What is sustainability, what does ESG mean, and how are these two concepts connected? This is something that many have been grappling with and attempting to define.
For PMI, sustainability is more than just a means to minimize negative externalities and mitigate risks while maximizing operational efficiency and resource optimization. We see it as a fundamental opportunity for innovation, growth, and purpose-led, impact-driven, long-term value creation, as well as a way to respond to the concerns of shareholders and other stakeholders.
In order to achieve this, it is paramount that our company understands ESG issues that are relevant to our business success. Managing well our company’s ESG performance can create competitive advantages, such as ensuring compliance with current and anticipated regulations, establishing a solid shareholder base, increasing stakeholder trust, improving corporate reputation and brand equity, mitigating the effects of supply chain disruptions, preserving business continuity, enhancing organizational resilience, and boosting employee morale, workforce productivity, talent attraction, and retention. To yield these potential benefits and mitigate legal, financial, and reputational risks, ESG considerations are regularly assessed, addressed, and embedded in an integral way throughout our business. As a result, at PMI, ESG is considered an input of our corporate strategy, with sustainability being the desired outcome.
Our business transformation connects sustainability and corporate strategy, recognizing that ESG issues are business issues. As a consequence, sustainability, in all its dimensions, is at the absolute core of our business strategy.
Our business transformation connects sustainability and corporate strategy, recognizing that ESG issues are business issues. As a consequence, sustainability, in all its dimensions, is at the absolute core of our business strategy. Accordingly, PMI has chosen to practice integrated reporting because this is the best way to communicate about a business transformation that has sustainability at its core. Our reporting addresses both the material ESG risks related to our operations, as well as those connected to our product. Since 2016, our company has worked to professionalize its approach to ESG reporting by seeking alignment with the expectations of voluntary standards and frameworks. In addition, we have introduced bespoke reporting of key performance indicators (KPIs) linked to our company’s sustainability materiality results, such as PMI’s Business Transformation Metrics and Sustainability Index.
Historically, ESG disclosures have been mostly voluntary. However, that is changing rapidly. Regulators and standards setters in various geographies are working to create comparable and more reliable standards for mandatory disclosures. We see this in the U.S., for instance, through the Securities and Exchange Commission (SEC), in the EU via the Corporate Sustainability Reporting Directive (CSRD), and globally through efforts led by the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB). We have actively engaged in the consultation processes led by the EU and the U.S. SEC, as well as with the ISSB, and will continue to support efforts to set a baseline for sustainability-related disclosures.
Moreover, building on that preparedness, we have completed a new in-depth climate-related risk and opportunity assessment aligned with the framework of the Task Force on Climate-related Financial Disclosures (TCFD). Alongside this year’s integrated report, we are publishing PMI’s first TCFD report detailing activities and targets related to its recommendations, anticipating regulatory requirements that may result from the U.S. SEC’s current climate-related disclosure proposal. We welcome more rigorous and regulated sustainability reporting requirements, as we believe this will further strengthen our ability to produce sustainability-related disclosures that are consistent, comparable, and reliable. In turn, our shareholders and stakeholders will be better able to assess how we are managing and improving on material ESG-related risk factors and how this is contributing to long-term value creation.
PMI’s Statement of Purposeread more
Capturing high-quality data is essential to accurate reporting. Accordingly, we are building systems and processes that can host a sound data governance model to ensure that nonfinancial data reported are meaningful, well-defined, and verifiable, and that processes are appropriately documented. Further, we continue to build synergies with our Legal and Finance teams to increase rigor and improve the robustness of our ESG disclosures.
To enhance our reporting and prepare for upcoming regulatory changes, we are also partnering with PMI’s risk functions to build a roadmap to gradually expand the scope of external assurance of our ESG data, seeking further alignment with voluntary standards.
We intend to continue evolving our processes to produce a leaner and more technical integrated report, primarily aimed at serving the needs of the financial community. To achieve this, we began a reporting relevance review in 2022 whereby we assessed the maturity, significance, and robustness of all KPIs disclosed in our integrated reports. As our organization becomes more sophisticated and our approach to ESG reporting further professionalizes, we aim to reduce the number of KPIs by prioritizing quality over quantity. To give our stakeholders visibility into this process, this Integrated Report 2022 describes the rationale and logic behind this exercise. Ultimately, our intent is not only to be transparent on what we report, but also to be clear and precise in the way we communicate why, what, and how we measure our ESG performance.
We welcome more rigorous and regulated sustainability reporting requirements, as we believe this will further strengthen our ability to produce sustainability-related disclosures that are consistent, comparable, and reliable.
We recognize the essential need to continue building legitimacy and trust among our stakeholders, who are fundamental to our company’s purpose and can accelerate the pace at which we achieve it. Our Integrated Report 2022 aims to address their demands for more transparent, comparable, and reliable information on our ESG-related risks and performance. As we continue to learn, transform, and discover better ways to develop solutions that have a meaningful impact, we hope our transparency and willingness to engage will spark dialogue with those who can help accelerate our pace of change. I invite you to reach out and share your feedback, to question, to challenge, and, above all, to engage with us as we remain focused on making our company better, dedicated to sustainability, and committed to transform, for good.
This letter is an excerpt from PMI’s Integrated Report 2022
Integrated Report 2022
This online content about our Integrated Report should be read in conjunction with PMI’s Integrated Report 2022. Unless otherwise indicated, the data contained herein cover our operations worldwide for the full calendar year 2022 or reflect the status as of December 31, 2022. Where not specified, data comes from PMI financials, non-financials, or estimates. Unless explicitly stated, the data, information, and aspirations referenced do not incorporate PMI’s Vectura Fertin Pharma business (consolidating the 2021 acquisitions of wellness and healthcare companies Fertin Pharma A/S, Vectura Group plc., and OtiTopic, Inc.), nor the late 2022 acquisition of Swedish Match AB. Please also refer to 'This report at a glance' on page 2 of the Integrated Report 2022 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 the Integrated Report 2022 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.