AGRICULTURAL LABOR PRACTICESPROGRESS UPDATE

FOCUSING ON MEXICO:IMPROVING HUMAN RIGHTS
AND LABOR PRACTICES
Q4 2020

BACKGROUND

KEY COMPONENTS OF THE ALP PROGRAM

The ALP code, based on ILO conventions, comprises seven principles, which apply to the 335,000
farmers worldwide from whom we source tobacco directly or indirectly. The principles are: no childlabor, no forced labor or human trafficking, fair treatment, safe working environment, fair income
and work hours, freedom of association, and terms of employment.

Mexico is an important sourcing market forPhilip Morris International (PMI). Initially,
Philip Morris Mexico (PMM) implemented
a direct sourcing model (buying tobacco
directly from farmers); however, in 2015, itchanged its sourcing approach to purchasing
through a third-party supplier, Tabacosdel Pacífico Norte (TPN—a subsidiary of
Universal Corporation) in the state ofNayarit. TPN, as PMM’s supplier, started to
implement the Good Agricultural Practices(GAP) framework, which is a demanding
set of standards focused on governance,
crop, environment, and labor practices.
A component of the GAP framework is
the rollout and implementation of theAgricultural Labor Practices (ALP) program(see infographic 1). The key aim of ALP is toeliminate child labor and other labor abuses
and improve the livelihood of all contracted
farmers in PMI’s tobacco supply chain.

Awareness-raising and training for suppliers, farmers, workers, and PMI’s Sustainable Agriculture
teams about applying the code and addressing any shortcomings in the process.

The cornerstone of the ALP program is a robust monitoring system performed across 22 countries
by over 2,800 field technicians. They visit the farms regularly to ensure the implementation of the
ALP code and identify and address issues requiring immediate remediation.

Layers of control: External assessments performed by Control Union (a specialist supply chain
auditor), external verifications conducted by local partners and targeted Human Rights Impact
Assessments—to independently evaluate the implementation of the ALP program, the effectivenessof our monitoring system, and our initiatives on the ground.

Collaboration with civil society organizations, governments, academia, and the private sector on
initiatives to address systemic issues and to empower communities.

Transparency: We share our progress and challenges annually in our integrated report, weissue quarterly progress updates on specific topics or countries, and we make public all the CU
assessments (available at pmi.com).

Infographic 1

In 2015, TPN began to implement the ALP
program on the ground. This means focusing
on extensive training of the field technicianson the ALP code requirements and the othercomponents of the program, such as recordingof farm profiles and farm-by-farm monitoring.
That same year, TPN monitored almost 80
percent of its contracted farmers against the
ALP standards. In the following years, TPN
further improved its governance and ensured
that proper resources were allocated, covering
100 percent of its farmer footprint in the farmby-farm monitoring visits.

In parallel, in 2018, the global ALP program
reached an important level of maturity, with amore accurate sense of the program’s overall
performance and improvement opportunities.
Looking at consolidated data from all sourcing
markets, PMI took the decision to deploy a“step change” approach to achieve significant,long-term “change” for the most recurringissues in the most impacted locations. Mexico
was identified as the appropriate learning
ground for piloting PMI’s new step change
approach.

Mexico showed us how a step change could
look in practice, and we will analyze this indetail in the following sections. Overall, it
helped us identify a set of key principles(ALP Step Change Guiding Principles) thatneeded to be put in place in order to achieve
impactful results. Thanks to that experience,
we were able to implement holistic, integrated
strategies that address the root causes of themost persistent issues identified through ourcontrol mechanisms (monitoring and external
assessments).

2018
y Step Change pilot
in Mexico

2011

y Sustenta program
launchy Agricultural Labor
Practices program
launchy First externalverification assessment

2015
y PMI sources
tobacco from TPN
y First Control Union
assessment

2020
y Achieving PMI’s
global targets on
accommodation
and PPE availability

2019y Second Control Union
assessmenty Second externalverification assessment

2025

y Zero Child
Labor

2022

y 100 percent
of tobacco
farmworkers paid atleast the minimum
legal wage

Step change approach implemented in all counties

THE STEP CHANGE APPROACH WAS THEN REFLECTED IN DECISIVE
EXTERNAL COMMITMENTS AND AMBITIOUS TARGETS, APPLICABLE
TO ALL PMI’S SOURCING MARKETS

