Philip Morris International : Top ten takeaways from PMI’s Integrated Report 2024
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TOP 10 TAKEAWAYS from PMI's Integrated Report 2024: Transforming for good
Find out how Philip Morris International is making progress toward achieving its purpose and receive detailed information about its strategic vision, performance, governance, and value creation.
This document should be read in conjunction with PMI's Integrated Report 2024
PMI aims to completely replace cigarettes as soon as possible with smoke-free products that are scientifically substantiated to be less harmful than smoking, while in the longer run laying the foundation of a strong business in the areas of broader lifestyle, consumer wellness, and healthcare.
Our company's purpose is clearly articulated in PMI's Statement of Purpose, a declaration issued by our Board of Directors. The Statement of Purpose also recognizes those stakeholders most critical to long-term value creation and sustainability.
EXCERPTS FROM PMI'S STATEMENT OF PURPOSE
In 2016, with the full support of the Board of Directors, PMI announced its new purpose of delivering a smoke-free future. Since then, PMI has fully aligned its employees with this purpose and swiftly shifted its organizational focus and resources to smoke-free alternatives. PMI is essentially disrupting its traditional business from the inside out and is leading the industry in this unprecedented transformation.
PMI remains committed to accelerating the end of smoking and laying the foundations of a strong business in areas of wellness and healthcare as we strive to develop commercially successful products that have a net positive impact on society.
Read PMI's Statement of Purpose
Read more about PMI's Stakeholder Engagement
PMI's key stakeholder constituencies, which are fundamental to both the achieving of its purpose and to the pace of its progress, will be affected in different ways by PMI's transformation.
To make its progress both measurable and verifiable, PMI developed a set of bespoke key performance indicators called Business Transformation Metrics. This set of metrics allow stakeholders to assess both the pace and the scale of its transformation and showcase how it is allocating resources away from its traditional cigarette business, aiming to base success on a future where it no longer makes or sells cigarettes.
We understand sustainability as a comprehensive approach that future-proofs our organization in multiple ways. Sustainability is a key component of our business strategy and long-term success. First, it strengthens our resilience by helping us anticipate and address environmental and social risks before they impact our operations. Second, it ensures we stay ahead of evolving regulatory requirements while maintaining the highest standards of transparency and accountability. Most importantly, we see sustainability as a catalyst for innovation and growth, opening new market opportunities and driving the development of products that offer solutions and create lasting value. This approach not only protects our business interests but also fulfills our broader purpose of making a positive impact on society while delivering value to our shareholders and other stakeholders alike. Through this lens, sustainability becomes both a strategic imperative and a source of competitive advantage.
-André Calantzopoulos, Executive Chairman
Transforming our company is not simply about substituting one product for another. It requires changing our entire value chain, as well as the way in which we engage with society. This has required a holistic review and overhaul of our entire business model and value proposition, which brings challenges and opportunities to all aspects of our business.
PMI'S BUSINESS TRANSFORMATION
Product transformation
Innovating for better products
Our product lines are the most visible aspect of our transformation. Over the past decade and a half, we have harnessed scientific and technological advances to develop alternatives to cigarettes that are scientifically substantiated to be a better choice for adult smokers than continued smoking. To achieve a smoke-free future, we work relentlessly to phase out cigarettes by replacing them with these less harmful alternatives as quickly as possible. We are increasing access for adult smokers by improving and expanding our portfolio of smoke-free products to meet their varying needs and preferences.
With an eye on the longer term, we are taking concrete steps to build the foundations for our wellness and healthcare business.
Internal transformation
A new organization and value chain
Since announcing our smoke-free vision, we have undergone a meaningful reorganization, which unfolds as we progress on our transformation journey.
Internally, we continue to invest in our employees to upskill their knowledge and build the capabilities they need to contribute fully to our business transition. Simultaneously, we are recruiting top talent and acquiring new capabilities. We are also incorporating new ways of working as we become an increasingly digitalized, project-based organization focused on consumer-centricity, agility, and data-driven decision-making.
Beyond our own operations, we are transforming every step of our value chain to serve our company purpose. We recognize the challenges these changes pose and are actively helping all those impacted (in our direct and indirect operations) to best manage the transition.
External transformation
Changing how we engage with stakeholders
Engaging with external stakeholders is critical to achieving our purpose. Our ability to successfully transform requires that we work with multiple segments of society to create a paradigm shift in which cigarettes become obsolete. This is particularly important as external circumstances and the actions of others can impact our ability to progress, and we must remain agile and adaptable in addressing these challenges to advance our transformation and foster a positive societal impact.
