Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

Welcome to your CDP Water Security Questionnaire
2020
W0. Introduction
W0.1(W0.1) Give a general description of and introduction to your organization.
Philip Morris International Inc. (PMI) is a leading international tobacco company. PMI has its
executive headquarters in New York, US, has its primary listing on the New York Stock
Exchange (NYSE: PM), and has its Operations Center in Lausanne, Switzerland.
PMI manufactures and sells cigarettes, smoke-free products and associated electronic devices
and accessories, and other nicotine-containing products in markets outside of the U.S. We
have a wide range of cigarette brands, including the world’s best-selling international cigarette
Marlboro. Our smoke-free product portfolio includes heat-not-burn and nicotine-containing
vapor products. In 2019, PMI net revenues amounted to $ 29.8 billion excluding excise taxes
on products worth $50.2 billion, on a like-for-like basis; 18.7% of PMI’s net revenues in 2019
related to the sale of smoke-free products. PMI’s 2019 total shipment volume for cigarette andheated tobacco units was 766.4 billion (706.7 billion cigarettes and 59.7 billion heated tobacco
units).
We are building our future on smoke-free products that are a much better consumer choicethan continuing to smoke cigarettes. Our vision is that these products ultimately replacecigarettes to the benefit of adult smokers, society, our company and our shareholders. This
ambition is at the very core of our corporate strategy and sits atop our sustainability priorities.
For PMI, sustainability means creating long term value while minimizing the negative
externalities associated with our products, operations and value chain. We are committed toaddress the impact on the communities and the environment across our value chain. We havea global footprint: as of December 31, 2019, PMI had a workforce of around 73,500 people
worldwide and operated 38 production facilities globally. In 2019, our tobacco was sourced
from over 335,000 contracted farmers across 24 countries, and our products were sold in over
180 markets.
To help us prioritize our focus and resources in areas where we can have the greatest impact,
we refreshed our sustainability materiality analysis in 2019. Climate protection, littering
prevention and product eco-design and circularity are tier 1 environmental topics that areprioritized in our sustainability strategy.
Engagement beyond our own operations is key, as this is where the most significant
sustainability impacts occur, especially when it comes to climate change and carbon emissions.
Our business has a significant, global supply chain organized by five main categories:
1. Agricultural products: ranging from tobacco growers to producers of other agricultural
products, such as clove, menthol and guar gum.
2. Direct materials used to produce cigarettes and other tobacco products, such as acetate tow(for cigarette filters) and paper (both cigarette paper and for packaging materials).

1Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

3.Machines for our cigarette and heated tobacco products factories, a highly specialized
industry.
4. Electronic devices for heated tobacco and vapor products.
5. Goods and services that are not specific to the tobacco business, but essential for any
business, such as office equipment etc.
As a responsible business, we want to understand and continuously address potential
sustainability issues in our global supply chain. We are working with business partners toproactively identify, manage, and reduce risks, and create shared value.
The description above is a summary and is qualified in its entirety by reference to the full text of
PMI’s Annual Report on Form 10-K for the year ended 2019 filed with the U.S. Securities andExchange Commission, and the full text of PMI’s Integrated Report 2019
Remarks for this disclosure:- In this submission, “PMI,” “we,” “us” and “our” refer to Philip Morris International Inc. and its
subsidiaries;- In this submission, we reference information reported in the 2020 Proxy Statement dated
March 26th, 2020;10-K filed February 7th, 2020 with the SEC; and PMI’s Integrated Report2019;- Trademarks and service marks in this submission are the registered property of, or licensed
by, the subsidiaries of Philip Morris International Inc;
-Expectations, aspirational targets and goals set forth in this submission do not constitutefinancial projections;- Smoke-Free Products or Reduced-Risk Products (RRPs) - the terms PMI uses to refer toproducts that present, are likely to present, or have the potential to present less risk of harm tosmokers who switch to these products versus continued smoking. PMI has a range of RRPs invarious stages of development, scientific assessment and commercialization;- Materiality: In this submission and in related communications, the terms “materiality,”“material” and similar terms, when used in the context of economic, environmental, and social
topics, are defined in the referenced sustainability standards, and are not meant to correspondto the concept of materiality under the U.S. securities laws and/or disclosures required by the
US Securities and Exchange Commission.

W-FB0.1a(W-FB0.1a) Which activities in the food, beverage, and tobacco sector does yourorganization 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, 2019

December 31, 20192

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

W0.3
(W0.3) Select the countries/areas for which you will be supplying data.
Argentina
BrazilCanadaChina
Colombia
Costa Rica
Czechia
Dominican Republic
EcuadorGermany
GreeceIndia
Indonesia
Italy
JordanKazakhstan
LebanonLithuania
MalawiMalaysia
MexicoMozambique
Netherlands
North Macedonia
Pakistan
Philippines
PolandPortugal
Republic of Korea
Romania
Russian Federation
SenegalSerbiaSouth Africa
Spain
Switzerland
TurkeyUkraineUnited States of America
Venezuela (Bolivarian Republic of)3

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

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 which water 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, orother exclusions from your disclosure?
Yes

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

Please explain

Offices andsome minor
facilities.

We have excluded offices and minor activities/facilities such as finished goods
warehouses for which our water footprint is marginal. These exclusions are notsignificant to this disclosure as we estimate that all the sites together represent lessthan 2% of our overall blue water usage based on a water footprint screening
performed in collaboration with an external consultant.

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.
Direct use
importance
rating
Sufficient
Importantamounts of goodquality freshwater
available for use

Indirect use
importance
ratingPlease explain

ImportantAccording to a study we conducted in 2017-2018,
our agricultural supply chain, our other directmaterials supply chain and our manufacturing
represent respectively 53%, 41% and 6% of ourwater footprint (offices and finished goods
warehouses excluded). As PMI relies on theavailability of sufficient good quality freshwater for
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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

the production of its raw materials, and the
manufacturing of its products, we have chosen an
importance rating of “important” both for direct andindirect operations.
Indirect: Water is used in PMI’s supply chain togrow raw materials. PMI's most critical suppliers interms of water risks are tobacco growers, paperand cellulose acetate based material suppliers.
More than half of our purchased tobacco crops
are rainfed, the rest require irrigation. PMI expects
its indirect dependency on water to decrease in
the future. This will be achieved throughcollaborations with our suppliers to promote ourGood Agricultural Practices (GAP) andResponsible Sourcing Principles (RSP) programs
to optimize the use of freshwater resources.
Direct: At our manufacturing sites, high quality
freshwater is used for WASH (Water Access
Sanitation and Hygiene) services, landscapewatering, and for manufacturing processes
including the preparation of flavors, liquid
products, in several stages of the tobacco
processing, among others. Good quality fresh
water is also an ingredient in the manufacturing
process of our RRP products which are expected
to have an increased importance in PMI’s strategy
in the future. PMI expects its direct dependency
on water to increase in the short to medium term
(up to 5 years) , as we are transitioning toward
RRP products which are more water-intensive intheir manufacturing processes. To reduce water
dependency in the long term, PMI is implementing
at its manufacturing facilities technologies torecycle and reuse water such as reverse osmosisand electrode ionization, and efficiency initiatives.
Sufficientamounts ofrecycled,
brackish and/or
produced water
available for use

Important

Important

Direct: The process to manufacture our RRP
requires approximately four to five times morewater per unit of product than conventional
cigarettes. Our efforts are geared towards
improving water efficiency throughout the processby implementing technologies to recycle andreuse water, and using rainwater harvesting forlandscape watering. We use recycled water for5

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

example in processing related to cooling, cooling
towers, boilers, equipment cleaning, and also forlandscape irrigation. For this reason, we have
rated the importance of recycled water asimportant. At our manufacturing sites, water isrecycled in our waste water treatment plants andused for watering gardens, equipment cleaning
and for some production processes where
technically possible. PMI expects its dependency
on recycled water to have a slight increase in the
future. This is related to the expected water needs
that PMI will face when transitioning to RRP,
which are more water intensive.
Indirect: tobacco and other direct material
suppliers like paper or cellulose acetate use every
opportunity to treat and use recycled or brackish
water as part of their processes, which might
include secondary uses of water such as forcleaning and maintenance of equipment,
operation of equipment, and others depending on
the local context. Reducing freshwater withdrawn
by using recycled water improves our direct andsupply chain resilience to water scarcity andincreases water availability for surrounding
communities, therefore, we have given them arating of important. Water recycling is gaining
importance among our suppliers and we expect
this trend to continue increasing in the future. Thisis linked to increasing water risks faced by This islinked to increasing water risks faced by suppliers,
who have to mitigate them through increased
efficiency in the use of water resources.

W-FB1.1a(W-FB1.1a) Which water-intensive agricultural commodities that your organization
produces and/or sources are the most significant to your business by revenue?
Select up to five.
Agriculturalcommodities% of revenue
Produceddependent on
and/orthese agricultural sourced
commodities

Please explain

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

TobaccoMore than 80%

Sourced100% of PMI heated tobacco units, cigarettes andother nicotine-containing products require
tobacco. We purchase tobacco leaf of various
types, grades and styles throughout the world. In
2019 our purchases came from around 335,000
farmers directly contracted either by us or by ourthird-party leaf suppliers in 24 countries. We
contracted farmers directly in several countries,
including Argentina, Brazil, Italy, Pakistan, thePhilippines and Poland. Some of our main
tobacco sourcing countries are Argentina, Brazil,
China, Italy, Indonesia (mostly for domestic use in
kretek products), Malawi, Mozambique,
Philippines, Turkey and the United States.
In 2019, PMI continued to assess water risks
associated with its value chain, as well as togather water intensity data from the production ofits key commodities such as tobacco.

W1.2(W1.2) Across all your operations, what proportion of the following water aspects are
regularly measured and monitored?
% ofPlease explainsites/facilities/operations
Water withdrawals –total volumes

100%

100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites. Flow meters are used as methodology
to measure continuously volumes of water
withdrawals by source and origin in all our sites.
100% of our factories are assessed against
ISO14001 requirements, helping our sites todemonstrate compliance with current and future
statutory and regulatory requirements
associated with water withdrawals. Monthly
water aggregated data from all sites is enteredinto our EHS data management system,
checked quarterly and audited annually by SGS
during onsite verification.
We have also become a member of the Alliancefor Water Stewardship to better understand how
to conserve the watersheds where we operate,and six factories have been already certified

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

against the AWS Standard by the end of 2019.
We have committed to certify at least 11
facilities by 2020 and all facilities by 2025.
Water withdrawals –volumes by source100%

We monitor 100% of our factories for this water
aspect and this is part of usual facility
management for our sites. Flow meters areused to measure continuously volumes of water
withdrawals by source and origin in all our sites.
100% of our factories are assessed against
ISO14001 requirements, helping them todemonstrate compliance with current and future
statutory and regulatory requirements
associated with water withdrawals. Monthly
aggregated water data from all sites is enteredinto our EHS data management system,
checked quarterly and verified by a third party
annually.
Our water stressed factories have been
identified through our recent water risk
assessment based on the WRI Aqueduct tool.
We have also become a member of the Alliancefor Water Stewardship to better understand how
to conserve the watersheds where we operate,
and 6 factories have been already certified
against this Standard. We have committed tocertify at least 11 facilities by 2020 and all
facilities by 2025.

Water withdrawals
quality100%

In all our factories where water is sourced via
the municipal provider, we monitor the quality
via the provider's analyses, with the exemptionof the RRP factories where we perform
additional analyses due to product quality
reasons. In all the cases we withdraw waterfrom wells, fresh water sources or in case westore water in water tanks, we monitored closely(up to 3 times a month). We collect up to 30
parameters like hardness, conductivity, metals,
suspended solids, Coliforms, pH, salinity,
temperature, and chlorine. Most of the analyses
are taking place in external accredited
laboratories, though we also measure inhousesome parameters like pH).
We have also become a member of the Alliancefor Water Stewardship to better understand how
to conserve the watersheds where we operate,

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

and 6 factories have been already certified
against this Standard. We have committed tocertify at least 11 facilities by 2020 and all
facilities by 2025.
Water discharges –total volumes

100%

100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites. PMI uses flow meters to measurecontinuously discharges volumes in almost halfof its sites, and calculates the rest based on
consumption values. 100% 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 aggregated data from all sites isentered into our EHS data management system,
checked quarterly and verified by a third party
annually. We have also become a member ofthe Alliance for Water Stewardship to better
understand how to conserve the watersheds
where we operate, and 6 factories have been
already certified against this Standard. We havecommitted to certify at least 11 facilities by 2020
and all facilities by 2025.

