Engage suppliers on Scope 3 with custom workshops

Sustainability is central to Philip Morris International (PMI)’s goal of phasing out cigarettes, which requires transforming its entire value chain and engaging with society by placing sustainability at the heart of its mission.

Addressing climate change is a key component of PMI’s sustainability strategy. The company has set an ambitious target to achieve net zero emissions by 2040, guided by its low-carbon transition plan released in 2022. Reducing emissions across its supply chain is essential to achieving this goal.

PMI recognizes its role in sharing knowledge, fostering collaboration, and accelerating progress not only with its tier 1 suppliers but also with those deeper in the value chain. In 2023, PMI launched the Sustainability Accelerator program to leverage its experience and accelerate its suppliers’ sustainability journeys. The program aims to expedite the implementation of sustainability initiatives agreed upon between PMI and its suppliers.

Initially, the program focused on helping suppliers understand how to address climate change through target-setting, progress management, and carbon accounting, with foundational learning on integrating sustainability into strategy development and deployment systems.

The program will further grow in 2025, reaching more suppliers and addressing additional topics.

Following an initial pilot with five suppliers in 2023, the PMI Sustainability Accelerator program expanded in 2024 to include 18 new suppliers, with the goal of reaching a significant number of suppliers by 2030. The program offers one-on-one support to participating suppliers through virtual workshops, tailored to each supplier's sustainability maturity and industry sector.

The Sustainability Accelerator program takes an integrated approach, addressing sustainability from both performance and reporting perspectives.

A team of experts works closely with each supplier, sharing PMI’s sustainability progress, learnings, and methodologies to accelerate their own sustainability efforts. Insights and learnings from the program are used to continuously enhance and optimize the offering for its diverse value chain.

The supplier learning journey begins with selecting suppliers and topics, followed by an engagement meeting to explain the program and roles. Once committed, suppliers participate in bi-weekly workshops that start with a general exploration interview and a deep dive into their specific challenge areas. Each supplier collaboration lasts for 3-6 months and is followed by regular touch points.

During the program, a roadmap is built with defined opportunities for energy efficiency and switching to renewable sources. This serves as a concrete map for both committed initiatives as well as further potential opportunities to continue to discuss and follow up.

Sustainability Impact

Climate Impact

Scope 1 & 2 Due to the company’s own emissions reduction efforts, as of year-end 2023, a 36% absolute GHG emission reduction was achieved compared to the company’s 2019 baseline. PMI is on track to meet its SBTi-validated target of a 50% reduction in its direct operations by 2030. One key focus of the Accelerator is to leverage on these successes and transfer knowledge to PMI’s suppliers.

Scope 3 Scope 3 emissions account for over 92% of PMI’s total emissions, primarily from its upstream value chain. Engaging suppliers is critical for reducing these emissions. Building capabilities and collaborating across the value chain is instrumental to achieving PMI’s ambitious targets.

Nature Impact

PMI’s value chain involves a significant agricultural footprint that can have effects on the environment, impacting various natural ecosystems. By building understanding and capability across value chain partners, PMI aims to accelerate progress toward the company’s goals on nature as well as climate. PMI started testing the nature program with selected suppliers in 2024.

More broadly, to address nature impacts, PMI’s nature strategy focuses on three main strategies:

Avoid and reduce pressures and negative impacts on nature, which would otherwise continue to grow.

Regenerate basic ecological functions and services, such as planting trees to stabilize bare soil, and restore ecosystems to their original state where possible.

Transform underlying systems at multiple levels to address the drivers of nature loss beyond the company’s value chain, for example, through landscape planning.

This approach serves as a blueprint for action in engaging key stakeholders, including the company’s business partners and other stakeholder groups, to promote landscape and jurisdictional approaches.

Social Impact

The company’s supply chain connects it with millions of people, from the farmers and farmworkers who cultivate tobacco and other agricultural products, to workers at the supplier companies that provide the products and services the company needs.

