Philip Morris International - Water 2018
W0. Introduction
W0.1(W0.1) Give a general description of and introduction to your organization.
Who we are:
Philip Morris International Inc. (PMI) is a leading international tobacco company with a diverse workforce of approximately
80,600 people across the globe as of December 31, 2017.
In 2017, our products were sold in over 180 markets, and we operated 46 production facilities globally.
Headquartered in New-York, US; PMI has its Operations Center in Lausanne, Switzerland.
What we do:
PMI manufactures and sells cigarettes and other nicotine-containing products in markets outside of the United States ofAmerica. Our portfolio comprises both international and local brands and is led by Marlboro, the world’ s best-sellinginternational cigarette. In 2017, PMI net revenues amounted to USD 78.1 billion including excise taxes on products worth
USD 49.4 billion. 2017 net revenues less excise tax amounted to 28.8 billion USD. 2017 Operating Income was USD 11.5
billion. PMI’s 2017 total shipment volume for cigarette and heated tobacco units was 798.2 billion (761.9 billion cigarettes and36.2 billion heated tobacco units).
Our vision:
We are building our future on smoke-free products that are a much better consumer choice than continuing to smoke
cigarettes. Our vision is that these products ultimately replace cigarettes to the benefit of adult smokers, society, ourcompany and our shareholders.
Our strategy:
To this end our core strategies are:
· Smoke-Free: Develop, market, and sell smoke-free alternatives, and switch our adult smokers to these alternatives, as
quickly as possible around the world· Transition: Transition our resources from cigarettes to smoke-free alternatives· Regulation: Propose regulatory policies that encourage the replacement of cigarettes by smoke-free alternatives· Sustainability: Drive world-class sustainability programs across our entire value chain· Talent: Be the employer of choice for our global workforce and work tirelessly to attract the best talent· Transparency: Share our progress, and invite dialogue and independent verification

· Growth: Provide superior returns for our shareholders
Sustainability:
For PMI, sustainability means creating long-term value while minimizing the negative externalities associated with our
products, operations and value chain. From the more than 350,000 farmers from which we source tobacco right up to theapproximately 150 million consumers of PMI products, we have an important impact on the commun ities and the environment
around us, which we are committed to address. We cannot achieve this alone. The engagement beyond our own operations
is key, as this is where the most significant impacts take place. While operating in a highly regulated environme nt, we strive
to go beyond mere compliance to achieve a sustainable smoke-free future.
Our business has a significant, global supply chain organized by five main categories. We have a large agricultural supply
chain, ranging from tobacco growers to producers of other agricultural products, such as clove, menthol and guar gum.
Another part of the supply chain consists of manufacturers of direct materials used to produce cigarettes and other tobacco
products, such as acetate tow (for cigarette filters) and paper (both cigarette paper and packaging materials). Key to ourbusiness are also the manufacturers of machines for our cigarette and heated tobacco products factories, a highly specialized
industry. A recently added part of our supply chain consists of the manufacturers of electronic devices for heated tobacco
products and e-cigarettes. Finally, we work with thousands of suppliers of goods and services that are not specific to thetobacco business, but essential for any business, such as office equipment e tc. As a responsible business, we want tounderstand and continuously address potential sustainability issues in our global supply chain. We are working with business
partners to proactively identify, manage, and reduce risks, and create shared value.
PMI supported the call for a price on carbon in the Paris Climate Agreement. Our targets, recognized by the Science -Based
Targets initiative in 2017, demonstrate how PMI can contribute to keeping global warming below 2°C based on pre -industrial
levels. We have set our performance baseline as 2010. Against that baseline, we aim to reduce absolute CO2e emissions
from our own operations by 30% by 2020, 40% by 2030 and 60% by 2040. We are well on track in 2017, achieving an overall
reduction of 31% for our GHG scopes 1 and 2 emissions, driven by the use of greener electricity, exceeding our 2020 target.
Across our value chain, we aim to reduce absolute CO2e emissions by 40% by 2030. In 2017, we achieved a 30% reduction
across scopes 1, 2 and 3, driven by gains in curing efficiency and use of greener fuels in tobacco agriculture. We also have along-standing commitment to reduce the emissions intensity of our value chain (measured in CO2e per million cigarettes
equivalent) by 30% by 2020. In 2017, we're on track to meet this target, reaching 24% reduction vs 2010.

W-FB0.1a(W-FB0.1a) Which activities in the food, beverage, and tobacco sector does your organization engage in?
Processing/Manufacturing
Distribution

W0.2(W0.2) State the start and end date of the year for which you are reporting data.
Reporting year

Start dateEnd date

January 1 2017

December 31 2017

W0.3
(W0.3) Select the countries/regions for which you will be supplying data.
Argentina
BrazilCanadaColombia
Costa Rica
Czechia
Dominican Republic
EcuadorGermany
GreeceIndonesia
Italy
JordanKazakhstan
Lithuania
Malaysia
MexicoNetherlands
Pakistan
Philippines
PolandPortugal
Republic of Korea

Romania
Russian Federation
SenegalSerbiaSouth Africa
Switzerland
TurkeyUkraineVenezuela (Bolivarian Republic of)

W0.4(W0.4) Select the currency used for all financial information disclosed throughout your response.
USD

W0.5
(W0.5) Select the option that best describes the reporting boundary for companies, entities, or groups for whichwater impacts on your business are being reported.
Companies, entities or groups over which operational control is exercised

W0.6(W0.6) Within this boundary, are there any geographies, facilities, water aspects, or other exclusions from yourdisclosure?
Yes

W0.6a
(W0.6a) Please report the exclusions.
Exclusion

Please explain

We have excluded offices and minor activities/facilities such as finished goods warehouses for which we have limited data andwhere we consider our water footprint and risks to be very small. These exclusions are not significant to this disclosure and weestimate that these sites represent less than 2% of our overall blue water usage based on a water footprint screening performed by
Offices and some external consultant, Quantis. In addition, none of these locations are in high water risk locations according to the WRI Aqueduct
minor facilities.
Tool.

W1. Current state
W1.1(W1.1) Rate the importance (current and future) of water quality and water quantity to the success of your business.
Indirect
Direct use use
importance importance
ratingratingPlease explain

Sufficient amounts ofgood quality freshwater
available for use

ImportantSufficient amounts ofrecycled, brackish and/or
produced water available
for useImportant

ImportantAccording to a study we conducted in 2017, our agricultural supply chain, our supply chain andour manufacturing represent respectively 53%, 41% and 6% of our water footprint, highlighting
the importance of direct and indirect quality freshwater for our business. Indirect: PMI's most
crucial suppliers in terms of water risks are tobacco, paper and cellulose acetate based material
suppliers. More than half of tobacco crops are rainfed, rest require water to grow. By
collaborating with our suppliers to promote GAP and RSP, we aim to reduce our dependency infreshwater consumption. Direct:At our manufacturing sites, high quality freshwater is required
for WASH services, landscaping, and for manufacturing processes. The increased production ofsmoke-free products, with higher water intensity, will increase our direct freshwater
consumption. With process maturity and implementation of water recycling initiatives, we expect
water consumption to decrease.

Important

Direct: At our manufacturing sites, water is recycled in our waste water treatment plants andused for watering gardens and for some processes where technically possible. Indirect: tobaccoand other direct material suppliers like paper or cellulose acetate use every opportunity to treat
and use recycled or brackish water. Reducing freshwater withdrawn by using recycled water
improves our direct and supply chain resilience to water scarcity and increases water availability
for surrounding communities, therefore, we have given them a rating of important. Water
recycling is a trend among our suppliers and we expect it to increase. The process to
manufacture our smoke-free products requires approximately four times more water per unit ofproduct than conventional cigarettes. Our efforts are geared towards improving water efficiency
throughout the process by implementing new process designs, reusing or recycling water, andusing rainwater harvesting.

W-FB1.1a(W-FB1.1a) Which water-intensive agricultural commodities that your organization produces and/or sources are themost significant to your business by revenue? Select up to five.

Agriculturalcommodities

TobaccoOther, please specify(Other timber based
direct materials)% of revenue
dependent
on these
Producedagricultural and/or
commodities sourced Please explain

More than80%

More than
80%

SourcedWe purchase tobacco leaf of various types, grades and styles throughout the world.
Approximately 90% of our purchases come from more than 350,000 farmers directly contracted
either by us or by our third-party leaf suppliers in 28 countries. In 2017, we contracted farmers
directly in several countries, including Argentina, Brazil, Colombia, Ecuador, Italy, Kazakhstan,
Pakistan, the Philippines and Poland. Some of our main tobacco sourcing countries are
Argentina, Brazil, China, India, Indonesia (mostly for domestic use in kretek products), Malawi,
Mozambique, Philippines, Turkey and the United States. In 2017, we conducted water baseline
studies for 60 different geographical areas where specific types of tobacco are grown. More thanhalf of tobacco crops are rainfed and thus do not require irrigation.

SourcedIn addition to tobacco leaf, we purchase a wide variety of direct materials from approximately 450
suppliers. In 2017, approximately 50% of our total direct materials were purchased from our top
ten suppliers. The three most significant timber based direct materials that we purchase areboard and paper materials used mostly in packaging, acetate tow used in filter making, and finepaper used in the manufacturing of cigarettes and heat sticks. In 2017, we conducted waterbaseline studies in 60 different geographical areas where more than 90% of the tobacco wepurchase is grown . A water risk assessment system has been developed, including a global andtailored local risk assessment methodology and guideline. The local risk assessment was piloted
in 3 countries in 2017, We will be expanding our water programs by assessing current and futurewater-related risks more broadly across our value chain.

W1.2(W1.2) Across all your operations, what proportion of the following water aspects are regularly measured andmonitored?
% ofsites/facilities/operations Please explain

Water withdrawals – total
volumes

100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helpng our sites to demonstrate compliancewith current and future statutory and regulatory requirementsassociated with water
withdrawals. Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually.

% ofsites/facilities/operations Please explain

Water withdrawals –volumes from water stressed
areas
100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
withdrawals. Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually. Our water stressed factories
have been identified as a result of the water footprint study done in 2017 and in the pastthrough a water screening based on the WRI Aqueduct tool.

Water withdrawals –volumes by source

100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
withdrawals. Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually

Produced water associatedwith your metals & mining
sector activities - total
volumes<Field Hidden><Field Hidden>

Produced water associatedwith your oil & gas sector
activities - total volumes<Field Hidden><Field Hidden>

26-50

Underground water and municipal water are monitored closely (up to 3 times a month) in
respectively 26% of our sites and in our new reduced-risk product (RRP) factories. We
collect up to 30 parameters like biochemical oxygen demand (BOD), chemical oxygen
demand (COD), salinity, temperature, and chlorine. The rest of the factories receive annual
certifications from the relevant authorities on water quality. As part of our new water
strategy plan, we will progressively extend on-site water measurements for all our sites.

100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
discharges. . Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually.

Water discharges – volumes
by destination
100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories are

Water withdrawals quality

Water discharges – total
volumes

% ofsites/facilities/operations Please explain
assessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
discharges. Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually

Water discharges – volumes
by treatment method
100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
discharges. Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually

Water discharge quality – bystandard effluent parameters 100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
discharges. Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually. Some parameters such as
biochemical oxygen demand (BOD), chemical oxygen demand (COD), salinity,
conductivity, pH, temperature and chlorides are controlled according to local regulatory
limits. As part of our water strategy, we will progressively increase the number ofparameters controlled and on-line measurements at all of our sites.

Water discharge quality –temperature

26-50

41% of our operational (i.e. factory) sites are monitored for this water aspect andcorrespond to those discharging into surface or underground water and this is consideredpart of normal facility management for our sites. 91% of our factories are assessed against
ISO14001 requirements, helping our sites to demonstrate compliance with current andfuture statutory and regulatory regulations associated with water discharges. Monthly water
data is input from all sites globally. We monitor all our sites with water treatment andespecially those discharging into underground or surface water. Some parameters arebiochemical oxygen demand (BOD), chemical oxygen demand (COD), salinity,
conductivity, temperature, and bacterial activity. As part of our water strategy plan, we will
progressively increase number of parameters controlled and on-line measurements to all
our sites.

100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
consumption. Monthly water data from all sites is entered into our EHS data management

Water consumption – total
volume% ofsites/facilities/operations Please explain
system, checked quarterly and verified by third party annually. We monitor waterparameters in all our sites with water treatment plants and especially those discharging into
underground or surface water. Some parameters are biochemical oxygen demand (BOD),
chemical oxygen demand (COD), salinity, conductivity, temperature, and bacterial activity.
As part of our water strategy plan, we will progressively increase number of parameters
controlled and on-line measurements to all our sites.

100%

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites. 91% of our factories areassessed against ISO14001 requirements, helping our sites to demonstrate compliancewith current and future statutory and regulatory requirements associated with water
recycle/reuse Monthly water data from all sites is entered into our EHS data management
system, checked quarterly and verified by third party annually. Optimizing our osmosis
water treatment plants and reusing rejected water are examples of initiatives implemented
to reuse water in our factories.

The provision of fullyfunctioning, safely managed
WASH services to all
workers
76-99

100% of our operational (i.e. factory) sites are monitored for this water aspect and this isconsidered part of normal facility management for our sites and is validated throughISO14001 and OHSAS18001 (health and safety management) certification in 91% of thesites. We use a global reporting requirement for water data with a central data collection
system for all sites. Audits and inspections are undertaken to check minimum requirements
set by our documented standards.

Water recycled/reused

W1.2b(W1.2b) What are the total volumes of water withdrawn, discharged, and consumed across all your operations, andhow do these volumes compare to the previous reporting year?
Comparison
withprevious
Volumereporting(megaliters/year) year
Please explain

Total
withdrawals

4152.3HigherAll water metrics are collected through our EHS data management system for all sites globally. Thisdata is input monthly from factory meters, reviewed and compared to invoices. Data is then checked
quarterly by global EHS and annually by a third party. In 2017, total withdrawals increased by 22.4%
vs. 2016 with 3,394 megaliters. Most of the increase was due to the inclusion of a new reduced risk
product (RRP) factory in our operational scope for the first time. If we adjust the 2016 baseline toComparison
withprevious
Volumereporting(megaliters/year) year
Please explain
account for the RRP impact, our total withdrawals in 2017 would have been reduced by almost 1%
vs 2016. Besides, the process to manufacture our new smoke-free and reduced risk products (RRP)
requires approximately 4 times more water per unit of product than for conventional cigarettes. In
2017, PMI implemented some initiatives to reduce water use and increase water recovery; however,
due to our new manufacturing process, our average water consumption increased from our lowest
level of 4.0m3 in 2016 to 4.8m³ of water for every million units of product equivalent (cigarettes andheat sticks). At present, we have only one facility producing these products; however, we expect thedemand and production to grow over time, which will proportionally increase our water footprint. In
2017, PMI performed a water footprint study which reviews the overall amount of water consumed(water withdrawal minus water released) and adjusted it for water scarcity (water consumed
multiplied by a regional or watershed based water stress indicator). This study will allow us prioritize
efforts based on water stress levels. To mitigate these future impacts, our efforts are geared towards
improving water efficiency throughout the process by implementing new process designs, reusing,recycling water, and using rainwater harvesting Therefore we expect short term increases of water
withdrawn and medium term decreases once RRP manufacturing process matures & our recycling
strategy is implemented

Total
discharges

2479.6HigherAll water metrics are collected through our EHS data management system for all sites globally. Thisdata is input monthly, checked quarterly and annually. In 2017, our total discharges increased by
30% from 1,900 megaliters in 2016. Most of the increase was due to a new reduced risk product(RRP) factory included in our operational scope for the first time. If we adjust the 2016 baseline toaccount for the RRP impact, our total discharges in 2017 would have been reduced by almost 2% vs2016. The process to manufacture our new smoke-free and reduced risk products (RRP) requires
approximately 4 times more water per unit of product than for conventional cigarettes. In 2017, PMI
implemented some initiatives to reduce water use and increase water recovery; however, due to our
new manufacturing process, our average water consumption increased from our lowest level of
4.0m3 in 2016 to 4.8m³ of water for every million units of product equivalent (cigarettes and heatsticks). At present, we have only one facility producing these products, however, we expect thedemand and production to grow over time which will proportionally increase our water footprint. In
2017, PMI updated the water footprint study that was conducted in 2015 which reviews the overall
amount of water consumed (water withdrawal minus water released) in relative to how it affects
water scarcity (water consumed multiplied by a regional or watershed based water stress indicator).
This study will allow us prioritize efforts based on water stress levels. To mitigate these future
impacts, our efforts are geared towards improving water efficiency throughout the process byimplementing new process designs, reusing or recycling water, and using rainwater harvesting.

Comparison
withprevious
Volumereporting(megaliters/year) year
Please explain
Therefore we expect short term increases of water discharges and medium term decrease once RRP
manufacturing process matures & our recycling strategy is implemented

Total
consumption

1672.7HigherAll water metrics are collected through our EHS data management system for all sites globally. Thisdata is input monthly and checked quarterly and annually. In 2017 our total consumption increasedby 12% from 1,498.4 megaliters in 2016. Most of the increase was due to a new reduced risk product(RRP) factory included in our operational scope for the first time. If we adjust the 2016 baseline toaccount for the RRP impact, our total consumption in 2017 would have been almost flat (0.4%) vs2016. The process to manufacture our new smoke-free and reduced risk products (RRP) requires
approximately 4 times more water per unit of product than for conventional cigarette. In 2017, PMI
implemented some initiatives to reduce water use and increase water recovery; however, due to our
new manufacturing process, our average water consumption increased from our lowest level of
4.0m3 in 2016 to 4.8m³ of water for every million units of product equivalent (cigarettes and heatsticks). At present, we have only one facility producing these products, however, we expect thedemand and production to grow over time which mayl proportionally increase our water footprint. In
2017, PMI updated the water footprint study that was conducted in 2015 which reviews the overall
amount of water consumed (water withdrawal minus water released) in relative to how it affects
water scarcity (water consumed multiplied by a regional or watershed based water stress indicator).
This study will allow us prioritize efforts based on water stress levels. To mitigate these future
impacts, our efforts are geared towards improving water efficiency throughout the process byimplementing new process designs, reusing or recycling water, and using rainwater harvesting.
Therefore we expect short term increases of water consumptio and medium term decrease once
RRP manufacturing process matures & our recycling strategy is implemented.