Water discharges –volumes bydestination

100%

100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites. PMI uses flow meters to continuously
measure discharges and identify volumes bydestination in almost half of its sites, andmeasures the rest based on consumption
values. 100% of our factories are assessedagainst ISO14001 requirements, helping oursites to demonstrate compliance with current
and future statutory and regulatory requirements
associated with water discharges. Monthly water
aggregated data from all sites is entered into
our EHS data management system, checked
quarterly and verified by a third party annually.
We have also become a member of the Alliancefor Water Stewardship to better understand how
to conserve the watersheds where we operate,
and 6 factories have been already certified
against this Standard. We have committed to9Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

certify at least 11 facilities by 2020 and all
facilities by 2025.
Water discharges –100%volumes by treatment
method100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites PMI uses flow meters to continuously
measure discharges and identify volumes bydestination in almost half of its sites, andcalculates the rest based on consumption
values. 100% of our factories are assessedagainst ISO14001 requirements, helping oursites to demonstrate compliance with current
and future statutory and regulatory requirements
associated with water discharges. Monthly water
aggregated data from all sites is entered into
our EHS data management system, checked
quarterly and verified by a third party annually.
We have also become a member of the Alliancefor Water Stewardship to better understand how
to conserve the watersheds where we operate,
and 6 factories have been already certified
against this Standard. We have committed tocertify at least 11 facilities by 2020 and all
facilities by 2025.

Water discharge
quality – by standard
effluent parameters

100% of our factories are monitored for thiswater aspect and this is considered part of usual
facility management for our sites. We do
sampling following recognized sampling
protocols and laboratory analysis in internal, but
mostly in external accredited labs, to measure
standard effluent parameters. 100% of ourfactories are assessed against ISO14001
requirements, helping our sites to demonstratecompliance with current and future statutory andregulatory requirements associated with water
discharges. BOD, COD, pH, temperature andchlorides are some of the parameters typicallycontrolled. The frequency of analyses and theparameters are according to the per local
regulatory requirements, and recognizedmethods. For example, in Italy, in our RRP
factory we measure a set of 11 parameters atleast once per month.
As part of our water strategy, we will
progressively increase the number of

100%

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

parameters controlled and on-line
measurements at all of our sites.
Water discharge
100%
quality – temperature

As part of our ISO14001 system, we ensure thatthe wastewater temperature is adequate to thereceptor requirements, and to achieve andmonitor this in all our sites we follow the mostadequate methods.
In the sites where wastewater is treated onsite
and discharged in natural receptors like surface
or underground water / soil, or in case the local
regulatory framework requires, we measure thetemperature in the various treatment stages aswell as in the final treated wastewater tanks with
online or offline thermometers, at least on anannual basis.
In the remaining sites, we calculate the effluent
temperature based on the process watertemperature and volume, and this is in line withthe temperatures measured on the sites withinstalled online meters. We ensure that thisparameter is controlled annually.
Our process water temperature is the sameacross our factories and has not changed over
the years, and our effluent wastewatertemperatures are similar to the civil wastewater.

Water consumption – 100%
total volume

100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites. The volume is calculated based on thewithdrawal and discharges. 100% of ourfactories are assessed against ISO14001
requirements, helping our sites to demonstratecompliance with current and future statutory andregulatory requirements associated with water
consumption. Monthly water aggregated datafrom all sites is entered into our EHS data
management system, checked quarterly andverified by a third party annually.

Water
recycled/reused

100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites. We use flow meters to continuously
measure the volumes, at the end of thetreatment process in our facilities, prior to being
reused. 100% of our factories are assessed

100%

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

against ISO14001 requirements, helping oursites to demonstrate compliance with current
and future statutory and regulatory requirements
associated with water recycle/reuse. Monthly
water aggregated data from all sites is enteredinto our EHS data management system,
checked quarterly and verified by a third party
annually. Optimizing our osmosis water
treatment plants and reusing rejected water are
examples of initiatives implemented to reusewater in our factories.
The provision of fully- 100%
functioning, safely
managed WASH
services to all
workers

100% of our operational (i.e. factory) sites aremonitored for this water aspect and this isconsidered part of usual facility management forour sites, with measurement being carried out
and validated through ISO14001 andOHSAS18001 standard in 100% of the sites.
We use global reporting requirements for water
data with a central data collection system for allsites. WASH services in all PMI sites is aminimum PMI requirement, it is integrated into
our occupational health and safety management
system, according to OHSAS standard and it ismonitored and controlled through internal,
corporate and third-party audits. Each site is
being audited against WASH requirements atleast annually.

W1.2b(W1.2b) What are the total volumes of water withdrawn, discharged, and consumed
across all your operations, and how do these volumes compare to the previous
reporting year?

Total
withdrawals

VolumeComparison(megaliters/year) with previous
reporting year

Please explain

4,009

In 2019, total withdrawals decreased by 8% vs.
2018. The decrease was due to the watersaving and water recycling initiatives despite theincremental production of our reduced risk
products (RRP) which require approximately 4
to 5 times more water per unit of product thanfor conventional cigarettes.
In 2019, PMI implemented several initiatives in
the frame of its “Drive for Zero” program, which

Lower

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

aims to reduce process losses, including water
use and increase water recovery; thesemeasures helped us achieve a decrease on our
average water withdrawals from 5.14 m3 in2018 to 4.74m³ of water for every million units ofproduct equivalent produced In the medium
term, PMI expects decreases in water
withdrawals, as we continue to improve theefficiency of manufacturing process for RRP
products and to implement our water recycling
and reusing strategy. PMI is expecting RRP
demand and production to grow over time,
which could lead to long-term slow increments
in our water withdrawal volumes. Still, thisincreased water withdrawal demand is expected
to be significantly less due to theimplementation of our water management
strategy.
As an example of our progress, our smoke-free
products factory in Bologna, Italy, improved its
water efficiency rate by 18 percent in 2019
versus the previous year. Several water-saving
initiatives contributed to this, including thepurification of 128,000 cubic meters (equivalent
to 50 Olympic-size swimming pools) of treatedwastewater with reverse osmosis for reuse incooling processes and steam production. This
increase in water efficiency led to reduction inwater withdrawals.
Totaldischarges

2,125

Lower

In 2019, our total discharges decreased by 12%
from 2,413 megaliters in 2018. Most of thedecrease was due to the new reusing andrecycling technologies applied to our new
reduced risk product factory (RRP) factories;
these measures helped us achieve a decreaseon our average water discharges from 2.84 m3
in 2018 to 2.51 m³ of water for every million
units of product equivalent produced. The
process to manufacture our reduced risk
products (RRP) requires approximately 4 to 5
times more water per unit of product than forconventional cigarettes.
To mitigate these impacts, our efforts are
geared towards improving water efficiency
throughout the process by implementing new13

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

process designs, reusing or recycling water,using rainwater harvesting and improving Waste
Treatment Plan efficiency.
We expect medium term (1-5 years) decreases
in discharge as we continue to improve theefficiency of manufacturing process for RRP
products and to implement our water recycling
and reusing strategy. PMI is expecting RRP
demand and production to grow over time,
which could lead to long-term slow increments
in our water discharge volumes.
Total
1,884
consumption

Lower

In 2019 our total consumption decreased by 4%
from 1958 megaliters in 2018. The decrease
was due to the water saving and water recycling
initiatives despite the incremental production of
our reduced risk products (RRP) which requireapproximately 4 to 5 times more water per unitof product than for conventional cigarettes.
In 2019, PMI implemented several initiatives toreduce water use and increase water recovery
and also to reduce losses; though this our water
consumption decreased from 2.30 m3 in 2018 to
2.23m³ of water for every million units produced.
We expect the RRP demand and thus
production to grow over time, and we will
mitigate these impacts, with our efforts geared
towards improving water efficiency throughout
the process by implementing new process
designs, reusing, recycling water and using
rainwater harvesting. In the medium term, PMI
expects decreases in water consumption, as we
continue to improve the efficiency of the
manufacturing process for RRP products and to
implement our water recycling and reusing
strategy. PMI is expecting RRP demand andproduction to grow over time, which could leadto long-term slow increments in our water
consumption volumes. Still, this increased water
consumption demand is expected to besignificantly less due to the implementation of
our water management strategy.

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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W1.2d
(W1.2d) Indicate whether water is withdrawn from areas with water stress and provide
the proportion.
Withdrawals
are from
areas withwater stress
Row Yes1%
withdrawn
from areas
with water
stressComparison Identification Please explain
with previous tool
reporting
year

51-75

HigherWRI
Aqueduct

PMI uses the WRI Aqueduct
tool to identify factories that arelocated in geographies facing
water stress. The analysis iscarried out annually and is
focused on those indicators
related to physical risks (quality
and quantity), future waterconditions and WASH, as theserisks are the most relevant for
PMI’s direct operations. Results
are used by PMI to monitor thetrend of water withdrawals ineach geography, and to identify
key factories where to
implement water efficiency
interventions.
Using the WRI Aqueduct toolwith each factory’s GPS
coordinates, we were able todetect those sites where thebaseline water stress is equal
to/greater than high 40 - 80%.
Then we calculated the total
amount of water withdrawn fromthose factories vs total
withdraws. Based on this study,
54% of our direct factory water
withdrawals are from water
stressed areas in 2019 vs. 30%
in 2018. We perform this study
annually to make sure that we
maintain our focus on water
stressed factories. Water
withdrawals increase is due to15

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020the higher production of our
reduced risk products (RRP)
which require around 4 to 5
times more water than ourconventional cigarettes. In
addition, the water stressed
areas unfortunately are
expanding, reaching regions
where in the past didn’t sufferfrom baseline water stress.
This impact has been partially
offset by programs that havebeen implemented in ourfacilities located in water
stressed areas to reduce ourwater consumption.
Our efforts are geared towards
improving water efficiency
throughout the process byimplementing new process
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 areas with water stress?
Agriculturalcommodities

The proportionof thiscommodity
produced inareas with water
stress is known

The proportionof thiscommodity
sourced fromareas with water
stress is known

Please explain

TobaccoNot applicableYes

We do not grow tobacco ; we source it as
raw material to manufacture our products.
To identify water stressed areas we use the
WRI Aqueduct tool and we calculate thetobacco volume grown in the areas with an
overall physical water risk scoring above 3.
We replicate the global assessment at the
local level with specific field visits to validate
the methodology on the ground with the help

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020of a technical advisor. After rolling out theassessment in eight geographies in 2018,
we extended the scope of the assessment in2019 to Canada, India, Mexico,
Mozambique, North Macedonia, Philippines
and Turkey. This has allowed us to further
improve our knowledge about local
conditions faced by farmers and suppliers in
the tobacco growing areas where they
operate. Studies will continue through 2020
to further understand local risks including
water stress risk and build best practices.
In 2017-2018, we conducted a water
footprint study showing that 53% is due toour agricultural supply chain, 41% to otherdirect materials supply chain, and 6% to ourmanufacturing processes (offices andwarehouses excluded). In 2017, waterbaseline studies were conducted in 60
different tobacco growing areas,
representing 90% of our tobacco leaf
purchases and we aggregate the data in abaseline database to analyse our tobacco
leaf water footprint. In 2019 we havecontinued the monitoring effort on ourconsolidated 140 tobacco growing areas
covering the entire global scope of ourtobacco supply chain.

W-FB1.2g(W-FB1.2g) What proportion of the sourced agricultural commodities reported in WFB1.1a originate from areas with water stress?
Agriculturalcommodities% of total
Please explain
agriculturalcommodity
sourced from areas
with water stress

Tobacco11-25

The percentage of total tobacco sourced from water stressed
areas increased by 6% compared to the previous year. Thisis actually due to improvements in PMI’s data collection andrisk assessment process, which cover a wider scope of
farmers and countries.
The production of RRP requires less tobacco compared to17Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

cigarettes. As PMI transitions to RRPs, we expect a reduced
demand for tobacco per unit of product. We plan to use datafrom our water risk assessments to inform our decision
making process to progressively reduce the percentage oftobacco sourced from water stressed areas by allocating
RRP tobacco volumes to less water stressed origins or to
origins where this risk is effectively managed throughinterventions.
PMI uses this metric internally to identify priority areas for
supplier engagement, initially to inform its sourcing strategy,
inform our risk assessment processes and develop supplierspecific projects to address water risks. For example, as partof PMI’s effort to reduce impacts from agriculture in water
stressed areas, we developed a specific approach toevaluate water stress at local level with our suppliers; theresults of the analysis triggers active collaboration with our
suppliers on water efficiency measures such as drip irrigation
systems and others. These interventions are particularly
focused on farmers in water stressed areas who are stillrelying on inefficient irrigation practices such as flood
irrigation.

