PMI’s Sustainability Index and Environmental, Social, and Governance Key Performance Indicators Protocol—ESG KPI Protocol08 Jun 2022
Our Sustainability Index and ESG KPI Protocol should be regarded as a framework and reference guide to help provide consistency and completeness in our reporting and should be read in conjunction with our annual Integrated Report.
During 2021, we developed a bespoke Sustainability Index (the Index) to measure and communicate progress toward achieving our 2025 Roadmap in a rigorous and quantitative manner, using a set of clearly defined and verifiable metrics.
Further, the introduction of the Index creates an explicit link between ESG performance and our company's long-term executive compensation scheme.
The Index —referred to in our 2022 Proxy Statement and further described in our 2021 Integrated Report—comprises 19 KPIs that are directly linked to our 2025 Roadmap goals. The mechanics of the Index and details of its KPIs are included in a separate publication, called the ESG KPI Protocol.
PMI's ESG KPI Protocol
As with our 2025 Roadmap, the Index splits the 19 KPIs into two drivers: “Product Sustainability” (11 KPIs) and “Operational Sustainability” (eight KPIs).
To form the Index, we sought KPIs that were:
- Well defined, allowing for accurate, reliable, and consistent measurement of progress over time
- Meaningful, enabling stakeholders to assess our company’s progress toward its priority sustainability topics
The weighting applied to each KPI is informed by the results of our sustainability materiality assessment. Specifically, we attributed the highest weight to the social impacts of our products, where we believe our company can have the greatest impact.
ESG KPI Protocol
The ESG KPI Protocol (the Protocol) establishes a framework, which is specific to our company and clearly defines KPIs that can provide our organization with a method for making the connection between our company’s purpose, strategic direction, financial performance, and environmental and social considerations. It includes the definitions, methodology, and scope of each of the Index’s 19 KPIs to provide measurable, verifiable, consistent, and accurate reporting on progress.
It is key to the integrity of our reporting that the information and data that we publicly disclose accurately reflect our company’s performance, following clear calculation methods.
Through the publication of this Protocol, we aim to provide further transparency on the key metrics we use to measure how our company is delivering on its purpose and creating value for our shareholders and other stakeholders.
There is a need for greater transparency, more robust methodologies, and better clarity on definitions and assumptions. Accordingly, we developed a clear process for establishing concrete definitions, documentation, and controls for sustainability with the aim of standardizing how we measure ESG performance.
“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,” said Jennifer Motles, PMI’s Chief Sustainability Officer.
“There is a need for greater transparency, more robust methodologies, and better clarity on definitions and assumptions. Accordingly, we developed a clear process for establishing concrete definitions, documentation, and controls for sustainability with the aim of standardizing how we measure ESG performance.”
Externally, the Protocol helps ensure that the ESG data we disclose is reliable, comparable, and meaningful, allowing our stakeholders to assess and track progress in a consistent manner over time.
Internally, the Protocol offers clear guidelines on ESG data management to support integrated decision-making within our company, accounting for both financial and non-financial information.
We will review the Protocol periodically to reflect relevant developments, such as changes in business priorities, revised methods of measuring or capturing data, stakeholder feedback, and developments related to mandatory and voluntary reporting frameworks and standards.