diseases related to WASH and absenteeism reduction
Access to safe water significantly enhances quality of life by reducing water-related diseases. This improvement is measured using the DALY
per capita metric from the Global Burden of Disease database. For example, children free from water-borne diseases attend school more regularly, leading to reduced absenteeism and higher future earnings, as reported by the World Bank. To assess
the contributing factors for reduction of diseases related to WASH, the health pathway impact is divided by the total impact, In the case of Argentina, we see that the health pathway’s impact is more than the total impact. The total impact is
100 units and the health pathway impact is 132 units. Ratio = 100/132 = 1.32 or 132 percent. This shows that the health benefits are 32 percent greater than the total impact.
2.Gender-based violence reduction Reducing the distance and frequency
of water collection trips can help decrease gender-based violence. Although direct links are challenging to establish, it is estimated that 20 percent of gender-based violence incidents are related to water-access issues and injury when they have
to go outside the home to haul. Psychological health improvements are measured using a 0.13 DALY reduction for moderate anxiety, with a 10 percent improvement attributed to clean water access.
3. Change in household costs (avoided costs water
access) Access to drinkable water leads to significant cost savings for households, assuming a daily consumption of 2.5 liters per person at USD 0.03 per liter. However, the construction and transportation of materials for water infrastructure have environmental impacts. These impacts are assessed using life cycle assessment and the ecoinvent database to calculate environmental indicators for the materials used.
