Philip Morris International on May 18 published its Integrated Report, a comprehensive overview of the company’s environmental, social and governance (ESG) performance and its progress toward its purpose of delivering a smoke-free future.
This includes its 2025 ambitions to have switched more than 40 million adult smokers to its smoke-free products, with half from non-OECD countries, and for smoke-free products to account for more than 50 percent of PMI’s total net revenues.
Further accelerating PMI’s transformation, this year, the company introduced two new 2025 ambitions linked to its business transformation metrics: for its smoke-free products to be available in 100 markets and for at least $1 billion in annual net revenues to come from “beyond nicotine” products. The Integrated Report also outlines case studies of early indications of PMI’s smoke-free products’ impacts in markets where such products have a meaningful presence.
“I present this report with pride in what we have already achieved in just five years, such as smoke-free products accounting for nearly one-quarter of our total net revenues in 2020 from essentially zero in 2015. I also have a deep recognition of the immense work ahead. Our new ambitious goals signal our confidence in our ability to monumentally change our company’s long-term future,” said Jacek Olczak, chief executive officer, in a statement.
“PMI is committed to serving as an agent of change and advocate of positive values. Innovation and inclusiveness are key to solving our challenges, whether related to tobacco harm reduction, environmental impact or social impact. We aim to create a sustainable future that benefits our company, shareholders, consumers and society.”
PMI’s Integrated Report 2020 demonstrates how the organization’s strategy, governance and performance create value. To showcase impact, the company reports on progress in various ESG areas, including toward achieving its ambitious 2025 Roadmap—a set of forward-looking targets pertaining to all Tier 1 topics from PMI’s sustainability materiality assessment.
The report highlights PMI’s most material sustainability topics, including the health impacts of its products—an aspect often not captured by external ESG assessments—and describes how the company is working toward researching, developing and commercializing scientifically substantiated better alternatives to continued smoking for those adults who do not quit. It also includes a new section on the company’s business transformation—which extends beyond changing the product—and an update on its business transformation metrics (BTMs).
The company’s BTMs are a set of bespoke key performance indicators introduced in 2016 to complement its ESG disclosure. These metrics allow stakeholders to transparently assess both the pace and scale of PMI’s transformation. Since then, based on stakeholder feedback, PMI has expanded the number of metrics to 28, with three new metrics introduced in this report.
The report also outlines the company’s belief that sustainability strategy is corporate strategy and that ESG issues are business issues. Reflecting this commitment to sustainability, the global sustainability team is now part of the finance function, reporting directly to the chief financial officer. In addition, executive compensation is now more clearly linked to ESG performance, complementing the strong product transformation incentives already in place.
“Sustainability stands at the core of PMI’s transformation and drives our development of strong ESG programs to mitigate the risks associated with our value chain while spurring innovation and growth to secure our success over the long term,” said Emmanuel Babeau, chief financial officer. “It is our firm belief that sustainability and corporate performance do not follow separate paths, and I am proud that we have spent the last year continuing to strengthen our sustainability governance and ensuring that ESG is integrated into decision-making at all levels of our organization.”
Acknowledging the unique and difficult challenges of the past year, PMI dedicated sections throughout its Integrated Report to showing how it addressed the impacts of the Covid-19 pandemic on its workers, business and value chain as well as instances where the pandemic directly affected the company’s sustainability efforts and the adjustments made in response.
“Despite the unprecedented challenges brought on by the global pandemic, we have not deviated from our efforts to show care, support those in our orbit and continue our quest to become a more sustainable company,” said Jennifer Motles, chief sustainability officer. “As we continue to transform, stakeholder engagement and constructive dialogue remain paramount to this evolution. In 2020, multi-stakeholder partnerships were key to the significant progress we made toward addressing many of our priority sustainability topics, ranging from protecting the health and safety of our employees to safeguarding the human rights of those impacted by our business and accelerating efforts to mitigate our impact on climate change throughout our value chain.”
The report was prepared following the Integrated Reporting framework and is in accordance with the Global Reporting Initiative Standards (core option).
It aligns with the principles and standards of the U.N. Global Compact and indicates contributions to the U.N. Sustainable Development Goals and corresponding targets.
PMI’s Integrated Report addresses some recommendations of the Task Force on Climate-related Financial Disclosures, with its environmental reporting to CDP covering most of the remainder.
It also considers guidance from the Sustainability Accounting Standards Board (SASB). Furthermore, for the first time—and as a result of PMI’s business transformation—it cross-references most aspects of the SASB standards defined for technology and communications, more concretely the Hardware Standard, and it also describes alignment with some aspects of the standards developed for the healthcare industry, specifically the medical equipment and supplies standard.
Finally, the content of PMI’s Integrated Report 2020 is mapped against the 21 metrics defined by the International Business Council/World Economic Forum’s “Measuring Stakeholder Capitalism: Toward Common Metrics and Consistent Reporting of Sustainable Value Creation” white paper to further reflect the importance of stakeholders, as per PMI’s statement of purpose.
On June 2, PMI will host an ESG-focused webcast during which the company will offer additional insight into how integrating sustainability across its business creates value for its shareholders and stakeholders. PMI will also publish in the coming week an ESG Highlights document, which will provide a more data-focused executive summary of the Integrated Report and will be made available on PMI.com/investor-relations.
Stakeholders can download the full Integrated Report 2020 as well as indexes mapping the company’s disclosures to internationally recognized frameworks on PMI.com/sustainability, including details about the company’s 16 Tier 2 sustainability topics.