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Marketing and Comms
Focusing on What Matters:
How PMI Transparently Identifies ESG Priorities

PMI recently released its 2021 Sustainability Materiality Report, which describes how the company identifies the ESG topics that inform its strategies, goals, and reporting. It’s conducted with full transparency — for stakeholders, and for society.

It is clear that companies — especially multinationals such as Philip Morris International, with an extensive value chain and stakeholders around the world — have an important role to play in understanding their impacts. Periodically assessing sustainability materiality issues helps a company articulate its strategy, guide its reporting, and ensure its efforts and resources remain focused on those areas where it can have the greatest impact.

At PMI, we’ve had strong sustainability programs in place for many years. However, we knew that if we weren’t first taking action to address the health impact of our products, any approach to sustainability would be incomplete and considered disingenuous. Thus, as we started to transform toward becoming a smoke-free company, we developed a more holistic sustainability strategy — putting product innovation at its core — and reported for the first time on our ESG efforts in 2016.

That same year, we conducted our first sustainability materiality assessment, which we then refreshed in 2018, 2019, and most recently, in 2021. Throughout our journey, our sustainability materiality assessment has proven to be fundamental in shaping our strategy and reporting. With every exercise, we strengthened our approach and accounted for both internal and external developments. Notably, the 2021 process allowed us to consider the rapid advancement of our business transformation, our recently announced ambition to venture into wellness and healthcare, and the progress we have made so far toward the sustainability ambitions we had announced as part of the 2025 Roadmap in our 2019 Integrated Report. In addition, we strived to embed the principles of double materiality to bring further sophistication to our assessment.

Importantly, each assessment incorporates the feedback we’ve collected from representatives of our key stakeholder groups: consumers, employees, the supply chain, investors and the finance community, regulators, the public health community, and civil society. Engaging with stakeholders — including PMI’s critics — in an open and transparent way offers the opportunity to understand their expectations and concerns, and to consider these while defining our priorities. In turn, it also allows us to strengthen our reporting and better explain the context and the challenges related to our transformation.

In 2021, we expanded our assessment — recognizing that there is value in integrating different perspectives into our analysis to deepen our understanding. We prepared a list of potentially relevant ESG topics; then, we not only gathered stakeholders’ views, but also evaluated them according to PMI’s impacts on society and the planet along its value chain (“outward impacts”) and the potential risks and opportunities for PMI’s performance and enterprise value carried by different ESG topics (“inward impacts”). The insights we gathered will help us refine our sustainability blueprint.

The results of the 2021 sustainability materiality assessment indicated that topics related to the social impacts generated by PMI’s products — including product health impacts; sales, marketing, and consumer communications; and innovation in wellness and healthcare — were a clear priority and represent those areas with the greatest transformative potential for the company.

Additional topics — such as climate, diversity and inclusion, and materials and product eco-design, amongst others — were also identified as clear priorities as they were assessed highly material from an inward and outward impact perspective or deemed highly relevant by stakeholders. Further, we identified three priority topics that were not included in the list of most material topics, but that we expect to gain momentum in the future: biodiversity, water and human capital development.

As the foundation of our sustainability strategy, the results of our sustainability materiality assessment allow us to prioritize our focus and resources on areas where we can have the greatest impact and make the most progress. We also understood early on that integrated reporting would be the most holistic way to describe the actions the company was taking to achieve its purpose of delivering a smoke-free future. This is why we have continuously evolved our reporting over the years, and quickly advanced it to seek alignment with the framework of the International Integrated Reporting Council.

In addition, we support and seek to align with guidance and recommendations from different reporting frameworks and standards, such as those from the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD), and the United Nations Sustainable Development Goals (SDGs). Applying all of these simultaneously while tailoring our disclosures to properly reflect our company’s unique value proposition is a complex exercise. It is also an enriching one, as it brings sophistication and perspective to our work.

At PMI, we are committed to continuously improve the way we measure and report on our company’s approach, taking a comprehensive approach that not only covers our activities (or “how” we operate) but also focuses on where we can have the greatest impact: our products (or “what” we produce). We welcome efforts toward the standardization of ESG reporting and are committed to respond to stakeholder expectations for transparent, comparable, and reliable information on our ESG risks and performance.

In February 2022, PMI published its 2021 Sustainability Materiality Report, summarizing the approach and findings of a sustainability materiality assessment conducted during the second half of 2021. A sustainability materiality assessment is a process through which the company identifies, assesses, and prioritizes issues by collecting inputs from a range of sources.