Finance community Regulators
Continuous engagement also allows us to build a shared understanding of contingency issues, proactively respond to concerns, identify potential areas of compromise, and find solutions that are good for our stakeholders, and for our business and long-term success.
Read more about PMI's Value Chain Transformation
We recognize that business transformation is a company-specific journey, which sustainability reporting standards and frameworks fail to adequately capture. To address this, we developed our Business Transformation Metrics, a bespoke set of financial and nonfinancial key performance indicators (KPIs).
These KPIs make our progress toward achieving our purpose of becoming a smoke-free business both measurable and verifiable. In doing so, they focus on the core of our sustainability strategy, consistent with the outcome of our sustainability materiality assessment.
They also showcase how we are allocating resources away from our legacy business as we advance toward a future in which we will no longer base our success on making or selling cigarettes.
By transparently reporting periodically on these KPIs-sharing both year-on-year and cumulative progress-we enable external scrutiny and allow our stakeholders to assess the pace and scale of our transformation.
BUSINESS TRANSFORMATION METRICS
Consumers&
Revenues
Total number of users of PMI smoke-free products (in millions)1* Total number of IQOS users (in millions)1*
Estimated number of users who have switched to IQOS and stopped smoking (in millions)2*
Adjusted net revenues ratio (smoke-free/total)3*
Number of markets where smoke-free products are available for sale4*
Number of markets where >50% of net revenues are smoke-free* Number of markets where >75% of net revenues are smoke-free*
Commercialization
Proportion of markets where smoke-free products are available for sale that are low- and middle-income markets5*
Commercial (marketing) expenditure ratio (smoke-free/total)*
Smoke-free product shipment volume-heated tobacco units (billion units)*
Shipment volume-nicotine pouch (million cans)*
Combustible tobacco product shipment volume (billion units)6*
Change in combustible tobacco product shipment volume (billion units) vs. 2015 baseline6,7*
Adjusted R&D expenditure ratio (smoke-free/total)*
Sourcing& Operations
Supply chain direct spend expenditure (smoke-free/total)8
Number of factories producing smoke-free products out of total number of factories9*
The 2024 metrics marked with an asterisk (*) are subject to PwC's Limited Assurance 'Report' (available on pages 195-197 of PMI Integrated Report 2024).
Note: Unless otherwise stated, all applicable business transformation metrics include Swedish Match related data as of November 11, 2022 (acquisition date), as well as wellness and healthcare business.
1 Total PMI smoke-free users is defined as the sum of total IQOS users, total oral smokeless users, and total e-vapor users of PMI products minus poly-users across PMI's smoke-free product categories. 2022 and 2023 IQOS user data was restated. For definitions, see pages 200-203 in PMI's Integrated Report 2024.
2 Previously the metric was named "Estimated number of users who have switched to PMI smoke-free products and stopped smoking (in millions)." The change pertains to name only. The methodology remains the same.
3 For definition of net revenues related to smoke-free, see pages 200-203 in PMI's Integrated Report 2024. Data excludes the impact related to termination of distribution arrangement in the Middle East in 2023.
4 For definition of available for sale, see pages 200-203 in PMI's Integrated Report 2024.
5 Excluding PMI Global Travel Retail. World Bank report issued in 2021 is used on a comparative basis for income level classification. For definition of low- and middle-income markets, see pages 200-203 in PMI's Integrated Report 2024.
6 Combustible tobacco products shipment volume includes cigarettes and other tobacco products expressed in cigarette equivalent units.
7 This indicator is calculated based on millions of units.
8 Direct spend focuses on materials used in the manufacture of our products; it includes tobacco leaf, direct materials, and electronic devices and accessories. Data excludes Swedish Match and wellness and healthcare business.
9 Data reflect the number of factories operated and owned by PMI at the end of the respective year. "Smoke-free products factories" is defined as manufacturing facilities producing heated tobacco units and oral nicotine products. The number of factories reported is based on location, i.e., if a facility is one location, but has several physical areas (plants) the facility is counted as one.
Read more about PMI's Business Transformation Metrics
2015 baseline
2022
2021 2024
n/a 33.3 38.6
25.1
18.1
32.1%
73
17
0
43%
74%
109
42
642
(26.8%)
98.8%
43% 14 out of 49
16 out of 50
Aspirations
(27.9%) (27.6%)
36.4% 38.7%
99.4% 99.5%
48% 49%
28.8 32.2
21.1 23.0
41% 40%
74% 78%
633 635
125 140
421 644
84 95
25 23 ~60 by 2030
>2/3 by 2030
100 by 2025
3 6 ~40 by 2030
>50% by 2025
PMI operates within a complex system that can both enable and constrain our transformation. While our organization holds significant capabilities and reach, it functions as part of a larger system of intertwined markets, supply chains, and regulations that influence the pace of transformation.
