Manage our supply chain sustainably

28 Mar 2024
Our supply chain accounts for a significant portion of potential social and environmental risks and opportunities. We are committed to collaborating with our value chain partners in identifying and managing these risks and opportunities responsibly.
Supply chain landscape

Our approach

Our operations rely on securing high-quality, cost-effective, and fit-for-use materials and services from suppliers, who are expected to adhere to PMI’s sustainability-related requirements that form a basis for collaboration with PMI set out in our Responsible Sourcing Principles (RSP). To achieve tangible environmental and social improvements, we identify and address current and potential risks while seizing opportunities to create a positive impact in the communities in which we and our suppliers operate.

As part of our procurement practices we identify and screen suppliers for business relevance and potential sustainability-related risks before engaging with them. Our screening methodology includes country-specific, sector-specific, and commodity-specific risks to determine a list of significant suppliers through a sustainability lens. In 2023, we had over 1,000 significant suppliers.

We then evaluate spend segmentation and the nature of components suppliers provide us with as well as supply flexibility to determine a list of critical suppliers. In 2023, we had 202 critical suppliers.

In addition to classifying suppliers as significant or critical, our approach to sustainable supply chain management is built on the following core principles:

  • We leverage the reach and understanding we have of our supply base to proactively engage our suppliers to implement impactful programs that can help us make progress in our sustainability strategies, such as tackling climate change, preserving nature, and improving the quality of life of people in our supply chain.
  • We perform supplier due diligence, assess their sustainability performance, and support them in driving continuous improvement toward compliance requirements.
  • We invest in enhancing supplier capabilities by engaging with them directly through dedicated training run by sustainability experts (read more about our Sustainability Accelerator later in this section).
  • We embed sustainability criteria in our strategic sourcing decisions and supplier selection process.

Our supply chain sustainability due diligence is guided by our RSP, which align with the UN Guiding Principles on Business and Human Rights (UNGPs), the 10 principles of the UN Global Compact, and the International Labour Organization (ILO) Conventions. It also helps us build preparedness for anticipated and pending legislation such as the European Corporate Sustainability Due Diligence Directive Proposal.

The RSP details our expectations and sets process and performance requirements for our suppliers. We expect all our suppliers to adhere to the mandatory section of our RSP requirements and close identified gaps to continuously improve their sustainability performance.

To monitor RSP adherence, we apply tailored due diligence mechanisms within specific segments of our supply chain. In our tobacco supply chain, our work is governed by our Good Agricultural Practices (GAP) and Agricultural Labor Practices (ALP) Code, which are operationalized at the farm level by field technicians working year-round with the farmers contracted by PMI and our suppliers. In our electronics supply chain, we leverage the work of the Responsible Business Alliance (RBA). For direct and indirect materials and services suppliers we collaborate through our preferred partner, EcoVadis.

Adherence to our RSP—and to GAP for our tobacco supply chain—is being built into our contractual agreements with suppliers. We use a suite of tools, including third-party assessments, on-site audits, and field visits to monitor performance.


The sustainable sourcing of goods and services involves broad cross-functional collaboration within PMI. This is executed by our Procurement and Global Leaf and Product Development teams with the strategic support of Operations Sustainability. It is overseen by our Senior Vice President, Operations.

Fostering collaboration with our network of suppliers

We engage partner with our suppliers—companies with diverse strategies, priorities, and cultures—to jointly progress on our sustainability journey. To achieve our sustainability-related ambitions, we work on common projects to drive improvements in our operations and beyond. We do so in various ways, including virtual events, webcasts, training sessions, and surveys.

PMI's Sustainability Accelerator

In 2023, PMI initiated the Sustainability Accelerator program to leverage our learnings and accelerate the sustainability journey of our suppliers. Fostering an integrated approach, the program covers sustainability-related matters from a performance and reporting standpoint. Five companies of different industry sectors, geographies, and sizes were enrolled in the initial pilot.

The primary focus of this program is to accelerate the delivery of sustainability programs agreed to between PMI and suppliers. The learnings and insights can be used to improve the program and optimize it for our diverse value chain.

The pilot was focused on climate change and sustainability fundamentals (covering, for example, strategy development and deployment systems). A team of experts collaborated with each supplier team individually to build capability and share PMI’s progress, learnings, and methodologies to help accelerate our supplier’s progress.

Overview of our supply chain in 2023

With over 26,000 tier 1 suppliers globally, our supply chain spend amounted to approximately USD 14 billion in 2023. Our global supply chain is organized into two main streams—direct spend (focused on materials used to manufacture our finished products), and indirect spend (focused on goods and services necessary to operate our business).