W1.2d(W1.2d) Provide the proportion of your total withdrawals sourced from water stressed areas.
%
Comparison
withdrawn withfromprevious
stressed reporting
Identification
areas
year
tool
Please explain
Row
1
24

Lower

WRI
Aqueduct

Using the WRI Aqueduct tool results, we were able to detect those sites with moderate to severe
drought risk. Then we calculated the total amount of water withdrawn from those factories vs total%Comparison
withdrawn withfromprevious
stressed reporting
Identification
areas
year
tool
Please explain
withdraws. Based on this study, 24% of our direct factory water withdrawals are from water stressed
areas, which is lower than in 2016 where 28% was withdrawn from water stressed areas. We perform
this study annually to make sure that our focus on water stressed factories remain relevant. Water
withdrawals decrease is in line with programs to reduce water-use in water stressed areas. Our
efforts are geared towards improving water efficiency throughout the process by implementing newprocess designs, reusing or recycling water, and using rainwater harvesting.

W-FB1.2e(W-FB1.2e) For each commodity reported in question W-FB1.1a, do you know the proportion that is
produced/sourced from water stressed areas?

Agricultural commodities

The
The
proportion proportionof thisof thiscommodity commodity
produced sourced
in waterfrom water
stressedstressedbasins isbasins is
known
known
Please explainNotapplicableYes

We do not produce agricultural commodities; we source them as raw materials to
manufacture our products. In 2017, PMI conducted a water footprint study showing that 53%
is due to our agricultural supply chain, 41% to our supply chain, and 6% to our manufacturing
processes. In 2017, water baseline studies were conducted in 60 different tobacco growing
areas, representing 90% of our tobacco leaf purchases. A water risk assessment system wasdeveloped using data from: our 2016 leaf water footprint study, baseline database of 106
growing areas, global and tailored local risk assessment methodologies and guidelines thatallowed to understand which areas were water stressed. Brazil, Malawi and U.S., important
tobacco-sourcing countries, were selected to pilot and validate the methodology. Studies willcontinue through 2020 to further understand local risks including water stress risk and build
best practices.

Other commodities from W- Not
FB1.1a, please specify
applicableYes

We do not produce agricultural commodities;we source tthem as raw materials to
manufacture our products. In 2017, PMI conducted a water footprint study showing that 53%

TobaccoAgricultural commodities

The
The
proportion proportionof thisof thiscommodity commodity
produced sourced
in waterfrom water
stressedstressedbasins isbasins is
known
known
Please explain(Timber based directmaterials)

is due to our agricultural supply chain, 41% to our supply chain, and 6% to our manufacturing
processes. We’re expanding our water programs by assessing current and future waterrelated risks more broadly across our value chain. Using as a base the water footprint study,
we calculated the amount of direct timber based materials (papers, boards, acetate tow...)measured in weight and sourced from water stressed areas in 2017. In the next years, weplan to engage in one to one conversations with some key suppliers to get specific factorydata (primary water consumption data, factory locations...), run WRI tool on water stressed
locations and collaborate with our suppliers reduce water stress risks.

W-FB1.2g(W-FB1.2g) What proportion of the sourced agricultural commodities reported in W -FB1.1a originate from water
stressed areas?

Agricultural commodities

Tobacco% of total
agriculturalcommodity
sourced inwater
stressedareas
Please explain

1

In 2017, water baseline studies were conducted in 60 different geographical areas where different
tobacco types are grown, representing 90% of our tobacco leaf purchases. A water risk assessment
system has been developed, including a global and tailored local risk assessment methodology andguideline. We confirmed that more than half of the tobacco we source is rainfed, the rest requires
irrigation. We’re expanding our water programs by assessing current and future water-related risks
more broadly across our value chain. As we transition to a smoke-free future, the production of smokefree products will require less tobacco compared to cigarettes. We are supporting our farmers andsuppliers to diversify their crop through a multistakeholder approach involving suppliers, NGOs, andother companies active in the agricultural sector. In order to calculate the tobacco sourced from

% of total
agriculturalcommodity
sourced inwater
stressedareas
Please explain

Agricultural commodities

stressed areas, we used the WRI Aqueduct tool to calculate the tobacco volume grown in areas withhigh risk of water stress (with an overall physical water risk above 3), and concluding that 1% of thetobacco volume sourced in 2017 was grown in water stressed areas. It is the first time that we havecalculated this figure and we plan to improve its measurement by including more primary data fromdirect material suppliers. In addition, we are looking to reduce the water stress in our footprint byactively collaborating with our suppliers on water efficiency in stressed areas.

Other sourced commodities
from W-FB1.2e, please specify(Timber based direct materials)

In 2017-2018, a water footprint was developed using the AWARE methodology by WULCA (TheWULCA working group’s overall goal focuses on providing practitioners, from both industry andacademia, with a consistent framework to assess, compare and disclose the environmental
performance of products and operations regarding freshwater use). This water footprint provided
information on freshwater withdrawals, consumption and water stressed footprints along with different
water pollution indicators that will allow us to prioritize programs with our suppliers. Using this water
footprint study, we understood that 3% of the timber based direct materials (papers, boards, acetate
tow...) measured in weight and sourced in 2017 are from water stressed areas. It is the first time wehave calculated this figure and we plan to improve its measurement by including more primary datafrom suppliers. In addition, we are looking to reduce the water stress in our footprint by actively
collaborating with our suppliers on water efficiency projects in stressed areas.

3

W1.2h
(W1.2h) Provide total water withdrawal data by source.
Comparison
withprevious
VolumereportingRelevance (megaliters/year) year
Please explain
Fresh surface water,
including rainwater, waterfrom wetlands, rivers, andlakes
Relevant

12.3

HigherAlthough globally fresh surface water is not too relevant in terms of volumes(less than 1% of our total water withdrawals), locally we consider it relevant
since whenever is possible we use it to reduce water sourced from
Municipal waters. In 2017, fresh surface water withdrawals increased by 9.7
megaliters from 2.6 megaliters in 2016. The main cause for this increase inComparison
withprevious
VolumereportingRelevance (megaliters/year) year
Please explain2017 is a new project to switch some of our operations in Switzerland to use
more fresh surface water and a rain harvest project in Indonesia fordomestic use which increased our freshwater sourced from previous years.
In particular, in Switzerland, we switched some of our operations to use
more fresh surface water. The benefit is that instead of using drinkablewater for the steam system, we use lake-water. We expect this source toincrease slightly over time as we implement more water harvesting andwater pump wherever feasible locally.

Brackish surface
water/seawaterNot
relevant

Groundwater – renewable Relevant

Groundwater – nonrenewableNot
relevant<Field Hidden>

1543<Field Hidden><FieldHidden>We do not currently use either brackish surface water or seawater. In allcases, we require higher quality water which can be used onsite. This isbecause we use the majority of our water for WASH facilities, landscaping,
and the manufacturing process itself. Currently, a third of our factories are
reusing treated wastewater, such as in Senegal where treated domestic
wastewater is used in toilets. We plan to increase these initiatives in years
to come as we continue to innovate and increase quality of treatedwastewater so it can be reused and take demand off of other sources suchas brackish surface water/ seawater.

About thesame

Since water quality is relatively important to our operations, inlet water iscurrently supplied from two main sources: urban network (63%) ofmunicipalities or private suppliers; and groundwater renewable sources(37%) from wells and aquifers, which are metered and verified annually byexternal auditors. In 2017, 1,543 megaliters were withdrawn fromgroundwater sources compared to the 1,495 in 2016. In the next years
should remain about the same or decrease in line with programs to reducewater-use.

<FieldHidden>We do not currently use non-renewable groundwater. We currently receive
37% of our water from renewable groundwater from wells and aquifers,
which are metered and verified annually by external auditors. Since we arelooking to reduce our water stress, it is unlikely that we will locate any future
manufacturing facilities in places that require non-renewable groundwater.
Currently, a third of our factories are reusing treated wastewater, such as in
Senegal where treated domestic wastewater is used in toilets. We plan toincrease these initiatives in years to come as we continue to innovate andComparison
withprevious
VolumereportingRelevance (megaliters/year) year
Please explainincrease quality of treated wastewater so it can be reused and take demandoff of other sources such as non-renewable groundwater.

Produced water

Third party sourcesNot
relevant

Relevant<Field Hidden>

2597<FieldHidden>We do not currently use produced or process water. In all cases, we require
higher quality water which can be used onsite. This is because we use themajority of our water for WASH facilities, landscaping, and the
manufacturing process itself. Currently, a third of our factories are reusing
treated wastewater, such as in Senegal where treated domestic wastewater
is used in toilets. We plan to increase these initiatives in years to come as
we continue to innovate and increase quality of treated wastewater so it canbe reused and take demand off of other sources such as produced water.

HigherWe are dependent on having sufficient amounts of high quality freshwater.
Water required for production in our factories, is currently sourced fromurban network (67%) of municipalities or private suppliers (third party
sources) and groundwater wells (33%) from wells and aquifers, which aremetered and verified annually by external auditors. In 2017, 2,597
megaliters were sourced from third party sources, 37% more than the 1,896
megaliters in 2016. The increase is due to our new RRP factory included forthe first time in our scope. Besides due to our new RRP manufacturing
process, our average water consumption increased from 4.0m3 in 2016 to
4.8m³ in 2017 of water for every million units of cigarette equivalent. The
expansion of RRP production may increase the withdrawn volumes in the
future. We are therefore incorporating new designs, reusing or recycling
water with a view to limit the increase in water withdrawal.

W1.2i(W1.2i) Provide total water discharge data by destination.

Comparison
withprevious
VolumereportingRelevance (megaliters/year) year
Please explain

Fresh surface
water

Brackish surface
water/seawater

Groundwater

Third-party
destinations

Relevant

Not
relevant

Relevant

Relevant

557.9<Field Hidden>

243.3

1677.5

About thesame

PMI’s discharges approximately 23% of its wastewater into surface water disposal.
Wastewater is equally treated in public and on-site water treatment plants, and thendischarged into surface water. In 2017 557.9 megaliters were discharged into
surface destination, representing a 3% increase vs. 542 megaliters in 2016. This
figure may increase slightly if we install in more heat pumps at our factories which
could use lake water as sources of withdrawal and discharge as we did in
Switzerland. Besides, the expansion of RRP production, which requires more water
than conventional, to other sites, may increase the discharged volumes in the
future. We are therefore incorporating new designs, reusing or recycling water tolimit the increase in discharge volume.

<FieldHidden>We do not currently discharge to either brackish surface water or seawater. This is
in part because we are not located near the ocean and thus are not discharging tothese sources. To validate our numbers, PMI's sites are audited annually by SGS
and to date, none of these sites have reported discharges to brackish surface wateror seawater. We feel confident in the responses since to validate the site level data,
SGS conducts a comprehensive annual corporate audit and visits five factories
around the world as part of the onsite verification. This year, SGS traveled to Brazil
and Italy. Based on the desktop review and site visits, they have not found brackishsurface water or seawater discharges. At this point, we do not foresee any change
to this water destination.

About thesame

PMI’s overall wastewater discharge to ground water destination is 10%.
Wastewater is equally treated between public and onsite wastewater treatment
plants In 2017, groundwater discharges increased by 1% from the 241 megaliters in
2016. The expansion of reduced risk product (RRP) production, which discharge
more water than conventional, to other sites, may increase the discharged volumes
in the future. We are therefore incorporating new designs, reusing or recycling
water to limit the increase in groundwater discharge.

HigherPMI’s overall wastewater discharge destination is 68% to public sewage network or
municipal wastewater treatment plant and 33% to surface water/undergrounddisposal. In 2017, third-party discharges increased by 50% from 1,117 megaliters in2016 due mainly to y the impact of our new reduced risk product (RRP) factory
included in our operational scope for the first time. The expansion of RRP
production, which discharge more water than conventional, to other sites mayComparison
withprevious
VolumereportingRelevance (megaliters/year) year
Please explainincrease the discharged volumes in the future. We are therefore incorporating new
designs, reusing or recycling water to limit the increase in discharge.

W1.2j(W1.2j) What proportion of your total water use do you recycle or reuse?
Comparison%
withrecycled previous
andreportingreused year
Please explain

Row
1
2-10

Higher

We follow the Reduce, Reuse, Recycle concept in managing water at our manufacturing operations around the world.
Our water recycle/reuse increased from 1% in 2016 to 3% in 2017 as PMI implemented initiatives to reduce water use
and increase water recovery. Currently, a third of our factories are reusing treated wastewater, such as in Senegal
where treated domestic wastewater is used in toilets. We plan to increase these initiatives in years to come as we
continue to innovate and increase quality of treated wastewater so it can be reused. We are incorporating new designs,
reusing or recycling water with a view to minimum water discharge. In some facilities PMI uses and measures water
recycled mostly for utilities or for toilet water and % recycled water is calculated using CDP definition. Since most of thewater is used only once in utilities and no further recycled and reused we don't have multiple loops or storage toconsider.

W-FB1.3(W-FB1.3) Do you collect/calculate water intensity for each commodity reported in question W -FB1.1a?

Agriculturalcommodities

TobaccoWater intensity
Water intensity
information for this information for thisproducedsourced commodity
commodity isiscollected/calculated collected/calculated Please explain

Not applicableYes

We do not produce tobacco, we source it as raw materials to manufacture
our products. Water intensity is calculated by dividing the total quantity ofwater (m3) used for irrigation by tobacco farmers supplying tobacco to PMI
by total tobacco volume (kg) sourced. This is the first year we measure thisAgriculturalcommodities

Water intensity
Water intensity
information for this information for thisproducedsourced commodity
commodity isiscollected/calculated collected/calculated Please explain
index globally, and we expect this number to decrease over time as we
implement our water stewardship strategy in our tobacco supply chain. Ourcurrent focus is to understand water related issues and build knowledge onwater resources management. We want to set water efficiency, local context
based targets by 2020 specific to water stressed areas.

Other commodities from
W-FB1.1a, please specify(Timber based directmaterials)
Not applicableYes

We do not produce agricultural commodities, we source them as raw
materials to manufacture our products. We calculate our water intensity
dividing the water used by our suppliers to produce these commodities using
LCA, ecoinvent database and direct supplier information and dividing by total
weight of direct materials purchased. These numbers are are preliminary
data since it is the first time we have this KPI built globally, and we plan
overtime to increase the primary data used to estimate water consumption.
We expect that through collaborating with our suppliers we can reduce thisnumber over time.

W-FB1.3b(W-FB1.3b) Provide water intensity information for each of the agricultural commodities identified in W -FB1.3 thatyou source.
Agricultural commodities
TobaccoWater intensity value
244
Numerator: Water aspect
Freshwater withdrawn
Denominator: Unit of production
Tons
Comparison with previous reporting year
This is our first year of measurement
Please explain

- Our numerator (units m3) includes freshwater withdrawn used to irrigate crops (rainfed water consumption excluded). Water
withdrawn has been estimated excluding tobacco crops grown in rain fed areas, while considering crops produced withirrigation practices; measuring the water used during seedbed, transplanting, and field growing stages and considering thesystems and technologies used (e.g.: surface/flooding/ overhead/sprinklers/guns/pivot/ drip irrigation, manual/cans/pipes), Our denominator is Tons of green Tobacco sourced. Currently we are not using t his intensity figure for direct engagementwith tobacco farmers as part of GAP and we use figures as a baseline. In GAP we request tobacco suppliers and their
farmers to maximize water use efficiency by implementing water conservation plans aimed at the ra tional use of water
resources and incorporating locally defined best available irrigation practices. We are collecting water usage data to develo pcontext based target
Agricultural commodities
Other sourced commodities from W-FB1.3, please specify (Other direct materials)
Water intensity value
0.05
Numerator: Water aspect
Freshwater consumed
Denominator: Unit of production
Tons
Comparison with previous reporting year
This is our first year of measurement
Please explain
Our numerator includes freshwater consumed used in our non-agricultural supply chain related with timber based directmaterials which require intensively the use of water (cardboard, shipping cases, acetate tow for filters, printshop materials )and excluding rainfed water consumption. This calculation has been done using LCA, ecoinvent database and direct supplierinformation. - Our denominator includes total weight of direct materials purchased. - It is the first time we have this KPI built
globally, and we plan overtime to increase the primary data used to estimate water consumption. We believe that our active
engagement with our suppliers will decrease this KPI and thus our water risk. We use this KPI along with other water scarcity
and water risks indicators to prioritize water initiatives with our suppliers.

W1.4(W1.4) Do you engage with your value chain on water-related issues?

Yes, our suppliers
Yes, our customers or other value chain partners

W1.4a(W1.4a) What proportion of suppliers do you request to report on their water use, risks and/or management
information and what proportion of your procurement spend does this represent?
Row 1% of suppliers by number
76-100%% of total procurement spend
1-25
Rationale for this coverage
Our 2017 water footprint shows that 53% is due to our tobacco farming (irrigation, fertilizers, and pesticides usage) performedby the farmers supplying PMI, 41% to our supply chain, and 6% to our manufacturing. Most crucial suppliers to PMI in termsof climate and water risk are tobacco suppliers. Through our use of LCAs, water stress, and water footprints, we haveidentified our agricultural supply chain as currently having our largest potential environmental impact. We have therefore
prioritized these areas to engage with leaf suppliers on water issues through the implementation of Good Agricultural
Practices (GAP) which covers all of the 350,000 farmers across in 28 countries. GAP standards are contractual requirement
to be met by all those who grow and supply tobacco to PMI. GAP water management practi ces guide, covering water
scarcity, local impacts, water efficiency and wash. Suppliers Data reporting is a key element of their performance assessment
and volume sourced (incentive)
Impact of the engagement and measures of success
Our GAP Implementation Guide lays out extensive agricultural environmental practices covering sustainable water
management and soil management/conservation. To assess suppliers’ conformity to GAP, the Sustainable Tobacco Program(STP) is used which includes an annual self-assessment and on-site reviews by AB Sustain, an independent company. As
part of the on-site review, AB Sustain looks for metrics and performance on reducing water and GHG emissions, eliminatinghazardous pesticides, using bio-pesticides, reforestation, soil and waste management. Based on the assessed scores andour measure of success is we expect our leaf suppliers to demonstrate continuous improvements. Results of theseassessments are included in our supplier scorecards and used to make future sourcing decisio ns and allocate volumes tosuppliers. Metrics used is % of farmers implementing best practices described in GAP; e.g. Water extraction rates notexceeding long-term recharge rates or water pollution plans.
Comment

In 2017, our Leaf Water Stewardship Strategy was deployed. A water risk assessment system has been developed, including
a global risk assessment tool and a tailored local risk assessment methodology and guideline. Three important tobacco sourcing countries – Brazil, Malawi and U.S. – were selected to pilot and validate the risk assessment methodology. Thiswater risk assessment system helped us manage water resources and risks and to engage with farmers and communities inriver basins.

