PMI releases Integrated Report, demonstrating strong ESG performance and progress toward delivering a smoke-free future
“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
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 (KPIs) 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 to 28 the number of metrics, with three new metrics introduced in this report.
The report also outlines the company’s firm 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
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 <IR> framework and is in accordance with the
It also considers guidance from the
Finally, the content of PMI’s Integrated Report 2020 is mapped against the 21 metrics defined by the
Stakeholders can download the full Integrated Report 2020, as well as indexes mapping the company’s disclosures to internationally recognized frameworks, on the newly refreshed PMI.com/sustainability, including details about the company’s 16 Tier 2 sustainability topics.
Progress on PMI’s Business Transformation
– As of
– In 2020, PMI invested
– PMI’s smoke-free product net revenues accounted for 23.8 percent of total net revenues in 2020, compared with 0.2 percent in 2015.
– PMI’s smoke-free product shipment volume accounted for over 10 percent of total shipment volume in 2020, compared with 0.1 percent in 2015.
Selected ESG Performance Highlights
– In 2020, 48 percent of PMI’s contracted farmers supplying tobacco were earning at least a living income, based on the Anker methodology, which is widely recognized for estimating living income benchmarks worldwide. Despite challenges of the global pandemic, 100 percent of tobacco farmers and farmworkers in PMI’s supply chain were provided with access to personal protective equipment.
– PMI is well on track to achieve its net zero targets of carbon neutrality in its direct operations (scope 1+2) and across its value chain (scope 1+2+3) in 2050. In 2020, it achieved significant absolute CO2e emissions reductions, including a 26 percent reduction in its direct operations (scope 1+2) and an 18 percent reduction across its value chain (scope 1+2+3). These were partially driven by COVID-19-related impacts but were mainly due to accelerated efforts toward our carbon neutrality goals.
– PMI introduced a new methodology to measure the prevalence of all types of child labor incidents—to gain greater visibility and increase reporting accuracy—as part of its aim for zero child labor in its tobacco supply chain by 2025.
– To strengthen its diligence framework and proactively identify risks and mitigate potential adverse impacts in its operations and value chain, PMI conducted human rights impact assessments in two countries—Mozambique and Russia—in 2020 and is on track to cover its 10 highest-risk markets by 2025.
– In 2020, PMI achieved its target of having 100 percent of its tobacco purchased at no risk of deforestation of old-growth forest, furthering its efforts to protect biodiversity and prevent the destruction of nature.
– PMI received a Triple A Score from CDP for its efforts in combating climate change, protecting forests, and promoting water security, and maintained its position on the A List for Climate Change for the seventh year in a row.
– PMI continued the rollout of its take-back program for smoke-free electronic devices, called CIRCLE, and achieved an 84 percent recycling rate of IQOS devices returned at CIRCLE hubs (percentage of the weight of each device).
– As of
Aspirational targets and goals do not constitute financial projections, and achievement of future results is subject to risks, uncertainties, and inaccurate assumptions, as outlined in the forward-looking and cautionary statements on page 145 of PMI’s Integrated Report 2020. Key terms, definitions, and explanatory notes are set forth in the report. In the Integrated Report 2020 and in related communications, “materiality,” “material,” and similar terms, when used in the context of economic, environmental, and social topics, are defined in the referenced sustainability standards and are not meant to correspond to the concept of materiality under the
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