Welcome, and thank you for joining us. I'm James Bushnell, Director of Investor Relations. Today's webcast is focused on our sustainability strategy and addressing the impact of our business in our next growth phase. We will hear today from our Chief Executive Officer, Jacek Olcak our Chief Financial Officer, Emmanuel Babbo and our Chief Sustainability Officer, Jennifer Mottez. Our Vice President of Strategic and Scientific Communications, Doctor.
Moira Gilchrist, will also join for the Q and A session. The materials we will share today are predominantly based on our 2020 integrated report published on May 18, where you will find comprehensive and in-depth coverage of all the topics we'll touch on. Today's remarks contain forward looking statements and projections of future results. I direct your attention to the forward looking and Cautionary statements disclosure in today's presentation and press release for a review of the various factors that could cause actual results to differ materially from forward looking projections or statements. Please also note the additional forward looking and cautionary statements related to COVID-nineteen.
A glossary of terms is posted on our website. As shown on this next slide, Responsibilities and ownership for key sustainability topics are assigned across our senior management team. There is a similar assignment of responsibilities and ownership at the Board level as outlined in our proxy statements and the integrated reports. Sustainability performance is also reflected in our management incentives, and Emmanuel will touch more on this later. It's now my pleasure to introduce Jacek Olcak, our Chief Executive Officer.
Jacek?
Thank you, James, and good morning, good afternoon or good evening. This is our first sustainability related webcast and It is obviously critical as investors, in particular, have the power to drive positive change by encouraging companies to improve. We talked about the next growth phase for our company at our Investor Day in February. I believe many of you also To join us at that time. And today, we want to give you a more depth on how sustainability and our impact on society are at the core of our growth And this is, as James indicated, following the publication of our most recent integrated report on MA 'eighteen.
I will start with the transformation, and obviously, it's about the driving the growth and the positive impact and financial performance Through a unique sustainability mission, which we have articulated for some years very clearly, which is about phasing out cigarettes and un smoking the world. Our strategic priorities are derived or are being driven by the sustainability The reality assessment and they reflect our business and they are being reflected in our business And executive compensation targets materiality takes into account what our stakeholders expect from us, And Jamie later on will talk more about the materiality assessments, how we adopted, how we approach it and How we use it to guide our strategies. We have a very statement very clear statement of purpose, which I will talk about later, which underpins our strategy. And again, materiality informs our purpose. So the things which we are addressing, they are really of the most of the importance to broader group of stakeholders.
James presented that there is a sustainability essentially penetrates all ranks Of our management team and below, we were clearly assigned roles and the contributions to the Specific sustainability agenda points. The sustainability strategy for us Substantial equals to the business strategy and obviously is being driven by our transformation strategy. We are differentiated from the industry by the fact of by our purpose, by the level And the commitment to transformations, by the way we allocate the magnitude of our resource allocation and obviously and also by the level of Disclosure income and impact, especially for the ESG and the product to KPIs and the progress. We are the only company today who work purposefully to phase out cigarettes and engage with Stakeholders to do so. We're not offering our smoke free product as another alternative or part of our portfolio.
Our objective, our purpose is very clear. This product should fully replace the cigarettes as they are much better Option for the consumers than a continuing smoking. We also have during our Investors Day For the first time talk that we're working on the strategy, which will deliver the long term growth Opportunity for Philip Morris International coming from beyond new cut and product, and I will also talk about that later on. We can go to the next slide. Obviously, as the outcome of our materiality assessment, it's Difficult for us to envisage that Ferrimore International can be a sustainable business if we don't address The problem of our product, I.
E, the combustible cigarettes. Therefore, our by far, the most important and a prime priority is to address the Problem of smoking by replacing cigarettes with a much better alternatives. This is not only about the developing and the scientific substantiation of these products, so both the consumers and the regulators and all other stakeholders I have a comfort dealing with this product, but is also ensuring that this product will have a broad the consumer smokers We'll have a broad access to this product. So obviously, it informs the way we design. So there is an accessibility to the product from affordability perspective, but also the way we engage with the regulators when we believe the consumers should have an access to the Very clear and transparent information about the products, what these products can do and what they don't and can make the informed decisions And also have an access in terms of a trial of the product, etcetera, which would facilitate I'll accelerate the switching to this proposition.
We are working purposefully to phase out cigarettes. Again, I repeat, our strategy is not that this is another line of the products which we offer to the consumer. Our desire or objective, our mission is So this product should fully replace cigarettes, and this is very well reflected in the magnitude of the resource allocations Where essentially 100% of our research and development budgets are devoted only to the reduced risk products And 3 quarters of our commercial spend is being devoted of being invested behind this product. So As you know, it's in a complete disproportion to how much these products contribute today to our top line, to our revenue. In the last year, we have generated close to 25% of revenue coming from a non combustible product.
Again, 75% of the resources are behind the further development and commercialization of this product. And obviously, as we've been developing and substantiating these Products, we have developed, I believe, quite a unique capability in PMI, which allows us to, in a more realistic terms, I think about the products which go beyond nicotine. They have nothing to do with the Tabakor and nicotine. We'll talk about this also later. I think the very critical if we can move to the next slide.
The very critical for us is to ensure that there was a perfect alignment The external and internal stakeholders, including obviously our Board of Directors. To your personnel already, I mean, last year, we have adopted the Board of Directors of Philip Morris International. It has adopted statement of purpose. It was published in our proxy In 2020, and I just wanted to highlight the 4 critical pillars, which are included, which are covered This statement of purpose. First, that we believe that with the right regulatory encouragement and support From civil society, we believe cigarette sales can end within 10 to 15 years in many countries.
In a country like Japan, when penetration of this product today is at the level of about 30% is a great example of how fast we can really Chief by traditional tobacco control measures. And we have a number of examples, which we also publish, disclose or case studies, which we publish, Closing our integrated report. We understand that there is the need to continue to build legitimacy and trust by being honest, Respectful, fair and transparent and by aligning our actions with words across all areas of our business. And I believe this event, the Sustainability Conference, is also one of the many examples what we as Affiliate Motors International are doing to be an Accessible, transparent company, when we can obviously when we can very openly talk about our Missions, our objectives and the progress to date. And hopefully, for the exchange of the opinions, we can Our key stakeholder constituencies, which are fundamental to both the achieving of our purpose and how fast We get there.