W1.2h(W1.2h) Provide total water withdrawal data by source.

Fresh surface water,
including rainwater,water from wetlands,
rivers, and lakes

Relevance Volume
Comparison(megaliters/year) withprevious
reportingyear

Please explain

Relevant

Even if fresh surface water isglobally less than 1% of our
total withdrawals, weconsider it relevant at local
level since, wheneverpossible, we use it to reducewater sourced frommunicipal water. In 2019,
fresh surface water
withdrawals increased by
6.07 megaliters vs. 2018,
due to the implementation ofvarious projects. In

25.77

Higher18

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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Switzerland a project to use
lake water for steam boilers
cooling increased fresh
water use by 2.46 megaliters
vs. 2018. We increased therainwater catch, in Argentina
and Brazil, in total 3.61
megaliters vs. 2018. Bysourcing fresh surface water
untreated and treating it inhouse (with natural means –filtering process and UVtreatment), we reduce theuse of drinkable water fromthe municipality and we do
not compete with othercatchment users likehouseholds.
We expect this source toincrease slightly in the next 1
to 5 years based onlearnings from the AWS
certification and theimplementation of water
harvesting and water pumptechnologies where feasible.
Brackish surface
water/SeawaterNot
relevant

We currently neither use
brackish surface water nor
seawater and we do not
anticipate to use it in the next
3 to 5 years. We indeed
require higher quality waterfor our operations. This isbecause we use mainly
water for WASH facilities,
landscape watering, and theutilities process. Currently, athird of our factories are
reusing treated wastewater,e.g. in Senegal where
treated domestic wastewater
is used in sanitation andhygiene services.
We plan to increase these19Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

initiatives in the mid-term (1to 5 years ) as we continue
to innovate and increase
quality of treated wastewater
so it can be reused and allow
PMI to continue operating
without the use of brackishsurface water/ seawater.
Groundwater –renewable

Relevant

1,400.38

Lower

Renewable groundwater isrelevant to PMI’s operations
as it represents the second
largest source of water forthe company’s direct
operations. Inlet water iscurrently supplied from two
main sources: urban network(64%) of municipalities or
private suppliers; andgroundwater renewablesources (35%) from wells
and aquifers, which aremetered and verified
annually by external
auditors.
In 2019, 1,400 megaliters
were withdrawn fromgroundwater sources
compared to the 1,616 in
2018. The decrease was due
to increase of the shares ofthe fresh surface water
sources, as well as thedecrease of the total
withdrawals and the increaseof recycled water

Groundwater – nonrenewableNot
relevant

We do not currently use nonrenewable groundwater and
we do not anticipate to use it
over the next 3 to 5 years.
PMI meets its groundwater
demands throughwithdrawals of renewable

20

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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groundwater and otherrenewable sources. This isbecause we use the majorityof our water for WASH
facilities, landscapewatering, and the utilities
process. Currently, a third of
our factories are reusing
treated wastewater, e.g. in
Senegal where treateddomestic wastewater is used
in toilets.
We plan to increase these
initiatives in the mid-term (1to 5 years) as we continue
to innovate and increase
quality of treated wastewater
so it can be reused and allow
PMI to continue operating
without the use ofgroundwater non-renewable.
Produced/Entrained
water

Not
relevant

We do not currently use
produced or entrained water
and we do not anticipate touse it over the next 3 to 5
years. . We indeed require
higher quality water which
can be used onsite. This isbecause we use the majorityof our water for WASH
facilities, landscapewatering, and the utilities
process. Currently, a third of
our factories are reusing
treated wastewater, e.g. in
Senegal where treateddomestic wastewater is used
in toilets.
We plan to increase these
initiatives in years to comeas we continue to innovate
and increase quality of21

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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treated wastewater so it canbe reused and allow PMI tocontinue operating without
the use of produced or
entrained water.
Third party sources

Relevant

2,582.91

Lower

3rd party sources represent
PMI’s main source of water.
As the company depends on
significant amounts of highquality freshwater, thissource of water isconsidered relevant. Water
required for production in ourfactories is currently sourced
from urban network (64%) ofmunicipalities or private
suppliers and groundwater
wells (35%) which aremetered and verified
annually by external
auditors.
In 2019, 2,583 megaliters
were sourced from third
party sources, 6% less than2018. The decrease was dueto the efficiency andreduction initiatives
implemented in our factories,
despite the incremental
production of our reduced
risk products (RRP) which
require approximately 4 to 5
times more water per unit ofproduct than for conventional
products.
The expansion of RRP
production may increase
withdrawn volumes fromthird party sources in the
mid-term (1 to 5 years). We
are implementing newtechnologies to recycle andreuse water to limit the22

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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increase in water withdrawal.

W1.2i(W1.2i) Provide total water discharge data by destination.
Relevance Volume
Comparison Please explain(megaliters/year) with previous
reportingyear
Fresh surface
water

Relevant

BrackishNotsurfacerelevant
water/seawater

458.3

Lower

Discharges to fresh surface water
are relevant because they are asignificant amount of PMI’s total
water discharges, and we have tocomply with regulation, including
water discharges related ones, inall countries where we operate.
We discharge around 22% oftreated wastewater into surface
water disposal. Wastewater istreated both in public and in onsite water treatment plants before
being discharged into surface
water. In 2019, we discharged 458
megaliters into surface water, a
19% decrease vs. 567 megaliters
in 2018. This decrease was due tothe increase of the implementationof new technologies to recycle andreuse water, that resulted in a
34% increase in recycling volumes
compared to 2018.
We currently neither discharge tobrackish surface water nor toseawater and we do not anticipate
this to change in the next 3 to 5
years, therefore this water
destination is considered to be not
relevant. Our operations are not
located near brackish surface
water or seawater locations.
Onsite audits conducted by ourthird-party auditor did not reveal
any brackish surface water orseawater discharge. We do not23Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020

foresee any discharge to brackishsurface or seawater in the next 1
to 5 years.
To validate our numbers, PMI'ssites are audited annually by SGS
and factory visits are part of theonsite verification. This year, SGS
assessed Indonesia, Korea,
Lithuania, Romania and Russia.
Based on the desktop review andsite visits, they have not foundbrackish surface water orseawater discharges.
Groundwater

Relevant

281.58Higher

Discharges to groundwater are
relevant because they represent asignificant amount of PMI’s total
water discharges. PMI’s overall
wastewater discharge to groundwater destination is 13%.
Wastewater is equally treatedbetween public and onsite
wastewater treatment plants.
In 2019, groundwater discharges
increased by 25% from 226
megaliters in 2018. The main
reason for this increase is theconversion of our factories in
Greece and Romania to RRP
products production. These
factories discharge the treatedwastewater in groundwater, andboth of these factories haveincreased their discharges morethan double vs. 2018.
The increase in reduced risk
products (RRP) production, which
require more water thanconventional products, may also
rise discharge volumes in the midterm (1 to 5 years). PMI willcontinue to implement newtechnologies to recycle and reusewater to limit the increase in24

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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discharge volumes.
Third-party
destinations

Relevant

1,385.32

About thesame

Discharges to third-party
destinations are relevant because
they represent the largest share of
PMI’s total water discharges.
Moreover, PMI has to comply withregulation in all countries where it
operates, including that related towater discharges.
In 2019, third-party discharges
decreased by 14% from 1,620.11
megaliters in 2018 due mainly tothe incorporation of new designs,
reusing or recycling water to limit
the increase in groundwater
discharge in our factories that
resulted in a 34% increase inrecycling volumes compared to
2018.
The increase in reduced risk
products (RRP) production, which
require more water thanconventional products, may also
rise discharge volumes in midterm (1 to 5 years). PMI willcontinue to implement newtechnologies to recycle and reusewater to limit the increase indischarge volumes.

W-FB1.3(W-FB1.3) Do you collect/calculate water intensity for each commodity reported inquestion W-FB1.1a?
Agricultural Water intensitycommodities information for thisproduced commodity
is collected/calculated

Water intensity
Please explain
information for thissourced commodity iscollected/calculated

TobaccoYes

Not applicable

We source tobacco as raw
material to manufacture our
products. Water intensity is25

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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calculated by dividing the total
quantity of water (m3) used for
irrigation by tobacco farmers
supplying tobacco to PMI by
total tobacco volume (ton)sourced. The data collection
focuses on water consumption
at the farm specificallyrequesting cubic meters ofwater use per cultivation stage
and it is managed through a
global survey covering theentire geographical scope of ourtobacco sourcing. Water use
has been estimated; recording
the water used during seedbed,
transplanting and field stages,
and considering the irrigation
systems used. Both irrigatedand rainfed origins are covered,with the latter contributing
marginally with water
consumption for seedbed andtransplanting. For 2019 we haveincreased the granularity of thecollected information including amore precise segmentation of
growing areas within markets.

W-FB1.3b(W-FB1.3b) Provide water intensity information for each of the agriculturalcommodities identified in W-FB1.3 that you source.

Agricultural commodities
TobaccoWater intensity value (m3)330

Numerator: Water aspect
Freshwater withdrawals

Denominator
Tons

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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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Comparison with previous reporting year
HigherPlease explain
Water intensity increased by 24% vs 2018 due to more refined data collection andincreased focus in developing a more precise segmentation of growing areas where
irrigation plays an important role, such as water stress level and water consumption
needs.
Water intensity data is used by PMI to inform its Good Agricultural Practices (GAP), andto establish a water intensity baseline for tobacco production, within the development ofcontext based water targets.
PMI’s strategy is based on the optimization of agricultural water footprint by tacklingwater issues in the watersheds we source tobacco from. PMI supports suppliers to
improve their efficiency by implementing water conservation plans and incorporating
locally available best irrigation practices. PMI monitors water stress contribution fromtobacco growing and outcomes of water stewardship initiatives in a given production
area and expects water use trends to decrease, as suppliers continue to implement
recommendations from GAP.

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
76-100

Rationale for this coverage
Through our use of Life Cycle Assessments (LCA), water stress estimation, and water
footprints, we have identified our agricultural supply chain as currently having our largest
potential environmental impact. As tobacco farming represent 53% of PMI’s water
footprint, it is key that we focus on gathering water related information from tobacco
farmers. We have therefore prioritized engagement with leaf suppliers through our Good
Agricultural Practices (GAP) program across 24 countries. Our tobacco suppliers arecontractually required to comply with the program’s requirements, among which includes
reporting on several indicators related to water use and quality. GAP water management
27

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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practices guide covers water scarcity, local impacts, water efficiency and WASH. A
representative sample is used to collect data and the several visits of Field Technicians
to each contracted farmer during the crop season allow for a detailed understanding of
local challenges and to monitor progress.

Impact of the engagement and measures of success
PMI requests tobacco suppliers to submit annual self-assessment and carries out onsite reviews by a third party on water consumption and local water issues in the tobacco
growing areas. Through these methods, PMI collects metrics on performance indicatorsincl. water extraction and quality, use of hazardous pesticides and others, integrates
them into supplier scorecards and develops internal indicators such as water intensity.
Suppliers are expected to annually improve their performance by demonstrating
continuous improvements in the annual assessment. PMI uses individual supplierscorecard to track annual performance for each indicator. Success is measured as thepercentage of farmers implementing best practices, which result in the mitigation ofwater related risks and an increase of farmers resiliency.

Comment
We share and discuss with suppliers and their farmers the relevant findings of ourassessment.

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 their river
basinsProvide training and support on sustainable agriculture practices to improve water
stewardship
Educate suppliers about water stewardship and collaboration% of suppliers by number
76-100% of total procurement spend
76-100

Rationale for the coverage of your engagement
53 % of our blue water footprint is used to grow tobacco required for our products, 41 %is used in the non-tobacco part of our supply chain, and 6 % is used in our
manufacturing sites. PMI focuses on covering these agricultural suppliers (tobacco,timber, paper, and cardboard), as they are the most critical to our business in terms of28

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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the relevance of their products, as well as the implications from being exposed to water
risks.
Through the implementation of our GAP program we address water issues within the
tobacco supply chain (covering contracted but also other farmers in the markets wesource from), collaborating with suppliers on implementing best practices towards
generating measurable improvements. PMI supports suppliers to identify and mitigate
risks where they operate and seize water opportunities through dedicated trainings forfarmers and technicians aimed at increasing their capacity on water resource
management at the farm.