W1.4b(W1.4b) Provide details of any other water-related supplier engagement activity.
Type of engagement
Innovation & collaboration
Details of engagement
Encourage/incentivize innovation to reduce water impacts in products and services
Encourage/incentivize suppliers to work collaboratively with other users in thei r river basins
Educate suppliers about water stewardship and collaboration
Provide training and support on sustainable agriculture practices to improve water stewardship% of suppliers by number
51-75% of total procurement spend
76-100
Rationale for the coverage of your engagement
Of our blue water footprint, 53 percent goes to our Leaf irrigation program, 41 percent is used in our supply chain, and only 6
percent is used in our manufacturing sites. PMI has a large number of suppliers, but those most cruc ial to our business interms of water risk are tobacco suppliers/farmers and direct materials (paper, cardboard and filters) supply chain. In 2017, westarted to roll out the Responsible Sourcing Principles (RSP), communicating directly with global partner s covering 99% of
our total spend on global vendors by Dec 2017. Besides, in 2018 we invited our key direct materials suppliers to participate in
our CDP Supply Chain Water program. In the frame of our water footprint study conducted in 2017 we engaged wit h a major
filter supplier who have a significant water footprint to review primary data and thus strengthen the accuracy of our water
footprint.
Impact of the engagement and measures of success
In 2017, we started to roll out the Responsible Sourcing Principles (RSP), communicating directly with global partners
covering 99% of our total spend on global vendors by Dec 2017. We also engaged with a number of suppliers to clarify
questions related mainly to the implementation of these principles. We reach out t o groups of suppliers to discusssustainability topics. For example, our Turkish affiliate organized a supplier sustainability day with the participation of t he
managing director and senior management. The coverage of the workshop represented over 60% of o ur direct and indirect
procurement spent in the country. As part of the water footprint study, we engaged with a major filter supplier who have asignificant water footprint to review primary data and thus strengthen the accuracy of our water footprint. Wa ter usage
efficiency on farms is measured through GAP assessments by third parties. Our suppliers are expected to demonstrate year
on year improvement in GAP score.
Comment

W1.4c(W1.4c) What is your organization’s rationale and strategy for prioritizing engagements with customers or otherpartners in its value chain?
We have engaged with several key account customers on sustainability topics to support their own reduction targets throughthe CDP supply chain program. We also regularly engage on sustainability topics with other key accounts and stakeholders
by responding to supply chain surveys and providing presentations of our water practices. We prioritize our customer
engagement based on the alignment between the customer’s sustainability targets and PMI's sustainability targets and arecontinually looking for opportunities to collaborate and innovate. We measure our success through direct feedback from ourcustomers where in some cases, sustainability topics form a part of our business rel ationship review, as well as, based on
attainment of targets. Our measure of success is based on the increase interest from our key customers on getting more
information from our environmental program and on how to participate to help further reduce our wa ter footprint.
Every year most affiliates perform voluntary awareness and promotion campaigns programs in order to increase employees’
active participation in environmental programs and to make carbon footprint reduction part of the company's culture. Aw ards
and recognition for best practices form a core element of such campaigns. Examples of these campaigns include waste
reduction tips as part of the annual eco-week in Turkey, involving employees and their families in tree planting activities inArgentina.
External consultants and third party verification companies: we have a broad number of partners that provide us withtechnical advice around water stewardship, help us in projects implementation phase and then tracking their progress.
Companies like Quantis, SGS, South Pole, AB Sustain, ERM, BSR, Ecofys or The Carbon Trust among many others are
critical to our success in reducing our environmental impact. As an example, our collaboration with Quantis in developing2017 Land-Use Change report https://quantis-intl.com/lucguidance/

W2. Business impacts

W2.1(W2.1) Has your organization experienced any detrimental water-related impacts?
No

W2.2(W2.2) In the reporting year, was your organization subject to any fines, enforcement orders, and/or other penalties
for water-related regulatory violations?
Yes, fines, enforcement orders or other penalties but none that are considered as significant

W2.2a(W2.2a) Provide the total number and financial value of all water-related fines.
Row 1
Total number of fines
16
Total value of fines
52965% of total facilities/operations associated17
Number of fines compared to previous reporting year
About the same
Comment

W3. Procedures
W-FB3.1(W-FB3.1) How does your organization identify and classify potential water pollutants associated with its food,beverage, and tobacco sector activities that could have a detrimental impact on water ecosystems or human health?

Although our direct operations use minimal water relative to our value chain (6% of total water footprint), we are cognizant ofwater pollutants resulting from our process. Our wastewater is either treated on -site or sent to treatment facilities prior todischarge respecting local legal regulations and limits.
Pesticides, which are used to protect tobacco crops from pests and diseases, can contaminate aquatic systems by surface
run-off and leaching. The contamination can be caused by inappropriate management of the pesticide and can have an
impact on aquatic life or fish-eating wildlife. Pesticide residues present in watercourses and groundwater can also have aneffect on humans through consumption of fish and shellfish that are contaminated by pesticides.
PMI implements GAP and GAP defines the principles and measurable standards to be met by all those who grow and supply
tobacco to PMI.
Where the use of synthetic pesticides is necessary, the supplier must take into account environmental and human health risk
where there is a choice of different pesticides. Products of World Health Organization (WHO), toxicity class III and higher (thehigher the class, the lower the toxicity level ) should preferably be used. Toxicity class II should only be used in well -justified
cases, and toxicity class I must not be used at all since crop 2018.
Supplier must have a list of recommended pesticides suitable for the local conditions, that cover the most common pests anddiseases. The list should include low toxicity and pest-specific products and can use local brand names relevant to the active
ingredients listed to ensure greater farmer understanding. This list of pesticides should only include those that are registeredfor use in tobacco in the country.
To support the elimination of WHO Tox1 and other Highly Hazardous Pesticides, PMI promotes the use of less ha zardous
alternative pesticides that include biopesticides such as botanicals, microbials, macrobials and semiochemicals.
Tobacco suppliers promote the use of low-toxicity and pest-targeted pesticides while avoiding preventative treatments,
conducting training and other initiatives with their contracted farmer base.
In 2017, we also launched and trained our suppliers on our Responsible Sourcing Principles (RSP) and Implementation
Guidelines, which established the foundation for a more comprehensive and systematic approach to addressing supply chain
sustainability beyond our agricultural supply chain. The RSP applies to all our suppliers currently not included in the IMP a nd
RSP includes guidelines on water wastewater pollution management.

W-FB3.1a(W-FB3.1a) Describe how your organization minimizes the adverse impacts of potential water pollutants on water
ecosystems or human health associated with your food, beverage, and tobacco sector activities.
Potential water pollutant
Pesticides and other agrochemical products

Activity/value chain stage
Agriculture – supply chain
Description of water pollutant and potential impacts
Pesticides, which are used to protect tobacco crops from pests and diseases, can contaminate aquatic systems by surface
run-off and leaching. The contamination can be caused by inappropriate management of the pesticide and can have an
impact on the ecosystems according to the toxicological characteristics of the active ingredient. PMI requests its leaf
suppliers to implement GAP and GAP defines the principles and measurable standards to be met by all those who grow andsupply tobacco to PMI. Where the use of synthetic pesticides is necessary, the supplier must take into account environmental
and human health risk where there is a choice of different pesticides. Products of World Health Organization (WHO), toxicity
class III and higher (the higher the class, the lower the toxicity level ) should preferably be used. Toxicity class II shoul d only
be used in well-justified cases, and toxicity class I must not be used at all. Supplier must have a list of recommended
pesticides suitable for the local conditions, that cover the most common pests and diseases. The list should include low
toxicity and pest-specific products and can used local brand names relevant to the active ingredients listed to ensure greater
farmer understanding. This list of pesticides should only include those that are registered for use in tobacco in the country . To
support the elimination of WHO Tox1 and other HHPs, PMI promotes the use of less hazardous alternative pesticides that
include biopesticides such as botanicals, microbials, macrobials and semiochemicals. Note that in order to clasify a pesticid e
as HHP, we use FAO and WHO guidelines. Tobacco suppliers promote the use of low-toxicity and pest-targeted pesticides
while avoiding preventative treatments implementing training and other initiatives with their contracted farmer base. Fertili zers
are used to improve tobacco yield, however they can enter groundwater or wat ercourses, impacting aquatic ecosystems
through eutrophication.
Management procedures
Soil conservation practices
Crop management practices
Sustainable irrigation and drainage management
Fertilizer management
Pesticide management
Substitution of pesticides for less toxic or environmentally hazardous alternatives
Follow regulation standards
Please explain
PMI has in place a global Integrated Pest Management (IPM) program to reduce the use of unnecessary pesticides, topromote the use of less hazardous alternatives and to manage them correctly. IPM plans have been implemented in all
markets where PMI sources tobacco and PMI has a target to eliminate the use of WHO CPA (Crop Protection Agents)

Toxicity Class I by crop 2018 and to phase-out the use of other HHPs (Highly Hazardous Pesticides) as defined by FAO andWHO guidelines by crop 2020. Tools have been developed to support the implementation of the program in collaboration with
the not-for-profit Centre for Agriculture and Bioscience International (CABI). An IPM Toolbox has been developed to support
the implementation of IPM program in all origins PMI sources tobacco from; the Toolbox includes an IPM App and a website(www.tobaccoipm.com) with country-specific management sheets for tobacco pests and diseases and factsheets on IPM and
CPA management which are frequently updated with newly developed contents. The IPM App has reached approximately
700 users, while the new IPM website has reached more than 6500 views in 2017. The PMI IPM program has establishes
national training programs to build up knowledge and commitment among its field technicians and farmers with a train the
trainer approach. To support these programs, a Training Guide on Integrated Pest Management in Tobacco was developedand is available as an ebook. In 2017 over 400 Field Technicians and 17000 farmers have been trained on CPA
management. A database of global biopesticides and low hazardous pesticides alternatives have been made available to thefarmers. A best practice guideline, based on an analysis of guidelines and regulations at international, regional, and national
levels, for Personal Protection Equipment (PPE) to be adopted while utilizing CPAs has been produced and distributed.
Through GAP PMI promotes the safe disposal or recycling of empty pesticide containers to prevent water contamination.
Through GAP PMI promotes the responsible use of fertilizers. PMI encourages the implementation of soil analysis as a basefor farmers to adjust fertilization to meet soil fertility and crop nutritional requirements. GAP principles promote the use offertilizers whose source is known and with available certificates of analysis and that recommended application levels can beapplied without negative impact on the environment. PMI promotes the develop ment of water water protection plans.
Potential water pollutant
Fertilizers
Activity/value chain stage
Agriculture – supply chain
Description of water pollutant and potential impacts
Fertilizers are used to improve tobacco yield, however they can can enter groundwater or watercourses, impacting aquatic
ecosystems through eutrophication.
Management procedures
Soil conservation practices
Crop management practices
Sustainable irrigation and drainage management
Fertilizer management
Calculation of fertilizer intensity data

Follow regulation standards
Please explain
Through its GAP (Good Agricultural Practices) program, PMI promotes the responsible use of fertilizers. PMI encourages theimplementation of soil analysis as a base for farmers to adjust fertilization to meet soil fertility and crop nutritional
requirements. GAP principles promote the use of fertilizers whose source is known, with available certificates of analysis andrecommended application levels that can be applied without negative impact on the environment. PMI promotes thedevelopment of water protection plans that include the implementation of buffer zones where fertilizers are utilized, theavoidance of methods and timing of fertilizer application that may result in leaching, the safe handling and storing of ferti lizers
to prevent contamination of water.

W3.3(W3.3) Does your organization undertake a water-related risk assessment?
Yes, water-related risks are assessed

W3.3a(W3.3a) Select the options that best describe your procedures for identifying and assessing water -related risks.
Direct operations
Coverage
Full
Risk assessment procedure
Water risks are assessed as a standalone issue
Frequency of assessment
Annually
How far into the future are risks considered?
>10 years
Type of tools and methods usedTools on the market
International methodologies
Other
Tools and methods used
WRI Aqueduct

Life Cycle Assessment
IPCC Climate Change Projections
Alliance for Water Stewardship Standard
External consultants
Comment
In 2015, ERM conducted a comprehensive Climate change risk assessment (CCRA) for corporate and asset level physicalrisks and opportunities up to 2025-2030; Quantis developed water and risk footprints in 2017 and 2018 respectively. We used
the WRI Aqueduct and IPCC Projections to update these annually. In 2017, we joined Alliance f or Water Stewardship andcertified our Brazil factory, to understand better local risks. We'll extend to 10 factories before 2020 and the rest 2030.
Supply chain
Coverage
Full
Risk assessment procedure
Water risks are assessed as a standalone issue
Frequency of assessment
Annually
How far into the future are risks considered?
>10 years
Type of tools and methods usedTools on the market
International methodologies
Other
Tools and methods used
WRI Aqueduct
Life Cycle Assessment
IPCC Climate Change Projections
External consultants
Comment
External consultants, ERM and Quantis conducted climate change (CC) risk assessment for corporate and asset level
physical risks & opportunities up to 2030 in 2015; water footprints in 2015 and 2018 respectively. We used WRI Aqueduct and
IPCC CC Projections to update this annually. We’re expanding to assess current and future water -related risks more broadly
across our value chain, such as water scarcity and quality in tobacco growing areas; flood risk in warehouses a nd ports.

Other stages of the value chain
Coverage
PartialRisk assessment procedure
Water risks are assessed as a standalone issue
Frequency of assessment
Every two years
How far into the future are risks considered?
>10 years
Type of tools and methods usedTools on the market
International methodologies
Other
Tools and methods used
WRI Aqueduct
IPCC Climate Change Projections
External consultants
Comment
External consultants, ERM and Quantis conducted climate change (CC) risk assessment for corporate an d asset level
physical risks & opportunities up to 2030 in 2015; water footprints in 2015 and 2018 respectively. We used WRI Aqueduct and
IPCC CC Projections to update this annually. We’re expanding to assess current and future water -related risks more broadly
across our value chain, such as water scarcity and quality in tobacco growing areas and water demand in cities wemanufacture in.

W3.3b(W3.3b) Which of the following contextual issues are considered in your organization’s water -related risk
assessments?

Water availability at abasin/catchment level

Relevance &inclusion

Please explain

Relevant,
alwaysincluded

In comparison to other products, tobacco is not particularly water intensive. Water is used in ourfactories, in filter manufacturing, paper and packaging materials, for staff use and green spaces; andin agriculture, more than half tobacco grown is rain-fed and does not require irrigation. AlthoughRelevance &inclusion

Please explain
relative to other industries, our operations withdraw small volumes of water, water availability isimportant for our operations and our agricultural supply chain in growing tobacco. For our direct
operations, we assess water risks through our company level risk assessment initiatives. External
consultants, conducted climate change (CC) risk assessment for corporate & asset level physicalrisks & opportunities up to 2030 in 2015; water footprints in 2015 and 2018 respectively. This water
footprint study showed that 53% comes from our agricultural supply chain, 41% to our supply chain,
and 6% to our manufacturing processes. We use the WRI Aqueduct and IPCC Climate Change
Projections to update this periodically. We have also become a member of the Alliance for Water
Stewardship to better understand how to conserve the watersheds where we operate, and ourfactory in Brazil was certified against the AWS Standard in March 2018. We have committed tocertify at least 10 facilities by 2020 and rest by 2030. We’re expanding our water programs byassessing current and future water-related risks more broadly across our value chain. These risks
include water scarcity and quality in tobacco growing regions, flood risk in warehouse locations andports, and water demand in cities where we have manufacture. In 2017, water baseline studies wereconducted in 60 different tobacco geographical areas, representing 90% of our tobacco leaf
purchases. A water risk assessment system has been developed, including a global and tailoredlocal risk assessment methodology and guideline. Baseline water stress was highlighted as high risk
(29% high/extremely high) and availability of water compromised.

Water quality at abasin/catchment level

Relevant,
alwaysincluded

Assessed through company level risk assessment initiatives. We ensure high quality water in our
products to protect our consumers and to meet strict Food and Drug Administration regulations.
Water quality is also important to our supply chain to ensure high quality raw materials and protect
workers’ health and livelihoods by providing access to adequate safe Water, Sanitation and Hygiene
services (WASH). Our direct operations are addressed as part of our ISO14001 and OHSAS18001
programs and minimum EHS requirements. For instance, tobacco slurry ingredient and final washwater for PMI operations worldwide, should be compliant with the EU Drinking Water directive. Water
use is evenly divided between WASH facilities, landscaping, and manufacturing. External
consultants, ERM and Quantis conducted climate change (CC) risk assessment for corporate &asset level physical risks & opportunities up to 2030 in 2015; water footprints in 2015 and 2018
respectively. We use the WRI Aqueduct and IPCC Climate Change Projections to update thisperiodically. We have also become a member of the Alliance for Water Stewardship (AWS.) Our
factory in Brazil was certified against the AWS Standard in March 2018. We commit to certifying atleast 10 more by 2020 and all PMI operations by 2030. AWS standard addresses technical capacity
to provide and treat water for both manufacturing and WASH. We’re expanding our water programsby assessing current and future water-related risks more broadly across our value chain; such as
water scarcity and quality in tobacco growing regions, flood risk in warehouse locations and ports,
and water demand in cities where we manufacture. In 2017, water baseline studies were conducted
in 60 different tobacco growing areas, 90% of our tobacco leaf purchases. The Malawi pilot helped

Relevance &inclusion

Please explain
highlight the lack of access to WASH with small holder farmers, which we have began supporting
access to. We strive to ensure access to WASH in all our facilities.

Stakeholder conflicts
Relevant,
concerning water resources at always
a basin/catchment level
included

Although relative to other industries, our operations withdraw small volumes of water, access towater and water rights are important to our operations and agricultural supply chain. This is factored
into company level risk assessment initiatives. An external consultant conducted a water footprint
and risk assessments in 2017. This water footprint study showed that 53% is due to our agricultural
supply chain, 41% to our supply chain, and 6% to our manufacturing processes. We use the WRI
Aqueduct and IPCC Climate Change Projections to update this periodically. We’re expanding ourwater programs by assessing current and future water-related risks more broadly across our value
chain. In 2017, water baseline studies were conducted in 60 different tobacco growing areas,
representing 90% of our tobacco leaf purchases. A water risk assessment system was developed,
including a global and tailored local risk assessment methodology and guideline. Brazil, Malawi andUS, important tobacco-sourcing countries were selected to pilot and validate the methodology. The
pilot in Malawi helped highlight the lack of access to adequate safe Water, Sanitation and Hygiene
services (WASH). We strive to ensure access to WASH in all our facilities and increase availability on
our contracted farms. In Malawi, we began supporting access to WASH services with our small
holder farms. Continuous improvement of water management practices in our tobacco supply chain
is also addressed through our Good Agricultural Practices program. We respect the vulnerability ofwater resources and the role of they play in the wider community. We became a member of the
Alliance for Water Stewardship to better understand how to conserve the watersheds where we
operate. In March 2018, our Brazil factory was certified against the AWS Standard. We havecommitted to certify at least 10 more facilities by 2020 and all of our operations by 2030.