Currently, our global supply chain supports our two main finished product categories—smoke-free products that are increasing in resource allocation in line with our growth strategy, and combustible cigarettes.

The majority of our supply chain spend for smoke-free products derives from our direct spend on electronics. During 2023, as we purchased more tobacco than in past years to replenish inventory, the overall proportion of supply chain spend attributable to electronics dropped relative to our overall spend on tobacco. As a result, smoke-free product supply chain spend decreased slightly to 41 percent (2022: 43 percent).

The supply chain categories exposed to the highest sustainability risks identified to date pertain to our direct spend and include:

Tobacco production, with the main risks associated with working conditions, child labor, climate change, access to water, and the socioeconomic well-being of farming communities.

  • Paper and pulp-based materials, with the main risks linked to deforestation, biodiversity loss, and climate change.
  • Electronics manufacturing, with the main risks relating to potential social issues on ethical recruitment, working conditions of migrant workers, and working time.

Swedish Match intergration

We are working to integrate our respective supply chains, mindful of their complexity. Such integration is a significant endeavor, requiring us to harmonize the procedures, systems, and performance indicators we have in place. As we do so, we also expect to find synergies and harness the expertise and best practices of each company. We provide further details on our efforts in the Improve the quality of life of people in our supply chain, Tackle climate change, and Preserve nature sections of this report.

Responsible Sourcing Principles

In 2023, we released the updated version of our Responsible Sourcing Principles (RSP) and related implementation guidance documents.

In the updated version, we broadened its scope to incorporate more relevant topics including environmental stewardship, forest, and biodiversity; enhanced sections on responsible sourcing of minerals; and added some sector-specific clauses on illicit trade, product scientific integrity, and scientific engagement that will drive improvements in the sustainability performance of our suppliers.

These additions allowed us to ensure further alignment with PMI’s Code of Conduct and account for current and emerging regulatory requirements. The updated document is composed of two parts: the first part contains mandatory requirements that all our suppliers must agree to implement; the second part provides guidance and implementation tips to suppliers that want to go beyond minimum requirements.

To deploy our updated RSP we developed a robust roll-out plan focused on raising awareness and building capabilities with relevant internal and external stakeholders.

All PMI employees have the ability to complete dedicated RSP fundamentals training, which is mandatory for relevant functions of the Company that have regular interaction with suppliers. Additional advanced RSP training was developed and launched at the end of 2023 for PMI employees to deep dive on key principles, case studies, roles and responsibilities, and the six steps due diligence framework.

Rollout and implementation of the updated RSP in our supply chain

To ensure all PMI suppliers comply with our RSP we developed a strategic framework which used a two-step approach, addressing significant suppliers through direct engagement and seeking their commitment to implement mandatory requirements of the RSP.

We communicated with all suppliers and provided them the opportunity to contact PMI directly for further support, when required. We ran two remote training sessions on RSP inviting over 3,000 suppliers. While the sessions were recorded over 600 suppliers attended these live sessions.

The RSP will be translated into over 30 languages to facilitate supplier understanding and its deployment. All contractual commitments will include an RSP adherence requirement by 2025.

Inaugural Electronics Suppliers Sustainability Day 

We are committed to supplier engagement and capability building. Read more about our first Electronics Suppliers Sustainability Day held in Hong Kong in 2023 here

Sustainability performance in our supply chain

Proactively managing the sustainability performance of our suppliers is paramount to our ability to identify, prevent, and mitigate sustainability-related risks. By doing so, we ensure PMI’s preparedness for existing and anticipated regulations. By endorsing robust governance, we seek to secure our success in achieving our environmental aspirations and improving the livelihoods of people in our supply chain.

Our supply chains are long and complex. Our procurement team therefore engages with significant suppliers to drive impact.

We use preferred platforms such as EcoVadis and RBA to perform desk-based assessments and on-site audits to drive performance improvements. On a regular basis we run supplier performance reviews in which we coach suppliers and provide guidance on the closure of previously identified gaps.

It is suppliers’ responsibility to put in place a corrective action plan (CAP) and drive improvements in their supply chain. These CAPs are reviewed by PMI’s procurement function and sustainability experts, who also offer ongoing guidance. We assessed our two largest leaf suppliers in 2023 as pilots, with the intention of expanding to additional suppliers as we and the suppliers learn what the requirements for the assessments are.

We aspire that 100 percent of spend with critical suppliers from whom PMI sources be done so sustainably by 2025. In 2023, we made continued progress, reaching 91 percent (2022: 93 percent).

Direct materials supply chain

We leverage our partnership with EcoVadis—the leading global service provider of online sustainability supplier assessments—to monitor and assess the sustainability performance of our suppliers of direct materials1. The EcoVadis assessment consists of a desktop assessment questionnaire that is largely aligned with PMI’s RSP.