Impact of the engagement and measures of success
In 2019 we supported suppliers to conduct local water risk assessments in sevenmarkets: Canada, India, Mexico, Mozambique, North Macedonia, Philippines andTurkey. In 2019 for example, with the support of our Leaf Suppliers, PMI sponsored
WASH projects with the drilling of 13 solar-pump boreholes and 30 hand-pumpboreholes in central Malawi and 60 hand-pump boreholes in Tete Province,
Mozambique. These boreholes directly benefit more than 3.500 tobacco farmers thatwere also trained on WASH practices resulting in estimated benefits for 80.000
community members.
With GAP, we engage with our tobacco suppliers and their farmers promoting training
sessions and methods to drive improvements, success is measured as farmers’participation to training (89% in 2019) and the % of farmers implementing best practices
as per GAP (66% in 2019). The beneficial outcome for PMI is to have a more resilient
supply chain to water related issues.

Comment
Along with these interventions improvements were made on sanitation facilities,
concrete storage tanks, and rainwater harvesting systems. Furthermore, we distributed
household water treatment products and organized WASH training sessions in villages
in Malawi.

Type of engagement
Onboarding & compliance

Details of engagement
Requirement to adhere to our code of conduct regarding water stewardship andmanagement
Other, please specify
Supplier due diligence and performance program, Sustainable Transformation
Enables Performance (STEP), to achieve supplier compliance with our responsible
sourcing principles in the Non-Tobacco (Leaf) supply chain.

% of suppliers by number
1-25
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Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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% of total procurement spend
26-50

Rationale for the coverage of your engagement
We focus STEP deployment on critical suppliers identified by our risk-based criteria. We
started to formally onboard suppliers in July 2019. This first wave focused mainly on
suppliers of direct materials and electronics. PMI's definition of critical suppliers is thefollowing:- High-spend supplier: a supplier with whom PMI spends ≥ $500 thousands per year
- Essential component supplier: all Tobacco (Leaf)and all Procurement Direct Spend (Direct Materials and Electronics) suppliers are
considered essential components.
- Non-substitutable suppliers: a supplier that cannot easily be replaced due to the lackof competition on the market and/or the high specificity of the component provided to
PMI.

Impact of the engagement and measures of successThrough this process we request and analyse the status of our supplier’s compliancewith our responsible sourcing principle, where water resources conservation andpollution, is an integral part. The results of this due diligence will trigger further auditing
process steps (desktop and/or an on-site audit). Already by the first semester of 2020
around 700 suppliers' subsidiaries were invited to submit in the STEP platform, 1desktop audit was completed in 2019, 21 completed & 8 in progress in 2020. We aim in
the future to integrate the tobacco suppliers, where the engagement activities are
currently far more advanced.

Comment
Suppliers are initially screened internally through a heatmap to identify the inherent risk
profile based on the type of material or service, as well as the country of production, orservice delivery. This risk profile tailors the subsequent evaluation: low risk suppliers willcomplete a basic questionnaire, while medium or high risk suppliers complete a fullquestionnaire. Depending on the results of the latter, the suppliers may go throughdesktop and/or on-site audit.

W1.4c(W1.4c) What is your organization’s rationale and strategy for prioritizing
engagements with customers or other partners in its value chain?
PMI engages multiple partners in its value chain including consumers, key account customers,
external consultants, verification bodies, supplier communities and other key stakeholders, anduses various methods such as dialogue, development of projects, training and materiality
assessment. PMI prioritizes engagement with stakeholders who can contribute to minimize therisks within their supply chain (e.g., through the development of initiatives with sharedsustainability goals) or to the achievement of PMI’s water targets and create opportunities tocollaborate and innovate. PMI measures engagement success in a variety of ways dependingon the stakeholder and engagement activity; these can include qualitative indicators such as
feedback from supply chain surveys and presentations on water practices (e.g. CDP SC
30

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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program), increased interest from customers on water issues, as well as quantitative indicatorssuch as response rates (e.g. from surveys) and achievement of engagement targets (e.g.
number of participants) and other water related targets (e.g. optimization of water footprint).
An example of this is PMI’s engagement with consumers and employees to address cigarettebutt littering, which causes negative impacts on water and land habitats. In 2019, PMI launched
its anti-littering program including 54 activities and involving over 3962 participants in 31
countries. As part of the anti-littering campaign, PMI also engaged consumers through public
communication efforts such as the ‘Leave no trace’, which displayed anti-littering messages onpack and at points of sale in 9 markets. PMI also used clean-up activities to further engage
employees; in Mexico 140 employees performed clean ups in 7 cities, while in Poland 500
employees conducted individual clean-ups.
PMI also engages other sustainability experts such as Quantis, SGS, South Pole, AB Sustain,
ERM, BSR, Ecofys or Carbon Trust on water stewardship, project implementation and progress
tracking.

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
4

Total value of fines
48,405% of total facilities/operations associated8

Number of fines compared to previous reporting year
About the same

Comment

31

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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PMI had 4 water related fines in 2019, the same number as in 2018. One example, as
mentioned in our 2019 PMI’s Integrated Report, was related to the waste water
treatment plant in Yangsan Factory of Philip Morris Korea, where some of the waste
water was accidentally drained to rainwater due to operational mistake of the contracted
service provider. PMI informed the authorities, implemented preventive measures, andpaid the corresponding fine. In PMI Integrated Report we report on fines above $10,000
while here we considered all fines including the ones below this threshold.

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 whole value chain (6% of total
water footprint), we are cognizant of potential water pollutants that may result from our directprocesses and supply chain. All of PMI’s wastewater is either treated on-site or sent totreatment facilities prior to discharge respecting local legal regulations, limits and otherapplicable standards.
In PMI we have internal standards on the spill prevention and chemical management in order toprevent water pollution. These standards are integrated in all our factories environmental
management systems, and their implementation is certified in the frame of the ISO 14001
certification. These standards dictate that all chemicals are assessed before delivery to thepremises based on the MSDS, in case these are hazardous, alternative materials are being
evaluated. Based on their properties (health & safety hazards and environmental impacts) they
are classified as per local legislation and internal assessment (ex. Toxicity, water hazards,
flammability) and are being registered and monitored. For the ones that are classified
hazardous to the environment appropriate technical measures are put in place to prevent
accidental release (retention basins, leak detectors, secondary contaminant among others). All
employees and contractors handling hazardous materials are systematically trained andappropriate spill kits are provided on the areas, as part of the assessment. Undergroundstorage tanks for hazardous materials, are officially avoided, and can only be approved byexemption. Waste water generated in our factories is either directed to authorize treatment
plants of the industrial zone or municipality or previously treated onsite throughbiological/physicochemical process. We have developed high corporate technical standards forthe design and operations of these wastewater treatment plants, including the parameters to bemonitored in each stage of the treatment but also the type and specifications of the measuring
instrumentation. Six factories had been already certified against the AWS Standard by the endof 2019. We have committed to certify at least 11 facilities by 2020 and all facilities by 2025.
As we strive to treat wastewater from direct operations according to all applicable laws,
regulations and standards where PMI operates, we do not expect significant water-related
impacts either on humans or ecosystems. However, negative impacts on ecosystems andhumans can be caused from the misuse of pesticides in our supply chain, which are used to32

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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protect tobacco crops from pests and diseases, can contaminate aquatic systems by surface
run-off and leaching. This contamination can be caused by inappropriate management of thepesticides and can have an impact on aquatic life or fish-eating wildlife, such as depletion ofoxygen by eutrophication. Since Highly Hazardous Pesticides (HHPs) can be considered either,carcinogenic, mutagenic, toxic for reproduction, pesticide residues present in watercourses andgroundwater can also have an effect on humans through consumption of fish and shellfish thatare contaminated by pesticides. To avoid these negative impacts from materializing, PMI
requires all those who grow and supply its tobacco to implement Integrated Pest Management(IPM) practices as part of Good Agricultural Practices (GAP) program. PMI’s GAP includes aseries of principles and measurable standards to be met by all those who grow and supply
tobacco to PMI, including the ones related to the use of pesticides such as frequency of use,quantity, and type of pesticides. Where the use of synthetic pesticides is necessary, thesupplier must take into account environmental and human health risk where there is a choice ofdifferent 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 IIshould only be used in well-justified cases, and toxicity class I was prohibited since 2018.
Suppliers must have a list of recommended pesticides suitable for the local conditions thatcover the most common pests and diseases. The list should include low toxicity and pestspecific products and can use local brand names relevant to the active ingredients listed toensure greater farmer understanding. This list of pesticides should only include those that areregistered for use in tobacco in the country.
To support the elimination of WHO Tox1 and other Highly Hazardous Pesticides, PMI promotes
the use of less hazardous alternative pesticides that include biopesticides such as botanicals,
microbials, macrobials and semi chemicals. Tobacco suppliers promote the use of low-toxicity
and pest-targeted pesticides while avoiding preventative treatments, conducting training andother initiatives with their contracted farmer base.

W-FB3.1a(W-FB3.1a) Describe how your organization minimizes the adverse impacts ofpotential water pollutants on water ecosystems or human health associated with yourfood, 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, also called Crop Protection Agents (CPAs), which are used to protect
tobacco crops from pests and diseases, can contaminate aquatic systems by surface
run-off and leaching and have an impact on aquatic life or fish-eating wildlife, such as
depletion of oxygen by eutrophication; pesticide residues present in watercourses andgroundwater can also have an effect on humans through consumption of fish and33

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020shellfish that are contaminated by pesticides. The contamination can be caused byinappropriate management of the pesticide and can have an impact on the ecosystems
according to the toxicological characteristics of the active ingredient.
An example from tobacco cultivation is Diamide insecticides, Flubendiamide andChlorantraniliprole, They are used in some geographies to control Lepidoptera pests in
tobacco. It has been reported that these insecticides may cause hazard to the aquatic
life. In order to limit potential impact on water, PMI has imposed for these insecticides
MRL s which are lower than those adopted by the industry.
Impacts from potential water pollutants mismanagement could have significant
consequences to PMI’s tobacco supply chain. In 2018, PMI identified that misuse ofpesticides could represent around 5% of PMI’s modelled water pollution footprint andthis estimation remains valid for 2019.
Furthermore, the insecticide methomyl, classified as WHO Toxicity Class I (WHOTOX1), has been completely eliminated from the production of tobacco destined to PMI.
Methomyl, used in the past to control budworms and acutely toxic to humans and manyaquatic species, has been substituted with less hazardous alternatives such as thebiopesticide Bacillus thuringensis which has no toxicity for aquatic life and humanhealth.

Management procedures
Soil conservation practices
Crop management practices
Sustainable irrigation and drainage management
Fertilizer management
Pesticide management
Follow regulation standards

Please explain
PMI requests its leaf suppliers to implement Good Agricultural Practice program (GAP)
which defines the principles and measurable standards to be met by all those who growand supply tobacco to PMI with the aim that acceptable pesticides are used to reducewater pollutant risk.
Where synthetic pesticides are used, 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 should only be used in welljustified cases, and toxicity class I must not be used at all.
PMI implements a global Integrated Pest Management (IPM) program to reduce the useof unnecessary pesticides(Crop Protection Agents - CPAs), promoting the use of lesshazardous alternatives and to manage them correctly. PMI developed tools to support
the implementation of the program in collaboration with the not-for-profit Centre for
Agriculture and Bioscience International (CABI), e.g. the IPM App and a website withcountry-specific management factsheets on tobacco pests and diseases and on IPM
and CPAs management which are kept up to date. The App has reached 1,400 users,
and the IPM website had more than 8,000 views in 2019 . A specific Sustainable Pest
34

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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Management training was organized in collaboration with CABI for field supervisors. A
database of global biopesticides and low hazardous CPAs alternatives is available tofarmers. In order to limit potential impact on water, PMI has set MRLs, which are lower
than those adopted by the industry, for high impact insecticides to prevent potential
water pollution impacts from mismanagement of CPAs. This is one of the reasons PMI
has implemented GAP as requirements to all its suppliers, promoting the reduction of
the use of unnecessary CPAs, the safe disposal or recycling of empty CPA containers toprevent water contamination. These tools combined with trainings raise awareness ofpotential impacts of each pesticide and enable PMI to deter the use of these. PMI
measures success for GAP and IPM programs, in 2019, 100% of the tobacco wesourced was free of any quantifiable level of residues attributable to the use of WHO
TOX1 CPAs. Furthermore, 92 % was free from any other quantifiable HHP residues,
showing further progress against our target to completely eliminate the use of HHPs by
the 2020 crop.