Caring for the quality of life of the people in the company’s supply chain is crucial for preparedness, resilience, and long-term success. Promoting and adhering to sustainable business practices in direct and indirect operations helps safeguard human rights, improve labor conditions, protect workers’ health and safety, tackle social inequities, and contribute to alleviating poverty. As a global company with hundreds of thousands of people engaged in the value chain, PMI aims to advance fair labor standards and foster prosperity.

PMI’s mid- and long-term goals cover fundamental human rights issues, such as child labor, income, working hours, health and safety, accommodation, and access to water, sanitation, and hygiene. PMI’s Leaf team, tobacco suppliers, contracted farmers, and farmworkers are regularly trained on the Agricultural Labor Practices (“ALP”) Code.

Beyond tobacco, PMI is leveraging extensive learnings from its ALP program and human rights impact assessments to address challenges in the electronics supply chain.

Business Impact

Benefits

The intensive collaboration through the Sustainability Accelerator Program aims to enhance suppliers' capabilities and establish baselines, fostering new opportunities and ideas for increasing efficiency and adopting renewable energy sources, extending beyond just climate concerns. The business advantage lies in developing a more prepared and resilient value chain, along with the faster implementation of sustainability goals and targets.

The program's initial success prompted approval for expansion in 2024, incorporating lessons learned to refine and update the program. As the collaboration continues, ongoing support and experience sharing persist throughout the execution phase of the suppliers’ accelerated sustainability plan.

Costs

The program requires investment in virtual workshops and customized support for each supplier, with bi-weekly workshops of 2 hours for 3-6 months. Costs may vary based on the supplier's sustainability maturity and industry sector.

To minimize costs and maximize benefits, the program leverages PMI's experience and subject matter experts, focusing on relevant solutions, technology, and methods for each supplier. The collaboration continues with less intensity, providing ongoing support and experience sharing during the execution phase.

Co-benefits

Shared benefits between suppliers and PMI for faster progress on shared sustainability goals related to climate, nature and labor standards.

Potential side-effects

Measuring progress and attributing it to involvement in the Accelerator can be challenging. The team is exploring how to ensure that its effort spent in upskilling suppliers results in supplier action and impact.

Typical business profile

Relevant for companies with a large and diverse supply chain, especially those with significant Scope 3 emissions. Suitable for businesses in various industry sectors with different sustainability maturity levels.

Approach

Step-by-step approach for implementation

1. The program begins by selecting suppliers and relevant topics

2. An initial engagement meeting is planned to outline the program and define roles

3. Once a supplier commits, bi-weekly workshops commence, starting with a general exploration interview and a deep dive into their baseline data

4. The program then focuses on key areas for each supplier, introducing modules on business fundamentals in sustainability, tackling climate change, preserving nature, and improving lives. These sessions culminate in a list of new opportunities and ideas

5. Monthly or bi-monthly workshops continue throughout the execution phase

With the connection of the program leading to technical collaboration between the sustainability teams set up, the continued collaboration is easy for both continued work on Climate as well as expansion to other topics such as Nature.

Stakeholders involved

• Sustainability Accelerator Program Team: The PMI team leads the program, conducts virtual workshops, and offers customized support tailored to each supplier's sustainability maturity and industry sector.

• Procurement colleagues: Procurement Colleagues collaborate with the Sustainability Accelerator Team to select key suppliers based on their relevance for footprint, sustainability maturity, and willingness to collaborate.

• Suppliers: Upon committing to the program, suppliers allocate team members and actively participate in bi-weekly workshops and ongoing collaboration sessions.

Key parameters to consider

Suppliers must allocate the right team members, including sustainability team members, facility managers, and responsible roles for energy consumption. Shared communication/working language is important to avoid time loss from language barriers.

Implementation and operations tips

Engage closely with procurement to select key suppliers based on relevance for footprint, sustainability maturity, and willingness to collaborate. Ensure suppliers allocate the right team members and have a good level of English. Collect learnings and insights to improve and update the program. Provide ongoing support and experience sharing during the execution phase.