Philip Morris International Releases Integrated Report 2022

Philip Morris International Releases Integrated Report 2022

Report communicates PMI’s progress toward becoming a majority smoke-free company as the company continues to transform for good.

LAUSANNE, Switzerland–(BUSINESS WIRE)—May 4, 2023– Philip Morris International Inc. (PMI) (NYSE: PM) released its fourth annual Integrated Report today. Informed by a formal sustainability materiality assessment, the report aims to provide an objective description of the company’s business model, governance and management, strategy, and performance.

“Despite its many tests, 2022 was a remarkable year that brought our employees closer and saw us make measurable strides toward achieving our purpose,” said Jacek Olczak, Chief Executive Officer of PMI. “We are progressing toward our 2025 aspiration of becoming a majority smoke-free company and ultimately phase out cigarettes. While a transformation of this magnitude and complexity cannot be achieved overnight, we are committed to making it happen as fast as possible. It is through constructive engagement that we will accelerate the pace of meaningful and impactful change and complete our transformation for good.”

PMI’s latest Integrated Report communicates the progress the company is making towards achieving its purpose—the company’s statement of purpose articulates PMI’s aim to deliver a smoke-free future by focusing its resources on developing, scientifically substantiating, and responsibly commercializing smoke-free products that are less harmful than smoking, with the aim of completely replacing cigarettes as soon as possible and to evolve in the longer term into a broader lifestyle, consumer wellness, and healthcare company.

Building on its ESG framework, PMI developed eight strategies targeting the company’s most pressing areas of impact. To accompany these eight strategies, PMI established 11 goals, which form the basis of its 2025 Roadmap, and 19 key performance indicators (KPIs) to measure progress via its Sustainability Index. Each KPI is also aligned with one of two drivers: product sustainability (11 KPIs) or operational sustainability (8 KPIs).

“Non-financial information is increasingly being used by external stakeholders to assess and compare a company’s performance to others, including the financial community in their analyses and investment decisions. It is key to the integrity of PMI’s reporting that the information and data that we publicly disclose accurately reflect our company’s progress, following clear calculation methods,” explained Emmanuel Babeau, Chief Financial Officer of PMI.

Last year, PMI also published its first ESG KPI Protocol, which includes the definition, methodology, and scope of each of the Sustainability Index’s KPIs to provide measurable, verifiable, consistent, and accurate reporting on progress. In conjunction with its latest Integrated Report, the company is also publishing an updated Protocol that notably accounts for efforts undertaken during 2022 to make these KPIs even more robust.

Progress against PMI’s sustainability aspirations continued mostly apace in 2022 as it sought to tackle the impacts of both its products (what it produces) and its operations (how it produces).

On the social side of its product impact, the company continued to transform and deliver on its purpose; further, it continued implementation of youth access prevention programs in its direct and indirect retail channels. Mindful of the importance of reducing post-consumer waste, it made progress in implementing take-back programs for its smoke-free devices and consumables and increased its electronic device repair capabilities.

Product impact

Social

• 24.9 million: Estimated total adult users of PMI’s smoke-free products (2021: 21.7 m)¹
• 32.1%: Of net revenues derived from smoke-free products (2021: 29.5%)²
• 73: Markets where PMI smoke-free products are available for sale, of which 42% are in low- and middle-income countries (2021: 71, 42%)³
• USD 10.7 billion: Cumulative investment behind smoke-free products since 2008 (2021: USD 9.2 billion)⁴
• 91%: Of total shipment volume covered by youth access prevention programs in indirect retail channels (2021: 91%)⁵
• USD 0.3 billion: Annual net revenue from wellness and healthcare products (2021: USD 0.1 billion)

Environmental

• 86%: Recycling rate of IQOS devices returned to centralized recycling hubs (weighted-average percentage of each device that is recycled) (2021: 86%)⁶
• 68%: Of shipment volume covered by markets with anti-littering programs in place for combustible cigarettes
• 8.5%: Of shipment volume covered by markets with smoke-free consumables take-back programs⁷

On the social side of PMI’s operations, the company expanded access to structured lifelong learning offers among PMI employees, published a strengthened commitment to human rights, and completed its sixth and seventh human rights impact assessments, in Brazil and Malaysia. On the environmental side, it continued decarbonizing its direct operations, and its science-based targets were validated for net zero GHG emissions across its value chain by 2040. In conjunction with the UN Biodiversity Conference (COP 15) in December 2022, the company announced new long-term biodiversity and water ambitions and strategies, aligned with the post-2020 biodiversity framework adopted by parties to the convention.

Operational impact

Social

• 40.7% Of management positions held by women, exceeding our 2022 target of 40% (2021: 39.7%)
• 7 Human rights impact assessments conducted since 2018 in highest-risk countries (2021: 5)

Environmental

• 55% Proportion of tobacco purchased at no risk of net deforestation of managed natural forest and no conversion of natural ecosystems (2021: 37%)
• Triple A Score from CDP for climate, forest, and water security for the third consecutive year

As a strong complement to the content and data included in PMI’s 2022 Integrated Report, the company has developed 12 case studies and market stories that showcase impact and highlight how PMI affiliates worldwide drive sustainability. All case studies and market stories are available online in a dedicated section of pmi.com/sustainability.