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 within PMI’s agricultural supply chain;
however, they can enter groundwater or watercourses, impacting aquatic ecosystems
through eutrophication. PMI considers impacts from mismanagement of fertilizers suchas overdosage or improper application related to vulnerable natural areas especiallywater bodies near to tobacco growing areas to be of a significant magnitude as the
problem involves all of PMI’s suppliers of tobacco, and if not properly managed
fertilizers could cause eutrophication of water and pollution. For this reason, good
fertilizer management practices are implemented with the GAP program for all suppliers
to comply with.
In 2018, with the support from an external consultant, PMI developed its water footprint
model based on the ISO14036. The model considers PMI’s direct and indirect
operations through a life-cycle approach, incorporating water consumption, depletionand pollution aspects. With this tool PMI identified that fertilizer leaching from tobacco
cultivation could represent up to 62% of PMI’s modelled water pollution footprint (nontobacco supply chain represents an additional 33%) and this remains pertinent for 2019.

Management procedures
Soil conservation practices
Crop management practices
Sustainable irrigation and drainage management
Fertilizer management
Calculation of fertilizer intensity data
35

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Follow regulation standards

Please explain
Through its Good Agricultural Practices (GAP) program, PMI promotes a series ofpractices for suppliers to optimize fertilizer usage and adjust rates to avoid unnecessary
applications. PMI encourages soil analysis as a basis for farmers to optimize fertilization
to meet soil fertility and crop nutritional requirements. By calculating the soil available
nutrients and related deficiencies and matching them with plant uptake needs, an
optimized fertilization plan can be designed and implemented, ensuring no excesses tothe amount of fertilizers needed by the plant and, therefore, minimizing fertilizer leaching
to the water table, avoiding the main source of eutrophication. PMI’s GAP principles andstandards promote the use of fertilizers with identified sources of origin, with available
certificates of analysis (i.e.: in accordance also to the Sustainable Tobacco Production –an industry standard – fertilizers should be analysed to determine specific substancessuch as cadmium and chloride), and that comply with regulatory standards, where
enforced, or with the PMI’s internal GAP standards which apply to all our suppliers.
Through GAP, PMI recommends appropriate amounts of fertilizers that can minimize
their negative impacts on the environment. PMI also promotes the development of water
protection plans that include the implementation of buffer zones where fertilizers are
utilized, the avoidance of methods and timing of fertilizer application that may result inleaching, the safe handling and storing of fertilizers to prevent contamination of water.
PMI measures and evaluates success of these initiatives through a series of targets andindicators within GAP, including the % of farmers implementing best practices as
described in the program, which is part of the contractual obligations for suppliers.

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 andassessing water-related risks.
Direct operations
Coverage
Full

Risk assessment procedure
Water risks are assessed as part of other company-wide risk assessment system

Frequency of assessment
Annually

How far into the future are risks considered?
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More than 6 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
Internal company methods
External consultants

Comment
In 2015, PMI conducted a comprehensive Climate change risk assessment (CCRA) for
corporate and asset level, identifying physical risks 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 and in early 2020 we
performed a global water risk assessment covering all our direct operations. In 2017, we
joined Alliance for Water Stewardship and certified our Brazilian factory in 2018, tobetter understand local risks, and by the end of 2019 6 sites were already certified. Our
target for 2020 is to have 11 factories certified and the rest by 2025.
Additionally, in 2018 PMI conducted a climate change risk assessment in line with TCFD
recommendations. As part of this assessment, PMI identified risks and opportunities for
its business under a reference scenario (exploring a decarbonization approach underthe existing climate and energy policies) and a 2 degrees scenario (aligned with anaverage global temperature increase below 2 degrees).
In our assessment process we considered the importance of water resources for PMI’s
direct and indirect operations and looked into several water elements including projected
prices of water and their implications, changes in water supply, water stress areas andothers.

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?
More than 6 years

Type of tools and methods used
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Tools on the market
International methodologies
Other

Tools and methods used
WRI Aqueduct
Life Cycle Assessment
IPCC Climate Change Projections
Internal company methods
External consultants

Comment
PMI undertakes an annual water risk assessment which uses internal methodologies,
tools on the market and external consultants to identify risks and opportunities in the
supply chain.
PMI’s Global Water Risk Assessment uses tools that are available in the market,
including WRI Aqueduct, Water Risk Filter, national databases, and others.
As part of this assessment, PMI measures its water footprint using primary andsecondary data. Since 2018, PM undertakes Local Risk Assessments (LRA) in key
markets, where suppliers’ water risks were evaluated during a 3-days workshop. The
LRA was carried out with the support from external consultants with the objective ofidentifying granular, and highly relevant local water risk related data together with avariety of stakeholders in order to better understand water risks and their materiality to
the areas where PMI sources tobacco. In 2019 the assessment was carried out in 7
locations, using 17 different indicators to measure physical, regulatory and reputational
water risks.

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?
More than 6 years

Type of tools and methods usedTools on the market
International methodologies
Other

Tools and methods used
WRI Aqueduct
IPCC Climate Change Projections
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External consultants

Comment
In 2015 external consultants ERM and Quantis conducted climate change (CC) risk
assessment for corporate and asset level physical risks & opportunities up to 2030;
water footprints were developed in 2015 and 2018 respectively. We used WRI Aqueduct
and IPCC CC Projections to update this annually. We are 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 locations where werun manufacturing facilities.

W3.3b(W3.3b) Which of the following contextual issues are considered in yourorganization’s water-related risk assessments?
Relevance & Please explain
inclusion
Water availability at abasin/catchment level

Relevant,
alwaysincluded

Water availability at a basin/catchment level is relevant
since water is a key input that is used in our factories, infilter manufacturing, paper and packaging materials, for staff
use and green spaces. Moreover, in our agricultural supply
chain water availability is needed for growing tobacco andother timber based commodities. For these reasons, water
availability is always included in our risk assessments.
For our direct operations, we assess water availability risks
through our company level risk assessment initiatives. For
instance, external consultants, conducted climate change
risk assessment (CCRA) for corporate & asset level
physical risks & opportunities up to 2030 in 2015 and in
2018; water footprints in 2015 and 2018 respectively. 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 tobetter understand how to conserve the watersheds where
we operate, and our factory in Brazil was certified against
the AWS Standard in March 2018. We have committed tocertify at least 11 facilities by 2020 and the rest by 2025.
We are expanding our water programs by assessing current
and future water-related risks more broadly across ourvalue chain. These risks include water scarcity and quality
in tobacco growing regions, flood risk in warehouse
locations and ports, and water demand in locations where
we have manufacturing facilities.
In 2019, PMI undertook a Local Risk Assessment (LRA) in
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key markets, where suppliers’ water risks where evaluated.
The LRA was carried out with the objective of identifying
granular, and highly relevant local water risks. The
assessment was carried out further 7 locations, using 17
different indicators to measure physical, regulatory andreputational water risks.
Water quality at abasin/catchment level

Relevant,
alwaysincluded

Water quality at a basin/catchment level is regarded as
relevant since PMI needs to ensure that high quality water
is used during the manufacturing of our products to protect
our consumers and to meet strict Food and Drug
Administration regulations for our reduced risk products.
Water quality is also important to our supply chain to ensurehigh quality raw materials and to protect workers’ health andlivelihoods by providing access to Water, Sanitation andHygiene services (WASH). For these, reasons water quality
is always included in the risk assessment.
PMI assesses this issue through a combination of internal
procedures and use of external tools and methodologies.
For example, in direct operations PMI assesses thecompliance of manufacturing sites with ISO14001 andOHSAS18001 programs and minimum EHS requirements.
We have detailed water quality standards for potable water
and water used as ingredient in production, which shouldmeet at least the requirements described in the EU directive
98/83/EC unless stricter local regulations are enforced.
For its supply chain, PMI uses external tools and external
consultants to assess risks associated to water quality. For
example, PMI uses WRI Aqueduct and IPCC Climate
Projections to explore how its supply chain is exposed tophysical risks related to quality such as changes in return
flow ratio and upstream protected lands, as these could
significantly alter the quality of water used by farmers indownstream areas. We have also become a member of the
Alliance for Water Stewardship (AWS) In March 2018, ourfactory in Brazil was certified against the AWS Standard,
which covers water quality at a basin level issues. We
commit to certifying at least 11 factories by 2020 and all
PMI operations by 2025.
In 2019, PMI undertook a Local Risk Assessment (LRA) in
key markets, where suppliers’ water risks where evaluatedin 7 locations, using 17 indicators to measure physical,

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regulatory and reputational water risks.
Stakeholder conflicts
concerning water
resources at abasin/catchment level

Relevant,
alwaysincluded

Our operations withdraw small volumes of water comparedwith other industries. Nonetheless, stakeholder conflicts
concerning water resources at a basin/catchment level
always are included in our water risk assessments sinceaccess to water and water rights within our supply chainsare essential to our operations. Our water risk assessment
aims, to provide PMI a better understanding of water
availability at the basin level, water use by different
stakeholders and potential implications on water quality andquantity that could lead to competing demand and potential
conflicts over time. An example of this is PMI’s local waterrisk assessment with tobacco suppliers and growers, wherestakeholders are engaged to identify how water demand
from different stakeholders in the basin can affect the water
budget in terms of quality and quantity. As part of thisprocess, stakeholders identify the main risks as well as
potential approaches to prevent future conflicts over water
resources.
Another example includes PMI’s work with external
consultants to conduct its water footprints, which highlightwater hotspots across the company’s direct operations andsupply chain. From this assessment, PMI learned that morethan 50% of its water footprint can be attributed to its
agricultural supply chain (tobacco represent 53% of PMI’s
freshwater consumption). PMI complements this analysis
with the use of external tools and methods such as WRI
Aqueduct and IPCC Climate Change Projections to identify
locations facing higher water risks such as water scarcity
and extended droughts, which could result in the availabilityof less water resources, causing potential conflicts with local
stakeholders. PMI also includes WASH services for local
stakeholders as part of the assessment.
We became a member of the Alliance for Water
Stewardship to better understand how to conserve thewatersheds where we operate and prevent any potential
conflicts with local stakeholders. In March 2018, ourBrazilian factory was certified against the AWS Standard.
By the end of 2019, we had certified ﬁve more sites – in
Italy, Portugal, Indonesia, Russia, and Turkey – as part ofthe program to certify all factories by 2025, with the ﬁrst
eleven targeted by 2020.

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Implications of water on Relevant,your key
alwayscommodities/raw
includedmaterials

Any significant change in tobacco leaf and clove prices,quality and quantity could affect our profitability and ourbusiness. Water is a key input for our agricultural supply
chain as it is needed for growing tobacco and for othertimber based materials, therefore we consider the
implications of water on our key commodities as relevant
and always include this issue in our risk assessments.
Implications of water on PMI’s key commodities are factored
into the risk assessment through a combination of internal
company methods, and the use of external methodologies
and other tools. Internally, PMI uses indicators from the
GAP program to assess different water variables such as
water availability, water use and water intensity fromproduction. These indicators are used by all suppliers, with
an emphasis on tobacco leaf and clove suppliers. PMI uses
WRI Aqueduct and IPCC Climate Projections to explore
how its supply chain is exposed to physical risks that could
have direct implications on its key commodities, such as theincreased occurrence of heatwaves, droughts and floods.
For the markets where a Local Risk Assessment (LRA)
report is available the inputs mentioned above arecomplemented by the estimation of baseline water stressand groundwater table decline to provide an indication of
the magnitude of the issue.
In 2019, PMI undertook a (LRA) in key markets, where
suppliers’ water risks where evaluated. The LRA wascarried out with the objective of identifying granular, andhighly relevant local water risk related data. The
assessment was carried out in further 7 locations, using 17
different indicators to measure physical, regulatory andreputational water risks. Additionally, PMI uses water
footprint and supplier engagement questionnaires tomonitor and evaluate how water requirements for the
tobacco production change overtime.

