Sustainability

Uphold business ethics and integrity

17 May 2022

We conduct business ethically and with integrity. We clearly define the ethical and compliance expectations we have for ourselves and for the third parties with whom we work, and we back up these expectations with governance and management systems to ensure we deliver on them.

Managing ethics is an integral part of any successful business operation, and major decisions that affect a company’s bottom line often involve questions of ethics. We all depend on systems that apply laws fairly and protect fundamental rights. Without the rule of law, it is difficult for companies to operate successfully. Issues such as corruption, unfair competition, and unsafe workplaces undermine societal well-being.

While following the rules is critical, it is sometimes not enough. It can be possible to behave unethically even while complying with the law or other rules. Good ethical judgment helps us guard against such failures and build lasting business success.

Our approach

We understand that PMI’s reputation comes from the sum of our actions. To ensure we conduct business ethically and with integrity, we maintain an Ethics & Compliance (E&C) program. The program is led by our Vice President and Chief Ethics & Compliance Officer, who reports to PMI’s General Counsel and also reports periodically to the Audit Committee of the Board of Directors.

Our Guidebook for Success (PMI’s code of conduct) sets clear standards and expectations. Its mandatory provisions apply to all PMI employees, officers, and directors. Key risk areas addressed in this document include anti-bribery and anti-corruption, anti-competitive practices, conflicts of interest, information protection security and data privacy, responsible marketing and sales, scientific integrity, supply chain responsibility, and workplace integrity. Internal policies—called Principles & Practices—provide more specific guidance on these topics.

Business integrity—topic overview

Ethics and integrity are core components of our culture at PMI. We are committed to our employees, our customers, our shareholders, and our communities to conduct business in an ethical manner and in compliance with all applicable laws and regulations. In 2022, as our company progresses further on its transformation journey, we plan to build on this solid foundation and will continue to implement and enhance our global ethics and compliance program. Among our initiatives for this year, we will launch a new Code of Conduct, roll out global training on key compliance risks, and continue to encourage our employees to speak up in case of concerns.

Suzanne Rich Folsom
,
Senior Vice President & General Counsel

Evaluating our Ethics & Compliance culture

We formally evaluate our E&C culture periodically, using a global online survey to understand employee experiences and attitudes related to ethical business conduct. For the last 15 years, PMI has been surveying its global employee population every two to three years, including most recently in September 2021.

According to the 2021 E&C survey results, PMI is stronger on ethics than at the time of the 2018 survey. The global survey results showed improved or maintained performance across all categories of questions. Most notably, we saw very high awareness among respondents of the company’s E&C program, our Guidebook for Success, our compliance helpline, and the duty to speak up should concerns arise. Analyzing the survey results helps us identify potential improvement opportunities. Current focus areas include reinforcing the importance of employees speaking up when they observe potential misconduct, even if they think someone else will report it, and enhancing leadership communication on E&C topics.

In addition to the employee surveys, we periodically work with third parties to assess elements of our E&C program, which we did in 2021 and plan to do again in 2022.

Employee communication and training

We use training and communication to help employees understand which standards are relevant to their roles and how to apply them in their daily work. We reach broadly across the organization using multiple formats and languages.

In 2021, 71.3 percent of employees received training related to topics in the Guidebook for Success.1 Employees and third parties completed a total of 261,890 training sessions (2020: 198,170).2 Key topics addressed included workplace integrity, speaking up, conflicts of interest, responsible marketing, privacy, intellectual property, insider trading, information protection, competition law, and anti-corruption. Training completions for 2021 continue to be recorded in the first quarter of 2022, so a slight increase in these figures is expected.

¹ As of 2021 the calculation is based on the 55,276 employees maintained in PMI’s central HR system.

² 2021 training completion data as of March 17, 2022.

Speaking up

At PMI, there are many ways to speak up about potential misconduct, get help on an E&C matter, ask a related question, or recommend an improvement.

Mechanisms include, but are not limited to, the following:

a. E&C in-person contacts (e.g., Regional Director, Cluster Head, E&C Country/Market Head)

b. PMI Global E&C email address

c. PMI Compliance Helpline (online or by telephone), which is operated by a third party and available 24 hours a day, seven days a week, in all languages spoken at PMI (employees may use the helpline anonymously, subject to local laws and regulations).

