“A remarkable year”—PMI’s Integrated Report 2022 highlights the progress we’re making toward our smoke-free ambition05 Apr 2023
Philip Morris International’s Integrated Report 2022 reveals we’re on course to achieve our ambition of becoming a majority smoke-free company by 2025.
Informed by a formal sustainability materiality assessment, the report aims to provide an objective description of PMI’s business model, governance and management, strategy, and performance.
Progress against our sustainability aspirations continued mostly apace in 2022 as we sought to tackle the impacts of both our products (what we produce) and our operations (how we produce).
On the social side of our product impact, highlights include:
- 24.9 million: Estimated total adult users of PMI’s smoke-free products (up from 21.7 million in 2021)1
- 32.1 percent: Of net revenues derived from smoke-free products (up from 29.5 percent in 2021)2
- 73: Markets where PMI smoke-free products are available for sale, of which 42 percent are in low- and middle-income countries (Up from 71 in 2021)3
- USD 10.7 billion: Cumulative investment in smoke-free products since 2008 (up from USD 9.2 billion in 2021)4
- 91 percent: Of total shipment volume covered by youth access prevention programs in indirect retail channels (unchanged from 2021)5
- USD 0.3 billion: Annual net revenue from wellness and healthcare products (up from USD 0.1 billion in 2021)
We continued implementation of youth access prevention programs in our direct and indirect retail channels.
And, mindful of the importance of reducing post-consumer waste, we made progress in implementing take-back programs for our smoke-free devices and consumables, and we increased our electronic device repair capabilities.
Other highlights from the environmental aspect of our product impact include:
- 86 percent: Recycling rate of our heated tobacco devices returned to centralized recycling hubs (weighted-average percentage of each device that is recycled) (unchanged from 2021)6
- 68 percent: Of shipment volume covered by markets with anti-littering programs in place for combustible cigarettes
- 8.5 percent: Of shipment volume covered by markets with smoke-free consumables take-back programs7
Accelerating the pace of change
PMI’s latest Integrated Report is designed to communicate the progress we’re making toward achieving our purpose. Our Statement of Purpose articulates our aim to deliver a smoke-free future by focusing our resources on developing, scientifically substantiating, and responsibly commercializing smoke-free products that are less harmful than smoking.
Our ambition is to completely replace cigarettes with these better alternatives for adults who would otherwise continue to smoke as soon as possible and, in the longer term, evolve into a broader lifestyle, consumer wellness, and healthcare company.
“Despite its many tests, 2022 was a remarkable year that brought our employees closer and saw us make measurable strides toward achieving our purpose,” said Jacek Olczak, Chief Executive Officer of PMI.
“We are progressing toward becoming a majority smoke-free company by 2025 and ultimately phase out cigarettes.
“While a transformation of this magnitude and complexity cannot be achieved overnight, we are committed to making it happen as fast as possible. It is through constructive engagement that we will accelerate the pace of meaningful and impactful change and complete our transformation for good.”
Putting sustainability first
Building on our ESG framework, PMI developed eight strategies targeting the company’s most pressing areas of impact. To accompany these eight strategies, PMI established 11 goals, which form the basis of our 2025 Roadmap, and 19 key performance indicators (KPIs) to measure progress via our Sustainability Index. Each KPI is also aligned with one of two drivers: product sustainability (11 KPIs) or operational sustainability (eight KPIs).
“Non-financial information is increasingly being used by external stakeholders to assess and compare a company’s performance to others,” explained Emmanuel Babeau, Chief Financial Officer of PMI, “including the financial community in their analyses and investment decisions.
“It is key to the integrity of PMI’s reporting that the information and data that we publicly disclose accurately reflect our company’s progress, following clear calculation methods.”
In 2022, we also published our first ESG KPI Protocol, which includes the definition, methodology, and scope of each of the Sustainability Index’s KPIs to provide measurable, verifiable, consistent, and accurate reporting on progress.
In conjunction with our latest Integrated Report, the company is also publishing an updated Protocol that notably accounts for efforts undertaken during 2022 to make these KPIs even more robust.
From the inside out
On the social side of PMI’s operations, we expanded access to structured lifelong learning offers among our employees, published a strengthened commitment to human rights, and completed our sixth and seventh human rights impact assessments, in Brazil and Malaysia.
We also exceeded our 2022 goal of at least 40 percent of management positions being held by women.
On the environmental side of our operations, we continued decarbonizing our direct operations, and our science-based targets were validated for net zero GHG emissions across our value chain by 2040.
In conjunction with the UN Biodiversity Conference (COP 15) in December, the company announced new long-term biodiversity and water ambitions and strategies, aligned with the post-2020 biodiversity framework adopted by parties to the convention.
Other environmental highlights pertaining to our operations include:
- 55 percent: Proportion of tobacco purchased at no risk of net deforestation of managed natural forest and no conversion of natural ecosystems (up from 37 percent in 2021)
- “Triple A”: Score from CDP for climate, forest, and water security for the third consecutive year
As a strong complement to the content and data captured in our Integrated Report 2022, we have developed 12 case studies and market stories that showcase impact and highlight how PMI affiliates worldwide drive sustainability.
“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,” said Jennifer Motles, Chief Sustainability Officer at PMI.
“Our latest Integrated Report aims to address their demands for more detailed and comparable information on our 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.”
The preparation of PMI’s Integrated Report 2022 considers guidance of international standards and frameworks, including the Global Reporting Initiative (GRI), the UN Global Compact (UNGC), the UN Sustainable Development Goals, the IFRS Foundation—including use of its SASB Standards, Integrated Thinking Principles, and Integrated Reporting Framework—and some of the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).
1. Figures pertain to total IQOS users. See [Glossary available on pages 209 to 213 of PMI Integrated Report 2022].
2. For definition of net revenues related to smoke-free products, see [Glossary available on pages 209 to 212 of PMI Integrated Report 2022]. 2022 figure includes Swedish Match net revenues from November 11, 2022 (acquisition date) to December 31, 2022. 2021 adjusted net revenues exclude the impact related to the Saudi Arabia customs assessments.
3. Including Swedish Match. Classification of low- and- middle-income countries is based on World Bank report issued in 2022, excludes PMIDF.
4. Investments reflect research, product and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding.
5. Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free product consumables. See PMI’s ESG KPI Protocol 2022 for further details.
6. Recycling rate: percentage of the weight of each device that is recycled, weighted-average depending on device type and processing facility (includes 80% recycling and 6% energy recovery). 2022 data cover CIRCLE hubs in Hungary and Japan.
7. Shipment volume includes heated tobacco units, e-vapor cartridges, and e-vapor disposables. See PMI’s ESG KPI Protocol 2022 for further details.