Our performance in 2024 is a testament to our unwavering commitment to transforming our company for good. We excelled in areas within our control- such as innovation, operational transformation, and market readiness. However, uncontrollable factors like regulatory barriers and geopolitical disruptions undeniably impacted our progress. Despite these external barriers, the dedication and strategic execution of our teams worldwide have positioned us strongly to continue making progress on our journey towards achieving one of the most ambitious corporate transformations in modern business history.
-Jacek Olczak, CEO
Our approach to sustainability is anchored in a comprehensive materiality assessment that serves as a strategic business tool for identifying our sustainability priorities. This robust process, enables us to make informed decisions that drive business value while meeting stakeholder expectations. Since 2021, our adoption of "double materiality" has strengthened our ability to evaluate sustainability matters through both impact and financial lenses, helping us identify opportunities for growth and differentiation while managing potential risks. Each iteration has enhanced our strategic capabilities, and in 2024, we further strengthened our approach by integrating regulatory requirements, notably the EU Corporate Sustainability Reporting Directive (CSRD), while leveraging our Enterprise Risk Management program to evaluate the financial implications of sustainability matters in a systematic fashion.
OUR APPROACH TO SUSTAINABILITY
Regulatory bodies globally are enforcing stricter guidelines on transparency and accountability in sustainability making compliance with evolving sustainability standards crucial. Ensuring readiness is the basis and foundation of our strategy.
Transformational leadership is core to our approach to sustainability. It is about inspiring significant, lasting changes at PMI and in our industry, influencing standards, shaping policy, and driving systemic change that redefines market expectations.
Identifying and mitigating sustainability-related risks tied to environmental and social issues is essential for business resilience. It protects our operations, enhances our reputation, and creates growth opportunities, ensuring our long-term success.
Streamlining processes and optimizing resource allocation can enhance productivity, reduce costs, and boost profitability and competitive advantage. This involves adopting technology, adopting circular practices, optimizing our supply chain, and developing our employees.
Aligning sustainability with long-term goals, driving innovation for competitive value, and future- proofing our business are interconnected strategies that ensure our company's enduring success and relevance in a rapidly changing world.
Read PMI's 2021 Sustainability Materiality Report
Read more about PMI's Approach to Sustainability
Read about PMI's renewed Materiality Assessment
Sustainability is more than just a means to minimize negative externalities and mitigate risks while maximizing operational efficiency and resource optimization. We see it as a fundamental opportunity for innovation, growth, and purpose-led, impact-driven, long-term value creation.
The company's approach to sustainability addresses its environmental, social and governance priorities through eight impact-driven strategies: four focus on product impacts, another four on impacts derived from its business operations. The company's policies, rules, and procedures define its ability to successfully implement these strategies.
Read more about PMI's Approach to Sustainability
Our financial strength, combined with our clear strategic focus and sustainability commitment, positions us well to continue investing in the future we envision.
We remain confident that our integrated approach-linking financial success with positive societal impact-is the right path forward. The road to transformation requires patience, persistence, and partnership. While we cannot control all variables that influence our progress, we can and will continue to demonstrate our commitment through concrete actions, transparent reporting, and an unwavering focus on our smoke-free vision. Our financial strategy, sustainability commitment, and business objectives remain perfectly aligned toward this goal.
-Emmanuel Babeau, Chief Financial Officer
PMI's 2025 Roadmap outlines our key goals and informs the route of our company's long-term plan. Running to the end of 2025, it comprises 11 headline goals, each connected to our eight strategies, which aim to address the priority sustainability topics identified by our 2021 sustainability materiality assessment.
