Sustainability is the core of our company’s transformation

We also celebrated the tenth anniversary of our Agricultural Labor Practices program, aimed at improving labor practices and livelihoods in our tobacco supply chain. We remain vigilant in our approach to tackling systemic issues and are encouraged by the progress made so far in reducing child labor incidence and improving income levels across our contracted tobacco farms. In 2021, we continued to conduct human rights impact assessments, completing one in our tobacco supply chain in Turkey and commencing our sixth assessment in Malaysia.

Promoting diversity, equity, equality, and inclusion is paramount for our company and a priority for me. Although we made continued progress over the past few years, much work remains to be done, and I am proud to be one of the commissioners of the newly formed Business Commission to Tackle Inequality, spearheaded by the World Business Council for Sustainable Development. We shall continue our work to promote human capital development, ensure a living income for all our contracted farmers, and explore ways to ensure workers in our direct supply chain earn at least a living wage.

Seven years ago, we set out to create a new future for PMI—a future in which cigarettes would be obsolete, replaced by less harmful, science-based alternatives. In 2021, we kept our relentless focus on that ambition, dedicating 99 percent of our research and development and 73 percent of our commercial expenditure to smoke-free products. Moreover, smoke-free products represented over 29 percent of our adjusted net revenues and, by year-end, we estimate that more than 15 million adults in total had switched to IQOS and stopped smoking. The strong position of our smoke-free business has allowed us to accelerate our timeline; early in 2021, we announced our ambition that by 2025 our smoke-free products would be sold in 100 markets and at least 50 percent of our net revenues would derive from smoke-free products.

PMI is committed to serving as an agent of change and advocate of positive values. We understand that our business must become a provider of effective alternatives. To achieve this, we are positioning ourselves at the forefront of consumer-centricity, technology, science, and innovation. With an eye to the long term, we are expanding our business into areas beyond tobacco and nicotine such as wellness and healthcare. Our ambition is that by 2025, at least USD 1 billion of our net revenues will derive from these adjacent avenues of growth, marking an initial milestone for a business with potential to grow much further over the longer term.

Last year, we acquired Vectura, Fertin Pharma, and OtiTopic—three leading and innovative companies with which we are excited to join forces to achieve a common purpose: Building world-class expertise in the research, development, and commercialization of solutions that have a net positive impact on society. Although this Integrated Report does not account for the impact of these acquisitions, 2022 will be a year when we further their integration so that the progress they achieve can be captured in our reporting efforts.

Transforming our business means venturing into a number of uncharted territories, each bringing unique challenges. I say this with pride in what we have already achieved, yet with a deep recognition of the immense work ahead. We will always have critics, and we remain committed to engaging with them honestly and transparently, pointing out the actions we are taking to address their concerns and welcoming feedback on how we can do better.

Our actions—grounded in data, science, and facts—speak louder than words. That said, our societal interactions, especially when it comes to our company’s transformation, bring an emotional component that can carry a heavy weight. Consequently, we will work to promote constructive dialogue and address our stakeholders’ legitimate concerns appropriately. We cannot make cigarettes obsolete in the absence of collaboration and coalition.

Without dismissing our past, I hope our 2021 Integrated Report provides a clear window into our present, as well as a more detailed view of the future we envision. I hope, too, that this report will spark dialogue and that our stakeholders will accept the invitation to judge us not for the company we were but for the company we are today and are working hard to become, as well as by the tangible progress we have made. It is through constructive engagement that we will accelerate the pace of meaningful and impactful change.