“We recognize the essential need to continue building legitimacy and trust among our stakeholders, who are fundamental to our company’s purpose and can accelerate the pace at which we achieve it,” said Jennifer Motles, Chief Sustainability Officer at PMI. “Our latest Integrated Report aims to address their demands for more detailed and comparable information on our risks and performance. As we continue to learn, transform, and discover better ways to develop solutions that have a meaningful impact, we hope our transparency and willingness to engage will spark dialogue with those who can help accelerate our pace of change.”

Please visit pmi.com/sustainability to learn more about sustainability at PMI and read the PMI Integrated Report 2022.

The preparation of PMI’s Integrated Report 2022 considers guidance of international standards and frameworks, including the Global Reporting Initiative (GRI), the UN Global Compact (UNGC), the UN Sustainable Development Goals, the IFRS Foundation—including use of its SASB Standards, Integrated Thinking Principles, and Integrated Reporting Framework—and some of the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

Philip Morris International: Delivering a Smoke-Free Future

Philip Morris International (PMI) is a leading international tobacco company working to deliver a smoke-free future and evolving its portfolio for the long term to include products outside of the tobacco and nicotine sector. The company’s current product portfolio primarily consists of cigarettes and smoke-free products. Since 2008, PMI has invested more than USD 10.5 billion to develop, scientifically substantiate and commercialize innovative smoke-free products for adults who would otherwise continue to smoke, with the goal of completely ending the sale of cigarettes. This includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies. In November 2022, PMI acquired Swedish Match – a leader in oral nicotine delivery – creating a global smoke-free champion led by the companies’ IQOS and ZYN brands. The U.S. Food and Drug Administration (FDA) has authorized versions of PMI’s IQOS Platform 1 devices and consumables and Swedish Match’s General snus as Modified Risk Tobacco Products (MRTPs). As of December 31, 2022, PMI’s smoke-free products were available for sale in 73 markets, and PMI estimates that approximately 17.8 million adults around the world had already switched to IQOS and stopped smoking. Smoke-free products accounted for approximately 32% of PMI’s total full-year 2022 net revenues. With a strong foundation and significant expertise in life sciences, PMI announced in February 2021 its ambition to expand into wellness and healthcare areas and, through its Vectura Fertin Pharma subsidiary, aims to enhance life through the delivery of seamless health experiences. For more information, please visit www.pmi.com and www.pmiscience.com.

Forward-Looking and Cautionary Statements

This press release and related materials contain projections of future results and goals and other forward-looking statements, including statements regarding business plans and strategies. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. In the event that risks or uncertainties materialize, or underlying assumptions prove inaccurate, actual results could vary materially from those contained in such forward-looking statements. Pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, PMI is identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained in any forward-looking statements made by PMI.

PMI’s business risks include: excise tax increases and discriminatory tax structures; increasing marketing and regulatory restrictions that could reduce our competitiveness, eliminate our ability to communicate with adult consumers, or ban certain of our products in certain markets or countries; health concerns relating to the use of tobacco and other nicotine-containing products and exposure to environmental tobacco smoke; litigation related to tobacco use and intellectual property; intense competition; the effects of global and individual country economic, regulatory and political developments, natural disasters and conflicts; the impact and consequences of Russia’s invasion of Ukraine; changes in adult smoker behavior; the impact of COVID-19 on PMI’s business; lost revenues as a result of counterfeiting, contraband and cross-border purchases; governmental investigations; unfavorable currency exchange rates and currency devaluations, and limitations on the ability to repatriate funds; adverse changes in applicable corporate tax laws; adverse changes in the cost, availability, and quality of tobacco and other agricultural products and raw materials, as well as components and materials for our electronic devices; and the integrity of its information systems and effectiveness of its data privacy policies.

PMI’s future profitability may also be adversely affected should it be unsuccessful in its attempts to produce and commercialize reduced-risk products or if regulation or taxation do not differentiate between such products and cigarettes; if it is unable to successfully introduce new products, promote brand equity, enter new markets or improve its margins through increased prices and productivity gains; if it is unable to expand its brand portfolio internally or through acquisitions and the development of strategic business relationships; if it is unable to attract and retain the best global talent, including women or diverse candidates; or if it is unable to successfully integrate and realize the expected benefits from recent transactions and acquisitions. Future results are also subject to the lower predictability of our reduced-risk product category’s performance.

PMI is further subject to other risks detailed from time to time in its publicly filed documents, including PMI’s Annual Report on Form 10-K for the fourth quarter and year ended December 31, 2022. PMI cautions that the foregoing list of important factors is not a complete discussion of all potential risks and uncertainties. PMI does not undertake to update any forward-looking statement that it may make from time to time, except in the normal course of its public disclosure obligations.

1. Figures pertain to total IQOS users. See the Glossary available on pages 205-209 of PMI Integrated Report 2022.

2. For definition of net revenues related to smoke-free products, see the Glossary available on pages 205-209 of PMI Integrated Report 2022. 2022 figure includes Swedish Match net revenues from November 11, 2022 (acquisition date) to December 31, 2022. 2021 adjusted net revenues exclude the impact related to the Saudi Arabia customs assessments.

3. Including Swedish Match and excluding PMI Duty Free. Classification of low- and- middle-income countries is based on World Bank report issued in 2022.

4. Investments reflect research, product and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding.

5. Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free product consumables, See PMI’s ESG KPI Protocol 2022 for further details.

6. Including recycling (80%) and incineration with energy recovery (6%). 2022 figure excludes Russia.

7. Shipment volume includes heated tobacco units, e-vapor cartridges, and e-vapor disposables. See PMI’s ESG KPI Protocol 2022 for further details.

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