Implications of water on yourkey commodities/raw
materials

This is factored into company level risk assessment initiatives through use of internal company
understanding of supply and demand issues influenced by engagement activities with key suppliers,
especially with tobacco leaf and clove suppliers. In 2017, water baseline studies were conducted in
60 different tobacco growing areas, representing 90% of our tobacco leaf purchases. A water risk
assessment system has been developed, including a global and tailored local risk assessment
methodology and guideline. We also continually review promising tobacco leaf and clove growing
areas and assess if climate change elements could favor increased yield. Brazil, Malawi and US,
important tobacco-sourcing countries were selected to pilot and validate the methodology. We
discovered more than half of tobaccos grown to supply PMI are rainfed and the remaining require
supplemental or full irrigation. As with other agricultural commodities, tobacco leaf and clove prices
can be influenced by imbalances in supply and demand, and crop quality can be influenced byvariations in weather patterns. Any significant change in tobacco leaf and clove prices, quality andquantity could affect our profitability and our business. We also engage with tobacco suppliers
through our Good Agricultural Practices program; and with other suppliers through our Responsible
Sourcing Principles (RSP) and Implementation Guidelines which were released in 2017. Additionally,

Relevant,
alwaysincludedRelevance &inclusion

Please explain
an external consultant conducted water footprints and risk assessments in the last 2 years. They
found out that 53% of our blue water footprint is due to our agricultural supply chain, 41% to our
supply chain and 6% to our manufacturing. We use the WRI Aqueduct and IPCC Climate Change
Projections to update this periodically. We’re expanding our water programs by assessing current
and future water-related risks more broadly across our value chain; such as water scarcity andquality in tobacco growing regions, flood risk, etc.

Water-related regulatory
frameworks

Status of ecosystems andhabitats

Relevant,
alwaysincludedThis is factored into company level risk assessment initiatives through use of internal company
knowledge of regulatory frameworks, water abstraction and discharge consents. Although relative toother industries, our operations withdraw small volumes of water, water-related regulatory
frameworks are important for our operations and our agricultural supply chain in growing tobacco.
We are subject to international, national and local environmental laws and regulations in the
countries in which we do business. We have specific programs across our business units designed tomeet and go beyond applicable environmental compliance requirements and reduce our water
consumption. We have a consistent environmental and occupational health, safety and security
management system ("EHSS") at all our manufacturing centers . We track compliance through our
EHS Systems and regulatory radar screen. For instance, our water footprint reduction strategy is ofconservation, reuse/recycling and zero liquid discharge. We piloted a water footprint study in our Italy
site to see if we can pursue water process conservation/reuse and update our corporate water
specifications. However, worldwide water quality is regulated by several Water Quality Management
Frameworks. Hence, we used the strictest guidelines, provided by the EU Drinking water maximum
limits of the chemical substances (controlled by nearly all the regulatory frameworks), product andcompliance teams in our water specifications for process water (slurry ingredient and final washwater). We have also become a member of the Alliance for Water Stewardship to better understandhow to conserve the watersheds where we operate, and our factory in Brazil was certified against theAWS Standard in March 2018. We have committed to certify at least ten more facilities by 2020 andall of our operations worldwide by 2030 this will allow us to stay ahead of any water-regulatory
frameworks dealing with water abstraction and discharge consents

Relevant,
alwaysincluded

The status of ecosystems and habitats are important to water availability and quality, both of which
are important to our operations and agricultural supply chain. This is factored into company level risk
assessment initiatives. For our direct operations, we became a member of the Alliance for Water
Stewardship to better understand how to conserve the watersheds where we operate. Our Brazil
factory was certified against the AWS Standard in March 2018. We have committed to certify at least
10 more facilities by 2020 and all of our operations worldwide by 2030. For our supply chain, throughlife-cycle and other assessments along our value chain we understand our main areas of impact andtherefore where to set priorities. These areas include tobacco farming for carbon footprint reduction
and water stewardship action and product end-of-use for action on litter and waste. Water baseline
studies were conducted in 60 different tobacco growing areas in 2017, representing 90% of ourRelevance &inclusion

Please explain
tobacco leaf purchases. A water risk assessment system has been developed, including a global andtailored local risk assessment methodology and guideline. We’re expanding our water programs byassessing current and future water-related risks more broadly across our value chain. For customers,
we address these indirectly as litter from cigarette butts and packaging is an issue that comes underregular public scrutiny that also affects our brand reputation. Much of the litter washes into thewaterways and causes problems during rain events. In many of our markets, such as the Philippines,
Japan and Switzerland, PMI actively supports programs and campaigns for responsible litter
disposal.

Access to fully-functioning,safely managed WASH
services for all employees

Other contextual issues,
please specify

W3.3c

Relevant,
alwaysincludedThis is factored into company level risk assessment initiatives. Lack of access to safe Water,
Sanitation and Hygiene services (WASH) poses a risk to farmers’ and workers’ health andlivelihoods. We strive to ensure WASH access in all our facilities and increase availability on ourcontracted farms. For our direct operations, this is addressed as part of our ISO14001 andOHSAS18001 programs and minimum EHS requirements. For our supply chain, through life-cycleand other assessments along our value chain we understand our main areas of impact and therefore
where to set priorities. These areas include tobacco farming for carbon footprint reduction and water
stewardship action and product end-of-use for action on litter and waste. Water baseline studies
were conducted in 60 different tobacco growing areas in 2017, representing 90% of our tobacco leaf
purchases. A water risk assessment system has been developed, including a global and tailoredlocal risk assessment methodology and guideline. Brazil, Malawi and US, important tobacco-sourcing
countries were selected to pilot and validate the methodology. The pilot in Malawi helped highlightthe lack of access to WASH services in those farms. In Malawi, more than 30% of the rural
population lacks access to basic WASH services. There are no indications that the situation ofsmallholder tobacco farmers and contracted workers would differ much from other rural households.
Our first priority is to smallholder farms where PMI’s active support in providing WASH services ismost needed. We’re expanding our water programs by assessing current and future water-relatedrisks more broadly across our value chain.

Relevant,
sometimes
included

There are no other contextual water related issues that we have identified. For many years, we havebeen expanding our water programs and assessing current and future water-related risks more
broadly across our value chain. These risks include water scarcity and water quality in tobacco
growing regions including Malawi and Brazil, flood risk in major tobacco warehouse locations andports, and water demand in cities where we have manufacturing facilities. Other contextual issues
are not anticipated to be relevant now or in the future, however, we continue to monitor for emerging
research, run tools like WRI Aqueduct, solicit stakeholder input, and conduct materiality assessments
to understand if there are other contextual issues around water that PMI should be engaged on.

(W3.3c) Which of the following stakeholders are considered in your organization’s water -related risk assessments?

Customers

Employees

Investors

Relevance &inclusion

Please explain

Relevant,
alwaysincluded

We ensure high quality water in our products to protect our customers. We also respect the vulnerability ofwater resources we use and the role of those resources in the wider community, which may affect thecommunities of some of our customers. As such we include customers in our water risk assessments
through: i) We are increasingly using life-cycle assessment (LCA) thinking to evaluate options for reducing
environmental impacts throughout the entire life-cycle of our products. Considering the transformation of ourbusiness with the introduction of our new product offering, Reduced-Risk Products (RRPs), we will expand
our LCA to cover the new suite of products including review of water risks. Additionally, in the last 2 years,
Quantis has conducted water footprints of our value chain. ii) Our consumer insights research helps us
understand the potential market for eco product developments. iii) As part of local stakeholders in the
Alliance for Water Stewardship (AWS) Standard which helps better manage water within the local
watersheds. We joined the AWS in 2017 and by March 2018, our Brazil factory became the first factory inthe country to be AWS certified. We plan to have the 10 factories which ranked highest in our previous risk
assessment certified by 2020 and to extend to the rest of our operations until 2030.

Relevant,
alwaysincluded

Employees are essential in helping us achieve our water reduction and stewardship goals. Through our
objective setting, Long-Range Planning process and via employee communications, sharing of tools,
guidance and best practices. We gave senior management briefings to all operations employees onsustainability in 2017 and run specific focus days and campaigns. An example of awareness sessions areannual eco-weeks held in our sites including initiatives like planting trees, recipes for homemade natural
soap or advices on saving water at home. Specific company awards such as the Chairman’s Award andExcellence Awards, which are either cash or stock, are available for EHS Managers, project teams and other
employees who are responsible for water related initiatives and improvements. In 2010, we set a goal of
reducing water consumption in our manufacturing facilities by 20% per unit of product by 2015, and we beatthat target, achieving a 24% reduction. Our success led us to going beyond the factory based approach to
managing water risk of focusing on compliance and water efficiency, and looking at the factory within its
watershed in relation to its stakeholders. We joined the AWS in 2017 and by March 2018, our Brazil factory
became the first factory in the country to be AWS certified. We plan to have the 10 factories which ranked
highest in our previous risk assessment certified by 2020 and to extend to the rest of our operations until
2030. Water quality is also important to protect workers’ health and livelihoods by providing access toadequate safe Water, Sanitation & Hygiene services (WASH). We strive to provide access to WASH to all
our facilities and contracted farms.

Relevant,
alwaysincluded

We receive numerous requests annually for information on our sustainability programs as a whole and have
opted to respond to the CDP Water Information Request to provide investors with more information andtransparency around our water risk management for our direct operations and supply chain. We also
communicate through our annual sustainability report and website. Our 2017 PMI Sustainability Report isavailable on our website. In 2017, we were recognized by the CDP for our leadership and were listed on the
CDP A list for climate and water.

Local communities

NGOs

Relevance &inclusion

Please explain

Relevant,
alwaysincluded

We respect the vulnerability of water resources we use and the role of those resources in the wider
community. We strive to use our water optimally, taking into account the surrounding water basin context
and community demand. Our approach to working with communities is based on 3 principles - water
preservation (management/pollution prevention), innovation (better irrigation/less water intensive seeds),
and engagement (safe water, sanitation and hygiene (WASH). This is factored into company level risk
assessment initiatives: i) Manufacturing operations, we joined the Alliance for Water Stewardship (AWS) in
2017 to better manage water within the local watersheds. By March 2018, our Brazil factory became the first
factory in the country to be AWS certified. We plan to have the 10 factories which ranked highest in ourprevious risk assessment certified by 2020 and to extend to the rest of our operations until 2030. In addition,
the AWS process of consulting local communities and stakeholders on water issues helps retain our social
license to operate. ii) Agricultural supply chain, especially for tobacco-growing, under our Global Agricultural
Practices (GAP), we expect our affiliates and suppliers to have a water management plan that takes into
account the use and management of water for tobacco production to minimize adverse impacts to otherusers within water catchment areas, including local communities. The plans also cover access WASH for
local communities, workers, and their families. Additionally, we conducted water baseline studies in 60
different tobacco growing areas in 2017. A water risk assessment system has been developed, including a
global and tailored local risk assessment methodology and guideline. Brazil, Malawi and US, important
tobacco-sourcing countries were selected to pilot and validate the methodology. The pilot in Malawi helped
highlight the lack of access to WASH services in small holder farms and we began supporting their access to
WASH.

Relevant,
alwaysincluded

We believe a multi-stakeholder approach is key to addressing climate change and water security. We workwith several NGOs on a global and local level. On a global level, we committed to the UN Global Compact in2015 and published our Communication on Progress (CoP) in 2017, reporting comprehensively on oursustainability practices. In 2016, we used our first CoP as an engagement tool along with signing up to
UNGC Local Networks around the world. We are also part of the World Business Council for Sustainable
Development (WBCSD), the WeMeanBusiness coalition, and since participating in the UNFCCC COP21 inParis, we continue to engage externally regarding our commitments on climate change adaptation andwater, including our support for the Paris Agreement. In 2017, we joined the Alliance for Water Stewardship(AWS) to better manage water within the local watersheds. By March 2018, our Brazil factory became thefirst factory in the country to be AWS certified. We plan to have the 10 factories which ranked highest in ourprevious risk assessment certified by 2020; and to all operations by 2030. On a local level, we support local
NGOs that help address water risks in our manufacturing and agricultural supply chain. For instance, in 2017
we worked with local suppliers and stakeholders, including NGOs such as Verite as part of our efforts toimprove the living and working conditions of migrant workers in tobacco growing areas in Mexico. This
includes providing access to safe water, sanitation and hygiene (WASH). We also help address water risks
locally through our charitable partnerships to support disaster preparedness and relief efforts

Other water users at abasin/catchment level

Regulators

Relevance &inclusion

Please explain

Relevant,
alwaysincluded

We strive to use our water optimally, taking into account the surrounding water basin context and water
demand. This is factored through our company level risk assessments. Our approach to working with
communities is based on 3 principles - water preservation, innovation (better irrigation/less water intensive
seeds), and engagement (safe water, sanitation and hygiene (WASH). Beyond just thinking about thecommunity, we also considering other water users at the local level and working to retain our social license
to operate. We interact with local stakeholders primarily through our: i) Manufacturing operations, we joined
the Alliance for Water Stewardship (AWS) in 2017 to better manage water within the local watersheds. By
March 2018, our Brazil factory became the first factory in the country to be AWS certified. We plan to havethe 10 factories which ranked highest in our previous risk assessment certified by 2020 and to all operations
by 2030. ii) Agricultural supply chain, especially for tobacco-growing, under our Global Agricultural Practices(GAP), we expect our affiliates and suppliers to have a water management plan that takes into account the
management of water for tobacco production to minimize adverse impacts to other users within water
catchment areas. The plans also cover access WASH for local communities, workers, and their families.
Additionally, we conducted water baseline studies in 60 different tobacco growing areas in 2017. A water risk
assessment system has been developed, including a global and tailored local risk assessment methodology
and guideline. Brazil, Malawi and US, important tobacco-sourcing countries were selected to pilot andvalidate the methodology. The pilot in Malawi helped highlight the lack of access to WASH services in small
holder farms and we began supporting their access to WASH. We strive to ensure access to WASH in all ourfacilities and contracted farms.

Relevant,
alwaysincluded

Factored into company level risk assessment initiatives through use of internal company knowledge of
regulatory frameworks, water abstraction and discharge consents. Although relative to other industries, ouroperations withdraw small volumes of water, water-related regulatory frameworks are important for ouroperations and our agricultural supply chain in growing tobacco. We have specific programs across ourbusiness units designed to meet and go beyond applicable environmental compliance requirements andreduce our water consumption. We have a consistent environmental and occupational health, safety andsecurity management system ("EHSS") at all our manufacturing centers. We track compliance through our
EHS Systems and regulatory radar screen. For instance, our water footprint reduction strategy is ofconservation, reuse/recycling and zero liquid discharge. We piloted a water footprint study in our Italy site tosee if we can pursue water process conservation/reuse and update our corporate water specifications.
However, worldwide water quality is regulated by several Water Quality Management Frameworks. Hence,
we used the strictest guidelines, provided by the EU Drinking water maximum limits of the chemical
substances, product and compliance teams in our water specifications for process water (slurry ingredientand final wash water). We have also become a member of the Alliance for Water Stewardship to better
understand how to conserve the watersheds where we operate. Our Brazil factory was certified against AWS
Standard in March 2018 and we have committed to certify all of our operations worldwide by 2030. This willallow us to stay ahead of any water-regulatory frameworks dealing with water abstraction and discharge
consents. In 2017, water baseline studies were conducted in 60 different tobacco geographical areas,

Relevance &inclusion

Please explain
representing 90% of our tobacco leaf purchases, which takes into account regulatory and river basin
management authorities' requirements.

River basin
management
authorities

Statutory special
interest groups at a
local level

Relevant,
alwaysincluded

We work with river basin management authorities when appropriate. Annually all our factories are assessedby ISO14001 allowing our sites to align with current and upcoming local river basin management regulations
associated with water withdrawals and wastewater. We have also become a member of the Alliance for
Water Stewardship to better understand how to conserve the watersheds where we operate. The AWS
standard also requires sites consider stakeholder needs, including those or river management authorities.
Our factory in Brazil was certified against the AWS Standard in March 2018. We have committed to certify atleast ten more facilities by 2020 and all of our operations worldwide by 2030 this will allow us to stay aheadof any water-regulatory frameworks dealing with water abstraction and discharge consents. As part of ourGood Agricultural Practices, we require all tobacco growers that their annual water extraction must notexceed long-term recharge rates or the maximum extraction rate as defined by applicable regulations,whichever is stricter. In 2017, water baseline studies were conducted in 60 different tobacco geographicalareas, representing 90% of our tobacco leaf purchases. A water risk assessment system has beendeveloped, including a global and tailored local risk assessment methodology and guideline. Brazil, Malawi
and US, important tobacco-sourcing countries were selected to pilot and validate the methodology, which
includes takes into account regulatory and river basin management authorities' requirements.

Relevant,
alwaysincluded

We work with local special interest groups as appropriate. For example: i) Manufacturing operations: In
2017, we joined the Alliance for Water Stewardship (AWS). By March 2018, our Brazil factory became thefirst factory in the country to be certified by AWS. We plan to have the 10 factories which ranked highest in
our previous risk certified by 2020; and to all operations by 2030. Through this process, we consult with local
stakeholders, which may include special interest groups when appropriate. ii) Supply chain: In 2017, we
conducted water baseline studies in 60 different tobacco growing areas. Brazil, Malawi and US, important
tobacco-sourcing countries were selected to pilot and validate the methodology. We plan to continue
validation to other areas in 2018-2020. The Malawi pilot helped highlight the lack of access to WASH
services in small holder farms and we began supporting their access to WASH. In 2018, we plan to begin a
program of providing and adapting boreholes fitted with hand pumps. We are also investigating moreinnovative solutions, such as cloud fishing nets (condensing water from air) and ferro-cement water storage
tanks. PMI is engaging with local stakeholders to leverage their local expertise and networks. iii) Charitable
contributions: In 2017, PMI supported projects to protect and enhance natural resources, implement
conservation agriculture, provide clean water, cater for food security, and improve the livelihoods of people
living in rural communities. Some of our 2017 contributions went to Caritas Senegal to improve water supply
and strengthen food security of communities living in Senegal, Mali and Burkina Faso; to the Semana
Foundation to provide safe drinking water through installation of alternative rainwater harvesting systems in
two schools in Montes de Maria region of Colombia; and to the Bunyad Literacy Community Council toprovide clean drinking water and raise awareness on good hygiene practices in Pakistan.