ZERO
child labor in our tobacco
supply chain by 2025

100 PERCENTof tobacco farmworkers paid at least
the minimum legal wage by 2022

100 PERCENTof tobacco farmworkers provided with safe andadequate accommodation by the end of 2020

100 PERCENT
of farmers and workers having access to personal
protective equipment (PPE) for the application ofcrop protection agents (CPA) and prevention ofgreen tobacco sickness (GTS) by the end of 2020

OUR FOOTPRINT IN MEXICOTHE STEP CHANGE APPROACH IN PRACTICE
Mexico, as mentioned above, was the ideal country for PMI totest the step change approach because of the complexity of
its tobacco supply chain. The situation in the region of Nayarit
is that tobacco farmers rely heavily on migrant workers fromthe Cora and Wixáritari (or Huichol) indigenous groups. These
workers migrate with their families from Mexico’s highlands
and settle in tobacco-growing areas for several months. The
vulnerability of this population (due to their migrant status
and indigenous cultures), exposes them to potential humanrights and labor rights risks (e.g., poor living and working
conditions).

Typically, the earnings during the tobacco season are themain source of annual income for these indigenous families.
Therefore, maximizing the number of working hours, andconsequently income (as they are paid on piece-rate), is the
key reason why they often prefer living and sleeping on thefield, in order to not lose time and money commuting (as often
accommodation options are at a distance).
After an in-depth, root-cause analysis of the complex andsystemic problems in the area, in consultation with all relevant
stakeholders (workers, indigenous leaders, field technicians,
NGOs, local authorities, and companies from other sectors)
and our strategic partner, Verité, in 2018, the Sustenta
program was established. Sustenta is TPN’s sustainability
program, which includes a comprehensive action plan to
improve the poor living and working conditions of migrant

workers in Nayarit, while contributing to achieving PMI’s
global targets.
More specifically, the analysis conducted showed that theinitial work needed to be focused on:
•
•
•
•
•

Preventing workers from living on the tobacco fields;
Preventing night work;
Providing adequate accommodation to all migrant
workers;
Providing workers with access to shaded areas for rest
and to toilets and washing facilities;
Ensuring availability and usage of PPE for harvesting
and crop protection agents’ application.

ENABLING CHANGE:TARGETED INITIATIVESThe Sustenta program introduced acomprehensive action plan that included
targeted initiatives on the ground toaddress the identified risks. It started
with the reorganization of work and laborschedules on Nayarit’s tobacco farms.

To support the overall implementationof the Sustenta program, PMM and TPN
partnered with Fundación de Apoyo
Infantil (FAI).

“

For me, this program is a great example of what we can achieve when we believe that change
is possible; when a company has a clear commitment to make things happen despite the complex
context. In Philip Morris, we always challenge the status quo. For us, good is never enough, andwe are always looking for different ways to do things better and to have a positive impact in thecommunities where we buy the tobacco.
In Nayarit, we have been working to support our tobacco supplier in order to move forward andcomply with our Agricultural Labor Practices code. Great things have been achieved; not only
giving comprehensive attention to the children of migrant workers, but also improving the qualityof life and the labor conditions of thousands of tobacco farmers and workers. For us, sustainability
begins in our value chain, working together with allies that can help us change lives.

“

The initiatives included improving workers’
accommodation, providing the necessary
PPE, constructing resting areas on thefields, and funding childcare centers.
Extensive communication efforts were also
undertaken with the objective of informing
farmers and both local and migrant workersof the program and its benefits.

— Paulina Villegas, manager, sustainability,
External Affairs Mexico

IMPROVING LIVING AND WORKING CONDITIONS
A key risk identified during the root cause analysis in 2018
was related to living and working conditions. The most severerisks included migrant workers sleeping on the fields without
access to accommodation, toilets and washing facilities, andensuring at least minimum wage payments.

MINIMUM WAGE PAYMENTS
The main driver of the indigenous migrants’ problems, asmentioned above, was that they were paid by the piece, andthe amount of money earned was the main source of their

Before: Workers did not use the recommended PPEannual income. This meant that the more hours they worked,
the more pieces they were able to make and, therefore, themore income they could generate. Migrant workers wereused to working long hours into the night and would sleep on
the fields to maximize their earnings. A key action TPN took
was to apply a 25 percent increase on the piece-rates paid toworkers, with annual adjustments for inflation. By doing this,TPN was aiming to ensure that without night work, migrant
workers would earn the same amount of money as before
the Sustenta action plan, but with good working conditions.

