Key facts about Our approach to sustainability Philip Morris International Inc. (PMI) and vision for a smoke-free future
For PMI, sustainability is about seeking opportunities to Company footprint create value while minimizing the negative externalities associated with our products, our own operations, and our value chain.
In 2016 we announced our ambition to create a 180 48 2 smoke-free future where cigarettes are replaced with Countries where Production facilities Research facilities less harmful, smoke-free products as soon as possible. PMI operates in 32 countries — one in Neuchâtel (Switzerland) and one Since then, we’ve been intensifying our work, focusing Sustainability in Singapore. on the transformation of our company from a cigarette maker to a smoke-free technology leader. We’re putting our product at the center of our sustainability strategy Insight Consumers while strengthening our efforts across a number of areas. 150m >3m 8,000 Combustible Smoke–free Smokers switch to Our sustainability framework products products IQOS every day At PMI we’re using the UNGC’s Ten Guiding Principles as a (2015) (August 2017) (June 2017) framework for our sustainability efforts, embedding them into our strategy, culture and daily work. Financials We also welcomed the adoption of the United Nations $70bn $7bn Sustainable Development Goals (SDGs) which set out the Excise taxes on Net profit vision of the world we all want, and we’re committed to PMI products (2016) (2016) doing our part to make them a reality.
Taking decisive action where we have the greatest impact Employees Smoking causes serious disease. By replacing cigarettes with less harmful alternatives we can significantly reduce the negative impact of our products on society. 80,000 +400 32.8% 68% Employees Scientists and Women in of employees worldwide experts hired since management covered by Taking ownership where we can provide a substantial contribution 2008 to work on positions collective labor smoke-free products agreements
Suppliers Distribution
Aligning our practices with the overall goals, even when we have less impact
380,000 50,000 77,000 5.9m Farmers contracted Suppliers Distributors Retailers selling by PMI and our worldwide and wholesalers PMI products suppliers in 28 Winter 2017 countries Learn more inside
Better alternatives Business Human rights for smokers transformation metrics We’ve been working to align our business practices with the United Nations Guiding Principles on Business and Human For PMI, translating our sustainability strategy into action We’ve developed five Business Transformation Metrics Rights. The foundation of PMI’s human rights program is our starts with our products. to make the actions we’re taking to achieve our smoke-free Commitment to Human Rights. vision measurable and verifiable. The first two metrics show We’ve invested more than USD 3 billion in R&D to date to apply, our resource allocation between combustible products and At the heart of our Commitment is a structured governance develop, and assess new technologies culminating smoke-free products, while the following three show process for ongoing human rights due diligence. We’ve in a suite of non-combustible nicotine products – including progress in making smoke-free products the core of our established a cross-functional Human Rights Core Team of e-cigarettes and heated tobacco products – that have the business. We will publish updates on these metrics on specialists to ensure continuous oversight and improvement potential to significantly reduce individual risk and population a regular basis. of our human rights program across our entire value chain. harm compared to continued cigarette smoking.
Our science and external validation Acting with integrity We follow a thorough and systematic approach to the development and assessment of smoke-free products and align with leading pharmaceutical industry standards and Actuals Estimate Aspiration¹ We believe in doing business with integrity and preventing guidance from the US Food and Drug Administration’s (FDA) unlawful and unethical behavior as essential ingredients for Center for Tobacco Products. Our research also includes long-term success; that includes how we market our products, 2014 2017 2016 2015 2025 laboratory and clinical studies based on internationally accepted advocate on issues related to our products, and our efforts R&D expenditure² practices in this area. 70% 72% >70 % to tackle the illicit tobacco trade. (Smoke-free/Total) Commercial expenditure 2% 8% 15% >30% PMI has pledged USD 100 million to support a global (Smoke-free/Total) initiative known as “PMI IMPACT” to support public, Our ambition for Net Revenues³ private and nongovernmental organizations in developing 0.0% 0.2% 2.7% >10% a smoke-free future (Smoke-free/Total) and implementing projects to tackle illegal trade and related Smoke-free product4 crimes. An independent body of experts oversees and 0.2 0.8 7.7 >30 >250 shipment volume (billion units) selects projects for funding. Combustible product5 shipment According to WHO projections, there will still be over 1 billion 890 881 845 <800 <550 smokers worldwide in 2025. We believe smoking prevalence volume (billion units) can be reduced much faster by supplementing government 1 Assuming constant PMI market share. We do not set aspirational targets measures to discourage smoking initiation and encourage for R&D and commercial expenditure but we expect both ratios to smoking cessation with efforts to encourage smokers, who continue increasing to enable the stated outcome in terms would otherwise continue smoking, to switch to smoke-free of shipment volume products. Our minimum ambition is to have at least 30% 2 R&D expenditures for smoke-free products were tracked separately as of 2015; the related metric was therefore left blank for 2014 of our volume coming from smoke-free products by 2025. 3 Excluding excise taxes 4 Includes heated tobacco units and e-cigarettes However, we cannot achieve a smoke-free future by 5 Includes cigarettes and other combustible tobacco products ourselves. Government and civil society, especially leading scientists and public health professionals, and ideally the WHO, can play a decisive role in encouraging smoke-free products to replace cigarettes for people who would otherwise continue smoking.