We'll be affected in different ways by Philip Morris transformation. And I put it on that way, the massive Change Filip Morris International is undergoing also requires change on our side. And very often, we are still today confronted With a more dogmatic approach and conversations which are more focused about the tobacco, big tobacco without giving Right. The recognition or at least attention to the network which Filipe Morris International is taking to completely So we shaved and transformed the entire tobacco industry. I go to the next slide.
Okay. The way we look at our transformations, we have 3 Very important accesses. One is obviously the product transformations. Without the product transformations, as I said earlier, it would be difficult to think about the Philippe Morris in the long term is a sustainable business. There is the internal transformations, which we need to recognize that new culture is required the company, new ways of working are very important.
New operating model as we transform to a more consumer centric business from this classical business The business setup is very required. Developing and upscaling of our people is very important and many new skills I've been already acquired or hired from other industries to complement our current talent and competencies. We've almost now half of our senior management, people who are directly reporting to me, which has They have a less than a 3 year seniority with Philip Morris, and they come from All other industry technology, life science, digital industry, they have essentially no legacy from tobacco cigarette business. And the 3rd very important component of our transformation is the external transformation. And as I said, we have a mission to phase out Cigarettes, and we can't achieve this alone.
We can do the product, we can invest in the science, we can continuously improve the product, we can understand what are the best ways of communicating with the consumers of facilitating their conversion to these products, But we also require some sort of regulatory frameworks, which at least allows consumers to have access To the information about the product. So we seek to actively engage with our key stakeholders And foster the debate, and we truly understand that not everyone is Well informed about the science and the evidence behind these products. There was a lot of misunderstandings, But it's our job to continue to have this debate, to foster this debate. And I think Emmanuel also will touch Upon more about what is the role of the investors in this external transformation. And obviously, all these free accesses that require significant investment over a number of years, and we didn't stay shy from putting significant amount of the resources of Human and capital and dollar resources behind our transformation, well before we have started commercializing IQOS And you will know also from our integrated report that year to date from the very, very beginning when we start investing behind that product, I mean, the total investment bill is north of the $8,000,000,000 but we're very happy that we started so early and we strengthened the resources and we are Where we are today?
So let me now turn into the product, right? And the biggest question or the most fundamental question is, Thus, product like Gaikos, which is our heat not burn proposition, impacts the total sales of a combustible product in the market. So on this chart, I look on the over the last 5 years period, 2016 is essentially a year when we started With vehicles, we almost had almost zero revenue at that time, and we started looking of with that acceptance And the penetration of IQOS in the different markets, how did we impact the sales of cigarettes of the total industry. And you could see here the blue line represents the cigarette industry in total, the trend line over the decline rate over this period of time. And in the red, you could see cigarette industry trend in the markets when IQOS was present.
And you could see that from the very beginning, IQOS had the positive impact on the acceleration in the decline rates of the combustible industry. Based on this, we have over if I can move to the next slide, please. So to build on this, in the integrated report, we have included a number of case studies looking at the impact of introduction of Smoke your products like IQOS, which are replacing cigarettes and thus accelerating smoking declines as measured by cigarette sales. Okay, I Broadly examples of Japan, Italy and Lithuania. And you could see that massive impact, frankly speaking, massive impact of I hit the tobacco product, the impact on the sales of the combustible business, and you also Could see that product really works, did not burn products.
Our product works really Very well as the pure substitution to cigarettes and confirmation of first confirmation of that is coming that Total of the combustibles and the heated tobacco units continue its sort of a historic outlook. Obviously, this is a data. There was limitations in the data. Obviously, we only have a visibility of the legitimate sales, tax Straight products on occasions like you observe on Lithuania, you might have some sort of deviations, Depends on the level of the illicit product penetrations in a given period in the market. However, I think in all countries in which we operate, could very quickly see that we accelerate the decline of the cigars.
So that's the one Questions, obviously, the first fundamental questions. What the products like IQOS do to the Sales of cigarettes, sales of combustible products in the market. Let's go to the next slide. As obviously, we know that investors and many other stakeholders are very interested in the tangible health impacts In other words, real world evidence, whether such fast declines in cigarette consumptions, what do they do actually To the health, do we have any other observations? And obviously, we are 5 years on the journey of Very heavily promoting the non combustible products, and so it's difficult to expect From that time series, a long term sort of epidemiological evidence.
However, the first indications From the time trend analysis on COPD exacerbations, something else than the flare ups Under certain conditions in Japan are consistent with what we would expect from a large amount of smokers moving to less harmful alternatives. Clearly visible trend you could see here that the trend line has started to change since 2016 and it Demonstrates the strong correlation within production of heated tobacco products. So we also continue looking in this whole on this real word data. We'll go to the next slide. We're looking for further indications of the health impact of small free products.
And today, I also shared with you This new study also coming from Japan in addition to the study I just showed the second before. And in a similar way to the TOP, the exacerbations we see here an encouraging trend in the decline of admissions for ischemic heart disease, Also coinciding with the introduction of heated tobacco products like IQOS. So this is also a time trend analysis in the absence of long Thermoepidemiology, but it's consistent with what we would expect from a large amount of smokers moving to less harmful products. So we start Observing here in these two examples the positive impacts that switching by smokers So these products have when it comes to some outcomes, and here we talk about the It's semi cut heart disease and COPD as measured by the hospital admissions. And I believe more and more of this data We'll be to make available, we're engaging in a number of studies in order to answer that Important question.
I have to say one thing that the results of the studies, and again, I mentioned this, the results of The status cannot be taken as the causation. Nevertheless, again, it is a very strong correlation with the only material interventions which happened at the time, which is the launch and commercializations of a heated tobacco product. And obviously, This study and many other studies warrants the further investigation. And I believe, as I said, We will continue our efforts in this domain. Let's now move to the next subject, which is the question Which is very often asked by many stakeholders what is about the impact which is about the impact of Nicot.
Nicotin is the most well known molecule in tobacco. It naturally occurs in the tobacco leaf. Because it is so well known and because smoking is also the most common source of nicotine uptake, People tend to wrongly associate all the dangers of smoking with nicotine. But we need to understand that For many, many years until recently, essentially, the only form of consumption of the nicotine As responsible for tobacco cost cancer, lung disease and heart disease. And I know that very often we are confronted with High level of skepticism when Philip Morris will make statements of this nature, therefore, I'll refer to EBITDA, Which on numerous occasions has is trying To properly assess or to properly explain what exactly is the problem of smoke.