After: The worker is using the full recommended PPE (at a minimum, long sleeves, longpants and gloves).

ACCOMMODATION AND RESTING AREAS
The second focus area was to ensure that workers were nolonger living in tents on the farms and are provided access tosafe and adequate accommodation protected from the hazardsof agricultural field. As a key component of Sustenta, TPN,
Verité, and FAI developed a set of minimum accommodation
standards in line with local legislation and relevant internationalframeworks. Farmers established action plans to identify
potential accommodation options (in their own or in rented
houses) and then worked to upgrade the proposed structures
and align these with the defined standards.
With the introduction of the new standards, much of theprovided accommodation required some refurbishments,
including building safer structures, providing access toelectricity, an adequate number of beds, and cooking facilities,
among others. Where accommodation was far from the field,
farmers also needed to provide transportation to workers. After
implementing the Sustenta program for several years, the 2020
results show that all 2,700 migrant workers and their families(four to five members per family) are provided with safe andadequate accommodation, with final refurbishments being
currently validated by external assessments.

Before: migrant workers were sleeping in tents on the field

Lastly, farmers upgraded resting areas on the fields to provide
workers’ access to water and sanitation and shaded areas forbreaks. In 2020, more than 7,000 local and migrant workers
benefited from this initiative and now have more comfortableworking conditions.
In this important endeavor, farmers invested significant
resources to align with the defined standards and, thus,
provide proper living and working conditions to workers. TPN,
acknowledging this financial investment, contributed with
monetary incentives to farmers that had implemented theaction plans, covering the relevant costs for a three-year period.

After: farmers provide migrant workers with accommodation

SAFE WORK ENVIRONMENT
An integral part of the ALP code is the safe work environment
principle. This includes availability and usage of PPE to ensure
safety while working on a tobacco field, especially whenhandling CPA and green tobacco.
When the Sustenta program began, sets of PPE were notcommonly available on tobacco farms. This represented ahigh risk for farmers and workers as they were exposed tohazardous chemicals and to green tobacco sickness. TPN
began a comprehensive distribution campaign to ensure thateveryone working on tobacco has access to appropriate PPE.
However, despite the successful provision and the many
improvements made over the years, there are still somechallenges with the usage of the required PPE. In fact, using
the recommended PPE items in certain conditions might beuncomfortable for farmers and workers. This is especially
noticeable for PPE used to prevent green tobacco sickness(during harvesting and stringing tobacco) as workers need towear long-sleeve shirts, pants, gloves, and closed footwear in
hot weather. To increase usage, TPN and PMM are exploring
innovative solutions to deliver PPE kits with materials andalternative designs that provide more comfort and safety.

Before: Workers harvested tobacco without using PPE.

After: Workers harvesting tobacco with the PPE distributed by TPN.

“

For the last six years, we’ve been working on this great
initiative promoted by Philip Morris, aimed to protect therights of workers’ children and adolescents by providing themwith food, education, and health in the centers for educationand child care (CECI); spaces that offer them conditions ofequity and inclusion for a better future.

“— María Josefina Menéndez Carbajal, Fundación de Apoyo Infantil CEO

PREVENTING CHILD LABOR
The risk of child labor in the tobacco supply chain of
Nayarit was high, especially because indigenous workers
migrate with their families. Children did not have accessto local schools and would stay with their parents on the
tobacco fields, in the absence of any alternative. Even
if they are not actually working, the very presence ofso many children was of concern.
PMM and TPN introduced a targeted initiative toprevent child labor by operating dedicated childcare
centers (Centros de Educación y Cuidado Infantil—
CECI, or child care and education centers). Thisapproach was, however, further reinforced in 2018,with the implementation of the Sustenta program, as
the CECI proved effective at addressing the root causesof child labor among migrant families. In 2020, FAI took
over the operation of the centers and has strengthened
the program by enhancing child protection andawareness activities.
The four CECI provide a safe space for migrant
workers’ children (ages 2 to 14) where they receive
comprehensive care, including: schooling, meals,
and medical attention during opening hours. On topof that, FAI provides children safe transportation toand from workers’ accommodation. In 2019 alone,
44 trained social workers positively impacted, taught,
and supported over 1,300 children. This has reduced
the presence of children on the tobacco fields and therisks and incidences of child labor.

