Report communicates progress toward achieving
sustainability targets and gives stakeholders an update on the
company’s transformation to accelerate the end of smoking.
Today, Philip Morris International Inc. (PMI) (NYSE: PM)
released its third annual Integrated Report, which includes an
updated Statement of Purpose, a new environmental, social, and
governance (ESG) framework, as well as detailed information about
PMI’s strategic vision, performance, governance, and value creation
model. The content was informed by a formal sustainability
materiality assessment conducted in 2021.
“Sustainability and business performance are fully interrelated
and mutually reinforcing. Our actions—grounded in data, science,
and facts—speak louder than words. PMI is committed to serving as
an agent of change and advocate of positive values. We understand
that our business must become a provider of effective alternatives
to continued smoking for adult smokers who don’t quit. To achieve
this, we are positioning ourselves at the forefront of
consumer-centricity, technology, science, and innovation. With an
eye to the long term, we are also expanding our business into areas
beyond tobacco and nicotine such as wellness and healthcare,” said
Jacek Olczak, Chief Executive Officer of PMI.
PMI has expanded its social, human, intellectual, and
manufactured capital in ways that allow it to go a step further,
shifting focus to its long-term goal from doing less harm to having
a net positive impact on society. The changes to the company’s
Statement of Purpose ensure it remains a current and fair
representation of the company’s strategy, expanding the last
horizon from achieving a smoke-free future to also encompassing
PMI’s long-term strategic efforts to become a lifestyle, wellness,
and healthcare company.
The company’s 2021 sustainability materiality assessment helped
identify the ESG issues on which PMI should prioritize and focus
its resources. PMI subsequently redesigned our ESG framework,
recognizing two distinct topic areas: those related to PMI’s
products and those related to its business operations. This
distinction forms the basis of PMI’s new approach to
sustainability, which consists of eight clear impact-driven
strategies that aim to address its most material ESG topics. These
eight strategies—four aimed to address the impact of PMI’s products
and four aimed to address the company’s operational impact—are
accompanied by a robust framework of nine governance-related
factors.
PMI’s 2025 Roadmap was revamped accordingly, and it now consists
of 11 goals directly linked to these eight strategies, clearly
explaining the social and environmental impacts PMI aims to
achieve. Further, to clearly assess progress toward achieving these
goals, PMI introduced 19 concrete KPIs to transparently showcase
how the company defines success and evaluates progress, making its
improvement both measurable and verifiable. Altogether, these KPIs
make up the company’s new Sustainability Index, which explicitly
links 30% of the company’s long-term compensation program to ESG
performance.
Said Emmanuel Babeau, Chief Financial Officer of PMI, “I’m proud
to be able to say that our executive compensation program now
reflects our commitment to put sustainability at the core of our
corporate strategy. PMI’s Sustainability Index aligns us even
further with the interests of shareholders and other stakeholders,
forming a strong link between our executive compensation practices
and the company’s short- and long-term ESG performance.”
In its 2021 Integrated Report and aligned with its new strategy,
PMI organized its description of progress into two categories: the
impact of its products and the impact of its operations. Highlights
include the following:
Product impact*
- 21.7 million* total adult users of PMI’s smoke-free products as
of December 31, 2021, of whom 15.3 million* have switched and
stopped smoking; up from 18.3 million* and 13.0 million*,
respectively, in 2020.
- 29.1%* of adjusted net revenues derived from smoke-free
products, which were available for sale in 71 markets worldwide by
year end; up from 23.8%* and 64, respectively, in 2020.
- 99% of adjusted R&D expenditure on smoke-free products
totaling USD 566 million, consistent in proportion but 14% higher
in dollar terms than the USD 495 million spent in 2020.
- 86% recycling rate of IQOS devices returned to our centralized
recycling hubs, weighted-average percentage of each device that is
recycled, vs. 84% in 2020.
Operational impact*
- 39.7% of management positions held by women, on track to
achieve 2022 target of 40%.
- Five human rights impact assessments conducted since 2018 in
highest-risk countries and action plans being implemented, up from
four in 2020.
- 67% of contracted farmers supplying tobacco to PMI who make a
living income, up from 48% in 2020.
- Reduced total value chain CO2e emissions (scope 1+2+3) by 18%
and emissions from direct operations (scope 1+2) by 33% vs. 2019
baseline.
- 100% of tobacco purchased at no risk of deforestation of
primary and protected forests.
“Our 2021 Integrated Report aims to address demands for more
robust, comparable, and reliable
information on our ESG risks and performance, including data
related to our company’s transformation, offering our stakeholders
visibility into the future we are working toward,” said Jennifer
Motles, Chief Sustainability Officer at PMI. “2021 was a year full
of achievements, but challenges remain. As we continue to
transform, learn, and discover better ways to develop solutions
that have meaningful impact, we hope our transparency and
willingness to engage will spark dialogue with those who can help
accelerate the pace of change.”
The preparation of the 2021 Integrated Report considers guidance
of international standards and frameworks, including: the Global
Reporting Initiative (GRI); the UN Global Compact (UNGC); the UN
Sustainable Development Goals; the Value Reporting Foundation
(VRF), 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).
To read the report, visit PMI Integrated Report 2021; to find
out more about sustainability at PMI, please click here to visit
the website.