So again, nicotine is not directly Responsible for Favococcus Cancer, Lung Disease and Heart Disease. It's also confirmed by many other institutes. Here, I gave I present a quote from the Royal College of Physicians, which also clearly state that incoten is not in itself A highly hazardous drug and combustion and the harmful chemical, which are produced as a During the process of combustion, the prime cause of smoking related disease. So products Like IQOS, with the 90%, 95% reduction in exposure to harmful and potentially harmful chemicals Will resolve or should resolve in a better public health outcomes. And again, this has been confirmed By the FDA after a very thorough assessment of all the scientific evidence, not only submitted by Philip Morris, Any evidence which existed by the time by FDA when FDA was concluding in its MRTPA modified risk tobacco product assessment The measurable and a substantial reduction in morbidity and mortality among individual tobacco users It's reasonably likely in subsequent studies.
So long term epidemiology needed to fully quantify the benefit of switching to smoke free products by all Indications. By all indications today, clearly reporting what we could or we should expect from this product in the longer It's very important, obviously, that even if you have a great product and a great product offers Such a significant reductions in exposure that these products are being adopted by the consumers like the smokers who have raised with continuous smoke. So it's very important in the design of the product to mimic the sensor and the retrieval experience to maximize the full switching And to follow switching of those who wouldn't quit, who don't quit. And that's exactly the role of nicotine of this product. And very often, we have Conversations, I'm confronted with the questions why these products cannot offer the nicotine.
Well, at this stage, if you offer the product without nicotine, There will be essentially very limited, if 0 adoptions. And remember that IQOS, in all the 66 markets in which we We're present with IQOS today. IQOS offers an unprecedented high level of a convergence. This is in excess of 70%, which means that from the 100 people who will buy IQOS, 70% will fully stop smoking. So essentially, They stopped interacting with combustible cigarette.
It is not the partial adoption. It's not the temporary use. It's not the Complementary type of reuse to the regular cigarettes, they fully stop smoking cigarettes, and that's the power of a product like IQOS in the harm reduction equation. And obviously, it's very important To have a very laser focused sharp Focus on the unintended use of a smoke free products, and we also Clearview sees this as a fundamental block in our building and sustainable business. And I'm very pleased We have a number of confirmations that this product have not that our product have not triggered any worrisome levels Of unintended consequences measured by uptake of underaged people or those smokers who have successfully Stop quit smoking before, and that confirms that the way we designed and the way how we're responsibly marketing this product It's actually perfectly addressing the problem which we're trying to address.
So we are very We are crystal clear in our approach. People should not start And you have heard from Philip Morris, there's a number of occasions. And for those who smoke, the best option is obviously to quit altogether. However, There is more than 1,000,000,000 people in the total globe who continue smoking, and They are much better choices for them than a continued smoking than a continued smoking. These alternative product needs nicotine to maximize full switching away from cigarettes as quickly as possible.
And the key is, however, in this The whole product is how does nicotine is delivered. And as I referred in the slide before, the methods of delivery for the combustion It's the worst ever known humanity method of delivering nicotine. And obviously, as the outcome of combustions, you release all of Toxics and substances, etcetera, by avoiding the consumptions, by eliminating fully the combustion, you really can talk about the products, which cause this Tremendous to offering this tremendous health benefit to the people who otherwise would just continue to smoke. Commercializations of the products I talk about is very important, responsible commercializations. We're also testing as we speak one of our versions of our electronic Products with the age log, with age verifications, essentially solutions, as all of us know from smartphones That is not enough to purchase the product.
You will need to activate the device. We can do it remotely only following The positive age verifications, if the tests are coming positive, We also have the support from tech companies in allowing the solutions to be accessible to all smokers. I mean, that's another important achievement, which we can make in order to really make sure that these products will land in the Right, Hans. And definitely, underage people will not have access to this product. Let me go to the next slide.
And I mentioned this at the beginning. So the whole journey of building, developing, designing and Scientifically substantiated product like IQOS requires from Philip Morris very substantial resources. And these resources, obviously, Majority of these resources is nothing else than the group of 400 plus fabulous scientists who decided to embark on the journey With us located mainly in Neuchatel in Switzerland. Now they have capability. We have built the capability in the company, which allows us To thinking about other products, not the products like IQOS, not the products which are replacements to cigarette, But what the hell is Philip Morris International can do as a contribution to the society, while improving the better By improving the health and well-being of many people in the world and also creating another great opportunity For our shareholders.
So we're talking about that product, which will go completely beyond nicotine. I know that Very often and over the last few months, it's Investors Day when we start talking about this product. I'm sure people don't pay attention at this stage today, so it's very difficult To envisage how come a Philip Morris cigarette company is going essentially almost into something which have very loose associations with each other. We're essentially leveraging the capability and the investment which we have made so far, And we think that investments we can leverage for different purposes. We have made a commitment, And our ambition is that 5 years from now, by 2025, actually 4.5 years from now, We should be in a position to generate the first $1,000,000,000 from the products, again, which has nothing to do with the nicotine or tobacco.
So we'll move to the next slide, Please. Okay. So to capture the significant growth opportunities beyond nicotine, we're essentially leveraging our scientific and Engineering knowledge around inhalation and aerosol delivery. We have learned a lot in the territory, which You know, I have to admit, is left behind by many pharma companies, which is the Respiratory Drug Delivery. We will be making use of our scientific assessment capabilities to support product testing, and you could Imagine how much of that capability we have built around developing of the products like IQOS, all our smokeless We're also in a position of repurposing our technology on devices To start with therapeutic purposes, we'll be able to deliver up other substances I mentioned beyond nicotine.
And we're also looking in how we can repurpose, maybe repurpose is the wrong word, but repurposing the tobacco plant. When we're looking into Alternative usage of various compounds, which are contained in the tobacco plant to serve other community needs that again go beyond just the pure nicotine So our focus corridors are the respiratory, drug delivery, botanicals. And obviously, here, we will We have the capabilities. We have significant capabilities built in the company, but obviously, we don't have end to end Capabilities needed from a pure development of the product, Regulatory part of the process and the commercialization of the process. So we will be working with our Partners and we also don't rule out that there will be a room for the potential bolt on acquisitions.
