Climate protection - Progress in 2019

Carbon emissions along our value chain in 2019

Based on our footprint model, our carbon reduction strategy focuses on four climate impacts across our value chain: 

• Direct operations (factories, offices’ and fleet): We aim to become carbon-neutral by 2030.

• Tobacco supply chain: Working with our suppliers and farmers, we seek to reduce carbon emissions created by tobacco cultivation, with a special focus on tobacco curing. We aim to improve curing efficiency, promote the adoption of biomass fuels, and ensure sustainable and traceable firewood.

• Direct materials supply chain: We are further accelerating the deployment of our supplier engagement strategy across all our procurement categories to achieve greater coverage, hence carbon footprint reductions. We focus on:

  • ensuring CO2 supplier measurement capabilities;
  • establishing deep-dive carbon value chain analysis;
  • identifying and delivering supplier improvement plans; and
  • consolidating, validating and reporting on data and results.

• Product development: We have introduced a set of sustainable design principles aimed at reducing the environmental footprint of our new products.  

We are on track to achieve our current targets, with an absolute reduction versus 2018 in scope 1 emissions of 3 percent, in scope 2 of 10 percent, and in scope 3 of 12 percent, amounting to an overall reduction of 615,595 tons of CO2e in 2019.

Global greenhouse gas emissions scope 1, 2, and 3 ('000 tons CO₂e)

Toward carbon-neutral manufacturing

Our strategy follows a three-step approach:

• drive energy efficiency to reduce consumption;

• switch to renewable energy, including green electricity; and

• as a last resort, offset unavoidable carbon emissions, ideally by in-setting projects developed in our supply chain and generating certified carbon credits, and alternatively by purchasing carbon credits.

In 2019, our factory in Klaipèda, Lithuania, became our first carbon-neutral factory, receiving its certification from Swiss nonprofit myclimate (read more on the next page). We are aiming for an additional two production sites to be certified by 2021.

Decarbonizing our direct operations: our strategy

Driving energy efficiency

Our activities in this area center on our Drive 4 Zero program, which aims to eliminate economic losses caused by inefficient energy use. Under the program, we look for industrial and manufacturing solutions such as heat recovery and manufacturing-process optimization. We also promote behavioral change through our Zero Loss Mindset program.

In our factory in Russia, for example, it was necessary to drain around 1 percent of the steam our boiler produced to maintain the desired water-quality parameters. This meant heat loss. We found a way to recover the wasted heat by installing a heat exchanger, which used the heat to generate steam. In that same factory, the water used for domestic purposes and radiators was heated by inefficient electric heaters, leading to avoidable losses. We installed a thermal pump that was five times more efficient, leading to a reduction of 210 tons of CO₂ equivalent (CO₂e) per year.

Switching to renewable energy

We implement renewable technologies across our manufacturing sites. This includes producing greener energy via photovoltaic panels and tri-generation processes (combining cooling, heat, and power). We also focus on thermal energy by installing biomass boilers and heat pumps and investigating pyrolysis techniques.

In 2019, we operated five biomass boilers in our manufacturing facilities and installed a total of 6,660 square meters of photovoltaic panels, contributing to a total of over 72,300 square meters of photovoltaic panels in our manufacturing facilities. We select technologies based on clearly defined criteria: They must lead to an annual emissions reduction, have a payback period of no more than five years, and be among the more cost-effective projects in comparison to other carbon emissions reduction projects proposed within PMI.

To complement our approach, we also purchase certified green electricity. We aim to source 100 percent green electricity in our manufacturing sites by 2025. Finally, we have worked to eradicate coal from our factories. We achieved this at the end of 2019 by replacing our last coal boiler, located in our South African factory.

In-setting and off-setting unavoidable carbon emissions

We compensate our absolute carbon emissions only as a last resort – once we have maximized our emissions reduction via energy efficiencies and renewable energy. We do so ideally through in-setting projects or alternatively by purchasing certified carbon credits.

As an example of an in-setting project, in collaboration with CarbonSink we evaluated the feasibility of a project that would provide access to clean and safe drinking water to farmers within the tobacco-growing areas of Mozambique – in line with our water, sanitation, and hygiene (WASH) program, also benefiting the schools we support through school feeding initiatives. We determined that the best approach would be to pilot 10 water access sites to determine how well the selected technology works within the local context and its potential to scale up. Ideally, the project will qualify for certification by the Gold Standard Foundation, thereby generating internationally recognized verified emission reductions and contributing to PMI’s carbon-neutrality targets. According to our feasibility assessment, the installation of 10 boreholes could benefit around 35,000 people and avoid 865,000 tons of CO₂ emissions over 10 years, while providing approximately 245 cubic meters of water per day.  

Offices and fleet

In addition to our carbon-reduction efforts at our manufacturing facilities, which represent most of our scope 1 and 2 emissions, we are also exploring ways to reduce emissions from our offices and fleet. In our fleet, we plan to improve efficiency through telematics, increasing the proportion of electric and hybrid vehicles, and providing eco-driving training to reduce our emissions further. In our offices, we are focused on strengthening our reporting to identify appropriate interventions. Some of our offices are already reducing their footprints; this is the case, for example, with our Operations Center in Switzerland, which became carbon-neutral in 2019.