““I like my children to come to CECI. We don’t worry because our children don’t get sick frombeing in the field. I feel happy because now we have water, bed, light, everything!
— Anselmo, worker, 34 years old““

Everything was very fun; I liked meeting the people who take care of our children and whoteach them to learn what is important while we are working in the field, because it makes us
feel safe.

The CECI program integrates the implementationof a comprehensive care model (Modelo deprotección integral con enfoque de derechos)with the objective to improve the health as wellas the emotional and physical development ofchildren. The program also provides formal
education to children who participate in thecenters. During the week, it includes workshops
and activities for parents and children withvarious topics such as child protection, healthand hygiene, and emotional welfare. In addition,
the centers also raise awareness of the ALP code
through information sessions, workshops, andrecreational activities. These reached over 500
families (both of farmers and migrant workers)
in 2019.
This holistic approach is key to achieving the ALP
program’s ultimate aim of improving livelihoodsof all contracted farmers and the surrounding
communities.

—Herminio, father, 30 years old

ENABLING CHANGE:RAISING AWARENESS

To enable the changes needed (no tobacco
work after sunset, provision of decent
accommodation, and improved working
conditions in the field), communication was
critical. Every effort was made to create theconditions necessary to overcome culturalbarriers, and, in parallel, create a senseof empowerment within the indigenous
community.

“

I learned that we must use the personal protection equipment:boots, hats, gloves, etc., to carry out well-protected field work,as there are many dangers.

“—Francisca, farmer, 63 years old

PMM supported TPN in developing
communication material to distribute tostakeholders, including field technicians
and farmers. Additionally, TPN developed
a sensitization campaign in the workers’communities of origin with the support
from the National Institute of Indigenous
People. A key stakeholder in the process
was ARIC (Asociación Rural de Interés
Colectivo de Productores de Tabaco), that
not only supported the decisions of TPN
and PMM, but has also strengthened thecommunication with farmers. The objective
was to ensure that the requirements were
understood and perceived positively byboth farmers and the indigenous migrant
workers.
PMM and TPN, with the support of FAI,
strengthened
thisawareness-raising
campaign by reaching out to indigenous
migrant workers before they arrived on thefield. FAI organized trainings through groupmeetings with indigenous migrant workers
and TPN field staff in their communities
of origin. Radio messages were also aired
to reach the most remote communities.
In addition, TPN identified indigenous
workers and community leaders to amplify
the message and support advocacy
efforts among their peers. This proactive
approach proved to be very effective incommunicating the key requirements andwere successfully applied by the majority of
migrant workers.

ASSESSING OUR PRACTICESOne of the key components of the ALP
program are the various layers of control(infographic 1), implemented throughexternal assessments. The objective of
these is to evaluate the implementation of
the ALP program and the effectiveness ofthe monitoring system and the impact of
initiatives on the ground. External thirdparty assessments are performed byControl Union (CU), a specialist supply chain
auditor, whereas external verifications
are conducted by local partners in selectcountries.

CONTROL UNIONThe CU assessment evaluated the labor
practices on contracted farms, and assessed
whether these were meeting the standardsof the ALP code. CU also evaluated TPN’s
internal structure and capacity to implement
the ALP program, the understanding offarm practices, and how issues were being
identified, recorded, and addressed.
The main findings were related to theprinciples of no child labor, income and work
hours, safe work environment, and terms of
employment. CU made several important
recommendations, such as the potential to
improve training on wearing PPE to avoid
green tobacco sickness and exposure tohazardous chemicals and proper storageof CPA containers. Various risks were also
highlighted related to children involved in
tobacco activities and low awareness among
farmers and workers on overtime rates andworkers’ legal benefits.
In addition to the above-mentioned
opportunities for improvement, many
positive findings were also identified, mainly
based on interviews with farmers, workers,
and family members. These included thepayment of the legal minimum wage to themajority of workers as well as improvementsin overall safety conditions on the farms
and a significantly lower number of workers
sleeping on the fields.

Following this assessment, TPN further
confirmed its commitment to addressing theissues identified and integrated the areas of
improvement and relevant recommendationsin the 2020 revision of the Sustentaaction plan.