So we expect to hear more From us on this front in the near future. So let's move to the next slide. So just to summarize my part, I think to characterize the progress against our purpose I used to unsmoke the word. I mean today, we have a 19,000,000 IQOS users, which Of which 70% have fully stopped smoking. Those of you who follow the evolution of the cigarette market and the various regulatory Through another interventions, never, never in the history of public health, you had such an intervention of this magnitude that in such We have set a very clear targets.
To mark where we want to be 5 years from now, so our starting point today is over the 60 6 markets with smoke free products, we aspire to go to the 100 markets by 2025. Today, As I said about the quarter of our revenues is coming from a smoke free product. By 2025, we want to Reached the 50% of the revenues, a minimum 50% and I mentioned about the 1st €1,000,000,000 of revenues, which by that time should From the Beyond Nicotine Products. So this is where we are 6 years ago. We had nothing Other than aspirations and then ideas and the concepts and some development and we've been at the very Early stages, many people thought that we're just doing a sort of the window dressings, that we're not serious, that this is a Small screen, very of you are familiar with the classical languages against the companies like ours, but I believe during the 6 years of hard work, dedications and a commitment, we have demonstrated that we're serious about our mission of unsmoking the world.
So I spent a lot of time on talking about the product, but I believe we all agree that without addressing the product, it's difficult to talk about the Sustainable business in Philip Morris International, which doesn't mean that my company, that this company doesn't pay Very, very high attentions to other important aspects coming from environment, society or the governance, and I am pleased now To hand over to Emmanuel, which and Jenny later on, and we'll come back to you during the Q and A session. Thank you for your attention.
Thank you, Jacek. Good morning, good afternoon, good evening, everybody, wherever you are In the world, thank you for being with us. I must say I'm absolutely thrilled to be detailing now how we are putting Our ambition to become a best in class company when it comes to sustainability and ESG matters At the very heart of our journey and transformation to become a smoke free company. But moving to the next Slide. I guess I should start explaining why we've been putting together finance And sustainability team in 1 single integrated team.
First of all, I have to admit that I'm just super excited and pleased to be adding these 2 team in 1 gather team and to have responsibility on the two fronts. But the reality is that I deeply believe that this combination is a natural one. Today, my belief is that the Chief Financial performance would actually be called the Chief Performance Officer. And there is no performance overall performance today If you don't put together, of course, still very strong financial result, but at the same time, strong delivery on a very, very ambitious Sustainability agenda. And for me, the 2 are totally entangled.
Of course, you need to deliver The great financial profit in order to have the resources to invest on innovation, on all the investments that are going to be needed to drive Fability agenda. And the other way around, there is no doubt that if you're not good on delivering very, very strongly and with very high level Of expectation on sustainability and ESG matter, you're not going to be able to deliver a strong financial return and performance for matters. So internally, as you can expect, of course, any strategic decision, any decision making that is really Of importance for the group today is taking sustainability and ESG as a key element, a key criteria to make the decision. Externally, you have seen that. We're going to elaborate on that.
We are in a very transparent, granular, detailed manner, Sharing a lot of information with all stakeholders to make sure that they understand the journey we are following, where we are in the journey. And of course, we help That they will, therefore, be more in a position to onboard with us on that journey, to support the journey and make it even faster And more successful. I'll detail that a bit later, but we're also calling for a frame, I On financial matters, we need a frame. We need something that would be homogeneous, that would be measurable, Audit table, and that will allow the benchmark between the various player of the category. If we now go to the next Slide.
I think that is a very good illustration when we say that we are 1 integrated now, A team between finance and sustainability. And when we have here, what are the key transformation metrics for us? As you can see, it's really gathering the 2 components. Of course, you still have finance dimension, are we focused on The right matters for R and D and commercial spending. Are we focusing on Radius Risk product?
Are we growing net revenue coming from RRP on the total of net revenue? So these are, of course, still financial matters that you're going to be able to find in the P and L are in the balance sheet. But as you can see, we are also coming with other metrics that are non financial or I would say not exactly totally financial When we look at our shipment ratio for smoke free product, the number of IQOS users or fully converted IQOS users, The proportion of market non OECD where we now are distributing IQOS or the number of markets where IQOS is already more than 50% of the sales. My message at the end of the day that you see the lines are getting blurry between finance and non finance. It is one set of integrated number That is, I think, in a very, very, I would say, reliable and clear manner, reflecting our transformation journey.
If we go to the next slide. So we have the dashboard, I would say, how are we doing on our transformation, what are the key elements that we are tracking and How we are doing on this element. We are also very clear on the course. So we are setting in a very clear manner what are The objective that we are pursuing, what are the aspiration, and we have this 2025 agenda that is a very nicely ambitious agenda. For me, there is, of course, 1 year landmark, which is to get above 50% of our global revenue On smoke free product by 2025.
And quite obviously, to get there, it means that we need to grow very rapidly our IQOS and globally registries for the business, it start by being above €450,000,000,000 or equivalent by 2025. More than 30% of our volume will have to be smoke free by 2025, and we will have to have converted more than 40,000,000 smokers to our registries product. At the same time, of course, we want to decrease in a pronounced manner our volume on combustible. And of course, we want to make our registries product widely available, and that's why we are targeting to be present in Android market. And then on top of that, the adzexedit, we have this beyond nicotine ambition where we intend to capitalize on all the assets, all the goodwill, All the IP that we have been creating through our journey on IQOS and on RRP.
Moving to the next slide. We are, of course, super consistent on the way we are Dealing with governance on this sustainability and ESG matter. They are the core of our journey, and we have put in place a very robust governance on this matter. First of all, I said it, we have been gathering to strengthen them, the finance and sustainability team In one gather team and that make it very, very efficient and powerful. All the work that we are doing on sustainability is reported to the Board through the nomination and governance committee at least once a year.
And we've set up a sustainability committee that is taking place every quarter. Jacek is, of course, Part of that committee, and that's when we are reviewing our sustainability agenda and the progress that we are making. We are, of course, being fully consistent again and putting a very significant part of the A variable part of the remuneration for the executive based on this element of the ESG and sustainability journey And whether we are progressing in line with our expectation. I don't want to elaborate on all of them. I will elaborate on a few of them in a second.
But as you can see, we are covering all the ground. So very clear element on product, very clear element on social and on environment. With strategic initiative, we are also covering the governance. So it is a full spectrum of the ESG plus P ambition that we are covering, and it is also The short term, so incentive part for the year, but also the long term or the performance share that are being impacted by our performance On all these metrics. If we go to the next slide, there is one element on which I really want to insist And elaborate because on the social ambition, it's a key one, and it's diversity and inclusion at PMI.
