Analyzing Philip Morris International's Environmental Impact in China

This report provides a comprehensive analysis of Philip Morris International's (PMI) environmental impact, focusing on its operations in China. It begins with an executive summary and an introduction that highlights the significance of environmental issues in the business world, particularly for tobacco companies. Task 1 delves into the external influences on PMI, utilizing a PESTLE analysis to examine political, economic, social, technological, legal, and environmental factors affecting the company's performance. Task 2 assesses the relevance and influence of environmental issues in China, including toxic waste, CO2 emissions, air pollution, and the use of plastics. It evaluates the effectiveness of PMI's responses to these issues and suggests areas for improvement, offering recommendations for mitigating the negative environmental impacts of tobacco production and distribution. The report concludes with a summary of findings and a list of references.

Contemporary
Developments in
Business and
Management

(See Company profile in Appendix 1)

EXECUTIVE SUMMARY
Smoking cigarettes can cause pollution and numerous health issues through releasing
various toxic gages and air pollutants into the environment. The entire report is structured around
the industry that involves the manufactures of tobacco products. In the initial section of the
report, the eternal industrial setting has been thoroughly assessed in order to capture the key
factors that come into play and influence the performance of Philip Morris International (PMI)
and its competitors that function in the dynamic industrial environment. The PESTLE framework
has been used to capture the factors of political, economic, social, technological, legal and the
environmental that influence the operational processes the reputed tobacco manufacturer. The
report is developing, analysing, evaluating and measuring numerous evidence, causes, relevant
outcomes and distinct effectiveness of those practices that can aid in achieving outcome to
understand the influence of PMI on China's environmental issues in more significant and
authentic manner.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
External influences to company and their value.........................................................................1
PESTEL ANALYSIS.............................................................................................................1
Political Factor...................................................................................................................2
Economical Factor.............................................................................................................2
Social Factor......................................................................................................................2
Environmental Factor........................................................................................................3
Legal Factor.......................................................................................................................3
Technological Factor.........................................................................................................3
TASK 2............................................................................................................................................4
i) Relevance and Influence of environmental issues...................................................................4
Environmental Issues in China...............................................................................................4
Toxic Waste.......................................................................................................................5
CO2 emissions and climate changes..................................................................................5
Air pollution.......................................................................................................................6
Use of plastics as packaging material and post-consumer waste.......................................7
Transport and distribution..................................................................................................7
ii) Critical evaluation of environmental issues response on its effectiveness.............................7
Emerged Issues Effectiveness................................................................................................8
Air pollutions.....................................................................................................................8
Toxic Waste.......................................................................................................................8
Tobacco production & climate changes............................................................................8
Transport............................................................................................................................9
Use of plastics as packaging material and post-consumer waste.......................................9
iii) Improvement areas and recommendations............................................................................9
Provided Suggestions to Resolve Issues ..............................................................................10
Air pollutions...................................................................................................................10

Toxic Waste.....................................................................................................................11
Tobacco production & climate changes..........................................................................11
Transport..........................................................................................................................11
Use of plastics as packaging material and post-consumer waste.....................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12
APPENDIX 1.................................................................................................................................15
A)...............................................................................................................................................15
B)...............................................................................................................................................17
C)...............................................................................................................................................18
D)...............................................................................................................................................19

INTRODUCTION
Existing, living and occurring at the same time period, it is significant for company to
maintain and manage their work in suitable manner. Numerous environmental issues are
significantly affecting the business industry and development of many companies. Various issues
such as waste disposal, pollution, change in climate inadequate water access or drought etc. are
there that are influencing the organisational environment in numerous ways. Report emphasise
the environmental issues causing from distinct functions and activities from Philip Morris China
based in Beijing (Alvarez, 2016). The company is one of the largest Tobacco organisations that
have recently expanded its business in China in 2005. The major purpose of this report is to
highlight external environmental forces of company along with understanding numerous aspects
of environment issues supporting with facts and authentic documents.
TASK 1
External influences to company and their value
Philip Morris International is one of the leading global tobacco company.(appendix 1)
Organisation is spinning its position as six top global brands among 15 expanded in approximate
180 markets (Symon and Cassell, 2014). Most popular product of Philip Morris International is
Marlboro enlisted as world's number one. For the purpose of understanding numerous external
business environments, the company need to outline those components of external factors i.e.
discussed as below:
PESTEL ANALYSIS
It is paramount for a retailing organisation to analyse whole external environmental
components of market for supporting and expanding the organisation's growth and sustainability
(Amin, 2014). This is essential for the company to analyse numerous macro components such as
social, technological, political, environmental, economical and legal factor which is required to
understand condition of organisation and set outcome accordingly. Here are discussed some
major determinants briefed as below:

Political Factor
Philip Morris International is operating their business operation in numerous nations and
exposes themselves to distinct political environment and risks associated with this; Political
barriers like Govt. tax and legal components might become PMI hindrance to raise their business
operational strategy. Cigarette industry is widely developing in China as number of cigarette
smokers has increased. Knowing its worse influence of health, government has enacted strict
regulations and policies barring foreign investment in the nation's enormous tobacco industry
restricting international organisational investment along with individual business involvement in
the retail, wholesale and alternative trading forms of tobacco. According to the report, 2.3billion
people are protected from the Smoke Free law in which major statics were counted from China
(Azevedo, Apfelthaler and Hurst, 2012). Hence, this indicate a major fall in the revenues of PMI
and made it’s more difficult to promote sponsorship and advertising due to numerous restrictions.
Although due to favoured trading partners and intellectual property protection, Philip Morris
International has facilitated more benefits overall.
Economical Factor
The components such as saving rates, interest rates, inflation or exchange rate etc. which
sets the aggregate investment and demands in an organisation's economy. These elements such as
competition norms influence the competitive edge of company. Philip Morris International
possesses more than 15.7% market share of entire cigarettes along with nearby $138.31billion
market capital at the selling time of product with constant demands cause of addictive product
nature. Approximate 10% smoker of China quit through choice in relation to more than 50% in
various high nation income where there are more previous smokers than smokers (Broadbridge
and Simpson, 2011). PMI in China are influence by many factors but are economically widely
influenced by the assistance of the whole industry. Hence, this has positive as well as negative
influence over the society.
Social Factor
Culture and methods of social activities can influence the organisation working
environment. Understanding the popularity and leading activities, Marlboro is one most famous
cigarette brand, direct PMI to criticism like major smoking contributor associated to global

death. 68% of Chinese men smoke relatively to only 32% are women. Ineffective restrictions of
smoking in public and indoor places like offices and restaurants mean about 740million which
are provided to second-hand smoke. As people are facing numerous issues, the company might
face different consequences within the organisation. Hence, these practices are affecting the
growth and development of organisation (Bučiūnienė and Kazlauskaitė, 2012). Through
organisation is working over less health harming products.
Environmental Factor
Due to the cigarettes litter, smoking has been banned on various places of china such as
beaches, jungles etc. Tobaccos growing often include substantial utilisation of chemicals
involving growth regulator, fertilizers and pesticides. Due to its environmental harm, China
Government has formed numerous acts and regulations as due to the ineffective smoking
restriction, pollution is increasing each and everyday that is leading to the lung cancer fatalities
and diagnoses in the global environment.
In regard of developing business and reducing the environmental harm, the company is
working over several practices e-cigarette. The company is leading fast-moving customer goods
enterprise in environmental foot-print terms (Budhwar and Debrah, 2013).
Legal Factor
In numerous nations, the legislative institutions and structure are not strong enough to
safeguard the IP rights of organisation. Philip Morris International Inc. is facing different family
smoking preventions and Tobacco control act regulated by the state of China. There are
numerous different regulations and anti-smoking acts that are operated for reduce the use of
tobacco from nation (Storey, 2014). Company has faced numerous issues such as plain
packaging laws case in Australia etc. Hence, these practices are creating different influence over
PMI and its market.
Technological Factor
Philip Morris International is entirely built over automated technology along with future
and recent innovations and discoveries reducing the smoking harm. To reduce the issues
associated with environment and making the organisation more technically enriched, research
and development division of PMI is developing each and every day. PMI has developed e-