EXTERNAL VERIFICATION
External verification (EV) by local partners
was introduced in 2018 with the twofold
objective of verifying the effectiveness andaccuracy of farm-by-farm monitoring by
PMI’s suppliers and, in parallel, providing
recommendations on improving the impact
of initiatives aiming to address issues.
In Mexico, FAI has been our implementing
partner in this EV work, supporting PMM
and TPN to understand objectively the
progress of the Sustenta program. In addition
to assessing the overall implementation of
the ALP step change program on the ground,
FAI was also tasked with verifying a) if theaccommodation provided by farmers for
migrant workers met national law and agreed
standards, b) if workers were paid at least theminimum wage, and c) if working conditions
had generally improved.
FAI’s verification approach involved
three components: identification of key
performance indicators, on-the-field
verification, and recommendations. The
reports from the first years showed somediscrepancies between the farm-by-farmmonitoring data and FAI’s findings, inparticular with regard to issues related toaccommodation. This prompted TPN to
put in place measures, including increasing
the number of unannounced field visits by
ALP supervisors, in-depth training for fieldtechnicians to enhance their monitoring skills(properly identifying issues) and reporting
accuracy.
In 2020, due to Covid-19, FAI was not able
to complete all the farm visits in scope, hence
partial results were reported. Despite this,we could see the progress, efforts, andimprovements of the local and migrant
workers’ situations, not only in the field, butalso in the provided accommodations.
Overall, the external verification has
proven to be a strong complementary toolfor PMM and TPN, to provide a deeper
understanding of the remaining weak areas,
clear recommendations on what needed to
be done, and valuable support to the fieldteam to proactively address issues and risks.

“Tabacos Del Pacifico Norte, a subsidiary of Universal Leaf Tobacco, has as a priority to offer
our farmers and customers a business proposal with a sustainable basis in all the processesof our supply chain, taking care of the environment where we work and its people.
— Javier Favela, managing director, TPN“

In the last three years, we have developed a program focused on caring for people—farmers,
workers, and families who work in our tobacco production. The challenge was not easy since
we were faced with deeply rooted customs and traditions, but working together with our
main client PMM/PMI we found the root cause of the problem, and today with pride we cansay that we have made a step change of life in all of them by offering them decent working
and housing conditions. This cause has been our greatest satisfaction and commits us tocontinue working and investing in programs that ensure the sustainability of our business.

“

High level of commitment and amazing team workwith different backgrounds, high support frommanagement teams; I believe that things can change
and small wins everyday cheer us on to keep working
hard for the last three years to implement a long-termsustainable change for the rural tobacco communities
and indigenous working communities in Nayarit. It is a
project that also changed my life.

“— Paulina Villa, manager, social sustainability Americas

CONFIRMING OUR COMMITMENT
TO CONTINUOUS IMPROVEMENT
2020 was a challenging and uncertain year due tothe Covid-19 pandemic. Our priority as a company
is to guarantee the safety and well-being of ouremployees and do our best to support everyone
working in our supply chains while continuing todeliver on our work and programs.
Given the restrictions mandated by the government
in Mexico, various activities were halted. We decided
to momentarily pause all activities in the CECI tocomply with government regulations and to protect
the health and safety of personnel and children.
Additionally, the farm-by-farm monitoring had to be
adjusted to fewer visits by field technicians, and theongoing external verification had to conclude early(and will resume in 2021, if possible).
Throughout these significant disruptions, PMM
supported the vulnerable population in the state byreallocating the funds from the CECI and providing

over 3,000 food packages to farmers, workers, andtheir families.
Despite the problems and challenges that we arefacing in 2020, alongside our supplier TPN, we areaccelerating our work in order to reach the two 2020
company-wide targets on accommodation and theavailability of PPE.
Looking ahead toward 2021, PMM, together with
TPN, FAI, and the growers’ association (ARIC),
are preparing for the next crop season having as acentral objective the security and health of people.
In this respect, each involved party has developed aclear and comprehensive protocol to be applied forthe uncertain reality we are facing. We will continue
working hard to deliver on all our commitments
toward achieving zero child labor, ensuring paymentof minimum wages to all workers, and improving
the livelihoods of farmers and tobacco-growing
communities.

We welcome your feedback. If you have comments or suggestions,please contact sustainability@pmi.com
Or visit www.pmi.com/sustainability to find out more.

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