During 2023, 120 suppliers representing 95 percent of our total direct material spend were assessed. Of these, 91 percent were determined to be sourced sustainably by PMI, based on the score provided by the assessment platform, and only 9 percent were below the minimum threshold required. Suppliers with a low score are mandated to drive improvement through dedicated CAPs.

CAPs are segmented by theme, indicator, and priority. Depending on priority, suppliers of direct materials are requested to close identified gaps in an agreed timeframe, and to conduct a reassessment to ensure compliance. In 2023, we actively supported supplier CAP reviews with underperforming suppliers. Overall, 13 suppliers (representing approximately 10 percent of our critical DIM suppliers) that re-assessed in 2023 as part of current and previous CAP review cycles improved their scorecards. The average score increase was 10 points versus the previous assessment in EcoVadis.

1 Excluding farmers and electronics suppliers, for which we use tailored due diligence tools, as described in this section.

Electronics supply chain

As our Company transforms, we're increasingly focused on the sustainability of our expanding electronics manufacturing supply base. This supply chain is complex and dynamic, and carries inherent risks and challenges, including the potential presence of conflict minerals.

PMI is a member of RBA, the world's largest industry coalition for sustainable supply chains that is widely used by the electronics industry. In 2023, we increased our participation as members in the alliance by expanding use of its various capability building programs with suppliers.

We continued to participate in RBA’s Validated Assessment Program (VAP)—the standard for on-site compliance verification and effective, shareable audits. Under the program, independent external auditors review our electronics suppliers’ sustainability performance against the RBA Code of Conduct, aligned with PMI’s RSP. To gather additional audit data, we leveraged customer managed audits (CMAs), a comparable audit standard recognized by RBA.

In 2023, 91 percent of our spend with critical electronics suppliers were covered by VAP or CMA audits. The average RBA score of our suppliers was 170 (out of a maximum of 200), compared with an RBA average of 173 in 2022. Audit reports revealed several common issues across suppliers in the areas of working time, emergency preparedness, and wages and benefits.

To drive improvement in these areas, we leveraged two key RBA programs: the Responsible Factory Initiative (RFI) and the Responsible Labor Initiative (RLI). The RFI focuses on building capability of suppliers' factories to help them prepare for RBA audits. The RLI provides a set of tools to address potential forced labor issues associated with migrant workers (read more in the People in our supply chain section of this report).

Conflict minerals

We are committed to operating with integrity and to responsibly source 3TG (tin, tantalum, tungsten, and gold), which are potentially used in our products.

Our 2023 conflict minerals submission to the U.S. Securities and Exchange Commission (SEC) covering the year ended December 31, 2022 showed that approximately 72 percent of the smelters or refiners (SORs) in our conflict mineral supply chain were confirmed to be Responsible Minerals Initiative Audit Program (RMAP)-Compliant or RMAP-Active. With respect to the remaining 28 percent, we conducted due diligence measures to verify whether they sourced 3TGs from the Covered Countries (as defined by the U.S. SEC) during 2022.

We conducted a GAP assessment and benchmark of our conflict minerals due diligence practices to identify leading practices and enhance our conflict minerals due diligence approach. The benchmark was performed in collaboration with human rights consultants Article One and PMI’s Procurement function.

Based on the benchmark study and industry insights collected, PMI launched a pilot with two electronics suppliers to increase the frequency of data collection and better anticipate potential risks. We will assess the pilot’s learnings and share them in our next report.

Another mineral, cobalt, is also linked to unethical mining practices. This critical raw material is used in the batteries that power our smoke-free devices. While the quantities required for our products are minor relative to the global market size, we are deploying a due diligence program based on the RMI approach along with tools to identify and address potential human rights risks in our supply chains.

In 2023, all our battery suppliers responded to a PMI request. Subsequent due diligence indicated that, as of December 31, 2023, each of the 18 smelters from which PMI battery suppliers source cobalt were either on RMI’s conformant list (17 smelters) or under initial screening (one smelter). We continue to engage with our suppliers to improve visibility into this complex supply chain and enhance our due diligence framework.

Tobacco supply chain

We define sustainable tobacco production as the efficient and competitive production of quality tobacco in conditions that limit as much as possible the impact on the natural environment and improve the socioeconomic circumstances of the people and communities involved.

Our Good Agricultural Practices (GAP) define the principles and measurable standards to be met by all those who grow and supply tobacco to PMI. These standards focus on four areas: governance, crop, environment, and people. The latter is governed by a dedicated Agricultural Labor Practices (ALP) Code.

GAP principles are mandatory for all suppliers of tobacco to PMI and are reflected in supply contracts.

