Muhammad Zeeshan

Director Finance, Philip Morris (Pakistan) Limited

Philip Morris International (PMI/’the Company’) recently released its third annual Integrated Report for 2021, highlighting a redesigned sustainability strategy. What does this renewed strategy entail and what does it mean for PMI?

Philip Morris (Pakistan) Limited’s (“PMPKL”) parent company, Philip Morris International (“PMI”) annually releases an integrated report that outlines the progress v/s. the roadmap and gives us a chance to re-assess, prioritize and identify the areas we should focus on for long-term value creation.

At PMI, sustainability is embedded at the core of its entire business transformation and plays an integral role in guiding the operations. PMI’s revamped sustainability strategy extends beyond a value proposition centered on doing less harm and seeks to have a greater positive impact on society. This strategy directs the company to innovate and inspire growth by addressing the social and environmental impacts of two concrete pillars; its products (what PMI produces), and its business operations (how PMI produces). Led by this strategic vision, PMI’s renewed sustainability strategy is divided into eight impact-driven focus areas, four under each pillar, that allow contributions to solving some of society’s most pressing challenges – fostering the wellbeing of its people and our planet through strong governance.

  1. What does the new strategy, and framework hold for the overall environment and society?

The entire objective of PMI’s sustainability strategy and efforts is to impart a net positive impact on society and the environment. The four goals listed under the area of product impact guide PMI to mitigate all possible negative externalities of its products on society and the environment by reducing post-consumer waste of products. Similarly, the set of other four goals listed under the area of its business operations’ impact guides to conservation nature against climate change forces and ensuring socio-economic empowerment of the workforce.

  1. Has PMI set any standards for evaluation of its performance against the set Environment, Social, and Governance (ESG) targets?

To evaluate the effectiveness of its approach to sustainability and give clarity to both internal and external stakeholders, PMI has set a Sustainability Index comprising 19 KPIs to help measure and communicate progress against its aspirations rigorously and quantitatively. These KPIs are split according to two drivers; product sustainability and operational sustainability, and directly correspond to the Company’s long-term sustainability agenda. To further reinforce this commitment to sustainability as part of its corporate strategy, PMI’s Sustainability Index also integrates PMI’s long-term executive compensation program with its ESG performance and is included as one of its performance metrics under equity awards.

  1. The report also presents the PMI’s corporate strategy under a reformulated ESG framework. How does this ESG framework guide your Company’s business operations?

PMI makes sure its goals are connected to impact and not merely to strategic inputs. This has led PMI to restate some of its goals to ensure that they are meaningful and viable, creating quantifiable long-term value in the communities it operates. Just as PMI’s strategic vision guides its ESG principles, its ESG framework guides how PMI operates, shedding light on how best to allocate resources and integrate sustainability into its ways of working.

The strategies under the product impact pillar guide what to produce, setting targets to mitigate the negative social and environmental effects of its products through science and innovation. On the operational impact front, the ESG framework encourages PMI to promote diversity and inclusion at the workplace, ensure the socio-economic wellbeing of its tobacco farming communities and preserve nature. The renewed ESG framework explicitly links each of PMI’s eight priority areas of action to the UN SDGs to which it aligns and where PMI can have a real and lasting impact.

PMPKL’s business operations also reflect PMI’s ESG goals and are guided by our global sustainability targets. For example, to ensure a safe working environment, all our contracted farmers are required to follow the Agricultural Labor Practices Code on sites. In line with our environmental conservation objectives, PMPKL initiated a program to ensure that 100% of our contracted farmers utilize wood from sustainable and fully traceable sources. In 2021, our farmers needed around 42.5 million Kg of wood, all of which came from sustainable & traceable sources. To reduce our CO2 emissions, we undertook the conversion of boiler fuel for our Green Leaf Threshing Plant’s operation from Furnace Oil to Liquified Petroleum Gas (LPG) which has a relatively lower emission factor. In addition to these, we are working to align PMPKL’s operations with Alliance for Water Stewardship standards for sustainable water management. We have solar panels installed at our Sahiwal factory which helped us achieve a 44% energy reduction compared with the 2018 baseline.

  1. In today’s day and time, how important is it for businesses to abide by ESG standards?

The unforeseen circumstances brought in by the deepening climate crises and the recent pandemic has made many investors and policymakers realize a greater need to accelerate investments and progress in businesses that prioritize ESG. Our society is dependent on the government and well-functioning businesses which meet its needs, ranging from employment creation, equitable growth, diversity, protection of natural resources, and safeguarding consumers' interests, among others. As the understanding in this area is increasing, consumers are now also demanding high standards of sustainability from businesses.

  1. Given the specific socio-environmental needs of Pakistan, what are the ESG targets of PMPKL?

PMPKL is also driven by the same ESG targets set by PMI. PMPKL prioritizes its focus areas keeping in mind the specific needs of its local market. For example, some of the key focus areas at PMPKL regarding its ESG targets include promoting women empowerment and diversity and inclusion in the workplace, supporting the socio-economic wellbeing of our farmers, eradicating child labor incidence among contracted farmers, and ensuring the wellness of people, decarbonizing and reduce littering.

  1. How did the year 2021 fare for PMPKL in terms of its sustainability targets? Share some notable initiatives PMPKL undertook last year in line with its sustainability goals?

As the year 2021 went by with lingering effects of the COVID-19 pandemic, supply chain disruptions, and increasing climate change, our clear priority remained to protect the health, safety, and well-being of our people and planet. We took measures to sustain our operations and support not only our employees and their families but also the communities in which we operate. Despite the challenges, we continued to deliver a strong performance in terms of our sustainability goals and I am proud of our achievements. However, there is still a lot of work that remains to be done and every day, each one of us puts in all our efforts to move closer to our targets.

Some of the notable sustainability initiatives that we, at PMPKL, undertook last year included our; MakeYourComeback initiative that hired women (for a defined period) who had taken a break from paid work and wished to relaunch their careers for its various projects. Mechanization program that increases the labor efficiency of farmers while mitigating potential risks associated with manual tasks. PMPKL had also initiated a mission called MissionCleanerPakistan to address the issue of litter by creating awareness around waste disposal and advocating lifestyle changes. Under the Mission, we carried out 20 cleanup drives across Pakistan. During these cleanup drives, more than 3,900 kgs of trash were collected and more than 2400 volunteers were engaged.  81 waste disposal bins were also placed across major cities in all four provinces.

  1. How does PMI assess its performance against its set benchmarks?

As mentioned earlier as well, PMI has in place an elaborate set of materiality and performance matrices. There is a set of 19 KPIs that collectively forms PMI's Sustainability Index and helps track progress on PMI’s 2025 Roadmap which outlines the key goals and informs the route of the Company’s long-term sustainability agenda. Similarly, to record and report PMI’s transformation, there is a set of KPIs composed of both financial and non-financial metrics that allow stakeholders to assess both the pace and scale of PMI’s transformation.

  1. What are the goals PMI has set for the ongoing and upcoming years? What are the key areas PMI is focusing on currently?

PMI’s focus for the ongoing and upcoming years will be on identifying any new challenges to sustainability that may have or might emerge from its operations and efficiently address them. As per the 2025 roadmap, currently, PMI is focusing on product health impact, innovation in wellness and healthcare, post-consumer waste, eco-design, diversity and inclusion, the wellbeing of tobacco farming communities, and climate. PMI aspires to maximize long-term value creation for all its stakeholders and shareholders and aims to continuously improve its performance and drive material and measurable progress.