1st, as you can imagine, gender balance, gender equality is certainly the first Element on which we are focusing our attention. We are very pleased to be equal pay certified. We are very proud to have been integrated to the Bloomberg Gender Equality Index. We are doing a huge work to promote Female talent within the company and really have a diverse environment at the level of leadership. Look at these two target, management position to be At 40% by 2022, so that's next year and senior roles, so at an even more senior level, if you want, To be at 32% by 2023.
But that's not the only element on which we are working. And that's why in 2020, a Chief Diversity Officer, Silke Munster, has been appointed, and she's directly Reporting to Jacek, to our CEO. And I can tell you she has a pretty busy and loaded agenda. And of course, we want to take The full benefit and feel the full power of diversity and inclusion in other dimension and beyond gender balance. There is the LGBTQ plus group and community from which we certainly want to increase diversity And inclusion, there is all the diversity on race, ethnicity, culture that we want to foster.
And there is certainly more inclusion for the disabled that we also want to develop in the coming years. We have a very progressive parental leave policy that I think is really cutting edge with A new gender inclusive policy that we've been issuing. We are working a lot on developing local talent. So we want to source, Develop, groom talent everywhere in the world as we are a truly global company, and we have more than 80 nationality today at PMI. And we are working on making sure that some of the illness and health issues are taken into account, and We create an inclusive environment for these people.
Going to the next slide. Another element that I want to Elaborate, maybe in the Q and A, we'll detail that. It's about carbon neutrality. And I am very proud to announce today That we are raising the bar when it comes to our ambition to become carbon neutral on Scope 12. Initially, we were targeting to be carbon neutral by 2,030.
We are not targeting to be carbon neutral by 2025. 5 years gain over time on this fight against climate change, and we're going to generate that by, of course, Working on our sourcing of energy to be greener, more renewable, we are working on waste reduction. We are also working on our fleet and logistics. And for what is missing to make the last mile, I would say, to get to carbon neutrality, we will generate The compensation. I think it's a very good illustration of the fact that despite the fact that we have already a very ambitious agenda On sustainability and ESG, we're going to keep raising the bar, leveling up to make sure that we generate further improvement In the future, but Jenny will talk about that in a moment.
Moving to the next slide. I certainly want to say a word about all this very granular detailed information and the fact that we call for a framework. So we are producing all this information. I think we're second to none in the detail that we are providing the transparency. And sometime, we have to show that we are not always fulfilling our ambition.
But at least people know, understand, I think they can trust us in what we are doing. And we're having exactly the same quality of dialogue with all the rating agency, exchanging with them on a very consistent basis. We believe that they are doing a very important job in making analysis comparison Possible, when it's possible. We think that certainly there is a role for them, which is based on Fact and element, and they should not exit this role, and they should not go on biased or non, I would say a numbers or science based element. But we are very pleased with what we've been reaching With all this rating agency, I've been commenting the fact that we are now part of the Bloomberg Gender Equality Index.
I've been very pleased to see That we got, again, a AAA rating from CDP. We've been joining the DoDjoint Sustainability Indices. Once again, we're very pleased with that. And when we are assessed and benchmark versus peers, we are most of the time And as number 1 or among the very best of our industry, and it's, of course, A matter of great satisfaction. It doesn't mean that we need to stop working, but it's a matter of satisfaction.
And I would even say when you look at the last S and P rating on our profile, if you exclude the tobacco industry dimension that we compare very well with best in class Company in FMCG. So we are very pleased with that. Now at the same time, we acknowledge some limitation that has come From this work from the rating agency, most of the time, they are backward looking. Sometimes, we're not too sure of the homogeneity And the comparability of the data, and that can give way to inconsistent rating. And for all these reasons, that's why we are calling for Regulators, in a very, once again, similar manner to what exists for finance, that there should be a frame for reporting, Once again, with data that are measurable, auditable, comparable and homogeneous.
And once we have that, I think we'll be certainly able to make in a more clear way apparent that we are Making a big difference versus other companies. Next slide. And actually, that would be my last slide, but That one is really super important. I want to insist once again on the key role that Investors in general and, of course, ESG investors in particular, have to push the sustainability and ESG Agenda through their choices. And at PMI, we have a very strong conviction is that these investors I have actually two angles or two way to invest to push and accelerate the good development on sustainability matters.
The first one is probably what everybody had in mind at the beginning, which is I'm going to invest in companies that are doing Already the right thing, ticking all the boxes, showing that they are doing well and with a nice impact. And of course, That will continue to be the case. But for us, the other one is as important. And I'm here talking about the company that Are improving things. You know that are coming with this mindset of I'm going to get the things better through my work, through the investment that I make, through the product that I'm going To create.
We don't believe for one second that ban or exclusion for companies that are not doing everything is perfect or when there is a problem Because there is an impact of what they are doing on climate or with some consumer impact, We don't believe that a ban or an exclusion is going to improve things because the impact on Planet will continue if They are not addressed, and the issue with the consumer will continue as well if they are not addressed. On the contrary, If ESG investors accompany this company that are coming with the right mindset to change for the better and improve thing, they're going to have a huge impact. First of all, because they're going to foster the ambition of this company that are willing to improve things. 2nd, because once they are a shareholder, they're going to make sure That the company is delivering on its agenda to improve things. And third, because there will be, of course, the advocate of What their investment is doing, they will be able to explain that to other people, public opinion, regulators, government, and they will certainly Make the journey faster and more successful.
So big responsibility, and we certainly count on Investor support in that respect. That's it for my presentation. Thank you very much for your attention. I'm now going to hand over To our Chief Sustainability Officer, Jennifer Motless, who is going to share more about how we intend to deliver even more impact on our
Thank you, Emmanuel, and hello to everyone. Thank you so much for joining us today. If we can start with my next slide. We have spoken a lot today about sustainability, but let me speak about what Sustainability mean at PeerMy? For us, of course, it's about mitigating risk and compliance and really Improving our operational and resource efficiency.
However, that's not our end goal. We really see sustainability As an opportunity for technology and growth, an opportunity for expanding And growing the way that we understand success and the way that we do our business, following our purpose and focusing on creating value, not just For our shareholders, but to our stakeholders. So we can go to the next slide. Everything starts with materiality. This is how we define our strategy.