Suppliers

Relevance &inclusion

Please explain

Relevant,
alwaysincluded

Factored into company level risk assessment initiatives through our Climate Change risk assessment, use ofwater risk tools, Good Agricultural Practices (GAP), Responsible Sourcing Principles (RSP) and engagement
activities with suppliers (directly or through CDP Supply Chain). Our suppliers are important partners inachieving our water reduction and stewardship goals. Conducted by Quantis in the last 2 years, our blue
water footprint is due to tobacco growing practices (irrigation, fertilizers and pesticides usage performed by
the farmers supplying PMI) (53%), supply chain (41%) and our manufacturing (6%). By engaging with
suppliers, we are reducing our overall water footprint while working with them to be more resilient. Examples
of how we partner: i) For tobacco-growing, under GAP, we expect our suppliers to have a water
management plan that takes into account the management of water for tobacco production to minimize
adverse impacts to other users within water catchment areas. The plans also cover access WASH for local
communities, workers, and their families. Building on GAP, 2017 was the foundational year of our leaf water
stewardship strategy, the objectives of which is to partner with the tobacco supply chain to manage andaddress water resources and risks; and engage with farmers and communities in relevant river basins. In
2017, we conducted water baseline studies in 60 different tobacco growing areas. A water risk assessment
system has been developed, including a global and tailored local risk assessment methodology andguideline. Brazil, Malawi and US, important tobacco-sourcing countries were selected to pilot and validate
the methodology. Validation of the methodology to other areas will continue in 2018 – 2020. The Malawi pilot
helped highlight the lack of access to WASH services in small holder farms and we began supporting theiraccess to WASH. ii) For all other suppliers, in 2017 we released and trained them on our RSP contractual
requirements.

Relevant,
Water utilities at a local always
level
included

Other stakeholder,please specify

Relevant,
alwaysincluded

We work closely with local water utilities to track and manage our water usage at large facilities. Where
possible, we work to integrate water efficiency projects and reduce our footprint. A water self-assessment
tool has been developed and is used to assess annually all our manufacturing centers serving as a greatsource for water saving initiatives. In 2017, we joined the Alliance for Water Stewardship (AWS). By March
2018, our Brazil factory became the first factory in the country to be certified by AWS. We plan to have the
10 factories which ranked highest in our previous risk assessment certified by 2020; and all operations
certified by 2030. Through this process, we consult with local stakeholders, which may include local water
utilities.
Through our materiality process that we undertake for our Sustainability Report, we solicit input from a broad
range of stakeholders on the topic of water. We engage with stakeholders on an ongoing basis in a numberof ways. In doing so, we are guided by AccountAbility’s Stakeholder Engagement Standard: AA1000. Key
stakeholders include the scientific community, investors & shareholders, employees, the business
community, media, civil society, farmers & farmworkers, local communities, suppliers, retailers, regulators &governments, and adult consumers. This year, we have also been working to align our work with the SDG's
including SDG 14 which addresses Life Below Water since that helps a broader group of stakeholders
identify our water program and actions within the broader context of other work. To date, we address both
the direct and indirect impacts. For example, litter from cigarette butts and packaging is an issue that comesRelevance &inclusion

Please explain
under regular public scrutiny that also affects our brand reputation. Much of the litter washes into thewaterways and causes problems during rain events. In many of our markets, such as the Philippines, Japanand Switzerland, PMI actively supports programs and campaigns for responsible litter disposal.

W3.3d(W3.3d) Describe your organization’s process for identifying, assessing, and responding to water -related risks withinyour direct operations and other stages of your value chain.
Annually, our company risk/opportunity identification and management process covers regulatory, physical climate, water,
geopolitical and market issues. In 2015, we performed a comprehensive Climate Change risk assessment (CCRA; water risk
due to climate change) of PMI and key supplier assets (e.g. ports & tobacco growing regions). We supplemented this byunderstanding our blue water footprint composed of tobacco farming practices (such as irrigation, fertilizers and pesticides
usage) (53%), rest of supply chain (41%) & manufacturing (6%) conducted in 2017 and 2018. We’re assessing current andfuture water-related risks more broadly across our value chain:
1. Manufacturing: Beyond compliance and water efficiency, we are looking at the factory within its watershed. In 2017, we joined
the Alliance for Water Stewardship (AWS) & certified our Brazil factory by March 2018. By 2020, we plan certification of 10
factories (ranked highest in water risk assessment); and all operations by 2030.
2. Supply chain: GAP results in risk identification & management through country/supplier-specific action plans. We also
conducted water baseline studies in 60 different tobacco growing geographical areas in 2017. A water risk assessment
system was developed, including a global & tailored local risk assessments. Brazil, Malawi and US, important tobaccosourcing countries were selected to pilot & validate the methodology. Validation of the methodology to other areas willcontinue in 2018 – 2020. The purpose of the Global Water Risk Assessment is to use globally available and comparable data
to evaluate water risks at a high level. The Global Water Risk Assessment was undertaken by PMI in 2017 and the results
were shared with tobacco suppliers. In 2017, we released our RSP (contractual requirements for our direct suppliers andaddresses water management).

W4. Risks and opportunities
W4.1(W4.1) Have you identified any inherent water-related risks with the potential to have a substantive financial or
strategic impact on your business?

Yes, both in direct operations and the rest of our value chain

W4.1a(W4.1a) How does your organization define substantive financial or strategic impact on your business?
In relation to substantive change, we refer to materiality - material issues are identified in a multidisciplinary way and include
those which:- have the highest potential impact and a realistic probability of occurrence;- are most relevant to our enterprises and geographic locations; and- are most important to our stakeholders. In 2020+ risk forecasting terms, higher level risks are defined as those with apotential impact in excess of US$5M or a raw material impact in excess of 1000 metric tonnes of tobacco leaves. These apply
to both our direct operations and our tobacco supply chain.
Over the last couple of years, we have been expanding our water programs by first assessing current and future water related risks more broadly across our value chain. These risks include water scarcity and water quality in tobacco growing
regions, flood risk in major tobacco warehouse locations and ports, and water demand in cities where we have manufacturing
facilities. Besides our tobacco supply chain, we have developed a water footprint analysis with Quantis to understand water
stressed hotpots from which we source materials that are production water intensive.

W4.1b(W4.1b) What is the total number of facilities exposed to water risks with the potential to have a substantive financial
or strategic impact on your business, and what proportion of your company-wide facilities does this represent?
Total
number %ofcompanyfacilities wide
exposed facilities
to water thisrisk
represents Comment
Row
1
6

26-50

Annually, our company risk/opportunity identification and management process covers regulatory, physical climate,water, geopolitical and market issues. In 2015, we performed a comprehensive Climate Change risk assessment

Totalnumber %ofcompanyfacilities wide
exposed facilities
to water thisrisk
represents Comment(CCRA) that highlighted risks for cyclone, floods or severe droughts and a list of factories to be considered as of high
risk,

W4.1c
(W4.1c) By river basin, what is the number and proportion of facilities exposed to water risks that could have asubstantive impact on your business, and what is the potential business impact associated with those facilities?
Country/Region
PolandRiver basin
Wisla
Number of facilities exposed to water risk
1
% company-wide facilities this represents
1-25
Production value for the metals & mining activities associated with these facilities<Field Hidden>% company’s annual electricity generation that could be affected by these facilities<Field Hidden>% company’s global oil & gas production volume that could be affected by these facilities<Field Hidden>% company’s total global revenue that could be affected
1-25
Comment
Annually, our company risk/opportunity identification and management process covers regulatory, physical climate, water,
geopolitical and market issues. In 2015, we performed a comprehensive Climate Change risk assessment (CCRA) thathighlighted risks for cyclone, floods or severe droughts and a list of fact ories to be considered as of high risk.

Country/Region
Indonesia
River basin
Other, please specify (RIVER BASINS)
Number of facilities exposed to water risk
3
% company-wide facilities this represents
1-25
Production value for the metals & mining activities associated with these facilities<Field Hidden>% company’s annual electricity generation that could be affected by these facilities<Field Hidden>% company’s global oil & gas production volume that could be affected by these facilities<Field Hidden>% company’s total global revenue that could be affected
1-25
Comment
Annually, our company risk/opportunity identification and management process covers regulatory, physical climate, water,
geopolitical and market issues. In 2015, we performed a comprehensive Climate Change risk assessment (CCRA) thathighlighted risks for cyclone, floods or severe droughts and a list of factories to be considered as of high risk,
Country/Region
Philippines
River basin
Other, please specify (RIVER BASINS)
Number of facilities exposed to water risk
2% company-wide facilities this represents
1-25
Production value for the metals & mining activities associated with these facilities<Field Hidden>

% company’s annual electricity generation that could be affected by these facilities<Field Hidden>% company’s global oil & gas production volume that could be affected by these facilities<Field Hidden>% company’s total global revenue that could be affected
1-25
Comment
Annually, our company risk/opportunity identification and management process covers regulatory, physical climate, water,
geopolitical and market issues. In 2015, we performed a comprehensive Climate Change risk assessment (CCRA) thathighlighted risks for cyclone, floods or severe droughts and a list of fact ories to be considered as of high risk,

W4.2(W4.2) Provide details of identified risks in your direct operations with the potential to have a substantive financial or
strategic impact on your business, and your response to those risks.
Country/Region
PolandRiver basin
Wisla
Type of risk
PhysicalPrimary risk driver
Flooding
Primary potential impact
Reduction or disruption in production capacity
Company-specific description
In 2017, 23 of our facilities manufactured over 10 B cigarettes each, of which 8 facilities produced over 30 B units each. As of
2017, we own and operate 46 manufacturing sites – our largest being located in 8 countries, including Indonesia, Poland andthe Philippines. Annually, our company risk/opportunity identification and managem ent process covers regulatory, physicalclimate, water, geopolitical and market issues. We conducted a comprehensive Climate Change risk assessment (CCRA) andreviewed water risk due to climate change, for corporate and asset level physical risks and oppor tunities up to 2025-2030 of
PMI and key supplier assets (e.g. ports & tobacco growing regions) in 2015. We use the WRI Aqueduct and IPCC Climate

Change Projections. On an asset level, we conduct environmental risk assessments (ISO14001) to identify materia lrisks/opportunities, which includes flood risk management and mitigation plans discussed with our insurers. Despite having amunicipal plan in place that began in 2007 to prevent flooding, a major flood in 2010 caused several deaths and affected
homes, roads and infrastructure; disrupting plant/production operations and logistics. There is a potential for flooding of ourmanufacturing location, based on the CCRA.
Timeframe
4 - 6 years
Magnitude of potential impact
Low
Likelihood
Unlikely
Potential financial impact
1000000
Explanation of financial impact
We estimate the relative magnitude at around $1 M in the short to medium -term (0-5 years) for our Polish operations basedon disruptions in production capacity. This is based on our 2015 company asse ssment of comprehensive climate change risk
assessment (CCRA), in which we assessed sites that are in high flood severity zones and estimated the cost of disruption
from downtime and future flood risk. We also used Information from our 2007 municipal plan and the 2010 major flood.
Primary response to risk
Develop flood emergency plans
Description of response
External providers are contracted to assess flood and business continuity risk each year. Flood risk assessments areundertaken at the site level to understand how sites are vulnerable to local flooding events. Understanding the scale andnature of this risk is an important initial step in managing the risk. As well as undertaking a risk assessment process, ourinsurance and business continuity management plans are designed to mitigate the impacts associated with disruptions that
may result from flooding events. Our operations are widely distributed across the world, helping to mitigate the effects of a ny
disruption. We have a sophisticated capacity and footprint planning process which mitigates against local or regional
operations disturbances. In 2017, we joined the Alliance for Water Stewardship (AWS) and March 2018 our Brazil facility was
AWS certified, the first factory in the country. We plan to have the 10 factories which ranked highest in our previous risk
assessment certified by 2020; and all operations by 2030. Part of the AWS is responsiveness and resiliency to water -relatedrisks.
Cost of response

1000000
Explanation of cost of response
This estimated recurring cost of external providers contracted to assess flood and business continuity risk annually andrelated staff costs. Flood risk assessments are undertaken at the site level to understand how sites are vulnerable to local
flooding events. Understanding the scale and nature of this risk and conducting a risk assessment, our insurance andbusiness continuity management plans are designed to mitigate the impacts from short and medium -term (0-5 years) flooding
events.
Country/Region
Indonesia
River basin
Other, please specify (RIVER BASINS)
Type of risk
PhysicalPrimary risk driver
Other, please specify (Flooding and cyclones)
Primary potential impact
Reduction or disruption in production capacity
Company-specific description
According to our 2017 Quantis analysis, our Indonesian sites are second of our Philippine sites in using most blue water. We
have significant operations in Indonesia. In 2017, 23 of our facilities manufactured over 10 B cigarettes each, of which 8
facilities produced over 30 B units each. We own and operate 46 manufacturing sites – our largest being located in 8
countries, including Indonesia, Poland and the Philippines. We also source our clove primarily from Indonesia and work with
38 3rd-party operators Indonesia who manufacture our hand-rolled cigarettes. Annually, our company risk/opportunity
identification and management process covers regulatory, physical climate, water, geopolitical and market issues. We
conducted a comprehensive Climate Change risk assessment (CCRA) and reviewed water risk due to climate change, forcorporate and asset level physical risks and opportunities up to 2025-2030 of PMI and key supplier assets in 2015. We use
the WRI Aqueduct and IPCC Climate Change Projections. On an asset level, we conduc t environmental risk assessments(ISO14001) to identify material risks/opportunities, which includes flood risk management and mitigation plans discussed with
our insurers. Through these assessments we identified the primary risk drivers in our Indonesian operations, they are flooding
and cyclones. Potential impacts from cyclones could cause loss/disruption of production in manufacturing plants,
warehouses, 3rd party operations, suppliers and ports.

Timeframe
4 - 6 years
Magnitude of potential impact
Medium-low
Likelihood
Unlikely
Potential financial impact
2000000
Explanation of financial impact
We estimate the relative magnitude at around $2-3 M in the short to medium-term (0-5 years) for our Indonesian operations
based on disruptions in production capacity. This is based on our 2015 company assessment of comprehensive climatechange risk assessment (CCRA), in which we assessed sites that are in high cyclone and flood severity zones and estimatedthe cost of disruption from downtime and future cyclone / flood risk.
Primary response to risk
Develop flood emergency plans
Description of response
External providers are used to assess flood and business continuity risk each year. Flood risk assessments are undertaken at
the site level to understand how vulnerable sites are to local flooding events. Understanding the scale and nature of this risk
is an important initial step in managing the risk. As well as undertaking a risk assessment process, our insurance andbusiness continuity management plans are designed to mitigate the impacts associated with disruptions that may result fromflooding events. Our operations are widely distributed across the world, helping to mitigate the effects of any disruption. W ehave a sophisticated capacity and footprint planning process which mitigates against local or regional operations
disturbances. In 2017, we joined the Alliance for Water Stewardship (AWS) and by March 2018 our Brazil facility was AWS
certified, the first factory in the country. We plan to certify the 10 factories which ranked highest in our previous water risk
assessment by 2020; and to all operations by 2030. Part of the AWS certification process is responsiveness and resiliency towater-related risks. We also work with our growers to improve the efficiency of th eir curing bars, which helps mitigate theimpacts of climate change. In 2017, approximately 23,000 barns were improved in countries including Indonesia and thePhilippines, bringing the total number of barns improved since 2014 to 45,000. We aim to improve a total of 60,000 barns by
2020.
Cost of response
1000000
Explanation of cost of responseThis estimated recurring cost of external providers used to assess flood and business continuity risk annually and related
staff costs. Flood risk assessments are undertaken at the site level to understand how vulnerable sites are to cyclones/local
flooding events. Understanding the scale and nature of this risk and conducting a risk assessment, our insurance andbusiness continuity management plans are designed to mitigate the impacts from short and medium-term (0-5 years) flooding
events.
Country/Region
Philippines
River basin
Other, please specify (RIVER BASIN)
Type of risk
PhysicalPrimary risk driver
Other, please specify (Flooding and cyclones)
Primary potential impact
Reduction or disruption in production capacity
Company-specific description
Based on GermanWatch’s annual Climate Risk Index, the Philippines is in the top 5 countries most affected by climatechange impacts (including cyclones and flooding) from 1997-2015. According to the Quantis 2017 analysis, our Philippine
operations uses the most amount of blue water. In 2017, 23 or our facilities each manufactured over 10 B cigarettes, of which
8 facilities each produced over 30 B units. We own and operate 46 manufacturing sites – our largest of which are located in 8
countries, including Indonesia, Poland and the Philippines. Annually, our company risk/opportunity identification andmanagement process covers regulatory, physical climate, water, geopolitical and market issues. We conducted acomprehensive Climate Change risk assessment (CCRA) and reviewed water risk due to climate change, for corporate andasset level physical risks and opportunities up to 2025-2030 of PMI and key supplier assets in 2015. We use the WRI
Aqueduct and IPCC Climate Change Projections. On an asset level, we conduct environmental risk assessments (ISO14001)
to identify material risks/opportunities, which includes flood risk management and mitigation plans discussed with our
insurers. Through these assessments we found the primary risk driver to our Philippine operations are flooding and cyclones.
Potential for impacts from cyclones could cause loss/disruption of production in manufacturing plants, warehouses, 3rd party
operations, suppliers and ports.
Timeframe
4 - 6 years

Magnitude of potential impact
Medium-highLikelihood
LikelyPotential financial impact
10000000
Explanation of financial impact
The threat of flooding and cyclones, which according to GermanWatch’s Climate Risk Index, have been especiallycatastrophic to the Philippines. We estimate the potential damage to our manufacturing and warehouse sites at US $10 -20Min the short to medium-term (0-5 years). This is based on our 2015 company assessment of comprehensive climate change
risk assessment, in which we assessed sites that are in high cyclone and flood severity zones and estimated the cost of
disruption from downtime.
Primary response to risk
Develop flood emergency plans
Description of response
External providers are used to assess flood and business continuity risk each year. Flood risk assessments are undertaken at
the site level to understand how vulnerable sites are to local flooding events. Understanding the scale and nature of this ri sk
is an important initial step in managing the risk. As well as undertaking a risk assessment process, our insurance andbusiness continuity management plans are designed to mitigate the impacts associated with disruptions that may result fromflooding events. Our operations are widely distributed across the world, helping to mitigate the effects of any disruption. We
have a sophisticated capacity and footprint planning process which mitigates against local or regional operations
disturbances. In 2017, we joined the Alliance for Water Stewardship (AWS) and by March 2018 our Brazil facility was AWS
certified, the first factory in the country. We plan to certify the 10 factories which ranked highest in our previous water r isk
assessment by 2020; and to all operations by 2030. Part of the AWS certification process is responsiveness and resiliency towater-related risks. We also promote best practice and water management incentives among our sites and manufacturers.
We also work with our growers to improve the efficiency of their curing bars, which helps mitigate the impacts of climatechange. In 2017, approximately 23,000 barns were improved in countries including Indonesia and the Philippines.
Cost of response
1000000
Explanation of cost of response
This estimated recurring cost of external providers used to assess flood and business continuity risk annually and related
staff costs. Flood risk assessments are undertaken at the site level to understand how vulnerable sites are to cyclones/local

flooding events. Understanding the scale and nature of this risk and conducting a risk assessment, our insurance andbusiness continuity management plans are designed to mitigate the impacts from short and medium -term (0-5 years) flooding
events.

