Organizational Change
10 Burning Questions:
PMI on How It Will Create a Smoke-Free Future

Jennifer Motles and her colleagues at Philip Morris International (PMI) are on a crusade to end smoking. They know many of us probably won’t believe them. And they are OK with that; they just want the chance to prove it.

Motles, who manages social impact and sustainability at PMI, said as much to a packed room at SB’18 Vancouver in June; in fact, she admitted to hating cigarettes before inviting any and all tough questions from session attendees. Afterwards, when a representative from another tobacco company in the audience came to commend her after her talk, she challenged them by saying, “Thanks … but when are you going to commit to stop selling cigarettes?”

Motles, previously an international human rights attorney at the United Nations, told Sustainable Brands she took this job with PMI because she believes that she can make a real difference by driving PMI’s strategy to properly address the harm created by cigarettes, by taking steps to stop making them. Together with many others working at PMI, she has put her heart, mind and career on the line for this.

PMI knows you’re skeptical; so are we. But if our collective cause is really to change the world through better brands, products, services and supply chains, what are we to do about the 1.1 billion people in the world who smoke?

We recently sat down with Motles to discuss our burning questions regarding PMI’s smoke-free vision for the future. Here’s what we learned.

PMI is designing a smoke-free future. What does that mean?

Jenny Motles: Smoking cigarettes causes serious disease, and the best way to avoid the harm of smoking is never to start, or to quit. But much more can be done to reduce health risks for the world’s 1.1 billion women and men who would otherwise continue to smoke.

We are building PMI’s future on smoke-free products that are a much better choice than cigarette smoking. Our goal is that these products will one day replace cigarettes.

While nicotine is addictive, it is the smoke generated by burning tobacco that is the principal problem. Through groundbreaking research, we have developed a range of smoke-free products that are enjoyable for smokers and have the potential to significantly reduce health risks when compared to smoking.

How does this approach differ from other traditional tobacco companies?

JM: At PMI (a separate company from Altria/Philip Morris USA), our efforts are squarely focused on replacing cigarettes with smoke-free products as soon as possible, and we are fundamentally transforming our organization to meet this ambitious objective.

Other cigarette companies have also ventured into research and development of new alternative nicotine deliverables that have the potential to reduce risk in the population, yet their intention is that of broadening their portfolio. Our value proposition differs drastically from that: In 2017, 39 percent of our global commercial expenditure and 74 percent of our global R&D expenditure were spent on smoke-free products. We are making considerable investments in the quality of our scientific research, and consistently share our progress with scientists, governments, and others stakeholders to facilitate dialogue and independent verification.

In 2017, smoke-free products already represented over 4 percent of our shipment volume and around 13 percent of our net revenues, excluding excise taxes, in just two years since commercialization. To accelerate this transition, we are increasingly shifting resources to the development, assessment, and commercialization of smoke-free products.

We are also enhancing our current organizational strengths and adding new capabilities and skillsets to meet the needs of our changing company.

Big tobacco has a history of deceit and intentionally concealing the addictive, harmful and deadly effects of cigarettes. How is PMI acknowledging this and making amends?

JM: When the product we are making harms the health of our consumers, the very least we can do is to acknowledge it and do everything in our power to address this harm. And the only way to properly address this is by committing to develop products that can completely replace cigarettes and make them obsolete.

This is exactly what we are doing. We have decided to change the lives of smokers around the world by developing innovative products that are better alternatives to cigarettes and have the potential to reduce the harmful consequences of smoking. Essentially, we have decided to revolutionize our business as a tobacco industry, building a smoke-free future.

"As long as there is demand for cigarettes, there will be supply; if we stopped making cigarettes today, not only would people continue to smoke, but other cigarette providers would fill in that space. Thus, if PMI alone stops selling cigarettes, it would be irrelevant from a public health perspective."

To be clear, however, we recognize the reputational deficit we face, both as a company and as an industry. As we transform our business, we know that one of our key challenges is, and will continue to be, earning the trust of our stakeholders and society as a whole.

To have any credibility in solving a problem that in essence we have created, our purpose needs to be none other than to use our resources and creativity to develop and commercialize better alternatives for society and the environment, and ultimately to stop making cigarettes as soon as possible.

Why should PMI be trusted?

JM: Given the industry’s history, it’s no surprise that people doubt our authenticity and whether we will follow through — lack of trust in cigarette companies is well-deserved.

Yet, to contribute to this shared goal of creating a smoke-free world, you do not need to trust us. I don’t think you should. Actions speak louder than words. Inform yourself on what you think we should be doing, what we are doing, how we are doing it; scrutinize, challenge and engage with us — so we can be better and make this a reality.

From our side, transparency and disclosure are key. Starting with our 2017 Sustainability Report, we began publishing key metrics for investments, resource allocation and results to make our business transformation visible to the outside world. These metrics aim to make the actions we are taking to pursue our smoke-free vision measurable and verifiable. The first two metrics show our resource allocation between combustible products and smoke-free products, while the following three show progress in making smoke-free products the core of our business. We will publish updates on these metrics on a regular basis.

In addition, we contributed to the establishment of an independent foundation to accelerate progress in achieving a smoke-free world by focusing on science-based approaches. The foundation is self-governed and operates completely independent of PMI. It scrutinizes the progress of PMI and other companies in the sector, ensuring that the public health interests of society are met through the foundation’s Board of Directors.

What is PMI's goal and timing for phasing out cigarettes? How much progress have you made?

JM: Our plan is to make cigarettes an obsolete product that can be banned.

Member states of the World Health Organization (WHO) are rightly dissatisfied with the slow pace at which smoking is declining. They have established a 2025 target to reduce the prevalence of tobacco use by 30 percent compared to 2010, aiming to achieve a smoking prevalence of 15.5 percent.