Water-related regulatory Relevant,frameworks
alwaysincluded

Although our direct operations withdraw small volumes ofwater in comparison to other industries, ensuring
compliance with water-related regulatory frameworks isimportant for our operations, for example to maintainlicense to operate and to be able to withdraw
water/discharge water, and for our agricultural supply chain.
This is particularly relevant for PMI, as 64% of our water
withdrawals are from third parties which could face further
regulations in the future. We are subject to international,

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national and local environmental laws and regulations in the
countries in which we do business. Therefore, water-related
regulatory frameworks are always factored into the waterrisk assessment.
PMI assesses this issue through the use of internal
company methods. For example, PMI has specific programs
across business units designed to meet and go beyond
applicable environmental compliance requirements related
to water withdrawal, consumption and discharges. As partof these programs, PMI uses a consistent environmental
and occupational health, safety and security management
system ("EHSS") at all our manufacturing centers. We trackcompliance through our EHS Systems and regulatory radar
screen. PMI also follows the guidelines provided by the EU
on maximum limit of chemical substances for drinking waterand products (controlled by nearly all the regulatory
frameworks), and compliance teams in our water
specifications for process water (slurry ingredient and final
wash water). All our manufacturing sites are assessedagainst ISO 14001. This certification process ensures thatlegal requirements are identified and complied with,otherwise the certification cannot be granted. In addition, we
have also become a member of the Alliance for Water
Stewardship to better understand how to conserve thewatersheds where we operate, and our factory in Brazil wascertified against the AWS Standard in March 2018. We
have committed to certify at least eleven facilities by 2020
and all of our operations worldwide by 2025 to stay aheadof any water-regulatory frameworks dealing with water
abstraction and discharge consents.
Status of ecosystems
and habitats

Relevant,
alwaysincluded

The conservation of ecosystems and habitats is key for thepreservation of water-related ecosystem services, such as
the maintenance of water quality and availability. Thus, thestatus of ecosystems and habitats are considered relevant
for both our operations and agricultural supply chain, andfactored into company level risk assessment initiatives.
PMI assesses this issue through a variety of methods
including the use of internal methodologies (analysis of
information from the Good Agricultural Practices (GAP)
program) and external consultants. In 2019 we continued tofocus our work to enhance understanding of potential
impacts on biodiversity (including life on water) from our

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direct operations and supply chain. From this work, we
identified that most of the potential impacts on biodiversity
can be found across our supply chain and are caused by
the use of fertilizers, pesticides and other land use activities.
Having identified these potential threats to biodiversity andecosystems, we defined a series of indicators to bemeasured and monitored by suppliers as part of GAP
program, including the development of water conservationplans, with the aim to assess both suppliers’ potential
impact and adherence to GAP. The indicators are alignedwith recommendations and standards by the international
Institute for Sustainable Development, the Business andBiodiversity Offsets Programme, and the Convention on
Biological Diversity. We’re expanding our water programsby assessing current and future water-related risks more
broadly across our value chain.
Littering is an issue directly related with water pollution andbiodiversity. Through our latest revision of our sustainability
materiality assessment in 2019, littering stood out as Tier 1
issue. While many consumers dispose of their waste
properly, too much waste ends up in the environment. We
are addressing this littering issue with a multipronged
approach, including awareness-raising campaigns, ongoing
research into alternatives to filters and improved design ofproducts and packaging. Such efforts also have thepotential to help mitigate costs related to emerging
environmental legislation.
Moreover, given the highly visible nature of butt littering,
addressing the issue carries reputational benefits for ourbrands and company.
Access to fullyfunctioning, safely
managed WASH
services for all
employees

Relevant,
alwaysincluded

For PMI the socio-economic wellbeing of tobacco farming
communities is tier 1 topic in 2019 materiality assessment.
For PMI, this means improving the capacity of tobacco
farming communities to achieve a decent standard of living.
Specifically access to water, sanitation, and hygiene(WASH) is a fundamental human right that helps ensure
healthy, prosperous communities and therefore is a relevantrisk considered in PMI assessment Lack of access to
Water, Sanitation and Hygiene services (WASH) poses arisk to farmers’ and workers’ health and livelihoods. WASH
related risks within our tobacco supply chain are identified
initially through a global water risk assessment performed
using the WRI Aqueduct tool. Based on the results of the

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global assessment, an internally developed methodology fora local water risk assessment (LRA), which covers WASH
indicators, is implemented for at risk countries with thesupport of regional teams and suppliers. These indicators
are continuously monitored at farm level through internallycollected data with the support of our field technicians andreported on an annual basis. These results help drive theimplementation of appropriate interventions in areas at risk.
In 2019, we extended the “WASH Action Plan” in Malawi,
which aims to address inadequate access to WASH
services in our leaf supply chain and to identify priority
needs and feasible actions. A sound action plan has been
put in place for a multiyear intervention to support our
farming communities to reaching WASH goals. For our
employees, access to WASH is addressed as part of our
ISO14001 and OHSAS18001 programs and minimum EHS
requirements. PMI tracks compliance with theserequirements at the facility level through the use internalreporting tools, and identifies any potential risks that could
prevent the company from providing full functioning, safely
managed WASH services to all employees. We have also
become a member of the Alliance for Water Stewardship
which recently added WASH as its fifth strategic outcome.
Our factory in Brazil was certified against the AWS
Standard in March 2018. We have committed to certify atleast eleven facilities by 2020 and all of our operations
worldwide by 2025.
Other contextual issues, Relevant,please specify
sometimes
included

There are no other contextual water related issues that wehave identified. For many years, we have been expanding
our water programs and assessing current and future waterrelated risks more broadly across our value chain. Theserisks include water scarcity and water quality in tobacco
growing regions including India and Mozambique, flood risk
in major tobacco warehouse locations and ports, 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
emerging research, run tools like WRI Aqueduct, ask forstakeholder input, and conduct materiality assessments tounderstand if there are other contextual issues aroundwater that PMI should be engaged on.

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

Relevant,
alwaysincluded

Customers are included because they are increasingly
expecting brands to manage their environmental impacts,
especially related to water management and climate change.
Failure to respond to PMI’s customers’ concerns can negatively
impact its business (for example a potential impact on sales).
PMI engages customers through a series of methods including
ongoing dialogue, surveys and questionnaires, corporate
communications, forums and events, and hotline and callcentres. Additionally, we ensure high quality water in our
products to protect our customers. We also respect thevulnerability of water resources we use and the role of thoseresources in the wider community, which may affect thecommunities where some of our customers live. As such we
include customers in our water risk assessments through: i) We
are increasingly using life-cycle assessment (LCA) thinking toevaluate options for reducing environmental impacts throughout
the entire life-cycle of our products. Considering thetransformation of our business 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. Our consumer insights researchhelps us understand the potential market for eco productdevelopments. PMI encourages proper disposal of cigarettebutts and heated tobacco units by raising awareness andproviding equipment, such as ashtrays and pocket ashtrays. We
are improving our understanding of littering behaviour, of antilittering approaches, and of ways to directly reach consumers
about this issue. For example, IQOS heated tobacco units aremuch less littered than cigarette butts. In 2019 PMI engaged
with its consumers in littering prevention, an issue connectedwith water stewardship and launched 54 anti-littering campaigns
with 3962 participants in 31 countries.

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Employees

Relevant,
alwaysincluded

Employees are included because they are the ones driving theimplementation of PMI’s goals and targets, they are also theones managing suppliers. Failure to engage employees could
lead to not meeting PMI water related targets.
PMI engages its employees on water issues through ongoing
dialogue, surveys and questionnaires, trainings, corporate
communications, forums and events, reports and publications,
PMI provides relevant water information such as the release oftargets, as well as progress to relevant employees, asks fortheir feedback. An example of awareness raising sessions areannual eco-weeks held in our sites including initiatives likeplanting trees, recipes for homemade natural soap or advices
on saving water at home. Specific company awards such as the
Chairman’s Award and Excellence Awards, which are either
cash or stock, are available for Sustainability and EHS
Managers, project teams and other employees who areresponsible for water related initiatives and improvements.
Other employee engagement activities take place in our AWS
certified sites, through awareness campaigns and additional
communications on specific risks and opportunities found in thecatchment area and how they can contribute at their workplace
and at home to mitigate them. We joined the AWS in 2017 andin March 2018, our Brazil factory became the first factory in the
country to be AWS certified. We plan to have the 11 factories
which ranked highest in our previous risk assessment certified
by 2020 and to extend to the rest of our operations until 2025.
This will enable further engagement opportunities and support
the achievement of our targets. Water quality is also importantto 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 andcontracted farms.

Investors

Relevant,
alwaysincluded

Investors are included because as one of the most important
stakeholders they have to be informed on the performance ofthe company in all aspects. Failure to respond to investors’
water concerns would directly translate in financial risks for PMI.
PMI engages Investors through various methods including
ongoing dialogue on water and sustainability issues, corporate
communications and reports, public disclosures such as CDP,
ESG ratings such as SAM CSA, attendance and contributions toformal gatherings, forums and events, ad-hoc requests andcalls. Another example is the engagement about the results of
the water risk assessment, which are shared with investors. We

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also communicate through our annual sustainability report andwebsite. Our 2019 PMI Integrated Report is available on our
website.
Local communities

Relevant,
alwaysincluded

We respect the vulnerability of water resources we use and therole of those resources in the wider community. Failure toinclude local communities could result in potential conflicts overwater resources especially when water resources are limited inwater stressed areas, and particularly in the company’s
agricultural supply chain. For example, a lack of availability ofwater resources for all stakeholders/users at the watershed
level could result in an increased competition for water
resources between agricultural requirements and local
community requirements, causing subsequent disruptions inagricultural production and leading to operational risks. We
strive to use our water optimally, taking into account thesurrounding water basin context and community demand,
therefore local communities are relevant and always included in
our water risks assessments.
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 hygieneWASH). As part of PMI’s AWS activities, the company consults
local communities and stakeholders on water issues. In 2019
PMI engaged local communities and other stakeholders as partof its Local Risk Assessment (LRA) to identify granular, highly
relevant water risk data at a local level. The format of the LRA isa workshop, which trains suppliers and local communities to beable to identify and understand water risks.
E.g.: in 2019, PMI sponsored WASH projects building boreholes
in Malawi and Mozambique, distributed household water
treatment products and organized WASH training sessions invillages in Malawi, with estimated beneficiaries above 3.500
tobacco farmers and 80.000 community members.
The capacity building part is really important because it enables
PMI to continuously identify and respond to water related risks.
The assessment was carried out in Canada, India, Mexico,
Mozambique, North Macedonia, Philippines and Turkey. The
assessment in Mozambique helped highlight the lack of accessto WASH services in small holder farms and we begansupporting their access to WASH.
We engage with local communities in several ways, including
ongoing dialogue, surveys and questionnaires, training,
corporate communications, formal gatherings, forums andevents, reports and publications, memberships and48

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partnerships, hotline and call centres, consultation processes
and others.
NGOs

Relevant,
alwaysincludedNGOs are included because they can often provide support andtechnical expertise to manage PMI’s sustainability related risks.
Failure to include NGOs could result in a lack of access to local
knowledge, which could prevent PMI from meeting its
sustainability targets with regard to water issues.
PMI engages NGOs in a variety of ways, depending on thelocation of the organization as well as their area of expertise.
Engagement methods include ongoing dialogue, consultations
and other collaborations on a project basis. We work withseveral NGOs on a global and local level and we engage withthem through training, corporate communication, formal
gatherings, forums, events, reports and publications,memberships and partnerships hotline and call centres. We arealso part of the World Business Council for Sustainable
Development (WBCSD), the WeMeanBusiness coalition, andsince participating in the UNFCCC COP21 in Paris, we continue
to engage externally on our commitments on climate change
adaptation and water, including our support to the Paris
Agreement.
On a local level, we support local NGOs that help address water
risks in our manufacturing and agricultural supply chain. A
sound example is our collaboration since 2017 with local
suppliers, stakeholders and NGOs, such FAI (Fundacion
Mexicana de Apoyo Infantil) in Mexico, as part of our efforts toimprove the living and working conditions of migrant workers in
tobacco growing areas we source from. Amongst others it
includes the provision of access to safe drinking water,
improved sanitation and hygiene (WASH). Furthermore, we also
help address water risks locally through our charitablepartnerships to support disaster preparedness and relief efforts.

