Progress of any kind requires clearly articulated priorities and targets, as
well as transparency and accountability for meeting them. I am proud to say that
Philip Morris International (PMI) is committed to
all of the above. Since embarking on an ambitious business
transformation
in 2016, PMI has remained steadfast in its purpose of delivering a smoke-free
future.
It is now also looking into building a lifestyle, wellness and healthcare
businesses
that would seek to have a net-positive impact on society. For the last three
years, our Integrated Report has demonstrated improving environmental, social
and governance (ESG) performance and progress toward delivering that smoke-free
future.
PMI recently released its third annual Integrated
Report which includes an updated
Statement of Purpose and a new sustainability strategy, as well as detailed
information about forward-looking roadmap, performance, and metrics. The Report
is guided by our formal sustainability materiality assessment — which helped us
identify, calibrate, and define the ESG topics to focus on and prioritize our
resources.
As part of our 2021 assessment, we redesigned our strategy to reflect the areas
in which our company can make the most significant difference. We recognized two
distinct forms of impact: those that derive from our products and those
generated by our operations. We subsequently classified each issue based on its
environmental, social or governance-related nature. These and other material ESG
topics form the basis of PMI’s updated roadmap, organized into 11 headline goals
running through the end of 2025.
2021 was a year when we also focused on developing a clear and accepted process
for establishing concrete definitions, documentation and controls for
sustainability with the aim of standardizing how we measure ESG performance.
Taken together, these standards compose our new ESG KPI Protocol — which
brings formality to the process of defining success, specific measures of
progress, and governance and accountability structures.
Finally, we carefully considered the best way to maximize the alignment of
incentives with sustainability-related results, in order to meet the evolving
expectations of investors and other key stakeholders. We are proud to have
answered this demand by introducing a Sustainability Index that lets PMI
formally integrate ESG performance into long-term executive compensation in a
clear, strategic, comprehensive and credible manner.
Our new Sustainability Index consists of 19 key performance indicators (KPIs)
that measure progress toward the 11 goals in our 2025 roadmap. We sought to
select KPIs that were meaningful — enabling stakeholders to assess our company’s
progress towards its priority sustainability
topics,
and well-defined — allowing for accurate, reliable and consistent measurement of
progress over time. As with our roadmap, we have split the 19 KPIs according to
two drivers: product sustainability (11 KPIs) and operational sustainability (8
KPIs).
In addition, we have defined annual targets for each KPI in our Sustainability
Index. We will assess and award a score to each KPI on an annual basis using a
weight assigned to each. Our total Sustainability Index score will then be
calculated on a scale from 0 to 150 percent, with a target between 90 and 110
percent every year. The weighting applied to each KPI was informed by the
results of our sustainability materiality assessment, with the highest weight
attributed to the social impacts of our products — where we believe our company
can have the greatest impact over time.
We understand that the value of embedding sustainability into corporate strategy
lies in being able to think long-term and disclose forward-looking ambitions,
plans, and progress. Setting clear targets allows us to define our direction,
align on definitions and measures of success, and follow and report on our
progress. By relying on a bespoke index, as opposed to external indices, we
believe PMI will be able to allocate its resources and align its efforts more
consistently and strategically with our most important ESG topics.
We also aim to continuously improve our performance and drive measurable
progress — all communicated through open and clear reporting. As we continue to
transform, learn and discover better ways to develop solutions that have
meaningful impact, we hope our transparency and ambitious targets will spark
dialogue with those who can help accelerate the pace of change — to question, to
challenge and to engage with us as we work on making PMI better, focused on
sustainability and committed to our purpose.
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Jennifer is an International and Human Rights lawyer currently working at Philip Morris International. More specifically, she is helping to advance its transformation goal of becoming a smoke-free company, with an emphasis on external stakeholder engagement projects.
Published Jun 14, 2022 8am EDT / 5am PDT / 1pm BST / 2pm CEST