Our intention is not to immediately exit the cigarette business — as in, make cigarettes somebody else’s problem. Indeed, we could spin off that part of our company — but that would not make cigarettes obsolete, and most importantly would not achieve the desired goal of removing cigarette smoking from society. In other words, to make the world smoke free, we need to remain competitive in the cigarette market as long as it exists.

In terms of timing, it is difficult to say. We are fully aware that many people are skeptical about our company and our products. We are frequently asked when we will stop selling cigarettes. Our objective is to reach this moment as soon as possible, and we’ll spare no effort to advise smokers to stop smoking or help them switch to smoke-free alternatives. However, we cannot achieve this alone.

Several elements need to come in place in order to be able to remove cigarettes from society. It depends on some factors out of our direct control — mainly, support from regulatory and public health authorities that will influence the pace and scale of switching. As long as there is demand for cigarettes, there will be supply. This means that, if we stopped making cigarettes today, not only would people continue to smoke, but other cigarette providers would fill in that space. Thus, if PMI alone stops selling cigarettes, it would be irrelevant from a public health perspective. Replacing cigarettes with better alternatives will take time, and we are fully committed to doing everything we can to ensure that this happens as soon as possible.

To achieve this objective, we have intensified our work and reallocated a significant part of our resources to support the development and commercialization of smoke-free products. We are already witnessing tangible progress: Since 2016, 5 million smokers have already stopped smoking and switched to our main smoke-free product, IQOS, with approximately 10 thousand more switching every day.

It is our ambition that at least 30 percent of our consumers, who would otherwise continue smoking, switch to our smoke-free products by 2025. Based on that ambition, we project that, by the same year, at least 40 million PMI cigarette smokers will have switched to smoke-free products – which means we would be contributing to accelerating the pace (projected by WHO) under which smokers stop smoking: 152 million by 2025 vs >95 million by 2020.

Although the health risks of heated tobacco/vaping products such as IQOS appear much lower than cigarettes, why move to them versus a new product segment without the hazards?

JM: Advancements in science and technology have made possible the development of smoke-free products that are a better alternative to smoking. While these products are likely to present less risk of harm compared to continued smoking, they are not risk-free.

The best option for health remains not to start or to quit smoking. However, for smokers who would otherwise continue smoking, our goal is to offer smoke-free alternatives that have the potential to reduce the risk as compared to continued smoking. These alternatives should be appealing to smokers: they should deliver a taste and sensory experience that leads smokers, who would otherwise continue to smoke, to switch.

"Of fundamental importance to me is having the opportunity to open the doors and windows of this company to the world; so we can look out, and everyone can look in. We can achieve a significant public-health benefit only when a large number of these smokers switch from cigarettes to better products."

Meanwhile, our R&D centers continue to research, learn more and create new platforms that can be even better suited to replace cigarettes.

Teen vaping is on the rise, spurred by flavored products. How is PMI addressing this issue and under-aged tobacco use?

JM: Children shouldn’t smoke or use products containing nicotine. We’re committed to doing our part to help prevent children from smoking or using nicotine products. Here is what we do at PMI:

• Our marketing complies with all applicable laws and regulations, and we have robust internal policies and procedures in place so that all our marketing and advertising activities are directed only toward adult smokers.
• We support regulation to ensure that only adults can buy tobacco and other nicotine products, and support strict enforcement of minimum-age laws and penalties for adults who buy or provide cigarettes to minors.
• We run retailer-training programs to ensure that retailers are aware of underage regulations and that they understand their role in preventing sales of tobacco and other nicotine-containing products to minors.

Flavorings are important because they can contribute to the overall taste and sensory experience of a product, and therefore can play a key role in smokers’ decision to switch to a better alternative than continued smoking. However, we agree that flavors should not be used to attract youth and would agree with an introduction of some sort of limitations. For example, we would agree with prohibition of flavors that have a dominant component of candy-type or confectionery flavors. Likewise, we would agree with prohibition of flavors marketed in a way appealing to underage users, like by using cartoons or candy trademarks. In addition, just like other ingredients, flavorings should be subject to appropriate quality and safety standards.

What comes beyond the shift to vaping for PMI?

JM: PMI’s commitment to phase out cigarettes is the logical next step for our company, but not the final destination.

The future of PMI involves integrating all of these complex issues into a corporate strategy – one that fundamentally changes the way we think about what makes us successful. Our company’s executives and scientists are constantly exploring options to go beyond the smoke-free products and strategies in place today and in that regard, we welcome input from the SB community on how PMI could continue its transformation.

What do you hope to accomplish by participating in the SB community?

JM: PMI's intention in participating with the Sustainable Brands community is not about financial benefit or piggy-backing on the reputable status the community has collectively gathered over the years.

The value for me is so much deeper than that. It is about breaking down silos to achieve change. Of fundamental importance to me is having the opportunity to open the doors and windows of this company to the world, so we can look out, and everyone can look in. We need to have open and frank dialogue with different brains that can help us navigate this change in the quickest and most efficient manner.

Transformative change takes time, but Sustainable Brands has allowed me (personally) and PMI (collectively) to realize the change that is possible when we choose to work together and collaborate in ways none of us ever thought possible.

Smoking is one of the world’s most pressing problems, one that is too complex for any one sector to solve alone. Substantial and tangible change can only be achieved at the convergence of inclusion, collaboration and innovation. I believe that is the value the SB community can bring to our transformation (and hopefully trigger the transformation of the entire sector).

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PMI certainly has a long journey ahead that begins with acknowledging the past. While we can’t know where this will lead; we are grateful to be asked to have a conversation, as skeptical as we all may be. We look forward to learning more about PMI’s journey and hope to see measurable progress and authentic, credible evolution of its ambitious goals and initiatives.