Published 2 years ago.
About a 8 minute read.
/ This article is sponsored by
Philip Morris International.
Last month, Philip Morris International moved its global sustainability team under the leadership of CFO Emmanuel Babeau. It may be one of the first global companies to make this prescient move; but here are three reasons why we believe this trend is only just beginning.
Each year, we increasingly feel the impact of some of the biggest crises in
history: the calamitous effects of climate change, the depletion of natural
resources and the widening of social inequities. It is clear that ignoring these
issues is no longer an option.
This is why it is now assumed that every sector must play a role, and that the
only way to solve these immense challenges is through multilateral collaboration
and partnerships. But what does this mean for businesses?
For much of the current and last centuries, businesses have largely turned a
blind eye to their environmental and social impact, but this is increasingly
starting to change. It is now largely understood that having a positive impact
on society and the environment is not only the right thing to do, but a
requirement for business’ long-term
Easier said than done. Developing global, scalable environmental and social
programs requires enormous resources — sometimes building entire teams. It’s
easy to set targets; it’s much harder to make the tough decisions needed to
For the world’s largest companies, which answer to shareholders, the ability to
prioritize the long term becomes even more challenging. Luckily, it isn’t only
who are creating pressure — the investor
and financial sector are also demanding companies to better align their
sustainability and business strategies. While the global pandemic has amplified
and accelerated the urgency for stronger action, the long-term message is clear:
If companies don’t take the action needed around environmental, social, and
we will feel the effects for generations to come.
Business has been slow to heed the call to action. But Philip Morris
International (PMI), perhaps surprisingly, has taken
a leadership position in aligning its corporate and sustainability strategies.
And while some may not think a tobacco company and
can go hand in hand, PMI acknowledges that its most material topic is its
In 2016, it publicly committed to actively phase out cigarettes and is working
to deliver on its vision of eradicating smoking altogether. The company has also
spent nearly two decades shifting resources towards developing products that are
better alternatives to smoking, and placed the transformation of its business at
the core of its sustainability strategy.
Just last month, PMI further reinforced its commitment to sustainability by
moving its global sustainability team under the leadership of Chief Financial
Officer (CFO) Emmanuel Babeau.
PMI may be one of the first to make this prescient move; but here are three
reasons why we believe this trend is only just beginning.
Two truths are now primarily self-evident: 1) mankind cannot continue to extract
our planet’s natural resources at an unsustainable pace; and 2) companies that
pay attention to these issues, and invest accordingly, outperform those who do
Institutional investors are seeing these two realities and are increasing their
in assessing the performance of companies using ESG factors, according to the
fifth EY Climate Change and Sustainability Services
of 298 institutional investors globally. The Art of Alignment: Sustainability
published by SustainAbility in November 2019, also identified investors as
the primary audience demanding greater alignment between financial and
However, EY’s research shows that investors continue to be concerned about the
gap that exists between financial and non-financial performance. The research
further shows gaps in data quality and integrity, and inconsistencies in
integrated reporting. Financial performance is managed by finance teams, whereas
ESG performance is often led by sustainability teams. With investors
increasingly demanding high-quality, accurate ESG data alongside financial data,
bringing these two areas of reporting and expertise together becomes an
In this area, PMI is leading from the front. The appointment of Jennifer
Social Impact & Sustainability Lead, to the position of CSO sees the role move
from External Affairs to Finance; with Motles reporting to the CFO, Babeau. PMI
attributes the move to the increased recognition, by both companies and
investors, that fully integrating ESG drivers into business strategy can
significantly enhance both the sustainability agenda and financial performance.
“This move outlines that ESG is core to PMI’s performance and success, and
further demonstrates PMI’s leadership in sustainability and corporate purpose,”
regarding Motles’ appointment. “It is our firm belief that sustainability and
business performance do not follow separate paths and narratives. They are fully
interrelated and mutually reinforcing and should be organized and presented to
all stakeholders in an integrated way.”
According to EY, ESG performance reporting generally lacks the rigorous systems
and controls that characterize financial reporting. Unlike financial reporting,
ESG reporting does not have consistent metrics, assurance or reporting formats
that investors and companies can analyze or compare. This topic was discussed in
depth with nearly 400 people at the recent Integrate
2021 virtual conference.
Advances in technology enable companies to gather ever-increasing amounts of
data — for example, about the environmental footprint of their operations.
However, this data needs to be presented in an accessible and verifiable way.
Motles says the need for increased focus on usability of ESG data and reporting
was a contributing factor in PMI’s decision to place sustainability within
“Where in an organization is the center of expertise of managing data? It’s in
Finance,” she explains. “Moving sustainability into Finance adds robustness to
sustainability data, and adds integrated decision-making to the finance
function. It is insufficient to assess the future of the company purely on a
At the recent launch of the new S30
last month, HRH The Prince of Wales called for empowered CSOs, working in
lock step with their C-suite counterparts. S30 — launched by the Sustainable
Markets Initiative, EY and Freuds — will provide a forum for senior
sustainability leaders and help make the case for other businesses to appoint
As Prince Charles said at the launch: "I very much hope to see major businesses
around the world appoint suitably empowered CSOs to ensure sustainability is
central to business strategy, decision-making, procurement, supply chains and
customer engagement. Sustainability leaders need to work hand-in-hand with
C-Suite counterparts, bringing them along as part of the solution; and with
younger employees who I know care deeply about sustainability and want to see
real, demonstrable action.”
And when Sustainability and Finance teams work together, they will inevitably
learn from each other and strengthen the business.
Motles agrees with the Prince, saying that, “Sustainability teams have a lot to
learn in terms of financial strategic thinking; and equally, in finance, there
is an opportunity to expand horizons and think more about the long-term future.
As we transform our business, it’s important that we encourage and invite open
dialogue — not just with our stakeholders, but also amongst internal teams.”
She continued, “Foundationally, as a company we believe that sustainability must
be embedded into every aspect of our business. Sustainability strategy is
corporate strategy, and key ESG issues are key business issues. In this regard,
our non-financial and financial performance are deeply interrelated when we
think about the success and the future of our company.”
Motles recognizes PMI’s predicament when reporting on
“If we want to talk about ESG, we need to be ready to say we sell a product that
is harmful but have shifted our resources and focus to create better
alternatives to continued smoking.”
As mentioned earlier, in 2016, PMI announced its new purpose: to deliver a
by focusing its resources on developing, scientifically substantiating and
responsibly commercializing smoke-free products that are less harmful than
— with the aim of completely replacing cigarettes as soon as possible for adult
smokers who would otherwise continue to smoke.
PMI predicts that in some countries it may be possible to end cigarette sales
within 10 to 15 years given the right regulatory encouragement and support from
civil society. But it’s a complex issue. Motles points to the myriad of nicotine
products, tobacco-control measures and smoking-cessation therapies already
available; and yet, over one billion people still smoke.
“This is a systemic issue — in which industry, public authorities, and every
part of society must work together. Our intention is not just to make our
company smoke-free. We are driving a kind of change that aims for cigarettes to
become obsolete and replaced by better alternatives for those adult smokers who
will not quit,” she says.
Earlier this year, PMI published its first Integrated
including a Statement of Purpose — which re-affirms its commitment to deliver a
smoke-free future. The company is confident that aligning the Sustainability and
Finance functions will accelerate its transformation.
Published Dec 16, 2020 1pm EST / 10am PST / 6pm GMT / 7pm CET
This article, produced in cooperation with the Sustainable Brands editorial team, has been paid for by one of our sponsors.