Other water users
at abasin/catchment
level

Relevant,
alwaysincluded

We strive to use our water optimally, taking into account thesurrounding water basin context and water demand. Failure toinclude other water users could result in potential conflicts overwater resources when water resources are limited in water
stressed areas, particularly when related to the company’s
agricultural supply chain, For example, a lack of availability ofwater resources for all stakeholders/users at the watershed
level could result in increased competition for water resources
causing subsequent disruptions in agricultural production andleading to operational risks. Thus, other water users at a49

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basin/catchment level are considered relevant and they arefactored through our company level risk assessments. PMI
engages with them through a combination of methods, including
ongoing dialogue, training, forums and events and other asnecessary. Our approach to working with other water users isbased on 3 principles - water preservation, innovation (better
irrigation practices/less water intensive tobacco varieties), andengagement (water access, sanitation and hygiene (WASH)).
We also consider other water users at the local level and work
to retain our social license to operate. The interaction with local
stakeholders is through our: i) Manufacturing operations - We
joined the Alliance for Water Stewardship (AWS) in 2017 tobetter manage water within the local watersheds. One of the key
elements of AWS certification is to understand local water risks
and opportunities and engage with local stakeholders. For
example, we organize at least two events during the certification
process where we invite water authorities, neighbour factories
or NGOs to discuss openly how to improve the local water
situation. ii) Agricultural, especially tobacco supply chain –Based on our Good Agricultural Practices (GAP) program, we
expect our suppliers to have a water conservation plan thattakes into account the management of water for tobacco
production to minimize adverse impacts to other users withinwater catchment areas. The plans also cover access to WASH
services for local communities, workers, and their families ingrowing areas where lack of access is a high risk.
Regulators

Relevant,
alwaysincluded

To be able to operate, PMI needs to ensure compliance withwater-related regulatory frameworks in all 31 countries where
we manufacture our products. Integral part of our manufacturing
sites’ ISO14001 certification is the risk and opportunities
assessment of each site, where regulators are always
considered. Potential increase in taxes, changes in wastewater
treatment permits rules, increased requirements for discharged
water quantity and quality can have significant impact in ouroperating cost and permits to operate and that's why thisstakeholder is considered relevant. This is particularly relevant
for PMI, as 64% of our water withdrawals are from third parties
which could face further regulations in the future.
PMI engages regulators through a variety of methods including
ongoing dialogue where appropriate and per local regulations, intraining, formal gatherings, forums and events, reports andpublications and consultations. For example, in our pilot RRP
factory in Italy, we have developed a collaborative relationshipwith the local authority ARPAE. We engage with them via
meetings and visits with an open and transparent attitude.

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Through discussion we became aware of the opportunity toapply for a temporary exemption for the limits of 3 parameters:
COD BOD and total suspend solids on the wastewater wedischarge to the sewage. Without this learnings and the efforts
that we invested to improve our waste water treatment facility,
we would have had an impact on our ability to operate, until the
improvements were set up, resulting in losses in production
volumes and extra cost.
Other examples of engagement includes specific programs andtrainings across our business units designed to meet and go
beyond applicable environmental compliance requirements andreduce our water consumption. We have a consistentenvironmental and occupational health, safety and security
management system ("EHSS") at all our manufacturing centers.
We track compliance through our EHS Systems and regulatoryradar screen.
River basin
management
authorities

Relevant,
alwaysincluded

Ensuring compliance and adherence to river basin management
plans that can have a direct influence both in direct operations
and PMI’s agricultural supply chain. Engaging river basin
management authorities is relevant for PMI as it can provide
important insights on future water related taxes, management
plans, regulations or other water related issues
River basin management authorities are engaged through avariety of methods including ongoing dialogue and training,formal gatherings, forums and events, consultations and regular
ad hoc visits. PMI combines results from these engagement
activities with the annual assessment of its factories by
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 memberof the Alliance for Water Stewardship to better understand how
to conserve the watersheds where we operate. The AWS
standard also requires sites to consider stakeholders’engagement and open dialogue to better understand theirneeds, including those of river management authorities. Our
factory in Brazil was certified against the AWS Standard in
March 2018.
By the end of 2019, we had certified ﬁve more sites – in Italy,
Portugal, Indonesia, Russia, and Turkey – as part of the
program to certify all factories by 2025, with the ﬁrst eleventargeted by 2020. This will allow us to stay ahead of any water-

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regulatory frameworks dealing with water abstraction anddischarge consents.
Statutory special
Relevant,
interest groups at a sometimes
local level
included

We believe a multi-stakeholder approach is key to addressing
climate change and water security. In this context, statutory
special interest groups are important since they can facilitate thedialogue between stakeholders and provide assistanceregarding best water stewardship practices. When applying forthe construction of a new factory, or when significant changes
are due to an existing one, the permitting process, according to
the EU regulation, might require open consultation from local
community and NGOs (for example in Italy and Greece
substantial modifications of the existing factories require thereview of the environmental permit, and its publication to
governmental website, where the “public” can have access andhas the right raise objections. In the specific example both water
resources management and withdrawals volumes andwastewater treatment and disposal are described in detail.
Thus, statutory special interest groups are regarded as relevant
and are engaged through a variety of ad hoc methods.
For example, in 2017, we joined the Alliance for Water
Stewardship (AWS). In March 2018, our Brazilian factory
became the first factory in the country to be certified by AWS.
We plan to have 11 factories certified by 2020; and all
operations by 2025. Through this process, we consult with local
stakeholders, which may include statutory special interest
groups when appropriate.
In 2019, PMI supported projects to protect and enhance natural
resources, implement conservation agriculture, provide cleanwater, cater for food security, and improve the livelihoods ofpeople living in rural communities. PMI is partnering with the
USAID Malawi-Feed the Future, to diversify smallholder farmers’
production away from tobacco and into other food crops andhave joined the Global Agribusiness Alliance. PMI’s Charitable
Contributions program includes climate change adaptation andmitigation. In Mexico, we supported the Natural Areas andSustainable Development Civil Partnership aiming at creating
new business opportunities for small agricultural producers,
increasing their resources management capacity, water
availability and knowledge of eco-technology solutions. We
signed up multi-stakeholder initiatives on environmental topics
such as the Brazilian Business Commitment to Water Security,
a coalition of over 20 major companies led by the Brazilian
branch of WBCSD, and a partnership with tobacco growers to
restore degraded riverbanks (Water Guardian Project ).

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Suppliers

Relevant,
alwaysincluded

Our suppliers are key partners in achieving our water reduction
and stewardship goals. Failure to include suppliers would
expose PMI to increased physical water risks and would preventthe company from achieving its overall sustainability targets
including water related ones. Thus, they are regarded as
relevant and 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).
Suppliers are engaged through a variety of methods andprojects including ongoing dialogue, surveys andquestionnaires, training, corporate communications, formal
gatherings, forums and events, memberships and partnerships,
visits, reports and publications, hotline and call centres,
consultations, contractual relationships, and other ad hoc
activities. E.g. we developed our blue water footprint with
Quantis in the last 2 years, including tobacco growing (farmers’
irrigation, fertilizers and pesticides usage) (53%), supply chain(41%) and our manufacturing practices (6%). By engaging andworking with suppliers, we are reducing our overall water
footprint and increase their resiliency. Examples of how wepartner: i) For tobacco-growing, under GAP, we expect our
suppliers to have a water management plan including themanagement of water for tobacco production to minimize
adverse impacts to other users within water catchment areas
and WASH services access for local communities, workers, andtheir families.
In 2019, PMI conducted its annual Local Risk Assessment, andshared results with all relevant tobacco suppliers. This action
has the objective of advancing conversations in the topic ofwater risk mitigation, as well as providing additional advice or
technical support as needed.
Through “STEP” supplier due diligence program we arerequesting suppliers to disclose on their annual consumption ofwater and unit of measure, monitoring of this consumption, andrelated reduction objectives.
Suppliers are also considered in the risks and opportunities
assessment at manufacturing site, according to the AWS
standard. E.g., in our factory in Italy where we engage with thelocal water supplier HERA via meetings and visits with an open
and transparent attitude, in order to assess together the risks
related to our future increase on water consumption and work
together the solutions.

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Water utilities at a
local level

Relevant,
alwaysincluded

We work closely with local water utilities to track and manage
our water usage at large facilities. This is particularly relevant for
PMI, as 64% of our water withdrawals and 65% of ourdischarges are from third parties which could face further
regulations in the future.
Failure to do so would expose PMI to water risks associated tolack of accurate data and potential misguide company decisions
related to water expenditures or the accomplishment of water
related targets. Where possible, we work to integrate water
efficiency projects and reduce our footprint.
We engage water utilities at a local level through data collection
processes and exchanges in scheduled meetings to better
understand future demands. PMI uses a water self-assessment
tool to assess annually all our manufacturing centers serving as
a great source for water saving initiatives. In 2017, we joined theAlliance for Water Stewardship (AWS). In March 2018, ourBrazilian factory became the first factory in the country to becertified by AWS. We plan to have the 11 factories which ranked
highest in our previous risk assessment certified by 2020; andall operations certified by 2025. Through this process, we
engage and consult with local stakeholders, including the local
water utilities.

Other stakeholder,please specify

Relevant,
alwaysincluded

We regularly conduct sustainability materiality assessments.
During our 2019 refresh, we asked for input from a broad rangeof stakeholders on the topic of water. We engage withstakeholders on an ongoing basis in a number of ways. Key
stakeholders include the scientific community, investors &shareholders, employees, the business community, media, civilsociety, farmers & farmworkers, local communities, suppliers,
retailers, regulators & governments, and adult consumers. In
2018, we had aligned our work with the SDG's including SDG
14 which addresses Life Below Water and this year we madesure to kept it up to date in line with the refreshed sustainability
materiality assessment. To date, we address both the direct andindirect impacts on water from PMI’s operations. For example,
litter from cigarette butts and packaging is an issue that comesunder regular public scrutiny that could potentially negatively
affect our brand. Much of the litter washes into the waterways
and causes problems during rain events. In many of ourmarkets, such as the Philippines, Japan and Switzerland, PMI
actively supports programs and campaigns for responsible litter
disposal.

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W3.3d
(W3.3d) Describe your organization’s process for identifying, assessing, andresponding to water-related risks within your direct operations and other stages ofyour value chain.
In 2015 PMI performed a comprehensive Climate Change risk assessment (CCRA; water risk
due to climate change) of PMI operational sites and key supplier assets (e.g. ports & tobacco
growing regions). This comprehensive risk assessment is updated annually through the use ofvarious tools in the market including WRI Aqueduct and IPCC Projections. This assessment
identifies material risks and opportunities using WRI indicators to assess risk levels factoring inthe significance of the operations sites for the business; risks assessed comprise costal andriverine flood, drought, baseline water stress and water quality.
The water risk scores were based on results of the Aqueduct Water Risk Atlas. The relevant
water risk indicators for PMI were identified based on the type of operations sites. The
indicators were selected to identify water risks that can result in potential impacts causingbusiness interruption or affecting operational continuity. A site is considered at risk if any of therelevant indicators for a site is above the score of 3 (high) in the Aqueduct scoring scale.
The analysis covers all PMI’s assets and it continues to be expanded to cover a growing set ofrisks within our supply chain (for example water scarcity, extended droughts, changes in water
quality and other). We complemented our understanding by conducting another study in 2017and 2018 of our blue water footprint which is composed of tobacco farming practices (such as
irrigation, fertilizers and pesticides usage) responsible for the 53%, rest of supply chain for the
41% and manufacturing activities for 6%.
From the results of the risk assessment we identified and prioritized:- Drought: three factories in Europe are facing a high risk;- Water stress: two of the above factories are located in a high risk areas;- Riverine flood: one factory in Asia is in high risk area.
The evaluations of the identified water risks are reviewed by senior management and guide thestrategy for the implementation of the mitigation actions. Specifically, the Senior Vice President
Operations examines and monitors water-related issues, ensuring the integration of the resultsof risk and opportunity assessment and their management into business direction andstrategies, and to form part of our annual and long-range plan, objectives, budget andperformances appraisal processes. He receives updates on progress towards objectives andtheir achievement, in monthly meetings with the Operations Management Team reporting tohim, and during quarterly functional reviews.
The water risk assessment takes place as follows 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
Brazilian factory in March 2018. Based on the results of our water risk assessment we set thegoal to certify 11 factories (ranked highest in water risk assessment) by 2020 and all our
factories by 2025.
2. Supply chain: PMI has a sound system to identify water related risks within its tobacco
supply chain. As part of the annual water risk assessment process, PMI undertakes a Global
Water Risk Assessment (GRA) building on internal company methods, national databases andinternationally recognized tools in the market (e.g. WRI Aqueduct). The purpose of the GRA is

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to use globally available and comparable data to evaluate water risks at a high level. PMI
collects data from farmers through the use of Water Insights surveys covering around 140
tobacco growing areas globally to improve its understanding of water use and materiality issues
for all tobacco growers of PMI’s supply chain. Additionally, we carry out a Local Risk
Assessment (LRA) utilizing granular local data to highlight water-related risks and engage local
stakeholders during the assessment. In 2019, the GRA was updated and LRAs were carriedout for key suppliers in Canada, India, Mexico, Mozambique, North Macedonia, Philippines andTurkey using 17 different indicators to measure physical, regulatory and reputational water
risks.
The mapping of the water related risks at local level allows for a better monitoring and anincreased focus in the implementation of the GAP program. The outputs are used to inform thecompany’s business, sustainability and sourcing strategies, to set objectives and targets where
relevant to risk mitigation, as well as to develop water efficiency projects within our facilities orwith strategic suppliers. In agriculture the risk is cross-referenced to the water applied that wemonitor on an annual basis to highlight where are potential areas of action for risk mitigation
through expenditures in local water-related initiatives. As results of these assessments in 2019,
we implemented projects to reduce water consumption in Philippines and Indonesia, while
additional efforts were dedicated towards more efficient water management practices in Brazil
and Argentina.