Philip Morris International: Delivering a Smoke-Free
Future Philip Morris International (PMI) is a leading
international tobacco company working to deliver a smoke-free
future and evolving its portfolio for the long term to include
products outside of the tobacco and nicotine sector. The company’s
current product portfolio primarily consists of cigarettes and
smoke-free products, including heat not-burn, vapor, and oral
nicotine products, which are sold in markets outside the U.S. Since
2008, PMI has invested more than USD 9 billion to develop,
scientifically substantiate, and commercialize innovative
smoke-free products for adults who would otherwise continue to
smoke, with the goal of completely ending the sale of cigarettes.
This includes the building of world-class scientific assessment
capabilities, notably in the areas of pre-clinical systems
toxicology, clinical and behavioral research, as well as
post-market studies. The U.S. Food and Drug Administration (FDA)
has authorized the marketing of versions of PMI’s IQOS Platform 1
devices and consumables as Modified Risk Tobacco Products (MRTPs),
finding that exposure modification orders for these products are
appropriate to promote the public health. As of March 31, 2022,
PMI’s smoke-free products were available for sale in 71 markets.
With a strong foundation and significant expertise in life
sciences, in February 2021 PMI announced its ambition to expand
into wellness and healthcare areas and deliver innovative products
and solutions that aim to address unmet consumer and patient needs.
For more information, please visit www.pmi.com and
www.pmiscience.com.
*Figures presented for 2021 and 2020 include Russia and Ukraine.
Given the uncertainty and volatility regarding the company’s
operations in Russia and Ukraine, in PMI’s Q1 2022 earnings release
on April 21, 2022, PMI also provided figures and comparisons on a
pro forma basis, which exclude the company’s operations in these
two markets for all periods and provide a more comparable view of
PMI's business performance.
Forward-Looking and Cautionary Statements This press
release contains projections of future results and other
forward-looking statements. Achievement of future results is
subject to risks, uncertainties and inaccurate assumptions. In the
event that risks or uncertainties materialize, or underlying
assumptions prove inaccurate, actual results could vary materially
from those contained in such forward-looking statements. Pursuant
to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, PMI is identifying important factors
that, individually or in the aggregate, could cause actual results
and outcomes to differ materially from those contained in any
forward-looking statements made by PMI.
PMI's business risks include: excise tax increases and
discriminatory tax structures; increasing marketing and regulatory
restrictions that could reduce our competitiveness, eliminate our
ability to communicate with adult consumers, or ban certain of our
products in certain markets or countries; health concerns relating
to the use of tobacco and other nicotine-containing products and
exposure to environmental tobacco smoke; litigation related to
tobacco use and intellectual property; intense competition; the
effects of global and individual country economic, regulatory and
political developments, natural disasters and conflicts; the impact
and consequences of Russia's invasion of Ukraine; changes in adult
smoker behavior; lost revenues as a result of counterfeiting,
contraband and cross-border purchases; governmental investigations;
unfavorable currency exchange rates and currency devaluations, and
limitations on the ability to repatriate funds; adverse changes in
applicable corporate tax laws; adverse changes in the cost,
availability, and quality of tobacco and other agricultural
products and raw materials, as well as components and materials for
our electronic devices; and the integrity of its information
systems and effectiveness of its data privacy policies. PMI's
future profitability may also be adversely affected should it be
unsuccessful in its attempts to produce and commercialize
reduced-risk products or if regulation or taxation do not
differentiate between such products and cigarettes; if it is unable
to successfully introduce new products, promote brand equity, enter
new markets or improve its margins through increased prices and
productivity gains; if it is unable to expand its brand portfolio
internally or through acquisitions and the development of strategic
business relationships; or if it is unable to attract and retain
the best global talent, including women or diverse candidates.
Future results are also subject to the lower predictability of our
reduced-risk product category's performance.
In addition, PMI’s business risks also include risks and
uncertainties related to PMI’s acquisitions of Fertin Pharma A/S
(“Fertin”), OtiTopic, Inc. (“OtiTopic”) and Vectura Group plc
(“Vectura”), including, amongst other things: (1) the possibility
that the integration of the operations of Fertin and Vectura with
those of PMI may be more difficult and/or take longer than
anticipated, and may not accelerate PMI’s desired entry into
additional smoke-free and beyond nicotine platforms as quickly as
anticipated; (2) the possibility that the respective integrations
of Fertin and Vectura into PMI may be more costly than anticipated
and may have unanticipated adverse results relating to Fertin,
Vectura or PMI’s existing businesses; (3) the inability to gain
access to or acquire differentiated proprietary assets, technology
and/or pharmaceutical development expertise as anticipated by these
acquisitions; (4) risks associated with third-party contracts
containing consent and/or other contractual provisions that may be
triggered by the acquisitions; (5) the success of the research and
development efforts of Fertin, OtiTopic and Vectura, including the
ability to obtain regulatory approval for new products, and the
ability to commercialize or license these new products; (6) any
unanticipated safety, quality or efficacy concerns and the impact
of identified concerns associated with the products developed by
Fertin, OtiTopic and Vectura; and (7) the ability of PMI to retain
key personnel of Fertin and Vectura, or hire key talent to work in
the Fertin and Vectura businesses due to their affiliation with
PMI.
PMI is further subject to other risks detailed from time to time
in its publicly filed documents, including PMI's Annual Report on
Form 10-K for the fourth quarter and year ended December 31, 2021,
and the Form 10-Q for the quarter ended March 31, 2022. PMI
cautions that the foregoing list of important factors is not a
complete discussion of all potential risks and uncertainties. PMI
does not undertake to update any forward-looking statement that it
may make from time to time, except in the normal course of its
public disclosure obligation.
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Philip Morris International
David Fraser Philip Morris International T. +41 (0)58 242 4500
E. david.fraser@pmi.com
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