PMI also has implemented a Global Speaking Up Policy, the principles of which are reinforced in the Guidebook for Success (PMI’s code of conduct) and in all PMI compliance policies.

There is a strong speaking-up culture at PMI, with most employees communicating directly with the E&C department and disclosing their identity when speaking up.

Specifically, in 2021, only 22 percent of the reports received by E&C were submitted anonymously. According to the 2021 E&C results, the vast majority of employees are aware of PMI’s anonymous reporting channels and do not fear retaliation for reporting potential misconduct. These statistics indicate that employees feel comfortable speaking up and sharing their names.

In addition, the E&C team continues to increase its outreach to employees on PMI’s speaking-up program. As part of our Inside E&C initiative, for example, the department shares quarterly statistics with employees globally about speaking-up reports, compliance violations, and disciplinary actions, as well as anonymized real-life examples of misconduct and advisory guidance provided in response to employee questions.

Furthermore, in 2021, E&C launched the #UnmuteYourself campaign to encourage speaking up across all regions. The initiative was championed by members of the Company Management team and resulted in management teams and employees across PMI regularly referring to speaking up during business calls.

Compliance investigations

At PMI, we take all reports received through our speaking-up channels seriously and are committed to following up objectively and in a timely manner. We investigate all reports that raise compliance concerns, and we involve other functions or line management to help resolve other concerns. Corrective measures are implemented to address investigation findings, and disciplinary actions are calibrated against past actions to keep the process fair. When investigating suspected E&C violations, trained personnel adhere to PMI Investigations Standards, which are designed to ensure a fair and respectful process.

We run a post-investigation quality assurance program to get feedback on how well we met these standards. We also have a Retaliation Check program to detect, remedy, and prevent retaliation against people who speak up, which includes regular follow-ups with employees who have made a report. We also run checks to ensure year-end performance assessments are fair, and we review substantial employment decisions regarding all people identified as at risk of retaliation before the decisions are implemented.

We received 929 reports of suspected misconduct in 2021 (2020: 762). Around 43 percent of the matters that were closed in 2021 did not involve a compliance allegation and were resolved through E&C advisory services or referred to line management or appropriate departments, such as our People & Culture teams, for further action.

In 2021, we investigated and closed 508 cases that involved potential violations of PMI’s Guidebook for Success and compliance policies (2020: 431). At least one violation was substantiated in 46 percent of these cases (2020: 54 percent), with “theft and fraud” accounting for 30 percent of all violations (2020: 22 percent), “workplace integrity” accounting for 22 percent (2020: 30 percent), and violations related to speaking up (such as failure to speak up or obstructing an investigation) accounting for 14 percent (2020: 20 percent). Corrective measures and disciplinary sanctions were implemented following these investigations. Specifically, in 2021, termination of employment accounted for 26 percent of the disciplinary actions issued from these cases, while suspension accounted for 5 percent, written warning for 32 percent, and verbal warning or counseling for the remaining 27 percent.

Preventing bribery and corruption

Our standard is clear: We do not bribe anyone, anywhere, for any reason. We recognize that our refusal to participate in corrupt activities may make doing business more difficult in some markets, but bribery is unacceptable at PMI.

Our anti-corruption standards regulate our interactions with government officials and entities, as well as with private individuals, both directly and through third parties. These standards prohibit all forms of bribery and facilitating payments. They also describe acceptable forms of giving and receiving gifts or entertainment, govern political contributions, and set clear pre-approval, reporting, and registration requirements.

We publicly disclose the very limited political contributions we make on PMI. com, and we follow lobbying regulations.

This online content about our Integrated Report should be read in conjunction with PMI’s 2021 Integrated Report. The information and data presented here cover the 2021 calendar year or reflect status at December 31, 2021, worldwide, unless otherwise indicated. Where not specified, data come from PMI estimates. Please also refer to 'This report at a glance' on page 5 of the 2021 Integrated Report 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 252. In the 2021 Integrated Report and in related communications, the terms “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 U.S. securities laws and/or disclosures required by the U.S. Securities and Exchange Commission.

Respect human rights

Human rights are inherent to the dignity of human life and a prerequisite for society to prosper. As a global company, we work to uphold human rights within our organization and across our value chain.

Uphold business ethics and integrity

Our approach

Business integrity—topic overview