cigarette (Appendix 2) to produce smokeless products and service that is influencing for the
company. Since 1998, PM USA launched the first electronically heated tobacco product and then
first e-cigarettes were commercialized in China since 2004. (PMI,sustainability report,2016.p12)
Hence, it can be affirmed from the discussed report that PMI is mainly influenced
negatively in the competitive business environment of China. This is fundamental for Philip
Morris International Inc. to manage their practices and introduced more effective techniques in
regard of achieving business objectives (Schneider and Spieth, 2013). Main legal and political
factors are influencing adversely in the country such as China as these regulations and laws are
strict. On the other hand, technological advancement, e-cigarette and other smokeless products
with harmless structuring are leading positive influence to organisation. According to the figures,
approximate 100 out of each 100, 000 are killed due to smoking and pollution created by this
(Air pollution is bigger killer in China than smoking, says new Greenpeace study, 2015). This
analysis presents some main tobacco player in environment issues.
TASK 2
i) Relevance and Influence of environmental issues
Environment issues can be referred as the dangerous influence of human affairs on
biophysical environment (Carney and et. al., 2011). Social, environmentalism and movement of
environment addresses issues of environment by education, advocacy and activism. Numerous
climate disasters have increased in the different environments of business that are leading to
changes and technological advancement in the competitive world.
Environmental Issues in China
The raised issue is authentic in context of PMI and its business & management
development this is the major issues that world is suffering due to the tobacco use despite of
health problems. Numerous conflicts can be identified in the environment causing PMI various
consequences and situation led to reduce in revenues as well. PMI is focusing over development
of technologies adopted and employed through their research and development team (Dumas and
et. al., 2011). China is making efforts to decline or ban of smoking in specific public places that
are not year enforced and well-coordinated in relatively.

This is complex to separate the influence of tobacco and pollution which is contributing
approximate PM2.5 (fine particles in air) and more in the whole. According to the report, more
than 44% of the world's cigarettes are smoked within China. More than a million people lost
their lives due to tobacco diseases. Air pollution could be identified as one of the main cause of
death which ratio is 1 by 3 in China. Among 74 cities evaluated some 3.03million deaths tracked
in 2013 which has increased by the end of 2018. The level of pollution is reaching about 500
PM2.5 (fine particles in air) determined over each cubic meter (Easterby-Smith, Thorpe and
Jackson, 2011). The level of environmental issues has hiked to the peak level which is led 30,
000 deaths in the year of 2013 due to the pollution.
PMI’s sustainable operational structure could help the tobacco business have a
sustainable existence in the Chinese market setting and positively influence the customers. Here
are discussed major impacts as below:
Water pollution
China tobacco company operating factory and farming use a lot of fresh waters. Farmers
plant tobacco with heavy pesticides which are carried pollutants into lakes, rivers and
underground. (Daniel Shemie and Kari Vigerstol,2018) It harms human health and environment.
Regarding this issue, PMI is concerning water stewardship to achieve improvements in
water efficiency and recycling water. It also ensures access to sanitation, hygiene and Safe in all
PMI’s facilities and supply chain. (PMI,sustainability report,2016,p58-60)
Toxic Waste
Estimated 6.25 trillion cigarettes worldwide in 2012, the smoke of cigarettes release
toxicants which Toxic emissions include 3000–6000 metric tonnes of formaldehyde;12 000–47
000 metric tonnes of nicotine to pollute environment directly.(University of California, 2016).
Farmers plant tobacco with heavy pesticides which are highly toxic to plants and human as well
as animals which can affect soil and seep waterways for numerous years. Hence, this is affecting
badly to the environment.
Therefore, PMI had established Integrated Pest Management(IPM) aims to manage
chemicals for crop protection to minimizing into environmental impact or safety of human. It
created a biopesticide database of 120 active substances to help our suppliers and affiliates to