If you are familiar with sustainability and how is it that you define a sustainability strategy, I'm sure you've seen this before. A materiality process is not something that is unique to PMI, but it's certainly something that we take very seriously. We follow a very structured approach Where we identify several sustainability topics, we gather the perspectives of different stakeholders, internal and external, We assess the impact that our company has on these different topics, and then we build and validate a materiality metrics. So what you can see here is this materiality So something that is quite evident, as you can see on the top right of the screen, Is that there's one issue that really departs from the rest and that pertains to product health impact. And of course, We know and we are aware that this is where we can have the greatest impact, and that's why not by coincidence, Most of this presentation has focused on the impact of the product.
1st and foremost, that is the core of our strategy. Now of course, we are a big multinational that has a big environmental and social impact and there are other sustainability issues that we need to address. So let me show you how this materiality matrix translates into. Next slide. So this is the result of our materiality matrix, our strategic framework of where and how is it that we allocate resources to create impact.
So as I was sharing with you before, 1st and foremost, for us sustainability is about transforming our company to achieve a sustainable smoke free future. And we do that by innovating for better products, operating with excellence, caring for the people that we work with and protecting the environment. These are our 4 pillars of action, and each pillar of action has 2 different tier topics. It's not that some tiers are Less important than others, but we understand that on certain ESG issues, we can have a greater impact. So what we do is that we have classified them and qualified them, understanding that, 1st and foremost, there are certain issues that we need to prioritize And address well in order to really tailor our strategy to have a better and more positive impact on society and the environment.
Next. So something that we did for the first time last year is that for all Tier 1 topics of our 4 pillars Actions is that we introduced forward looking targets. We believe that even though reporting disclosure and transparency It's very important. It is equally important to bring clarity of what is it that we want to achieve. Sustainability is about the long term, Creating impact and giving direction to all our stakeholders, shareholders and our own employees about what is it that we want to achieve.
And for that, it's very important that we report progress and that we can be clear and transparent about our impact. But at the same time, it's very important to show where is it that we're going. So this set of forward looking targets mostly Focused on an end goal of 2025, we call our 2025 road map. So allow me to elaborate on a few of Then for the first time this year in our 2020 integrated report, we actually communicate progress. So on our 2019 integrated report, you would have Are we moving fast enough?
Where is it that perhaps we're not doing enough or fast enough? So some of these issues pertain to, for example, Human rights, we're very proud about the work that we're doing to advance our understanding on the impact that we have on our value chain And on those who work for PMI and for that, we have a forward looking goal of conducting 10 human rights impact Investments in those countries that we ranked as highest risk. So we have so far conducted 4, and last year, we conducted 2, 1 in Mozambique That was focused on our tobacco supply chain and one in Russia. And something that is very special about the human rights impact assessment that we conducted in Russia is that Despite all the challenges brought on by COVID, we actually successfully were able to complete it in a virtual mode, And that shows the ability that our organization has to be nimble and agile and really adapt to difficult times. Another issue that is important for us And the granular data knowledge about what are the core root causes that create the main problems in our tobacco farming communities.
And in that regard, we have adopted an ambitious goal of bringing making sure that 100% of the farmers Supply Tobacco to PMI are actually making a leading income by 2025. We're making good progress on this as well, And you can find more information about it in our integrated report. Next. So as we develop our sustainability strategy, we continue to build a base for embedding sustainability into everything that we We have identified a corporate purpose and built a culture around it. We have implemented strategic ESG She practices and created accountability structures for ESG integration.
We've made operational changes to ensure that our sustainability strategy Successfully executed, and we have and remain committed to transparently reporting on progress and building relationships with our investors. I hope that This is clear that this is a journey in which we are becoming more sophisticated and mature and that your engagement and engaging with different parts of society can only help us better and improve. Next. So last but not least, I couldn't finish my Presentation today without sharing with you and reminding you all that if you want to learn more about our sustainability strategy, you can check out our integrated report that was Published last week, we also have a dedicated sustainability materiality report that describes in detail in a very transparent way how is it that we define our strategy. Very It aligns with GRI, with the UNGC, the sustainable development goals and its corresponding targets.
Something that is unique for this year is that in seeking to align with SaaS B, not only for the tobacco sector, But as a result of our transformation, we also referenced the technology standard more concretely on hardware, and we also referenced the healthcare Industry standard, more concretely on medical equipment. And last but not least, we're also reporting following the World Economic Forum's Index On measuring stakeholder capitalism, and this is just one more way to showcase how is it that we're making progress against our Thank you again for being with us today, and I look forward for your questions. Thank you.
Thank you, Jennifer, it's now time for the Q and A session for which we have allocated around 20 to 30 minutes. Joining Jacek, Emmanuel and Jennifer will be Doctor. Moira Gilchrist, Vice President of Strategic and Scientific Communications. We also invite webcast participants to submit questions using the question box on the right hand side of the Time permitting, I'll come to these later on. We now invite live participants to ask a question by raising their hand.
Maybe I take it absolutely. I mean, the whole FICOVE's transformation is to make it in a way that all the parties which are somehow involved in our combustible business model, I mean, what we can do that we all together go through these transformations with possibly a limited impact. I mean, we're working, for example, of the number of alternative crops to the tobacco, but we also have to take into consideration the Income, obviously, which the tobacco generates for the farmer. So the farmer would have to be The crop of a tobacco for the farmer would have to be replaced with the crop, which sort of offers the similar sort of economics. I mean, the attractiveness of a tobacco to many farmers rests with the fact that, as you know, tobacco is not a commodity, it's not a traded commodity, Right.
So therefore, the farmer is well somehow insulated or protected from speculations and all of the ups and downs of The classical commodity market has a very good visibility into demand, and that visibility It actually helps into making sure that year on year, you have the right number of the farmers and so on The right expected yields, tobacco yields, so there is not much of Just surprises oversupply of farmers left with unsellable stock, but I do believe that more efforts we have started Quite a few programs with alternative crops, also the crops which I believe could benefit the general public, right? I mean, there are some Great nutrients to nutritionally rich crops, which could offer similar sort Of profitability to the farmer, and I think it will be a mix All of the interventions, which somehow will also help the farmers community to navigate through that Transformations. I mentioned also that we're spending quite a significant effort on finding the And I call it the repurposing of Tabakalif, but I do believe there's another factor, which in the long run, at least to some extent, may I contribute to how do we take care about the farmers' community.