W4.2a(W4.2a) Provide details of risks identified within your value chain (beyond direct operations) with the potential tohave a substantive financial or strategic impact on your business, and your response to those risks.
Country/Region
Indonesia
River basin
Other, please specify (RIVER BASINS)
Stage of value chain
Supply chain
Type of risk
PhysicalPrimary risk driver
Other, please specify (flooding and cyclones)
Primary potential impact
Supply chain disruption
Company-specific description
Water risks due to climate change could have both beneficial and adverse impacts on quality and yield of the crops we use,such as tobacco leaf and cloves. The supplies of tobacco leaf in Indonesia are exposed to physical climate change risks, withcyclones and flooding being most critical. Tobacco leaf growing is strongly influenced by physical climate change such aschanges in temperature and precipitation. Crop losses, quality impacts and supply chain manufacturing restrictions could
impact PMI’s production and sourcing strategy. This could change our crop buying pattern and result in increased operationalcost. Also, clove is an important raw material for PMI to use in our local kretek brands. Indonesia produces over 70% of theworld’s cloves. Clove yields are complex; harvests can vary by up to 60% over a 4 year harvest cycle. Clove production is
weather sensitive, climate changes such as intensification of the wet season could impact clove growing areas. This would
reduce the supply and increase the price of cloves.
Timeframe>6 yearsMagnitude of potential financial impact
MediumLikelihood
LikelyPotential financial impact
3000000
Explanation of financial impact
The potential impacts are based on a long term climate change. We estimate the relative magnitude at around $3 -4 M in thelong-term (>6 years) for our Indonesian growers based on supply chain disruptions. This is based on our 2015 company
assessment of comprehensive climate change risk assessment (CCRA), in which we assessed sites that are in high cyclone
and flood severity zones and estimated the cost of disruption from crop losses, quality impacts and supply chain
manufacturing restrictions.
Primary response to risk
Improve alignment of our procurement policy influencing activity with our water stewardship commitments
Description of response
As part of our procurement strategy, we require all suppliers to follow our Good Agricultural Practices, which helps mitigate
climate related risks. We also work with our growers to improve the efficiency of their curing bars, which helps mitigate theimpacts of climate change. In 2017, approximately 23,000 barns were improved in countries including Indonesia, Pakistan
and the Philippines, bringing the total number of barns improved since 2014 to 45,000. We aim to improve a total of 60,000
barns by 2020. In addition, our substantial inventories of tobacco leaf can help mitigate short term impacts. Our tobacco
supply chain is widely spread around the world and there is the opportunity to relocate tobacco crops if some growing areas
become more favorable than others.
Cost of response
20000000
Explanation of cost of response
The cost of response is based on program management for Good Agricultural Practices implementation and engagement withclove suppliers to improve crop management practices in Indonesia. Supplier diversification is part of our overall businessstrategy and we cannot assign a specific cost. We have engaged with our tobacco suppliers to improve crop management
practices and are strengthening our supply chain for tobacco at an overall co st of several tens of millions US$.
Country/Region
Pakistan

River basin
Other, please specify (RIVER BASIN)
Stage of value chain
Supply chain
Type of risk
PhysicalPrimary risk driver
Drought
Primary potential impact
Supply chain disruption
Company-specific description
The supplies of tobacco leaf in Pakistan are exposed to physical climate change risks, with drought being most critical. Croplosses, quality impacts and supply chain manufacturing restrictions could impact PMI’s production and sourcing strategy.
Tobacco leaf growing is strongly influenced by physical climate change such as changes in temperature and precipitation.
Yield, quality and availability of the tobacco crop could be influenced by changes in precipitation and periods of drought. This
could change our access to tobacco supplies, impacting our crop buying pattern and increasing operational cost.
Timeframe>6 years
Magnitude of potential financial impact
Low
Likelihood
Unlikely
Potential financial impact
1000000
Explanation of financial impact
The potential impacts are based on a long term climate change. We estimate the relative magnitude at under $1 M in thelong-term (>6 years) for our Pakistan growers based on supply chain disruptions. This is based on our 2015 company
assessment of comprehensive climate change risk assessment (CCRA), in which we assessed sites that are in high droughtzones and estimated the cost of disruption from crop losses, quality impacts and supply chain manufacturing restrictions.
Primary response to risk
Improve alignment of our procurement policy influencing activity with our water stewardship commitments
Description of responseAs part of our procurement strategy, we require all suppliers to follow our Good Agricultural Practices, which helps to mitigate
against climate related risks. We also work with our growers to improve the efficiency of their curing bars, which helps
mitigate the impacts of climate change. In 2017, approximately 23,000 barns were improved in countries including Indonesia,
Pakistan and the Philippines, bringing the total number of barns improved since 2014 to 45,000. We aim to improve a total of
60,000 barns by 2020. In addition, our substantial inventories of tobacco leaf can help to mitigate against short term impact s.
Our tobacco supply chain is widely spread around the world and there is also some flexibility in terms of the potential torelocate tobacco crops if some growing areas become more favorable than others.
Cost of response
5000000
Explanation of cost of response
This cost of response is based on program management for Good Agricultural Practices implementation and support provided
to farming communities on a water supply project in Pakistan. Supplier diversification is part of our overall business strate gy
and we cannot assign a specific cost. We have engaged with our tobacco suppliers to improve crop management practices
and are strengthening our supply chain for tobacco at an overall cost of several tens of millions US$.
Country/Region
Philippines
River basin
Other, please specify (RIVER BASINS)
Stage of value chain
Supply chain
Type of risk
PhysicalPrimary risk driver
Other, please specify (drought, flooding and cyclones)
Primary potential impact
Supply chain disruption
Company-specific description
Based on GermanWatch’s annual Climate Risk Index, the Philippines is in the top 5 countries most affected by climatechange impacts (including cyclones and flooding) from 1997-2015 resulting to a loss of $2.8 B in purchasing power parity to
the country from 1996 - 2015. The supplies of tobacco leaf in Philippines, quality impacts and supply chain manufacturing
restrictions could impact PMI’s production and sourcing strategy. Tobacco leaf growing is strongly influenced by physicalclimate change such as changes in temperature and precipitation. Yield, quality and availability of the tobacco crop could be
influenced by changes in precipitation and periods of drought. This could change our access to tobacco supplies, impacting
our crop buying pattern and increasing operational cost.
Timeframe>6 years
Magnitude of potential financial impact
MediumLikelihood
LikelyPotential financial impact
3000000
Explanation of financial impact
The potential impacts are based on a long term climate change. We estimate the relative magnitude at around $3-4 M in thelong-term (>6 years) for our Philippine growers. This is based on our 2015 company assessment of comprehensive climatechange risk assessment (CCRA), in which we assessed sites that are in high drought, cyclone and flood s everity zones andestimated the cost of disruption from crop losses, quality impacts and supply chain manufacturing restrictions
Primary response to risk
Improve alignment of our procurement policy influencing activity with our water stewardship commitment s
Description of response
As part of our procurement strategy, we require all suppliers to follow our Good Agricultural Practices, which helps to mitig ate
against climate related risks. We also work with our growers to improve the efficiency of their curin g bars, which helps
mitigate the impacts of climate change. In 2017, approximately 23,000 barns were improved in countries including Indonesia,
Pakistan and the Philippines, bringing the total number of barns improved since 2014 to 45,000. We aim to improv e a total of
60,000 barns by 2020. In addition, our substantial inventories of tobacco leaf can help to mitigate against short term impact s.
Our tobacco supply chain is widely spread around the world and there is the opportunity to relocate tobacco crops i f somegrowing areas become more favorable than others.
Cost of response
20000000
Explanation of cost of response
This cost of response is based on program management for Good Agricultural Practices implementation in the Philippines.
Supplier diversification is part of our overall business strategy and we cannot assign a specific cost. We have engaged with

our tobacco suppliers to improve crop management practices and are strengthening our supply chain for tobacco at an overall
cost of several tens of millions US$.

W4.3
(W4.3) Have you identified any water-related opportunities with the potential to have a substantive financial or
strategic impact on your business?
Yes, we have identified opportunities, and some/all are being realized

W4.3a(W4.3a) Provide details of opportunities currently being realized that could have a substantive financial or strategic
impact on your business.
Type of opportunity
Efficiency
Primary water-related opportunity
Improved water efficiency in operations
Company-specific description & strategy to realize opportunity
Opportunities exist to improve water efficiency in our operations. Our smoke -free and reduced risk products (RRP) requireapproximately 4 times more water per unit of product than conventional cigarettes. The re is an opportunity to optimize our
new process by increasing water recycling and defining specific water quality by use. In 2017, PMI implemented otherinitiatives to reduce water use and increase water recovery; however, due to our new manufacturing pro cess, our averagewater consumption increased from our lowest level of 4.0m³ in 2016 to 4.8m³ of water for every million units of productequivalent. As the new manufacturing process matures, we are incorporating new designs, reusing or recycling water wit h aview to minimum water discharge. It will take us around 1-3 years to realize these opportunities. To better understand ourwater footprint, in 2017 Quantis discovered our blue water footprint to be composed of agricultural supply chain (53%), suppl y
chain (41%) and our manufacturing (6%). Furthermore, in 2015 we beat our 20% reduction target (from 2010 baseline),achieving a 24% reduction and have since focused on a minimum 1% year-year reduction in the short term, with additional
focus on operations present in water scarce areas. Our improvements in water efficiency, conservation and recycling at PMI
manufacturing facilities are driven by a water reduction target.
Estimated timeframe for realization
1 to 3 years
Magnitude of potential financial impact

Low-medium
Potential financial impact
2000000
Explanation of financial impact
The Quantis assessment of our water footprint and potential financial savings to increase water efficiency to be around $2 -3
M USD in the next 1 - 3 years. The Quantis update of the water footprint of our smoke-free and RPPs will provide us with abetter understanding of opportunities on how increase water efficiency. In our industry, the possibility of direct cost of wa ter
which could result in potential financial impact is low.
Type of opportunity
Resilience
Primary water-related opportunity
Increased resilience to impacts of climate change
Company-specific description & strategy to realize opportunity
Our success in achieving a 24%, beating our 2015 water reduction target of 2 0% (2010 baseline), lead us to expand ourwater stewardship strategy beyond a factory based approach on compliance and water efficiency. We became a member ofthe Alliance for Water Stewardship to better understand how to conserve the watersheds and water demand in areas where
we operate. Coupled with our water efficiency efforts, this increases our resilience to impacts of climate change andstrengthens our relationship with our local communities. Our factory in Brazil operating in the Rio Pardo Watershed wascertified against the AWS Standard in March 2018. In 2018, we plan to start 4 regional AWS trainings and assessments. We
plan to have the 10 factories which ranked highest in our previous risk assessment certified by 2020 and to extend to the res tof our operations until 2030.
Estimated timeframe for realization
1 to 3 years
Magnitude of potential financial impact
Low
Potential financial impact
1000000
Explanation of financial impact
In our industry, direct cost of water and resulting potential financial impact expected is low. Moreover, the upfront cost of
AWS certification may offset any short-term savings. The cost of AWS certification varies, however based on cost of AWS
assessments and certification audits, it could cost more than $8.5K per factory. We do see this as a long-term investment thatwill increase our resilience to water risks due to climate change and it is difficult to determine exactly how much this will save
PMI. Based on potential water savings however, we estimate this to be around $1,000,000 for all our operations until 2030. In
addition, the AWS process of consulting local communities and stakeholders on water issues helps retain our social license tooperate.
Type of opportunity
Resilience
Primary water-related opportunity
Increased supply chain resilience
Company-specific description & strategy to realize opportunity
Majority of our water risks are in our supply chain based on the 2017 Quantis - PMI blue water footprint: tobacco farming(53%, practices such as irrigation, fertilizers and pesticides usage) and supply chain (41%). Water risks due to climatechange could have both beneficial and adverse impacts on quality and yield of the crops we use, such as tobacco leaf andcloves. Some benefits include water short growing areas could benefit from increases in precipitation. We manage ourgrowers under our Global Agricultural Practices (GAP), in which suppliers conduct a water management plan. 2017 was afoundational year for our leaf water stewardship strategy and we conducted water baseline studies in 60 different tobacco
geographical areas. A water risk assessment system was developed, including a global and tailored local risk assessment
methodology and guideline. Brazil, Malawi and US, were selected to pilot a nd validate the methodology; which will continue tobe tested in other countries from 2018-2020. We also released our Responsible Sourcing Program (RSP) Implementation
Guidelines in 2017 which sets water guidelines and applies to all suppliers not part of GAP. Working with our suppliers tounderstand and better manage their water risks will create a resilient supply chain. We continually review promising tobacco
leaf and clove growing areas and assess if climate change elements could favor increased yield; and actively researcheddrought tolerant seed varieties.
Estimated timeframe for realization>6 years
Magnitude of potential financial impact
Low-medium
Potential financial impact
2000000
Explanation of financial impact
Good water and irrigation management has a positive effect on crop yield and helps minimize uncertainty in supply. Based on
our water baseline studies, we estimate this to be around $ 2-3 M USD with long-term impacts (>5 years).

W5. Facility-level water accounting
W5.1(W5.1) For each facility referenced in W4.1c, provide coordinates, total water accounting data and comparisons withthe previous reporting year.
Facility reference number
Facility 1
Facility name (optional)
Philip Morris Polska
Country/Region
PolandRiver basin
Wisla
Latitude50.070762
Longitude
20.026857
Primary power generation source for your electricity generation at this facility<Field Hidden>
Oil & gas sector business division<Field Hidden>
Total water withdrawals at this facility (megaliters/year)
169.2
Comparison of withdrawals with previous reporting year
About the same
Total water discharges at this facility (megaliters/year)
112
Comparison of discharges with previous reporting year
About the same
Total water consumption at this facility (megaliters/year)57.3
Comparison of consumption with previous reporting year
HigherPlease explain
The water consumption increased from 42.7 to 57.3 megaliters resulting in a increase of 34%.
Facility reference number
Facility 3
Facility name (optional)
PMFTC Batangas
Country/Region
Philippines
River basin
Other, please specify (RIVER BASINS)
Latitude14.129355
Longitude121.118746
Primary power generation source for your electricity generation at this facility<Field Hidden>
Oil & gas sector business division<Field Hidden>
Total water withdrawals at this facility (megaliters/year)
165.3
Comparison of withdrawals with previous reporting year
Much lower
Total water discharges at this facility (megaliters/year)
113.8
Comparison of discharges with previous reporting year
HigherTotal water consumption at this facility (megaliters/year)
51.5

Comparison of consumption with previous reporting year
Much lower
Please explain
The water consumption decreased from 102.5 to 51.5 megaliters, resulting in a 50% decrease as a result of different
initiatives for reducing water use and increase water recycling along a slight production decrease.
Facility reference number
Facility 2
Facility name (optional)
Philip Morris Indonesia Karawang
Country/Region
Indonesia
River basin
Other, please specify (RIVER BASINS)
Latitude-6.358696
Longitude107.289555
Primary power generation source for your electricity generation at this facility<Field Hidden>
Oil & gas sector business division<Field Hidden>
Total water withdrawals at this facility (megaliters/year)
227.5
Comparison of withdrawals with previous reporting year
About the same
Total water discharges at this facility (megaliters/year)
133.8
Comparison of discharges with previous reporting year
Lower
Total water consumption at this facility (megaliters/year)
93.7

Comparison of consumption with previous reporting year
HigherPlease explain
The water consumption increased from 90.8 to 93.7 megaliters resulting in a increase of 3%.
Facility reference number
Facility 4
Facility name (optional)
Philip Morris Indonesia Sukorejo
Country/Region
Indonesia
River basin
Other, please specify (RIVER BASINS)
Latitude-7.698419
Longitude
112.69915
Primary power generation source for your electricity generation at this facility<Field Hidden>
Oil & gas sector business division<Field Hidden>
Total water withdrawals at this facility (megaliters/year)
503
Comparison of withdrawals with previous reporting year
HigherTotal water discharges at this facility (megaliters/year)
301.8
Comparison of discharges with previous reporting year
HigherTotal water consumption at this facility (megaliters/year)
201.2
Comparison of consumption with previous reporting year

Higher
Please explain
The water consumption increased from 189 to 201.2 megaliters resulting in a increase of 6.4%.
Facility reference number
Facility 5
Facility name (optional)
Philip Morris Indonesia Handroll
Country/Region
Indonesia
River basin
Other, please specify (RIVER BASINS)
Latitude-7.331043
Longitude
112.762057
Primary power generation source for your electricity generation at this facility<Field Hidden>
Oil & gas sector business division<Field Hidden>
Total water withdrawals at this facility (megaliters/year)
96.7
Comparison of withdrawals with previous reporting year
About the same
Total water discharges at this facility (megaliters/year)
57.8
Comparison of discharges with previous reporting year
About the same
Total water consumption at this facility (megaliters/year)
38.9
Comparison of consumption with previous reporting year
HigherPlease explain
The water consumption increased from 38.7 to 38.9 megaliters resulting in a increase of 0.04%.
Facility reference number
Facility 6
Facility name (optional)
PMFTC Marikina
Country/Region
Philippines
River basin
Other, please specify (RIVER BASINS)
Latitude14.661436
Longitude121.128043
Primary power generation source for your electricity generation at this facility<Field Hidden>
Oil & gas sector business division<Field Hidden>
Total water withdrawals at this facility (megaliters/year)
163.9
Comparison of withdrawals with previous reporting year
Much lower
Total water discharges at this facility (megaliters/year)
1.5
Comparison of discharges with previous reporting year
Lower
Total water consumption at this facility (megaliters/year)
162.3
Comparison of consumption with previous reporting year
Lower
Please explain

The water consumption decreased from 206.9 to 162.3 megaliters, resulting in a 22% decrease as a result of different
initiatives for reducing water use and increase water recycling along a slight production decrease.