PROGRESS ON OUR 2025 ROADMAP
Goals Priority sustainability topics Intentionally work toward phasing out cigarettes by ensuring that we become a substantially smoke-free company by net revenues by 2030 and continue to reduce our combustible shipment volume
Product health impact
Develop and commercialize science-based smoke-free alternatives, making them available in 100 markets (of which at least half are low- and middle-income markets) and continue to increase the total number of users
Product health impact; Sales, marketing, and consumer com-munications
Deploy robust youth access prevention programs in indirect retail channels and ensure that sales of our products abide by our Marketing Codes
Lay the foundation to evolve into a broader lifestyle, consumer wellness, and healthcare company in the long term
Innovation in wellness and healthcare
Reduce post-consumer waste and prevent littering by implementing comprehensive programs covering all our consumables
Follow eco-design and circularity principles for all smoke-free electronic devices
Materials and product eco-design; Post-consumer waste
Nurture a fair and inclusive culture that promotes the continuous development of our employees
Fair and inclusive culture; Human capital development
Eradicate systemic child labor in our tobacco supply chain
Ensure all contracted tobacco farmers make a living income; partner with our direct suppliers to promote a living wage for their workers
Socioeconomic well-being of tobacco farming communities
Achieve carbon neutrality in our operations and accelerate our decarbonization toward net zero across our value chain
Climate
Promote biodiversity, address critical water challenges, ensure no conversion of natural ecosystems, and halt deforestation in both our tobacco and pulp and paper supply chains
Biodiversity; Water
In 2021, we developed PMI's Sustainability Index to measure objectively and communicate rigorously progress toward our aspirations, using a set of clearly defined and verifiable metrics.
We completed the first performance share units (PSU) cycle of our 2022-2024 Sustainability Index, which accounts for 30 percent of our performance-based long-term equity award. We achieved an overall index score of 89%, with 76% on product sustainability ("what" we sell) and 115% on operational sustainability ("how" we operate). Out of the 19 key performance indicators constituting the index, we exceeded our targets on ten.
Sustainability Index 30%
GRAPHIC TO BE
EPS 30% TSR 40%
DISCUSSED
10% 20%
PRODUCT
SUSTAINABILITY
OPERATIONAL
SUSTAINABILITY
Additional information about PMI's Sustainability Index
Substantive information about PMI's Sustainability Index can be found in:
• PMI's annual Proxy Statement: for disclosure of performance achievement for vested awards.
• PMI's annual Integrated Report: for disclosure of the structure of the version of the Index introduced in the year on which the report is focused.
• PMI's Sustainability KPI Protocol: for a transparent explanation of how we define and measure progress, each Index KPI has its own standard, which includes definitions, assumptions, scope, methodology, and basis for preparation.
• PMI.com: to learn more about the Sustainability Index structure, governance, and mechanics including scoring.
SUSTAINABILITY INDEX 2024-2026
PMI's Integrated Report 2024 introduces the company's Sustainability Index 2024-26, linked to the 2024-2026 PSU cycle. This new Index maintains continuity with its predecessor, the 2023-25 Index, reflecting priorities resulting from our 2021 sustainability materiality assessment.
Read more about PMI's Sustainability Index and Sustainability KPI Protocol
2024 HIGHLIGHTS
Many might view the pairing of tobacco and sustainability as paradoxical, yet this perceived contradiction is precisely what makes our actions impactful and our story so compelling. Sustainability for us is an opportunity to transform our industry from within, proving that positive change can emerge from unexpected places. By combining deep expertise, talent, and dedication we are demonstrating how a company can evolve to create lasting positive impact for consumers, society, and the planet.
-Jennifer Motles, Chief Sustainability Officer
1 Total PMI smoke-free users is defined as the sum of total IQOS users, total oral smokeless users, total e-vapor users of PMI products minus poly-users across PMI smoke-free product categories. 2023 IQOS user data was restated. For definitions, see pages 200-203 in PMI's Integrated Report 2024.
2 For definition of net revenues related to smoke-free, see pages 200-203 in PMI's Integrated Report 2024. Data excludes the impact related to termination of distribution arrangement in the Middle East in 2023.
3 For definition of available for sale, see pages 200-203 in PMI's Integrated Report 2024.
4 Excluding PMI Global Travel Retail. World Bank report issued in 2021 is used on a comparative basis for income level classification. For definition of low- and middle-income markets, see pages 200-203 in PMI's Integrated Report 2024.
5 Investments reflect research, product and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding. Figures do not include Swedish Match and wellness and healthcare business.
6 Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free product consumables. See PMI's Sustainability KPI Protocol 2024 for further details. Data excludes Swedish Match and wellness and healthcare business.
7 See PMI's Sustainability KPI Protocol 2024 for further details.
8 Excludes China, Switzerland, and India (flue-cured) due to restrictions on farmer income data, and Thailand and Tanzania since the living income benchmark is still under development. See PMI's Sustainability KPI Protocol 2024 for further details on methodology.
Showcasing the work and results from our long-term strategies, as well as the people driving them forward.
Learn more about the people at the heart of our sustainability initiatives, spearheaded by our teams and partners around the world.
Disclaimer
Philip Morris International Inc. published this content on April 07, 2025, and is solely responsible for the information contained herein. Distributed via , unedited and unaltered, on April 07, 2025 at 10:57 UTC.