But it's very important for us. I mean, these are the hardworking people, And we have spent so many years on upgrading the agronomy practices, they're actually very skilled farmers, And it's very close to our heart to make sure that they land at the end of this transformation on the With the minimum impact if possible.
Thank you.
Okay. We have a few questions here, which have been submitted via the written box. Let me read this one out from an analyst. The transformation of the company is happening quickly, and it's clear that PMI seems to be focused intently on accelerating this transformation and is doing it with a continued shift in investments away from combustibles and 2 smoke free products. The question is trying to understand if there's more PMI can do to Influence this transformation, e.
G. By spending more to expand RRPs? Or is it a matter of consumers and competitors catching up to PMI's vision.
Well, maybe I take this. Yes, obviously, every organization always Can do more and better and faster is the classical impact of a learning curve, and I wouldn't I'll be honest admitting that PMI internally Still at the reservoir of agility and unleashed agility, and me and my colleagues at SMT are working on it. But To really look at the fast acceleration of the trend of going to smoke free, frankly speaking, you need the 2 things, Which are desperately needed as we speak. One is to obtain the absolute clarity and stop confusing the smokers what is really the problem of smoking. And I have seen it on a number of occasions when the smokers will tell you, oh, you know, your IQOS or a cigarette product or other non combustible products, They contain nicotine.
That's the problem. And I thought I was very crystal clear today in my presentations. Nicotine is not the prime problem. And we essentially everyone who claims though is confusing the smokers and smokers are using this as another Not to do anything about the smoking. They continue smoking.
Every time when I hear any responsible claims about the nicotine and its negative impact, The net result is people are going back to what they used to do, which is smoking cigarettes. This is they are seriously highly irresponsible. And second thing is The regulatory environment, which in many markets, I have a completely ban access to the product and unfortunately, this continues to be celebrated by anti Organizations or NGOs. And me, I'm looking at this celebrations that the markets are not accessible, So they'll make not accessible, don't have an access, don't offer access to these products. And those organizations who are supposed to work on addressing Since they are not interested in solving a problem of smoking, they're interested in perpetuating the problem of smoking.
And this is, at this stage, when we stand today, 2021 science, technology, everything exists, and these claims are becoming highly responsible. So my Dream or ask or whatever you want to call it is, can we get together and make sure that within as I said, within 10, 15 years in most of The market, if everyone acts together, we can put the smoking behind. And we never also to be very clear, we never have said that the Products like IQOS are risk free, and these products are not for the general public. These products are developed, designed for a very specific audience which are smokers which will continue to smoke. And can we be serious and irresponsible that this product today is the 2nd best choice Smokers can do other than a continuing smoking, and obviously, quitting smoking is the best one.
So the two accelerations would come from regulations, but We have countries like New Zealand recently, and you remember New Zealand was always on the very aggressive, quite rightly, Tabacco regulations, combustible regulations, they are realized without the help of innovations and technology, they will perpetuate the problem of smoking.
Thank you. Okay. We have another question here, which has been sent in. The questioner is keen to know about plans develop harm reduction products at a price point and level of acceptance that will work in low- and middle income countries.
Absolutely. I mean, at our desire, when we have said and we said it's been very responsible, our desire is to unsmoke the 1,000,000,000 people who would continue smoking. Therefore, I need to think when we're thinking and we're designing the products when the economic barriers will not constitute the problem for those people to have access to this Product. So obviously, we're working on having an access by consumers in these places to informations about the product. And obviously, the affordability barriers would have to be addressed.
As you well know, in majority actually, majority of the countries, These products, quite rightly, are being taxed at a level lower than a cigarette. And sometimes, we're being criticized for the thing, but this is So, all it is an incentive which we're passing to the consumers to create another economic incentive that rather than a continuous smoking cigarettes, they switch to this product. I believe the mix of the regulatory interventions and obviously on our side make Product which is intuitive, which is low on the cost, so therefore, we lower the barriers to entry, etcetera. We'll go for the so called low Middle income consumers are countries. But the truth is also, and we have talked about this number of occasions, I mean, we also on our side as much as we can lowering the barrier economic barrier to entry for these products by, for example, subsidizing the devices, Okay.
So we're taking a lot of efforts that the consumer for consumer to change the behavior, to change the habit From a smoking, it requires a multi pronged type of a strategy and approach. You need to have And I'll explain the benefit, why this is better than a continuing smoking, remove if possible the economic barriers, the affordability barriers and so
Thank you, Jacek. We have another question here potentially for Moira. How do you deal with those externally, For example, around World of No Tobacco Day recently, he questioned the science that PMI carries out or even questions the FDA's MRTP authorization.
So thank you, James, and hello, everybody. Yes, I've personally seen a lot of these statements, both in the scientific Literature, but then also in media. And I think oftentimes, I would characterize them as opinions of individuals and organizations 2 are not necessarily scientists or who are simply opposed to either all products or companies in And I think from my perspective, I think what's important is not to focus on what we think or feel About tobacco products or companies, but really to focus on the scientific evidence and also focus on what's the best approach, what's in the best interest For men and women who would otherwise continue to smoke. And really that's exactly what the FDA did and that's what they have to do according to the Review by their experts. They came to the conclusion that the product with its authorized messages meets the standard as they call it of being Appropriate to promote the public health.
And I think this is what we should be focusing on. Jacek mentioned in his remarks The words of FDA, the available evidence without conducting long term epidemiological studies demonstrates that a measurable And substantial reduction in morbidity and mortality among tobacco users is reasonably likely to be seen So reduced exposure messages is one important step forward, and we're continuing to build the scientific evidence and again, Jacek showed you some interesting time series analysis that gives us real hope for the future of what Epidemiological studies will show. So all I ask is people to really focus on the scientific evidence and focus on men and women who would otherwise Continue to smoke and let's have a serious discussion about what the next step should be.
Okay. Thank you, Mora. Another question submitted here, Perhaps for Emmanuel, a competitor announced recently it was making its vaping products carbon neutral. Is PMI considering doing the same for IQOS?