W5.1a(W5.1a) For each facility referenced in W5.1, provide withdrawal data by water source.
Facility reference number
Facility 1
Facility namePhilip Morris Polska
Fresh surface water, including rainwater, water from wetlands, rivers and lakes
0
Brackish surface water/seawater0
Groundwater - renewable
0
Groundwater - non-renewable0
Produced water0
Third party sources
169.2
Comment
Facility reference number
Facility 3
Facility name
PMFTC Batangas
Fresh surface water, including rainwater, water from wetlands, rivers and lakes
0
Brackish surface water/seawater0Groundwater - renewable
158.2
Groundwater - non-renewable0
Produced water0
Third party sources
7.1
Comment
Facility reference number
Facility 2
Facility namePhilip Morris Indonesia Karawang
Fresh surface water, including rainwater, water from wetlands, rivers and lakes
4.5
Brackish surface water/seawater0
Groundwater - renewable
0
Groundwater - non-renewable0
Produced water0
Third party sources
223
Comment
Facility reference number
Facility 4
Facility namePhilip Morris Indonesia Sukorejo

Fresh surface water, including rainwater, water from wetlands, rivers and lakes
0
Brackish surface water/seawater0
Groundwater - renewable
503
Groundwater - non-renewable0
Produced water0
Third party sources
0
Comment
Facility reference number
Facility 5
Facility namePhilip Morris Indonesia Handroll
Fresh surface water, including rainwater, water from wetlands, rivers and lakes
2.2
Brackish surface water/seawater0
Groundwater - renewable
39.6
Groundwater - non-renewable0
Produced water0
Third party sources
54.9
Comment

Facility reference number
Facility 6
Facility name
PMFTC Marikina
Fresh surface water, including rainwater, water from wetlands, rivers and lakes
0
Brackish surface water/seawater0
Groundwater - renewable
0
Groundwater - non-renewable0
Produced water0
Third party sources
163.9
Comment

W5.1b(W5.1b) For each facility referenced in W5.1, provide discharge data by destination.
Facility reference number
Facility 1
Facility namePhilip Morris Polska
Fresh surface water0
Brackish surface water/Seawater0
Groundwater0
Third party destinations

112
Comment
Facility reference number
Facility 2
Facility name
PMFTC Batangas
Fresh surface water0
Brackish surface water/Seawater0
Groundwater0
Third party destinations
113.8
Comment
Facility reference number
Facility 3
Facility namePhilip Morris Indonesia Karawang
Fresh surface water0
Brackish surface water/Seawater0
Groundwater0
Third party destinations
133.8
Comment
Facility reference number

Facility 4
Facility namePhilip Morris Indonesia Sukorejo
Fresh surface water
301.8
Brackish surface water/Seawater0
Groundwater0
Third party destinations
0
Comment
Facility reference number
Facility 5
Facility namePhilip Morris Indonesia Handroll
Fresh surface water
28.3
Brackish surface water/Seawater0
Groundwater0
Third party destinations
29.5
Comment
Facility reference number
Facility 6
Facility name
PMFTC Marikina
Fresh surface water0Brackish surface water/Seawater0
Groundwater0
Third party destinations
1.5
Comment

W5.1c(W5.1c) For each facility referenced in W5.1, provide the proportion of your total water use that is recycled or reused,and give the comparison with the previous reporting year.
Facility reference number
Facility 1
Facility namePhilip Morris Polska% recycled or reused
Less than 1%
Comparison with previous reporting year
This is our first year of measurement
Please explain
This is our first year of measuring the volume of water that is recycled or reused. Going forward, we will be able to compare
this data to prior years.
Facility reference number
Facility 3
Facility name
PMFTC Batangas% recycled or reused
Less than 1%
Comparison with previous reporting year

This is our first year of measurement
Please explain
This is our first year of measuring the volume of water that is recycled or reused. Going forward, we will be able to compare
this data to prior years.
Facility reference number
Facility 2
Facility namePhilip Morris Indonesia Karawang% recycled or reused
11-25%
Comparison with previous reporting year
This is our first year of measurement
Please explain
This is our first year of measuring the volume of water that is recycled or reused. Going forward, we will be able to compare
this data to prior years.
Facility reference number
Facility 4
Facility namePhilip Morris Indonesia Sukojero% recycled or reused
Less than 1%
Comparison with previous reporting year
This is our first year of measurement
Please explain
This is our first year of measuring the volume of water that is recycled or reused. Going forward, we will be able to compare
this data to prior years.
Facility reference number
Facility 5
Facility namePhilip Morris Indonesia Handroll% recycled or reused
Less than 1%
Comparison with previous reporting year
This is our first year of measurement
Please explain
This is our first year of measuring the volume of water that is recycled or reused. Going forward, we will be able to compare
this data to prior years.
Facility reference number
Facility 6
Facility name
PMFTC Marikina% recycled or reused
Less than 1%
Comparison with previous reporting year
This is our first year of measurement
Please explain
This is our first year of measuring the volume of water that is recycled or reused. Going forward, we will be able to compare
this data to prior years.

W5.1d(W5.1d) For the facilities referenced in W5.1, what proportion of water accounting data has been externally verified?
Water withdrawals – total volumes% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of sites
had EHS&S data verified by external party (SGS). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespel lano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.

Water withdrawals – volume by source% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of sites
had EHS&S data verified by external party (SGS). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.
Water withdrawals – quality% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of sites
had EHS&S data verified by external party (SGS ). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.
Water discharges – total volumes% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of site s
had EHS&S data verified by external party (SGS). As part of this exercise, 5 sites are verified on-site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy) ,Karawang (Philippines). As a result, 25% of our production volume has been 100% verified .
Water discharges – volume by destination% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of site s
had EHS&S data verified by external party (SGS). As part of this exercise, 5 sites are verified on-site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy) ,Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.

Water discharges – volume by treatment method% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of sites
had EHS&S data verified by external party (SGS ). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), P hilsa (Turkey), Crespellano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.
Water discharge quality – quality by standard effluent parameters% verified
51-75
What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of site s
had EHS&S data verified by external party (SGS). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.
Water discharge quality – temperature% verified
51-75
What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017. We are constantly measuring our water discharge in all our affiliates
and we are beyond local requirements. Around 50% of our sites have been reviewed by local authorities. Going forward, weare planning to verify them externally as part of our verification process.
Water consumption – total volume% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of sites
had EHS&S data verified by external party (SGS). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.
Water recycled/reused

% verified
76-100What standard and methodology was used?
91% of our sites have been ISO 14001 certified in 2017, covering 100% of the facilities in W5.1. On top of that, 100% of sites
had EHS&S data verified by external party (SGS ). As part of this exercise, 5 sites are verified on -site based on size, risk andglobally significance. In 2017, these sites were Santa Cruz (Brazil), Kharkiv (Ukraine), Philsa (Turkey), Crespellano (Italy),
Karawang (Philippines). As a result, 25% of our production volume has been 100% verified.

W6. Governance
W6.1(W6.1) Does your organization have a water policy?
Yes, we have a documented water policy that is publicly available

W6.1a(W6.1a) Select the options that best describe the scope and content of your water policy.
Scope

Content

Description of business
dependency on water
Description of business impact
on water
Description of water-related
performance standards for
direct operations
Description of water-related
standards for procurement
Reference to international
standards and widelyrecognized water initiatives
Company water targets andgoals
Commitment to align with
Row Company- public policy initiatives, such as
1
wide
the SDGs

Please explain

Our commitment to water stewardship is company-wide, extending through our operations andsupply chain, including the sourcing of tobacco raw material. We are AWS members, and havecertified our first cigarette manufacturing facility. SDG 6 is embedded in our Sustainability
Program, including Good Agricultural Practices. We are committed to building capacity with our
stakeholders and tobacco suppliers by jointly assessing risks in our growing areas. In our supply
chain, water related procurement standards are set forth through our GAP program, our risk
assessment process, Water Insights data collection, and Responsible Sourcing Principles.
Beyond our efficiency targets in factories, we have outlined a roadmap for taking action with our
suppliers and stakeholders, including watershed action and the development of seed varieties thatare drought and flood tolerant. We have more formally committed to water stewardship throughour environmental commitment to be published in Q3 2018

ScopeContent

Please explain

Commitments beyond
regulatory compliance
Commitment to water-related
innovation
Commitment to stakeholder
awareness and education
Commitment to water
stewardship and/or collective
actionAcknowledgement of thehuman right to water andsanitation
Recognition of environmental
linkages, for example, due toclimate change

W6.2(W6.2) Is there board level oversight of water-related issues within your organization?
Yes

W6.2a
(W6.2a) Identify the position(s) of the individual(s) on the board with responsibility for water -related issues.
Positionofindividual Please explain

Board
Chair

In 2017, the highest level of direct oversight for water-related issues within PMI was with the Product Innovation and Regulatory Affairs
Committee of the Board of Directors. The Committee comprised 9 out of the 13 Directors and was chaired by Harold Brown (Counselor,
Center for Strategic and Int. Studies). In 2018, as part of our continued focus on sustainability, the Board has added oversight of oursustainability strategies (including water) and performance to the charter of the Board’s Nominating and Corporate GovernanceCommittee that advises the Board on sustainability matters. Part of the Board’s oversight is a focus on management’s efforts to enhanceshareholder value responsibly and sustainably.

W6.2b
(W6.2b) Provide further details on the board’s oversight of water-related issues.

Frequency
that waterrelated issues Governanceare amechanisms intoscheduledwhich water-related
agenda item issues are integrated

Please explain

Monitoring
implementation andperformance
Overseeing acquisitions
and divestiture
Overseeing major capital
expenditures
Providing employee
incentives
Reviewing and guiding
annual budgets
Reviewing and guiding
business plans
Reviewing and guiding
major plans of action
Reviewing and guiding
The Board established Committees to assist with the performance of its responsibilities and isrisk management
regularly informed of the company’s performance, future plans, and significant issues affecting thepolicies
business. The Board meets several times per year with additional meetings held as necessary. The
Reviewing and guiding
Board of Directors believes that environmental, social, and governance (ESG) factors relevant to thestrategy
company’s business are important to PMI’s long-term success, and in 2017, the Product Innovation
Reviewing and guiding
and Regulatory Affairs Committee was responsible for reviewing and monitoring PMI’s programs on
corporate responsibility societal alignment issues, including water stewardship with the PMI’s CEO and the VP Operations.
strategy
Since 2018, the Board’s Nominating and Corporate Governance Committee is responsible to
Reviewingoversee our sustainability strategies and performance, and advises the Board on sustainability
innovation/R&D priorities matters. The four other committees (Audit, Compensation and Leadership Development, Finance,
Row Scheduled Setting performance
Product Innovation and Regulatory Affairs) assist the board with a full range of activities that also1
some meetings objectives
include sustainability related matters.

W6.3(W6.3) Below board level, provide the highest-level management position(s) or committee(s) with responsibility forwater-related issues.
Name of the position(s) and/or committee(s)Other C-Suite Officer, please specify (Senior Vice President, Operations)
Vice President, Social & Economic Affairs, who reports to the President, External Affairs & General Counsel
Responsibility
Both assessing and managing water-related risks and opportunities
Frequency of reporting to the board on water-related issues
More frequently than quarterly
Please explain
Water Stewardship is embedded within our overall business strategy, our Guidebook for Success (Code of Conduct) and our
Responsible Sourcing Principles. It's integrated into normal business activities and forms part of our annual Long Range
Planning process which reviews and sets business direction. In 2017, the strategy was developed/reviewed based on prioryear performance, regulatory/external developments, risk/opportunity assessments, stakeholder interest and businesschanges, through functional management teams up to our Senior Management Team (Management Board). Our Senior VP of
Operations is a member of PMI’s Senior Management Team (Management Board); he reports to PMI’s CEO and is delegatedwith operational responsibility. In 2017, the SVP Operations was responsible for reviewing and monitoring PMI’s objectives,
strategies and action plans related to forest issues with the CEO and reported to the Prod. Innovation and Regulatory Affairs
Committee of the Board of Directors
Name of the position(s) and/or committee(s)Sustainability committee
Sustainability Team
Responsibility
Both assessing and managing water-related risks and opportunities
Frequency of reporting to the board on water-related issues
Half-yearly
Please explain
Currently, our Senior Management Team is responsible for reviewing sustainability matters, including water -related issues –strategy, key programs, and budget ― through a cross-functional representation, coordinated by the Sustainability Team ledby the Vice President Social & Economic Affairs, who reports to the President External Affairs & General Counsel, a memberof PMI’s Senior Management Team. The Sustainability Team strives to equip our Company with the relevant know -how andexpertise in view of the changing nature of our business. From an operational perspective, the Sustainability Team manages
and coordinates our sustainability work across PMI functions and regions seeking to ensure it is embedded at all levels of th eorganization. Finally, three cross-functional working groups have been created to manage environmental, social and reporting
matters that are overseen by committees composed of senior function heads.

W-FB6.4/W-CH6.4/W-EU6.4/W-OG6.4/W-MM6.4(W-FB6.4/W-CH6.4/W-EU6.4/W-OG6.4/W-MM6.4) Do you provide incentives to C-suite employees or board members
for the management of water-related issues?
Yes

W-FB6.4a/W-CH6.4a/W-EU6.4a/W-OG6.4a/W-MM6.4a(W-FB6.4a/W-CH6.4a/W-EU6.4a/W-OG6.4a/W-MM6.4a) What incentives are provided to C-suite employees or board
members for the management of water-related issues?
Who is entitled tobenefit from theseincentives?

Monetary
rewardIndicator for
incentivized
performance

Corporate executive
team
Reduction of product
Chief Executive Officer water intensity(CEO)
Efficiency project or
Other, please specify target – upstream in(Sustainability
the value chain
Managers,
Increasing access to
Employees)
workplace WASH

Please explain
1) Chief Executive Officer (CEO) Our CEO specifically covers EHS results in theassessment of our annual company-wide performance that is reviewed by theCompensation and Leadership Development Committee of the Board of Directors.
Accordingly, these results are included in our overall performance rating which
determines the cash bonuses for the management group and other eligible
employees. Executive management covering EHS topics are specifically appraised
each year for performance against targets. 2) Management group Executive
management covering EHS topics are specifically appraised each year for
performance against targets. The assessment of Environment and Health and Safety(EHS) results directly influences the annual performance rating of our SVP Operations
and certain members of our Management Team. This covers the annual cash
incentive compensation and long term restricted stock incentive compensation
elements for those roles. 3) All employees Specific company awards such as the CEO
Award and Recognition for Excellence Awards, which are either cash or stock, areavailable for Energy Managers, EHS Managers, project teams and other employees
who are responsible for water change related initiatives and improvements. 4)
Environmental manager Managers, team members and others have targets set out intheir annual performance objectives and are assessed against those targets in theirannual performance appraisal. Water targets are set annually for at manufacturing
facilities.

Who is entitled tobenefit from theseincentives?

Indicator for
incentivized
performance

Recognition(nonmonetary)

Reduction of productwater intensity
Efficiency project or
Other, please specify target – upstream in(Employees)
the value chain
Management Group,
Increasing access to
Sustainability Manager workplace WASH

Other nonmonetary
rewardNo one is entitled tothese incentives

Please explain
Behavior change related indicator; Annually many affiliates continued to performvoluntary awareness and promotion campaigns/ programs in order to increase
employees’ active participation in EHS programs and to make water stewardship partof the company's culture. Awards and recognition for best practices form a coreelement of such campaigns Water reduction project; Operations employees also havethe opportunity to earn awards for best practice initiatives in the areas of water
consumption reduction and water efficiency. This forms part of our Operations “Lead,
Lean and Learn” (3L) program which encourages innovation, continuous improvement
and employee engagement.

<Field Hidden>

W6.5(W6.5) Do you engage in activities that could either directly or indirectly influence public policy on water through anyof the following?
Yes, trade associations
Yes, other

W6.5a(W6.5a) What processes do you have in place to ensure that all of your direct and indirect activities seeking to
influence policy are consistent with your water policy/water commitments?
PMI operates within an overarching Code of Conduct to a set of internal policies, which we call our Guidebook for Success.
These policies cover our mandatory requirements and processes in relation to Environment, Health and Safety (EHS) andSustainability, which includes our water strategy; corporate contributions; and interaction with government officials, amongs tothers. As part of these management controls, we conduct due-diligence to ensure consistency with our Code and Principles,
and to check potential compliance and reputational issues when joining trade associations. We belong to many carefully
selected business and trade associations around the world. We work with these groups because they represent our industry
and the larger business community in policy discussions on issues where we have a common interest or objective. Our
support to these organizations and groups complies with applicable laws and our own principles and practices. We routinely
evaluate our participation to ensure that the groups’ objectives align with the long-term interests of PMI and its shareholders,and that their activities continue to reflect PMI’s values and high standards of conduct. There are times when we may notagree with certain positions adopted by the organizations we support. In these instances, we may choose to withdraw ourparticipation or support.

W7. Business strategy
W7.1(W7.1) Are water-related issues integrated into any aspects of your long-term strategic business plan, and if so how?
Longterm
Are water-related timeissueshorizonintegrated?
(years) Please explain

Long-termbusiness
objectives

Strategy forachieving longterm objectives

Yes, water-related
issues areintegrated
16-20

Water security is embedded within our overall business strategy as part of climate change risk
management. Water security is vital and integrated in our normal business activities and forms part ofour annual Long Range Planning process, which reviews and sets business direction. The EHS and
Sustainability teams undertake annual strategy reviews based on prior year performance,
regulatory/external developments, risk/opportunity assessments, stakeholder interest and businesschanges. With the ongoing challenge of water security, we find it important to look further into the
future. Since the physical risks of climate change have the potential to materially impact our business,
we have conducted climate risks assessments which have looked out to 2030 and 2040 since that iswhere we start seeing climate trends shift. We also chose that time horizon because it is hard for the
climate/water risk models to get more granular and to accurately interpret the data. This time horizonis also aligned with our risk planning and climate change goals, allowing us to implement actionable
goals with tangible long-term effects that impact our business (16-20 years versus 50 years).

Yes, water-related
issues areintegrated
16-20

The strategy is developed through functional management teams up to the Senior Management
Team, CEO, the Product Innovation and Regulatory Affairs Committee of Board of Directors and thencascaded. Our strategy is aligned with our annual Long Range Planning process. It also focuses on
efficient water use through our operations and value chain contextualized to the water basins we areoperating in. In addition, PMI’s Board of Directors believes that environmental, social, and governancefactors relevant to the business are critical to PMI’s long-term success. Part of the Board’s oversightis a focus on management’s efforts to enhance shareholder value responsibly and sustainable. The
Board’s sustainability oversight was more formally established at the beginning of 2018 when its
Corporate Governance Committee was given the mandate to oversee the sustainability strategy andperformance. With the ongoing challenge of water security, we find it important to look further into the
future. We have conducted climate risks assessments which have looked out to 2030 and 2040 sincethat is where we start seeing climate trends shift. It is hard for the climate/water risk models to getLongterm
Are water-related timeissueshorizonintegrated?
(years) Please explain
more granular and to accurately interpret the data beyond the 16-20 year horizon. This time horizon is
also aligned with our risk planning and climate change goals, allowing us to implement actionable
goals with tangible long-term effects that impact our business.