To ensure a consistent level of due diligence across our tobacco supply chain, we began onboarding our two major leaf suppliers to EcoVadis. Additional suppliers will be onboarded to EcoVadis in 2024.

Overview of tobacco sourcing under PMI's integrated production system (IPS)

As a consequence of our smoke-free transition, the share of our purchased volume of tobacco directed to the manufacture of combustible cigarettes is steadily declining while the proportion dedicated to the production of heated tobacco units is increasing. Over time, we are seeing a gradual decrease in total volumes sourced, as smoke-free products use at most half the amount of tobacco required for combustible cigarettes.

Despite these dynamics, the volume of tobacco purchased in 2023 increased from approximately 281,000 tons in 2022 to approximately 308,000 tons to replenish inventory stock. During 2023, we sourced tobacco grown across 23 countries, with most of our volume coming from Argentina, Brazil, China, India, and Indonesia.

Note: Note: In 2022 we evolved our strategy to introduce the implementation of our STSC framework (read more here).

Maintaining full traceability and monitoring in our tobacco supply chain

To a large extent, responsible sourcing stems from strong relationships on the ground. PMI’s IPS connects leaf suppliers and farmers beyond the customary boundaries of a commercial relationship and enables direct technical support, agronomic advice, financial loans, and various other services. Our IPS covered 94 percent of our tobacco purchases in 2023. The excluded amounts originated from Argentina, Indonesia, India, and Thailand.

The IPS is vital to providing traceability and visibility in our supply base; it enables the deployment of our GAP and ALP monitoring and remediation system down to the farm level. At the center of this system are field technicians, employed by PMI or our third-party suppliers. These technicians visit each farm at least five times during the crop season on average and monitor how well sustainability requirements are applied and commercial processes are working. They also provide agronomic assistance, deliver training to farmers, identify and address labor issues, and ensure the implementation of improvement plans are implemented.

In 2023, field technicians enabled us to monitor compliance with GAP by all farmers supplying tobacco to PMI under the IPS.

Third parties, such as specialized NGOs, can also monitor GAP implementation. This is an approach we have taken in Brazil since 2020 in collaboration with Produzindo Certo, a specialist company helping farmers operate more efficiently and sustainably. During 2023, almost all (over 99 percent) contracted farmers agreed to be part of this voluntary program.

Indirect materials and services supply chain

2023 was a stepping stone for PMI in embedding sustainability in our indirect materials and services (IM&S) sourcing activities and supplier management activities.

IM&S suppliers were segmented to determine significant suppliers that are in scope for deployment of sustainability programs. Over 700 suppliers were included in scope in 2023.

IM&S spend is complex and involves a large number of small suppliers that serve the specific needs of different markets. It requires a large effort to engage suppliers and ensure they perform due diligence on their supply chains. To support our suppliers on this journey we organized an event during 2023, during which we shared our sustainability aspirations and proposed a plan to collaborate to drive impact and progress toward our net zero ambition together.

In addition, training sessions were conducted for markets and suppliers to explain the relevance and importance of onboarding on EcoVadis. Over 56 percent of IM&S suppliers disclosed their sustainability efforts through EcoVadis and over 78 percent  reached PMI’s minimum performance requirements.

Low-performing suppliers were supported through capability building sessions with procurement and sustainability experts.

In 2023, we continued to participate in multi-stakeholder working groups organized by the Indirect Spend Alliance, sharing best practices and learning from peer companies.

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This online content about our Integrated Report should be read in conjunction with PMI’s Integrated Report 2023. This report includes metrics that are subject to measurement uncertainties due to inherent limitations in the nature and methods for data collection and measurement. The precision of different collection and measurement techniques may also vary. This report includes data or information obtained from external sources or third parties. Unless otherwise indicated, the data contained herein cover our operations worldwide for the full calendar year 2023 or reflect the status as of December 31, 2023. Where not specified, data comes from PMI financials, nonfinancials, or estimates. Unless explicitly stated, the data, information, and aspirations referenced in online content do not incorporate PMI’s wellness and healthcare business, Vectura Fertin Pharma. Regarding the Swedish Match acquisition, completed late 2022, unless otherwise indicated, online content does not include information pertaining to their sustainability performance. Please also refer to "This report at a glance" on page 2 of the PMI's Integrated Report 2023 for more information. 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 our forward-looking and cautionary statements on page 214. In PMI's Integrated Report 2023 and in related communications, the terms “materiality,” “material,” and similar terms are defined in the referenced sustainability standards and are not meant to correspond to the concept of materiality under the U.S. securities laws and/or disclosures required by the U.S. Securities and Exchange Commission. 

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