Thanks, James. As I've Been clarifying, we are actually raising the bar to become carbon neutral globally for Scope 1 and Scope 2. So We're not too sure that to take one part of the business is really meaningful because that will rely on a lot of allocation and how you are So we prefer to work on what is really making an impact, which is a full company. And as you have seen today, we are coming with 5 year acceleration, so it's a significant effort that we are making to further improve our roadmap on becoming carbon free. And for us, that's what is really important and what matters rather than looking at the small piece of the company that is probably not meaningful.
Thank you, Emmanuel. We've got quite a few questions coming in here, so I'll keep going. Another one here, perhaps also for Emmanuel. What is your view on linking some of the same sustainabilityESG KPIs that are part of the compensation structure to those in financing sources? Could this be another way to further solidify your commitments to the investment community?
Sorry, James, the connection was bad for us. One second. Connecting finance and ESG element, correct?
Yes, to financing sources, I think it's around having yes.
Yes. Well, that's a very interesting thought, and we are giving some consideration to it. We think it would Makes sense. And that would probably further highlight, confirm, support our commitment on our Sustainability and ESG Agenda. So we're going to look at that.
Of course, that will require that we come with The, I would say, criteria, parameters that are relevant to our journey, but we see that Possibly as a very interesting angle, and we're going to explore it.
Thank you. Another investor question. The largest sustainable investment strategy continues to be negative or exclusionary screening, Appreciating the FDA regulatory history in the United States, how important will the consumer adoption of IQOS in this predominantly combustible market be to moving the company in a positive direction, I. E, the reduced risk claim halo effect and derisking the total company portfolio.
Should I take that one as well? No, happy to start and Jacek, I'm sure you will complement. I think it's a journey where we're going to go Step by step. And it's certainly important that in the U. S, we are also developing Through our license to Altria, the business and create more awareness On IQOS and certainly, therefore, increasing the impact for Our product there.
It is clear that we have a strong base of shareholder that are in the U. S. They know about our product. They learn about Our products are what we are doing elsewhere, but they are just seeing the beginning of the launch and the development in the U. S.
And I have little doubt that as more consumer will go to IQOS, adopt this reduced risk product, The heat not burn category developing, that will have an impact on the perception for sure and understanding of what our Journey means for smokers and how it can really change the life of 1,000,000,000 people globally, but certainly having people Nextdoor, which is a neighbor adopting and creating some proximity and better understanding. Yes, I think you want to complement the same.
No, I think we cover 2.
Great. Okay. We have a follow-up question from the live Q and A line from Gaurav Jain of Barclays again. Gaurav, Please feel free to unmute your microphone and ask your question.
Great. Thank you. Just I had a question on the Single use plastic ban that will happen in the EU, I think, over the next 2 years as part of which your littering will be prevented. And When you are developing all these reduced risk products, which come with devices and packaging, how are you thinking in a comprehensive way, the Issue of the trend and the circular economy and how these devices could be recycled. If you could just
Thank you, Gaurav. I think the line was not perfect, but I think the question was around Single Use Plastic Director of in Europe littering, particularly for the new products, perhaps that's one that Jenny could take up.
Thanks, James. Sorry, Gaurav, I couldn't answer your question couldn't hear your question very well, but I can refer to Plastics, that I guess is what James was talking about. So we have a related forward looking target to that, that is to half The amount of plastics that we have in our products by 2025 and the initiatives that we have related to that pertain to, a, reducing liters, so anti littering campaigns and b, developing and putting in place principles of eco design and circularity. So putting all of that together, we're looking to halving the amount of plastic that our products have, specifically our filters. That was the question.
Okay. Thank you.
There is an important element, which maybe is not that widely known that Actually, we have a less problem with the littering on the alternative products like IQOS than on the cigarettes. And the Delta, the factor by which and we measure this in there, at least if I remember, in one market pretty solidly. And the factor was, I remember by a factor of 10 or so, you had the less littering of an IQOS product Then on the classical combustible cigarettes, so that's something which we also learned from the behavior Of the consumers that we might actually be by switching consumers or faster switching consumers to the alternatives, we actually may also address the
So I'll just pick one from the question submitted via the portal. You talked about moving a significant portion of your selling and marketing expenses toward RRPs and a much larger portion than your RRP sales as a percentage of total sales. Do you expect Let's continue to expand this transformation of the business and you have lost market share in combustibles of late. Do you believe this is a function of this significant shift and the company's efforts and investments behind combustibles.
We will continue with investing disproportionately Kind out our piece compared to the combustibles because this is really what our strategy and our vision, etcetera, is. I'm very pleased that even during the most challenging times like last 15, 18 months, we have not lost the eye from the ball on IQOS, And we opened the markets, further markets. We brought the product accessible to the larger number of geographies, And we continue with the consumer acquisition and IQOS actually volumes and the share within a category within a total combustible And we said that for us, maintaining our strong leadership position in a combustible is a very important component of our transformation And then the journey to the Smokefree as only by maintaining continue to having a high relevance with the smokers for our combustible products and the relevance With trade, for example, etcetera, we're actually accelerating the conversions to RRP products. And to be very frank, The success of IQOS in places like Japan, Italy, many European markets, etcetera, is to a large extent, Thanks to the fact that we had an access to the smokers because very often they've been using our products. We had an access to the trade So we could shortcut a lot of these interventions and go directly and talk to the and convert the smokers to IQOS.
Very few people don't really see this whole thing, but in essentially all markets where we go with IQOS, one of the things which we implement is So putting in informations about the smoke free product, IQOS via the text, leaflets, In terms of QR codes, wherever legally it is possible, on the packs of the consumable products. So it gives us this frequency of communications of staying in touch with a to a consumer. So Yes. So that's the answer to your question.
Okay, great. That concludes the Q and A session for today. I'll now turn it back to you, Jacek, for any closing remarks.
Well, I think the most important is and this is really which You know, it's somehow disturbing an absence of other word is these Conversations which we have, we'll end up with outright exclusion without really spending the time and thinking that actually by So one of the reasons why we started to organize this as a first conference which we organize around the sustainability It's also to address what Manuel had in his presentations, etcetera. I do believe that investors have a role to play, but you only Can play that role if you are in the room. If you leave the room, none of the company will change. Nothing will change. It's only by the dialogue, participations, negotiations, push, motivations, incentives.
This is how you can drive the change, and I'm a strong believer that you can change any company, but you need to participate. You cannot just abdicate. It's too easy to update. So thank you very much for your attention, and I hope we'll have a number of opportunities, myself, Jenny, Moira, Emmanuel, to engage with you.