Yes, water-related
issues areintegrated
16-20

Financialplanning

Our tobacco supply chain is widely spread around the world, which helps to mitigate against climate
related risks like water scarcity, droughts or flooding; there is also the opportunity to relocate tobacco
crops if some growing areas become more favorable than others. In addition, our substantial
inventories of tobacco leaf can help to mitigate against short term impacts. We have engaged with our
clove suppliers to improve crop management practices and are strengthening our supply chain forclove at an overall cost of several tens of millions US$. The estimated cost is also based on program
management for Good Agricultural Practices implementation. With the ongoing challenge of water
security, we find it important to look further into the future. Since the physical risks of climate change
have the potential to materially impact our business, we have conducted climate risks assessments
which have looked out to 2030 and 2040 since that is where we start seeing climate trends shift. It is
hard for the climate/water risk models to get more granular and to accurately interpret the data
beyond the 16-20 year horizon. This time horizon is also aligned with our risk planning and climatechange goals, allowing us to implement actionable goals with tangible long-term effects that impact
our business.

W7.2(W7.2) What is the trend in your organization’s water-related capital expenditure (CAPEX) and operating expenditure(OPEX) for the reporting year, and the anticipated trend for the next reporting year?
Water- Anticipated Water- Anticipatedrelated forward
related forward
CAPEX trend for
OPEX
trend for(+/- %CAPEX (+/- (+/- %OPEX (+/change) % change) change) % change) Please explain

Row
1
0

0

189

-50

OPEX - a net increase of 189% in our OPEX driven mostly by our new RRP facility in Italy that
due to lack of proper infrastructure had to use external waste treatment plant until proper on site
WTP was fully functional. If we adjust the 2016 baseline to account with the RRP impact, our total
water-related opex in 2017 would have increased by 3% vs 2016. In 2018 we expect this cost to
get reduced by at least 50%. Water-related OPEX is not significant to our business (less than0.1%). CAPEX - we only segregate CAPEX that is water-related in certain circumstances, often

Water- Anticipated Water- Anticipatedrelated forward
related forward
CAPEX trend for
OPEX
trend for(+/- %CAPEX (+/- (+/- %OPEX (+/change) % change) change) % change) Please explain
the project drivers are varied and the water-related element is not financially significant. The levelof projects compared to 2017 is similar and therefore 0% change has been entered for CAPEX.

W7.3(W7.3) Does your organization use climate-related scenario analysis to inform its business strategy?
Use ofclimaterelated
scenario
analysis Comment

Row
1
Yes

Due to the nature of our business where our business relies on agricultural crops, physical risks are the primary driver for us. We
have conducted a physical climate risk analysis of our direct operations and our agricultural suppliers growing regions using IPCC
physical risk scenarios. The climate risk analysis evaluated impacts from the reasonable worst case (RCP 8.5) which is prudent toapply when assessing these risks.

W7.3a(W7.3a) Has your organization identified any water-related outcomes from your climate-related scenario analysis?
Yes

W7.3b
(W7.3b) What water-related outcomes were identified from the use of climate-related scenario analysis, and what wasyour organization’s response?
Climaterelated
scenario(s)Other, please
Row specify (RCP1
8.5)

Description of possible water-related outcomes

Company response to possible water-related outcomes

Our evaluation of water security impacts uses the IPCC RCP
8.5 scenario which allows us to model and better understandthe potential worst case impacts across our operations andvalue chain. The scenario analysis uses various metrics

In comparison to other products, tobacco is not particularlywater intensive. To mitigate future challenges, we continue toassess water security in the geographies where our tobacco isgrown. In 2017, water baseline studies were conducted in 60

Climaterelated
scenario(s)Description of possible water-related outcomes

Company response to possible water-related outcomes

including crop loss, business disruption to contextualize risks
to our operations in the future. Some of the challenges
identified include increased risk of drought and cyclones insome of our tobacco growing regions as well as some of ourfacilities. For example, in the Philippines, based on our
scenario analysis, there is an increasing risk of crop loss fromdroughts with losses estimated at greater than 10 percent andcyclones. This would also affect our manufacturing operationsin the region, potentially increasing the number of downtime
days in the future.

different geographical areas where specific types of tobacco
are grown. The selected areas represent 90% of PMI’s global
purchases of tobacco leaf. A water risk assessment system has
been developed, including a global risk assessment tool and a
tailored local risk assessment methodology and guideline.
Three important tobacco-sourcing countries – Brazil, Malawi
and U.S. – were selected to pilot and validate the risk
assessment methodology. IN our manufacturing facilities, water
is not a major input to conventional tobacco productmanufacturing. We also continue to support and invest in
growing practices that enable the tobacco crop to be resilient tothe changing water scenarios. We continue to reduce water use
across our facilities through improvement in water efficiency byimplementing new process designs, conservation, and reusing
or recycling water where possible.

W7.4(W7.4) Does your company use an internal price on water?
Row 1
Does your company use an internal price on water?
No, but we are currently exploring water valuation practices
Please explain
We joined the Alliance for Water Stewardship (AWS) in 2017, a leading organization dedicated to better managing water
within the local watersheds. We successfully piloted the adoption of the AWS Standard in our factory in Brazil and developed
a toolbox for wider implementation. In March 2018, our factory became the first factory in the country to be AWS certified.
Based on the results and learnings from this pilot, we will roll out the AWS Standard globally. As a priority, we plan to cer tify
the ten factories which ranked highest in our previous risk assessment by 2 020 and to extend to the rest of our operations
until 2030. Based on the results derived from the AWS certification, we will consider implementing a water valuation practicein order to favor water stewardship on those sites identified as with higher risks .

W8. Targets
W8.1

(W8.1) Describe your approach to setting and monitoring water-related targets and/or goals.
Levels fortargets and/or
goals

Company-widetargets and goals
Business levelspecific targets
and/or goals
Site/facility
Row specific targets
1
and/or goals

Monitoring at
corporate level

Approach to setting and monitoring targets and/or goals

Targets aremonitored at thecorporate level
Goals aremonitored at thecorporate level

PMI is committed to be a good steward of water resources by minimizing water use and effluent
discharge in our factories; assess water risks where we operate and work with stakeholders in sharedwatersheds towards the four water stewardship outcomes (good water governance, sustainable waterbalance, good water quality and habitat protection); and implement good agricultural practices in our
tobacco supply chain. We understand that setting company-wide science based targets for GHG
carbon reductions, doesn't apply for water withdrawal were consumption, and pollution typically havean impact only in the basin in which they occur. That's why our approach is along with reducing water
intensity in our products we work to understand the water risks in our operations, agricultural and nonagricultural supply chain and then create specific targets to mitigate any risks. As an example is ourtarget to certify under the Alliance for Water Stewardship standard in all our top 10 highest water
stressed factories by 2020.

W8.1a(W8.1a) Provide details of your water targets that are monitored at the corporate level, and the progress made.
Target reference number
Target 1
Category of target
Water consumption
Level
Site/facility
Primary motivation
Water stewardship
Description of target
In 2015, we exceeded our goal to reduce 20% our water consumption in our manufacturing facilities from a 2010 baseline.
Due to the recent uncertainty on RRPs impact, in 2016 and 2017 we set an interim target of average 1% reduction year on
year and to shift focus from general water savings approach in manufacturing and leaf to a focus on water scarce areas andto extend to our entire value chain.
Quantitative metric% reduction per unit of productionBaseline year
2010
Start year
2016
Target year2017
% achieved
100
Please explain
In 2017, we achieved a 1.4% average water reduction vs 2010 water intensity. The result is due to the different initiatives toreduce overall water consumption, increase water efficiency in process, utilities and landscaping. This result was also
impacted by the extended of our manufacturing centers scope to produce our new smoke-free products. The process to
manufacture our new smoke-free products required approximately four times more water per unit of product than forconventional cigarettes. Our efforts are geared towards improving water efficiency throughout that process by implementing
new process designs, reusing or recycling water, and by using rainwater harvesting where feasible, with a view to minimum
water discharge.
Target reference number
Target 2
Category of target
Community engagement
Level
Site/facility
Primary motivation
Risk mitigation
Description of target
In order to understand our factories local context and to engage with communities surrounding our factories regarding relativ ewater related issues we created a roadmap to assess and certify under the Alliance for Water Stewardship standard the ten
factories which ranked highest in our previous risk assessment by 2020 and to extend to the rest of our operations by 2030.
This is an important target because it promulgates the use of the AWS international standard for sustainable water use within
the organization. Reinforcing our commitment to a rigorous and data driven approach to evaluating water. Our AWS team andour 1,600 employees are fully engaged to ensure that our factory meets the AWS standard, including engaging with local

authorities, the farming community and civil society groups. After our first pilot in Brazil we plan to extend our efforts gl oballyand hope this commitment will inspire other companies in our value chain and beyond to take similar steps on water
stewardship
Quantitative metric
Other, please specify (Number of sites certified by AWS)
Baseline year
2010
Start year
2017
Target year
2020
% achieved
10
Please explain
We joined the Alliance for Water Stewardship (AWS) in 2017, a leading organization dedicated to better managing water
within the local watersheds. We successfully piloted the adoption of the AWS Standard in our factory in Brazil and developed
a toolbox for wider implementation. In March 2018, our factory became the first factory in the country to be certified by AWS.
Based on the results and learnings from this pilot, we will roll out the AWS Standard globally. As a priority, we plan to cer tify
the ten factories which ranked highest in our previous risk assessment by 2020 and to extend to the rest of our operations
until 2030.
Target reference number
Target 3
Category of target
Water pollution reduction
Level
Other, please specify (Tobacco Supply Chain)
Primary motivation
Reduced environmental impact
Description of target
PMI has targets to eliminate WHO Toxi1 pesticides by 2018 and other Highly Hazardous Pesticides (HHPs) as defined by
FAO/WHO guidelines by 2020. The level of hazard of a pesticide is an intrinsic toxico logical property. HHPs are pesticides

that are acknowledged to present particularly high levels of acute or chronic hazards to health or the environment according
to internationally accepted classification systems. As per the definition given in the Guidel ines on Highly Hazardous
Pesticides by FAO and WHO, a pesticide can be classified as an HHP if it meets one of the following criteria: highly acutetoxic (WHO Tox1), carcinogenic, mutagenic, toxic for reproduction or listed in Montreal protocol (ozone depl eting), Rotterdam(restricted or banned for health or environmental reasons) Stockholm convention (Persistent Organic Pollutants).
Quantitative metric% reduction in concentration of pollutants
Baseline year
2015
Start year
2015
Target year
2020
% achieved
87
Please explain
PMI is testing 100% of its tobacco purchased for pesticides residues. PMI is making important steps towards the eliminationof WHO Tox1 and other HHPs. In 2017, 99% of our tobacco purchase did not contain any WHO Tox1 and 87% free from
HHPs.

W8.1b
(W8.1b) Provide details of your water goal(s) that are monitored at the corporate level and the progress made.
Goal
Engagement with suppliers to help them improve water stewardship
Level
Basin level
Motivation
Water stewardship
Description of goal
As part of the local Alliance for Water Stewardship roll out we are performing in our factories, we want to engage with local
suppliers (tobacco suppliers, farmers or direct material suppliers) to promote the standard and exchange best practices. B y

2020, we plan to have 10 of our sites AWS certified and all our major sites by 2030. This is an important goal because it
promulgates the use of the AWS international standard for sustainable water use within the organization. Reinforcing ourcommitment to a rigorous and data driven approach to evaluating water. Our AWS team and our 1,600 employees are fully
engaged to ensure that our factory meets the AWS standard, including engaging with local authorities, the farming communityand civil society groups. We look forward to building on this success in Brazil to extend our efforts globally and hope thiscommitment will inspire other companies in our value chain and beyond to take similar steps on water stewardship.
Baseline year
2017
Start year
2017
End year
2030
Progress
In 2017, we piloted the adoption of the standard for water stewardship in our factory in Brazil, using the opportunity to lea rn
how such standards could also support our tobacco supply chain work. We engaged locally with a major tobacco supplier,visited different tobacco farms and informed about our plans to other local stakeholders in order to promote the standard.
Different pilots will be done in the next years and we will use the opportunity to promote water stewardship at local level . We
are measuring progress through the roll-out of these pilots, as well as, the best practices that emerge. Currently, we have justcompleted a pilot in Brazil and are working to scale up into several additional pilots.
Goal
Promotion of sustainable agriculture practices
Level
Basin level
Motivation
Risk mitigation
Description of goal
PMI expects suppliers to develop and implement a water conservation plan that aims at the rational use of water resources
and incorporates locally defined best available irrigation practices including efficient irrigation systems such as drip irrigation,
timing, and amount of water distributed, based on water use efficiency measurements. It must consider water recirculation
and reuse, maintenance of the water distribution network, and the minimization of water use. We operate in areas where we
assessed water scarcity and drought risks. One of the element of our strategy is the adoption by the farmers of irrigationpractices more efficient, reducing water withdrawal rates. The increasing number of farmers using drip irrigation has an
impact on reducing water withdrawal rates and is supporting the achievement of our risk mitigation objectives. We started
more than 10 years ago implementing GAP and water management practices; fo r example, based on the informationcollected in the water baseline studies conducted in 2017 we estimated that more than 40% of the tobacco purchased by PMI
in Italy is produced in field areas which have in place drip irrigation systems to reduce water us age, vs surface and/or
overhead irrigation practices, with a pick adoption rate of more than 80% in the north of Italy in Verona area; we target topossibly have 100% of the farmer using drip irrigation by 2030.
Baseline year
2007
Start year
2007
End year
2030
Progress
We continue to measure progress against this goal by the amount of farmers that we have using drip irrigation. We aremeasuring the effectiveness of the program in areas where we can track effectiveness of these programs over longer timeframes such as in Italy. In 2017, we estimated that more than 40% of the tobacco purchased by PMI in Italy is produced infield areas which have in place drip irrigation systems to reduce water usage, vs surface and/or overhead irrigation practice s,with a pick adoption rate of more than 80% in the north of Italy in Verona area; we target to possibly have 100% of the farmer
using drip irrigation by 2030.

W9. Linkages and trade-offs
W9.1(W9.1) Has your organization identified any linkages or tradeoffs between water and other environmental issues in
its direct operations and/or other parts of its value chain?
Yes

W9.1a
(W9.1a) Describe the linkages or tradeoffs and the related management policy or action.
Linkage or tradeoffLinkageType of linkage/tradeoff
Decreased energy use
Description of linkage/tradeoff
Energy is often required to drive water-consuming processes like humidification, refrigeration (e.g. water cooled towers) or
steam production. Improving the efficiency of processes and equipment supports the reduction of both water and energy
consumption. To facilitate this, our Energy Management Program (EMP) was developed to help achieve our CO2e reduction
target of 30% by 2020 compared to our 2010 baseline for our manufacturing affiliates. This program, although focusing onenergy, also delivers water savings. The management focus provided by the EMP provides a context for general resource
optimization. Based on this program, we have made improvements around the world including: Steam -system optimization or
reduction in Indonesia, Argentina, Poland, Switzerland, Canada, Germany, Lithuania, Russia, and Pakistan; Chiller -system
improvements in Indonesia, Kazakhstan, and Russia; and more efficient humidification in Turkey and Canada.
Policy or action
Examples of how the EMP have been applied include: Optimization of steam systems results in decreases in both energy andwater use; Installation of energy and water metering devices at all facilities allows a better understanding of water
consumption and allows targeted improvement actions; Development and use of a “Ready mode” on specific equipment hashelped to reduce the consumption of electricity, gas, steam and water.; Installation of new high efficiency chillers to impro veboth electricity and water consumption. For example, in our Indonesia factory, we upgraded our chilled water system andsaved energy, water, and money.
Linkage or tradeoff
LinkageType of linkage/tradeoff
Other, please specify (Increase tobacco crop yield)
Description of linkage/tradeoff
Future scenarios of increasing population and climate change pose additional focus on soil and water sustainable
management and farmer productivity gains have a key role to play. PMI launched Good Agricultural Practices (GAP) in 2002,
which promotes practices to improve farmers’ yields and crop quality. Yield improvements is linked to a reduction ingreenhouse gases and water withdrawn while improving farmer income and the access to land for food crops, helping
strengthen food security and nutrition. Through the adoption of GAP, over the last 8 years, we estimate an yearly average
yield increase (kilos per hectare) of around 2.5% (based on internal data collected in PMI sourcing countries). The increased

productivity per hectare can be used as a proxy to estimate around 2.5% net reduction per year in terms of land cropped to
grow tobacco to fulfill PMI requirements as well a decrease in water usage and other crop inputs.
Policy or action
PMI is committed to the sustainable production of tobacco in conditions that limit as much as possible the impact on thenatural environment, and that improve the socioeconomic circumstances of the people and communities involved in its
production. PMI, via the Global Agricultural Practices (GAP) program, focu ses actions to enable tobacco farmers to haveaccess to the information, systems and tools needed to be successful business owners who minimize the environmental
impacts of their activities, builds a sustainable supply chain in the long term, and aims to c reate a positive impact on
livelihood of local farming communities; this entails management of their water risks such as water access and sufficientavailability for sustainable development. Working with our suppliers and farmers to understand and better m anage their water
risks will create a more resilient supply chain. We regularly review Climate Change elements impacting tobacco growing
areas in order to adapt GAP implementation, with the aim to further increase yield while minimizing impact on theenvironment; as an example we actively research drought and flood tolerant tobacco seed varieties.

W10. Verification
W10.1(W10.1) Do you verify any other water information reported in your CDP disclosure (not already covered by W5.1d)?
No, we do not currently verify any other water information reported in our CDP disclosure

W11. Sign off
W-FI(W-FI) Use this field to provide any additional information or context that you feel is relevant to your organization's
response. Please note that this field is optional and is not scored.

W11.1(W11.1) Provide details for the person that has signed off (approved) your CDP water response.
Row 1

Job title

Corresponding job category

Andre Calantzopoulos, Chief Executive Officer (CEO)

Chief Executive Officer (CEO)W11.2(W11.2) Please indicate whether your organization agrees for CDP to transfer your publicly disclosed data on yourimpact and risk response strategies to the CEO Water Mandate’s Water Action Hub [applies only to W2.1a (response
to impacts), W4.2 and W4.2a (response to risks)].
Yes