Reducing carbon in our tobacco supply chain

We are currently running strategic initiatives to reduce carbon emissions in our tobacco supply chain, which are focused on three areas: reducing fuel consumption by improving curing-barn efficiency, promoting the switch from fossil fuels to biomass fuels, and ensuring sustainable and traceable firewood. In our tobacco supply chain, we achieved an absolute reduction in 2019 of 244,423 tons of CO2e versus the previous year, with over two-thirds of that reduction attributable to efficiency gains in curing barns and reductions in use of curing fuels.

Reducing fuel consumption by improving curing-barn efficiency

We mainly source three types of tobacco: Virginia, Burley, and Oriental. Virginia tobacco (approximately 46 percent of purchased volumes) is cultivated around the world and, once harvested, must be cured to dry out the leaves using an external heat source. Curing barns may be heated with coal, diesel, natural gas, firewood, or biofuels such as agricultural by-products. The GHG emissions of flue-cured tobacco curing represent 10 percent of our total carbon footprint.

To meet our 2020 target of a 70 percent reduction, versus our 2010 baseline, in GHG emissions per kilogram of tobacco flue-cured, we have made curing barns more efficient, with a commitment to improve 80,000 barns by 2020. While most farmers own their curing barns, PMI and our suppliers provide guidance and support to make them more fuel-efficient. A primary reason for low efficiency is lack of insulation and the thermal conductivity of the construction materials. We work with farmers and suppliers to improve combustion efficiency, ventilation, and heating control, together with insulation.

Fertilizers

The use of fertilizers in tobacco production represented around 10 percent of PMI’s total carbon footprint in 2018, making it the third largest contributor of GHG emissions, after tobacco curing and acetate tow. While we encourage the optimization of fertilizers – minimizing their use in our tobacco supply chain in line with our Good Agricultural Practices – technological developments in the manufacturing process for fertilizers have also contributed to reducing their CO₂ footprint.

In 2019, PMI updated its calculation model for fertilizers’ CO₂ emissions, which had been developed in 2015, to more precisely assess their impact on the company’s carbon footprint. The total emissions calculated for 2019 are based on the updated model – taking into consideration efficiency gains and technological developments occurring in the manufacturing of fertilizers – and provide a more accurate figure. Emissions for 2019 represented 8 percent of PMI’s total footprint, and were significantly lower in absolute terms than in 2018. The decrease is explained both by the new emission factors, representing a 27 percent emission reduction compared with 2018 figures, and a further contribution due to a 13 percent decrease in fertilizer use.  

Our direct materials supply chain

All our materials must be responsibly sourced, in line with our Responsible Sourcing Principles. In 2019, we worked on collecting primary data for our scope 3 emissions pertaining to our direct materials. The procurement categories with the greatest impact on our CO₂ footprint are cellulose acetate tow, pulp, and paper (packaging board). We are currently engaging with our suppliers to develop an emissions reduction strategy in line with our carbon emissions reduction objectives.

 In 2019, the CO₂ reductions in our direct materials supply chain amounted to 71,225 tons of CO₂, contributing 12 percent to our annual reduction across our value chain. We expect to achieve increasingly greater reductions in this category as we further develop our emissions reduction strategy in this area.  

Next steps

In 2019, we were on track or already meeting most of our existing CO₂ targets, which had been based on the 2.0-degree scenario consistent with the 2016 Paris Agreement. Nevertheless, it became increasingly clear that society, including businesses, needs to be more ambitious to avert a climate crisis. The 2018 IPCC report recommended limiting global warming to 1.5 degrees, because of its “clear benefits to people and natural ecosystems,” as well as to ensure “a more sustainable and equitable society.” Toward the end of 2019, the European Union announced its Green Deal, aiming for EU-wide net zero carbon emissions by 2050.

These developments led to a heightened sense of urgency at PMI when it comes to reducing carbon emissions, and made us decide to step up our ambition. At the same time, the ongoing change in our business model toward smoke-free products made it opportune to update our baseline for target setting to 2019. We also wanted to better align our new targets with the ambitions conveyed by the European Union in its Green Deal, and other governments, and continue setting our targets consistent with the best scientific evidence.

Therefore, in early 2020, we established new and more ambitious targets to guide our decarbonization journey for the years to come:

• PMI to be carbon-neutral by 2030 (scope 1 and 2);

• our whole value chain to be carbon neutral by 2050 (scope 1, 2, and 3); and

• a reduction in absolute CO₂ emissions consistent with science-based targets for a 1.5-degree scenario.

During the course of 2020, we plan to submit our absolute reduction targets to the Science-Based Targets Initiative Committee for validation and expect to report on progress in next year’s report.

In addition to continuing, and where needed, stepping up our work, we also plan to roll out internal carbon pricing to drive PMI’s transition to a low-carbon operating scheme. Our roadmap also includes a gradual shift from improved process technologies to more disruptive technologies such as CO₂ capture. In our product development work, we are increasingly embedding environmental criteria into the design process. To offset our unavoidable emissions, we focus on carbon in-setting projects to generate carbon credits. We will also launch an employee engagement campaign to prompt behavioral change. Finally, we will continue to improve the quality of our climate-related disclosures.  

¹ We calculate our carbon footprint using the “precautionary approach”: We use a full carbon emissions factor for firewood until proof is available 2017 2018 2020 that the source is sustainable.