How Sustainability Helps Business Transformation: Mihael Solter

Mihael, I have spoken to a lot of business executives about sustainability from financial to agricultural sectors. One thing that became clear for me is that “sustainability” means many different things to different people. Let me start by asking a very simple question: what is sustainability for Philip Morris?

It’s an excellent starting point. Let me first take a step back and make an important point which sets basis for our approach to sustainability.  Back in 2016, Philip Morris International – who is  the holding company of Philip Morris Armenia announced its vision. To base its future success on smoke-free products, it aims to become a majority smoke-free product company by 2025 and to completely replace cigarettes with smoke free alternatives as soon as possible for those adults who continue to use nicotine products.

We have a commitment to our employees and our shareholders, which we are fulfilling by pursuing this path to sustainable success.

We have a commitment to society, which expects us to act responsibly. We are doing just that, by delivering a smoke-free future.

In these fast-changing times, you can always choose to do nothing. Instead, we’ve set a new course for the company – we have chosen to do something really big.

Achieving this vision is simply unthinkable if we do not tackle the impacts of both our products (what we produce) and our operations (how we produce and market). For us – sustainability is the authentic business strategy, that helps us accelerate the vision of smoke-free future.

In 15 years Philip Morris has invested over 10.7 billion dollars in the development, scientific substantiation, manufacturing, commercialization and continuous innovation of smoke-free products.

How do you evaluate your success in implementing this strategy?

Let me be very specific about our business here, in Armenia. Transformation is never easy because change takes time. At present, our company is in mid-stride: with one foot in our past, operating in a fiercely competitive legacy cigarette business, and one foot in our bold future, building an entirely novel and improved category of products. We sell both conventional cigarettes and smoke-free products. An extremely important milestone has been to introduce smoke-free products to Armenia in the first place. And Armenia was among the first countries globally, where smoke-free products became available in 2018. What makes Armenia unique, is that is only one of three locations globally, where PMI conducts vigorous research and development activities on the ground.

It’s been a sizeable investment here because since 2018 we have invested 20 million dollars.

With the establishment of the center, Armenian scientists are able to exchange experience and develop scientific work in relevant fields. It already has connections with other Philip Morris research centers and laboratories, where there is a scientific community from about 30 countries around the world.

So Armenia is very intimately integrated into PMI’s business not only as a place where we market our products, but also as a location which helps develop science and better products for tomorrow. I am extremely proud that we have this collaboration with the scientific community of the country, globally know for its academic excellence and scientific curiosity. This is an important contribution to Armenia and smoke-free future.

There are people who remain doubtful if not skeptical about your efforts. For example, they say that tobacco companies specifically target minors as “the next generation of consumers”. What is your response?

Preventing minors from access to tobacco products is what everyone expects from a tobacco company – our shareholders, our partners, our employees. It’s a problem that needs a joint effort – of regulators, retailers and civil society. There are things that we can and do as a manufacturer.

Our programs cover both cigarettes and smoke-free. We do not own or control the vast majority of our retail stores in Armenia, so we work with our trade partners to deploy the Youth Access Prevention program. First of all, we strongly support regulation that ensures only adults can buy tobacco and nicotine products and that the PMI’s  global Youth Access Prevention requirements apply to all our commercial activities even when not required by law. We also conduct annual training on youth access prevention requirements among our employees who work in brand retail. We design and distribute stickers for our trade partners with reminders to verify age before selling tobacco products, you can see these stickers in Armenian shops as well. Youth Access Prevention program is not just one single act, it’s about continuous progress.

Many consumers consider the environmental impact of products and services in their purchase decisions. Regulators are also increasingly focusing on corporate responsibility for use of materials such as plastics, as well as for product end-of-life management. How do you approach the issues related to product life-cycle?

Appropriately addressing post-consumer waste helps us enhance our brand equity and company reputation and meet the adult consumer expectations. It also allows us to mitigate implications for our bottom line, as producers increasingly are asked to participate in cleanup costs, for instance.

We have created opportunities for responsible adult consumers to recycle electronic devices at the collection points at the retailers. Globally, 8.5% of shipment volume was covered by markets with end-of-life take-back programs in place in 2022. The minimum criteria which must be met by each market to be considered as having a take-back program in place are very strict. Shipment volume includes heated tobacco units, e-vapor cartridges, and e-vapor disposables. By 2025, PMI’s objective is to increase this indicator almost ten-fold to 80%.

What other components of your sustainability programs are you proud of in Armenia?

Not only do we implement sustainability in our operations, but we also share our knowledge with the business sector and civil society here in Armenia. Let me share with you one of the projects we plan to launch starting from the middle of August. The project is called Circular Programme, which is a major step forward for PMA’s sustainability programs and an important part of our transformation journey to a smoke free future. The aim is to create value for our consumers, the business and society reducing post-consumer waste and providing with simple, convenient and responsible solutions for the disposal of our used devices and consumables. It becomes increasingly important in the context of enlarging our portfolio of smoke-free products. Besides, by educating consumers and general public on post-consumer waste in general, we can collectively work towards a more sustainable and environmentally conscious future.

Philip Morris is always about ongoing challenges, ongoing learning from others and new environment, and, more importantly about doing the right thing for the society.