test their substitution over synthetic substances. The IPM is doing any possible applications for
recycled material from e-cigarettes. (PMI,sustainability_report,2016,p60)
Since PMI developed the e-cigarettes(IQOS) which were first launched it to China in
2004. Afterwards,this product has captured the global attention include IQOS, TEEPS, E-vapor
products, etc.(Appendix_2)
The IQOS is a tobacco heating system that heats the tobacco component to release the
nicotine vapour without actually burning the tobacco. Similarly, the TEEPS warms the tobacco to
release the natural taste. The E-vapor products are the smoke-free cigarette substitutes without
tobacco ingredient. (PHILIP MORRIS INT,2018). These products reduce in harmful toxicants
compared to cigarette smoking.
Air pollution
China Xinhya news reported for China National Tobacco Corporation (CNTC or China
Tobacco) that “... total industrial emissions of sulfur dioxide, [are] 5688 metric tonnes, down
29.8%; chemical oxygen demand emissions [are] 2751 metric tonnes, down 11.7%” (Xinhya
News,2012). incurred environmental costs of approximately RMB 451 000 and RMB 589 000
for the years ended 31 December 2014 and 2013,respectively”, refer to this annual report that is
unclear whether these are government fines for polluting or other costs.
On the other hand, air pollution is causing the death of 1.6million people in which 25%
part is contributed due to the cigarette consumption. Using the statics from the reporting system
of national air quality of China as well as other third party sources, numerous scientists mapped
focus of size key pollutants across the China which is affecting approximate 97% lives of people
(Air pollution in China is killing 1.6 million people a year, researchers say, 2016). The situation
of climate is altering and rapidly worsening each and every day according to the stated graph
(Refer to the Appendix C).
For solving the issues, the best example of their invention is e-cigarette (IQOS,Teeps
orE-vapor) in appendix 2. But, it raised on expensiveness which make only elite people use of
that product. Also Philip Morris International Inc. has come up with smokeless and less harming
Nicotine products which can reduce the issue of environment led to the organisation. Philip
Morris International is aiming over vision of cigarette-free future that can be attained with
scepticism. They have predicated a phase-out-period for cigarette that is less harmful unlike
traditional smoking. This is the new initiative to resolve the air pollution issues from the country.

Product and post-consumer waste
The factory waste are always disposed in landfill plus each year have about 340 to 680
million kg of waste tobacco product litters the world that contain over 7000 toxic chemicals
harming environment directly (Wright,2015). The costs of clean up and disposal are not borne
by smoker or producers but solving by government.
For solving this, PMI’s factory has waste management program to recycle, reuse and
reduce before any disposal. But, post-consumer waste lies on their behaviour that is big
challenge.
However, PMI’s IQOS heated tobacco units are made by bio-based polymer and wood
pulp, these materials can be recycled for using in retail fixtures, cloth’s fabrics or frames of
glasses etc.(PMI,sustainability_report,2016,p62)
Transport and distribution
For vehicle CO2 emissions, PMI’s agricultural of supply chain removed middlemen to
reduce transportation costs and reduce truck fuelling(PMI,sustainability.report,2016,p49).
Furthermore, PMI’s fleet management and optimization program train worker mindful of
efficiency of their fleet of vehicles. It improved 10% of fuel efficiency of vehicles from 2013 to
2015 which helps to reduce CO2 emission. (FAO Stat,2014).
CO2 emissions and climate changes
The largest of CO2 emissions and climate change are contributed by deforestation to
plant tobacco, and farmer burns woods to cure the tobacco leaves. In China lost about 16,000 ha
of forest and woodland for tobacco farming yearly where about 5% of national
deforestation(Geist H,1999). As results, it effected greenhouse gas emissions(GHG) problem.
For solving this, under PMI’s good agricultural Practices (GAP) program for supplier
including reforestation program, recycle program, use of sustainable sourcing for fuel, curing
barn improvements and using solar energy etc. They target to reduce 70% of greenhouse gas
emissions from tobacco curing against 2010 to 2020, no deforestation and no coal usage due to
cure tobacco by 2020 (FAO Stat,2014).
Though, the government of China is making numerous changes in the system i.e. leading
to better outcomes (Guest post: China’s CO2 emissions grew less than expected in 2017, 2018).