A tobacco company that will replace cigarettes with smoke-free products – that is the unprecedented move Philip Morris International’s (PMI) CEO André Calantzopoulos outlined in the company’s Sustainability Report 2017.
To affect this change and shape PMI into what the report describes as a true leader in sustainable business practices, he identified four areas in which PMI plans to excel in; and first and foremost, it will start with its products.
Spearheading this is a reduced risk product that heats tobacco instead of burning it, thereby creating a nicotine-containing vapour that the company says has the potential to significantly reduce individual risk and population harm compared to cigarettes. It’s one of a portfolio of smoke-free products PMI has developed and is the result of over UD$4,5-billion spent in research over the last decade.
“It is our ambition,” said Calantzopoulos, “that at least 30% of our consumers who would otherwise continue smoking switch to our smoke-free products by 2025 versus 2010. Based on that ambition, we project that by 2025 at least 40 million PMI cigarette smokers will have switched to smoke-free products.”
Along with this commitment to replacing cigarettes with a better alternative, the report outlines managing its social impact, reducing its environmental footprint, and operational excellence as the other three key spheres that PMI regards as materially sustainable practices to fundamentally transform its business. In terms of its focus on social sustainability, PMI identified progress in several crucial areas, including:
- Agricultural labour practices to achieve safe and fair working conditions on tobacco farms, as well as eliminate all forms of labour abuse. This is one of a range of policies included in PMI’s Human Rights Commitment published last year.
- Increasing the representation of women in leadership roles – women currently hold 34.4% of PMI’s management positions, and it is on track to reach a goal of 40% by 2022.
PMI’s environmental management strategy has involved a two-pronged approach: minimizing its impact on the environment through, among other initiatives, reducing carbon footprint, water use reduction, and combating deforestation; and adapting to the future – considering the business impact a major environmental trend like climate change could have on tobacco growing.
To provide a measurable indication of how effective its business transformation policies have been, last year PMI introduced a set of metrics that took stock of the actions the company was taking to pursue its smoke-free vision.
Key among these were:
- R&D expenditure included clinical studies, the development of new machinery, prototype, and product acceptability testing. In the 2017, 74% of R&D expenditure was on smoke-free products. That’s up on 2016’s 72% and the projected figure for 2018 is 80%
- Commercial expenditure relates for marketing, consumer engagement, and trade promotion costs of smoke-free products. The 2017 figure was 39% – an increase from 15% in 2016. For 2018, PMI has projected a further improvement to 55%.
- Net revenue: for 2017, smoke-free products accounted for 13% of net revenue – up from 2,7% last in 2016 and PMI sees a projected value of 16% in 2018.
This sustainability report – PMI’s third – concluded with a look ahead at opportunities for environmental sustainability its business transformation can effect.
Here, PMI stated it intends applying good environmental stewardship practices that includes implementing water stewardship across its operations, with ten factories expected to be certified by 2020 and the remaining by 2030.
Expanding its efforts on deforestation prevention and post-consumer waste management was another stated goal, along with incorporating good environmental management into its smoke-free products, ensuring the use of components that can be recovered or recycled.
This post was sponsored and provided by Philip Morris International.