Measuring what matters

As sustainability matures and gains importance inside and outside our company, the question of how to measure ESG performance is something many continue to grapple with. We have long expressed our support for more rigor in sustainabilityrelated reporting and disclosures—and not just for companies, but also for ESG ratings and related products. There is a need for greater transparency, more robust methodologies, and better clarity on definitions and assumptions. We certainly welcome recent developments leading to more consistency in standards under strong governance frameworks.

Accordingly, 2021 was a year when we also focused on developing a clear and accepted process for establishing concrete definitions, documentation, and controls for sustainability with the aim of standardizing how we measure ESG performance. Taken together, these standards make up our ESG KPI Protocol, which brings structure to the process of defining success, concrete measurements of progress, and clear governance and accountability structures, and will be published later in 2022.

Reporting is, by nature, a backward-looking exercise. That said, we understand that the value of embedding sustainability into corporate strategy lies in thinking long term and being able to disclose forward-looking ambitions, transition plans, and progress. Coupling comparable, meaningful, and reliable data with clear goals, long-term plans, and forecasted impacts is central to stakeholders’ and investors’ ability to incorporate ESG into their decision-making.

Another topic of debate relates to the optimum way to maximize the alignment of incentives with sustainability-related results to meet the evolving expectations of investors and other stakeholders. We are proud to have answered this demand by introducing a Sustainability Index that lets us integrate ESG performance into long-term executive compensation in an easily understandable, strategic, coherent, comprehensive, and credible manner.

We believe that relying on a bespoke index, as opposed to relative external indices, will allow PMI to align its resource allocation and efforts more consistently and strategically with its most material ESG topics. PMI’s Sustainability Index consists of 19 KPIs, which measure progress toward the 11 goals in our 2025 Roadmap. We aim to continuously improve our performance and drive material and measurable progress—all communicated through open and clear reporting and disclosure.

Having an overarching global sustainability strategy is as important as ensuring it is cascaded down to our markets—PMI employees are the heart, soul, and primary driver of change within our company. They are the ones building a culture that embraces sustainability and a community conscious of its impacts.

Together we ensure that success is achieved while respecting environmental and social boundaries. We recognize the essential need to continue building legitimacy and trust with our stakeholders, who are fundamental to our company’s purpose and can accelerate the pace at which we achieve it. Our 2021 Integrated Report aims to address their demands for more transparent, comparable, and reliable information on our ESG risks and performance.

2021 was a year full of achievements, but challenges remain, including in areas related to ESG. As we continue to transform, learn, and discover better ways to develop solutions that have meaningful impact, we hope our transparency and willingness to engage will spark dialogue with those who can help accelerate the pace of change. I invite you to reach out and share your feedback, to question, to challenge, and above all, to engage with us as we remain focused on making our company better, focused on sustainability, and committed to our purpose.