This article is sponsored by Philip Morris International.
We sat down with Jennifer Motles, Philip Morris International’s chief sustainability officer, to discuss the company’s approach to measurement and management of sustainability goals and performance. She tells us that the company seeks to focus on aligning with external standards and science-based targets, while increasing supplier transparency and stakeholder engagement.
What internal measurement methodologies have you set to ensure alignment across the company’s value chain?
We seek to align as much as possible with external frameworks and standards that give guidance to companies on how to measure and report on ESG performance. This ensures our external reporting is consistent and comparable across multiple frameworks, as well as transparent.
On the environmental side, there is more development in terms of external metrics available that allow us to internalise standard frameworks to assess our impact across our value chain, encompassing both direct and indirect operations. In other areas, such as social impact, there is more variability around metrics. To compensate, we incorporate bespoke KPIs that we consider meaningful, provided we can gather reliable, comparable and auditable data.
When it comes to ESG or non-financial performance, PMI has a set of metrics that are unique to the company’s value proposition and corporate strategy. These metrics, called the Business Transformation Metrics, are a set of bespoke key performance indicators composed of both financial and non-financial metrics. They showcase how we are allocating resources away from our legacy business as we advance towards a smoke-free future.
What methods have you undertaken to measure the company’s environmental impacts to ensure accuracy?
With the external maturity on standards and frameworks to measure climate-related impacts, we have been able to prioritise that area, and PMI has been recognised with CDP’s ‘Triple A’ rating for three years in a row now.
We have data in place not only to understand our carbon footprint, but also our efforts to reduce deforestation, contribute to reforestation and afforestation, and the overall preservation of natural ecosystems. Because we have visibility to provide this degree of data, we are able to design strategies that we believe will lead to more robust and meaningful impact.
Something that is very important to us as a company is to ensure we can have reliable data and that our disclosures bring transparency to both our processes and our impacts. The fact that our sustainability team reports into our CFO allows greater synergies within different parts of the organisation, and means we are well-positioned to leverage the capabilities of our financial reporting organisation.
How will PMI ensure adherence towards the company’s zero deforestation commitments?
We are committed to achieving a deforestation-free supply chain for our tobacco, paper and pulp-based materials. We published a Zero-Deforestation Manifesto and our Environmental Commitment, which are important policies that guide our strategy. Zero deforestation in our supply chain relates to tobacco, but also paper and pulp-based material, which is where the biggest impact comes from. The supply chain represents the vast majority of PMI’s total land use and provides the materials that are more often linked to the risk of deforestation and the conversion of natural ecosystems.
Through annual global forest risk assessments, we can determine where the highest risks are and focus our strategy on our forestry management efforts. We monitor the compliance of our Zero-Deforestation Manifesto by considering not only farm boundaries where tobacco is grown, but looking at the natural forests to cover changes in areas that go beyond the tobacco farmland.
These areas are intentionally broader than the farm level to consider potential indirect impact on natural ecosystems. We monitor these tobacco-growing areas by integrating geospatial analysis with material traceability, such as wood, and the data collected on the ground. We then develop forest risk mitigation plans, which seek to ensure our tobacco sourcing is not a cause of deforestation, and cross check that with our submissions to the CDP.
How does PMI approach measurement for indirect activities such as Scope 3 emissions?
The vast majority, 87.6 percent, of our carbon footprint lies in our upstream value chain.
Our Low-Carbon Transition Plan includes a decarbonisation curve based on science-based targets, involving absolute reductions for both Scope 1 and 2, as well as Scope 3 emissions. We then share this plan with our suppliers and collaborate with them to encourage the adoption of similar science-based targets, which in turn, will contribute to reducing our Scope 3 emissions. Our plan in the years ahead includes PMI engaging with suppliers, while taking into consideration how the environment externally is changing in terms of regulation, policy and supply.
We engage very closely with our supply chain so that we can contribute to our suppliers’ transition to a net-zero economy and drive further impact towards our upstream emissions. Some suppliers don’t have the resources, data or knowledge, and part of our strategy is to accelerate that learning curve through different forms of engagement – sharing knowledge, best practices and challenges – so that then they can move at a faster pace towards that transition.
Our strategies for preventing deforestation, water stewardship and reducing greenhouse gas emissions are all interlinked. Looking at these connections is the only way that you can have a holistic environmental strategy.
Importantly, our decarbonisation targets are science-based and have been validated by the Science-Based Targets initiative. To uphold our approach to climate action, we collaborate with our critical suppliers to ensure they also adopt science-based targets that align with our decarbonisation strategy.
How do you see the measurement and reporting landscape evolving in the future?
There is such a disparity when it comes to environment versus social. When measuring issues, such as human rights or living wages, that are related to social impact, there will need to be more of an evolution in terms of standardisation and frameworks that follow similar paths as TCFD and now TNFD. This is what we’re preparing for and we’re engaging externally to support these developments.