A hand-roller of kretek cigarettes in Indonesia Open here Key developments towards a smoke-free future PMI opens The Cube, a new R&D facility Late 1980s: PM USA PMI expands R&D dedicated to smoke-free commercialized Next, on smoke-free products in Neuchâtel, a nicotine-free cigarette products Switzerland It failed to satisfy consumers and was later withdrawn
Pre 2001 2003 2004 2006 2007 2009 2000s
1998-9: PM USA and US Institute of Adoption of the WHO The first 2006-7: Launch of UK Royal College of US Family Smoking PMI launch the first Medicine publishes Framework Convention e-cigarettes Heatbar by PMI in Physicians publishes Prevention and Tobacco electronically heated “Clearing the Smoke” for Tobacco Control (FCTC) commercialized Switzerland and Australia a report on tobacco Control Act tobacco product, It concludes that “reducing risk It defines “tobacco control” as “a in China Heatbar is the second generation harm reduction Provides authority to US Food called Accord in of disease by reducing exposure range of supply, demand and harm of electronically heated tobacco and Drug Administration (FDA) the USA and to tobacco toxicants is feasible” reduction strategies that aim to products; consumer acceptance to regulate tobacco products and improve the health of the population” was low due to the bulky device and creates a regulatory framework Oasis in Japan sub-optimal taste, and the product for the commercialization of Consumer acceptance was withdrawn “Modified Risk Tobacco Products” was low, and the product was subsequently withdrawn PMI completes multiple five-day clinical studies on UK Department of Health IQOS, one of its smoke- free tobacco products. publishes five-year tobacco control plan US FDA releases draft Smokers who switched to IQOS guidance on evidence that reduced their exposure to should support a Modified harmful chemicals on average to PMI launches an PMI city test of MESH FDA announces levels approaching those found e-vapor product, in Birmingham, UK comprehensive plan to reduce Risk Tobacco Product in smokers who quit for the Application (MRTPA) duration of the study Solaris, in Spain an innovative e-vapor product tobacco-related disease and Israel
2010 2012 2014 2015 2016 2017
PMI opens R&D facility PMI launches IQOS PMI completes two IQOS available in PMI reaches 200 peer- in Singapore dedicated city tests in Italy three‑month clinical 19 countries reviewed articles on to assessing smoke-free and Japan studies on IQOS, the science around its products confirming results PMI submits an MRTPA smoke-free research PMI acquires of the five-day study on IQOS to the US FDA Nicocigs Ltd. IQOS available in more (e-cigarette maker) Public Health England than 25 countries publishes report on e-cigarettes concluding >3m people have EU Tobacco they are significantly stopped smoking and Products Directive less harmful than switched completely II adopted cigarettes to IQOS (August 2017)
Our people Our supply chain Managing our environmental footprint At PMI, we are a multigenerational, diverse community With a complex, global supply chain, PMI has a number of of around 80,000 employees worldwide, speaking over sustainability issues that we need to understand, manage 80 languages and working together in a culture of honesty, and continuously address. Climate change is one of the biggest challenges facing respect and fairness. We are committed to being a top humanity today and requires global collective action. employer, and we seek to foster a safe, diverse and We take our role in promoting sustainable agricultural inclusive work environment which enables employees production very seriously, and our Good Agricultural At PMI, we’re focusing on minimizing our environmental to thrive and contribute to our business success. Practices (GAP) program is mandatory for farmers impact through carbon footprint and water use reduction, contracting with PMI or our suppliers. In 2016, PMI and waste minimization and other initiatives, and we’re taking Ways in which we’re doing this include: improving the our suppliers contracted with approximately 380,000 steps to understand and adapt to potential future business percentage of women in management positions at PMI tobacco farms worldwide. impacts posed by megatrends such as climate change and to meet our target of 40% by 2022, and plans to achieve water scarcity. global Equal-Salary certification by 2019. Our Agricultural Labor Practices (ALP) program aims to eliminate child labor and other labor abuses in tobacco PMI has set ambitious targets to reduce our greenhouse We take pride in our leading record on safety, too, both growing. Since its inception, we have committed to full gas (GHG) emissions intensity by 30% by 2020 against in our facilities where we have one of the lowest lost injury transparency regarding the evolution and status of the a 2010 baseline across our value chain. As well as adopting time rates in our industry and across our global fleet program, publishing standalone regular updates and an internal price on carbon to help accelerate environmental of 25,000 vehicles. external assessments of implementation status on a performance improvements, PMI is one of just over 300 country-by-country or supplier basis. companies who have adopted science-based targets (SBTs) to contribute to keeping global warming below 2°C based In 2016, we set the foundations on pre-industrial levels. for a more comprehensive and systematic approach to PMI’s Science-Based Targets (SBTs) addressing supply chain We aim to reduce our absolute GHG emissions across sustainability with the our own operations and value chain by 40% by 2030 development of a set of and by 60% by 2040 (all against a 2010 baseline). Responsible Sourcing Principles (RSP) and PMI gained recognition for corporate Implementation Guidelines. leadership in this area making the CDP A List for Climate & Water in this year’s CDP rankings. CDP is a leading international not-for-profit organization independently assessing companies’ environmental efforts.
For more information, log on to www.pmi.com/sustainabilityreport Sustainability Report Report Sustainability Sustainability Communication on Progress 2016 United Nations Global Compact Global Nations 2016 United Progress on Communication Report Share your feedback at [email protected]
Other key resources: www.pmi.com www.pmi-science.com Logistics worker in our manufacturing A field technician discusses the www.pmi-impact.org www.stopillegal.com facility in Neuchâtel, Switzerland ALP Code with a farmer in Malawi Communication on Progress 2016 United Nations Global Compact