Message from our Chief Financial Officer

As the CFO of our company, I am compelled to share not just a financial narrative, but one that weaves together the myriad nonfinancial factors that are also important to our enduring success.

Strategic foresight unites our nonfinancial aspirations with financial outcomes. This is an evolution consistent with our purpose, which increasingly resonates with all our stakeholders and we believe powerfully demonstrates the interplay between societal impact and shareholder returns.

Nearly eight years into our commitment to deliver a smoke-free future, our company finds itself bridging two worlds: Remaining competitive in the legacy cigarette market while leading the way in the development and commercialization of smoke-free products that promise a less harmful future for adults who would otherwise continue to smoke.

Our goal is to make cigarettes obsolete by effecting system-level change. Significant advances in our sustainability agenda have fortified this resolve. At PMI, sustainability is not just a part of our corporate strategy; it is at the core of our business transformation. Notably, our efforts contribute to mitigating climate change, protecting nature, and fostering inclusive growth that benefits our workforce and our supply chain. These endeavors are parallel to our smoke-free objectives—both demand transformative solutions that transcend individual actions.

Transformation is an arduous, continual process. In 2023, we continued to navigate the complexities of global markets and regulation. We operate in a resilient legacy cigarette business while simultaneously building an entirely novel and improved category of products. Having invested approximately USD 12.5 billion in scientifically researching, developing, and commercializing smoke-free products since 2008—which accounted for nearly 40 percent of our total net revenues in the last quarter of 2023—we are living the future we envisioned nearly a decade ago when we set out our smoke-free vision.

Our commitment to transformation is unwavering, but we have been clear from the start that we cannot accomplish it alone. Collaboration and a multistakeholder approach are vital to realizing the change we seek. In a world that demands change, it is imperative that governments stay on top of technological and scientific developments, while ensuring that innovative products are appropriately regulated. 

Pressing environmental and social concerns, including those related to human rights, climate change, product health impacts, youth access prevention, and circularity, also steered our course in 2023. Addressing these issues well is not merely a corporate ethos but a business imperative that directly correlates with risk mitigation and long-term value creation for our stakeholders and society. This path aligns with investor interests that are increasingly geared toward companies that demonstrate environmental and social stewardship. Further, it directly contributes to our competitive advantage and market positioning. Our shift in executive remuneration, with the PMI Sustainability Index now dictating 30 percent of executive Performance Share Unit (PSU) long-term compensation, marked a groundbreaking step in further integrating nonfinancial and financial performance. In 2023, we introduced our second iteration of the Sustainability Index, which will serve the 2023-25 PSU cycle.

Our financial returns are supported by our sustainability performance, acknowledged by key ESG ratings, which aim to attract investments that can fuel our business. In 2023, our leadership in this area was recognized by our inclusion in the Dow Jones Sustainability World Index and top ranking in the tobacco sector for the first time. Furthermore, we maintained our position in the Dow Jones Sustainability North America Composite Index for the fourth consecutive year. Inclusion in these indices validates our long-term economic, environmental, and social sustainability efforts and positions PMI among the top 10 percent of the largest 2,500 companies in the S&P Global Broad Market Index.

Moreover, we are proud to have attained “Prime” status according to the ISS ESG rating methodology. PMI is the only company in the tobacco industry to have received this prestigious qualification. We also obtained a Triple A score from CDP for the fourth consecutive year, underscoring our commitment to environmental performance and transparency. Our transparent and robust reporting practices were acknowledged by the annual WBCSD Reporting Matters publication, which has recognized PMI as a top performer for three consecutive years.

While we celebrate these achievements, it is important to acknowledge the long road ahead and that addressing our most material issue—phasing out the world of cigarettes—remains our top priority and the core of our strategy. Success requires us to be dynamic in our core business while seeking out new territories for innovation and growth. Each step we take is aimed at nurturing the trust and confidence of those we serve, fully aware of the magnitude of our undertaking.

We will continue to report on our progress transparently and pursue milestones that reflect our ambitions. As we present this 2023 Integrated Report, let this commitment be clear: delivering a smoke-free future and excelling in our sustainability aspirations are not just ethically sound decisions; they are the bedrock of our financial strategy and the key to our shared success. We invite you to explore this report to gain further insights into our aspirations, challenges, achievements, and ongoing efforts to transform our business, for good.