W4. Risks and opportunities
W4.1(W4.1) Have you identified any inherent water-related risks with the potential to have asubstantive 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?
PMI evaluates a “substantive impact” (e.g.: financial or strategic impact) based on a variety offactors and quantitative indicators, including but not limited to the potential impact on financial
performance as well as other strategic factors that may affect PMI’s efforts and/or delivery
towards a smoke-free future, ultimately replacing cigarettes with RRPs. The impacts reported
as substantive strategic or financial impacts are defined as those identified and prioritized bymanagement in our value chain, through key enterprise risks based on four risk dimensions:the impact a risk could have on the organization if it occurs, the likelihood a risk will occur, thevelocity with which a risk would affect, the organization if it occurs, and the interconnectivity of arisk with other risks, that exceed defined thresholds at the corporate level.
As part of the Company’s annual Integrated Risk Assessment (IRA) process, we have in place
an extensive risk control program by which we assess the climate change physical risks
including the water related ones. Specifically in our operations, locations with values exceeding$30 million range are surveyed by engineers from our property insurer, who provide

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recommendations to us on the magnitude of environmental risks, for example risk of floodingthat could cause reduction or disruption in production capacity in specific locations, and thecost of management. Recommendations for risk management are given if the expected
reduction in the financial impact of the risk exceeds the cost to comply by a factor of 10 ormore. Internally, we focus on recommendations above the $50 million range as management ofidentified risks can involve substantial capital expenditure and disruption to operations including
our supply chain.
In 2020+ risk forecasting terms, in relation to our tobacco supply chain, we assumed as
substantive risks those with a potential impact in excess of $5 million or a raw material impact
in excess of 1000 metric tons of tobacco leaves. This definition is applicable to PMI’s
agricultural supply chain.
For example, in our 2019 water risk assessment in our tobacco growing areas, risks likedrought, flooding and cyclones and other severe weather events with a potential impact above$5 million have been identified in Indonesia, the Philippines and Brazil.

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 % companyof facilities
wide facilities
exposed tothiswater risk
represents
Row 4
1

1-25

Comment

Annually, our company’s risk and opportunity identificationand management process covers regulatory, reputational,
physical climate, water, geopolitical and market issues. In
2015, we performed a comprehensive Climate Change risk
assessment (CCRA) that highlighted risks for cyclone, floods
or severe droughts and a list of factories to be considered asof high risk. Our Climate change risks and opportunities
assessment was further aligned with the TCFD
recommendations. The analysis is updated every year, andin early 2020 we conducted additional water risk assessmentof physical water risks (water supply, drought, water stress,
flood, water quality) using WRI Aqueduct.

W4.1c(W4.1c) By river basin, what is the number and proportion of facilities exposed towater risks that could have a substantive financial or strategic impact on yourbusiness, and what is the potential business impact associated with those facilities?

Country/Area & River basin
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Italy
Other, please specify
Samoggia and Reno

Number of facilities exposed to water risk
2% company-wide facilities this represents
1-25% company’s total global revenue that could be affected
1-10

Comment
Annually, our company’s 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) that highlighted
risks of cyclones, floods or severe droughts and a list of factories to be considered as ofhigh risk. In the frame of our annual exercise, in early 2020 we conducted a water risk
assessment on physical water risks, (water supply, drought, water stress, flood, water
quality) using the WRI Aqueduct.

Country/Area & River basin
Indonesia
Other, please specify
Citarum river

Number of facilities exposed to water risk
1

% company-wide facilities this represents
1-25% company’s total global revenue that could be affected
1-10

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) that highlighted
risks of cyclones, floods or severe droughts and a list of factories to be considered as ofhigh risk. In the frame of our annual exercise, in early 2020 we conducted a water risk
assessment on physical water risks, (water supply, drought, water stress, flood, water
quality) using the WRI Aqueduct.

Country/Area & River basin
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PolandWisla

Number of facilities exposed to water risk
1

% company-wide facilities this represents
1-25% company’s total global revenue that could be affected
1-10

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) that highlighted
risks of cyclones, floods or severe droughts and a list of factories to be considered as ofhigh risk. In the frame of our annual exercise, in early 2020 we conducted a water risk
assessment on physical water risks, (water supply, drought, water stress, flood, water
quality) using the WRI Aqueduct.

W4.2(W4.2) Provide details of identified risks in your direct operations with the potential tohave a substantive financial or strategic impact on your business, and your responseto those risks.

Country/Area & River basin
Italy
Other, please specify
Samoggia and Reno

Type of risk & Primary risk driver
PhysicalIncreased water stressPrimary potential impact
Reduction or disruption in production capacity

Company-specific description
Water risk and opportunities assessment is undertaken at the site level to understandpotential issues with regards to a shared and sustainable management of the water
resources, following the AWS protocol and the ISO 14001 standard. At a global level
PMI conducted a water risk assessment through the use of WRI Aqueduct and a
Climate change risks and opportunities assessment following TCFD recommendations.
These assessments aim to identify material risks and opportunities, which includes
flood, drought, baseline water stress, water depletion and water quantity limitations risk
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management and mitigation plans discussed with our insurers and local stake holders.
From the risk assessment, PMI identified that its manufacturing facility in Valsamoggia(Italy) is directly exposed to potential disruptions in production capacity due to water
stress and drought, as these indicators were identified as ‘very high risk’ according toresults from PMI’s risk assessment, estimating one week of water unavailability as aminimum threshold which could cause a potential substantive impact.
In 2019, our RRP manufacturing facility in the Samoggia and Reno river basins was
responsible for about half of PMI’s total production of heated tobacco units (HTUs) andtherefore is strategically significant for the business.

Timeframe
4-6 years

Magnitude of potential impact
Medium-highLikelihood
More likely than not

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
1,400,000

Potential financial impact figure - maximum (currency)
11,000,000

Explanation of financial impact
We estimate the relative magnitude at the range of $1.4 million to $11 million in themedium to long term (4-6 years) for our operations based potential disruptions in
production capacity
and current production data, as well as per our insurance’s estimations, not having
experience yet such an event.
PMI's range of potential financial impacts related to water impacts is developed byestimating potential losses related to minor and major business interruptions. This
assessment is carried out on a per facility basis considering the total cost of businessinterruption per day based on production costs (excluding raw materials).
These costs mainly represent labour costs from business disruption, as production
would not be able to continue. PMI's estimated range of financial impacts can be broken
down as in the formula below; the actual number of days of business interruption will
depend on the site’s ability to recover from an event:Potential financial impact (minimum): number of interruption days in minor event * costof business interruption per day
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Potential financial impact (maximum): number of interruption days in major event * costof business interruption per day

Primary response to risk
Adopt water efficiency, water reuse, recycling and conservation practices

Description of response
PMI’ s response has been focused on reducing water dependency on water withdrawals
through the implementation of water saving initiatives in our factory. Since 2018, PMI
has implemented several water efficiency, reuse, recycling and conservation projects
have been implemented in this which specifically aim to reduce water consumption andmake the site more resilient to increased local water stress. In 2019 the factory in Italy
decreased the water withdrawals by 21% vs. 2018 and increased the use of recycledwater by 65%. More specifically PMI has focused on investing in the followinginterventions:- use reverse osmosis on treated recycled water in boilers and cooling towers;- Installation of SR-CT for Cooling Tower Water Treatment;- reuse of treated wastewater in boilers;- boiler blowdown cooling with re-used water;- increase potable water use efficiency by implementing water plant saving settings- Pilot Cold Plasma System in tobacco processing to replace water scrubbers.
In addition to those technical measures the site got certified according to the AWS
protocol in 2019, aiming to further assess and mitigate these risks.

Cost of response
2,900,000

Explanation of cost of response
The cost of response refers to the investment costs for the design and implementationof the initiatives in 2018 ($1,200,000) and ($1,700,000) in 2019. Specifically, in 2019,
PMI implemented several technologies, aiming to reduce water withdrawals. The cost of
response corresponds to the design and implementation of all these:- Reuse of treated wastewater in boilers: installation of SRCT systems that use
electrolysis technology to reduce blowdown frequency and save water- Boiler blowdown cooling with re-used water: the osmotic water produced in the WWTP
is recycled for cooling purposes in boiler blowdowns- Implementation of plant saving settings: process water conductivity standardization,
boiler blowdown optimization and standardization on water utilities- Cold Plasma System in tobacco processing (Pilot Phase): an electricity-based air
emissions treatment technology replaced the washing towers (scrubbers)- Electrodialysis Reversal System: measurement and validation plan to confirm the EDR
capability to treat water according to washing specifications, define the equipment
performance and validate operative cost assumptions.
PMI re-evaluates the need for further investments on an annual basis and updates its

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budget to manage water related risks in all factories, including in Italy.

Country/Area & River basin
Indonesia
Other, please specify
Citarum

Type of risk & Primary risk driver
PhysicalFlooding

Primary potential impact
Reduction or disruption in production capacity

Company-specific description
Results from PMI’s water footprint indicate that manufacturing facilities in Indonesia are
the company’s second most water intensive in terms of fresh water consumption. We
conducted a comprehensive Climate Change risk assessment (CCRA) and reviewed
water risk due to climate change, for corporate and asset level physical risks andopportunities 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 and 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 are flooding and cyclones. Potential impacts from cyclones could cause loss
and/or disruption of production in manufacturing plants, warehouses, 3rd party
operations, suppliers and ports, which could have a directly impact PMI’s operations.
The indicated facility in Karawang was responsible for the production of around 9% of
PMI’s total production of cigarettes. This facility was included due to its relevance for thebusiness and the potential impacts that could be caused by floods and cyclones.

Timeframe
4-6 years

Magnitude of potential impact
Medium-low

Likelihood
LikelyAre you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
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400,000

Potential financial impact figure - maximum (currency)
3,500,000

Explanation of financial impact
We estimate the relative magnitude at the range of $0.4 million to $3.5 million in medium
to long term (4-6 years) for our Indonesian operations based on potential disruptions in
production capacity and current production data, as well as per our insurance’s
estimations, although actual losses due to flood cases remained much below thisthreshold.
PMI's range of potential financial impacts related to water impacts is developed byestimating potential losses related to minor and major business interruptions. This
assessment is carried out on a per facility basis considering the total cost of businessinterruption per day based on production costs (excluding raw materials). These costs
mainly represent labour costs from business disruption, as production would not be able
to continue. PMI's estimated range of financial impacts can be broken down as in theformula below; the actual number of days of business interruption will depend on thesite’s ability to recover from an event:Potential financial impact (minimum): number of interruption days in minor event * costof business interruption per day
Potential financial impact (maximum): number of interruption days in major event * costof business interruption per day

Primary response to risk
Develop flood emergency plans

Description of response
External providers are contracted annually to develop flood emergency plans thatmitigate flood and business continuity risks identified from the water risk assessment.
External providers carry out additional flood risk assessments at the site level to further
understand how sites are vulnerable to local flooding events. This is followed by thedevelopment of flood and cyclone emergency plans which are specific to our facilities’
conditions in Indonesia and addressing the risks of flooding and cyclones. In Indonesia
Karawang factory is located in the Industrial Estate Area in West Java province. For thissite PMI’s emergency plan is also covered by the industrial estate’s emergency plan.
PMI operates another factory in Sukorejo, which is located in East Java. As part of the
PMI Business Contingency Plan, both manufacturing production facilities are linked, andKarawang’s production can be temporally discontinued, in case of flood and cyclones,
and be transferred to Sukorejo. PMI’s insurance and business continuity management
plans are informed through this process and designed to mitigate the impacts
associated with disruptions that may result from flooding events.
PMI further mitigates these risks by having widely distributed operations across theworld, which reduce impacts from individual facilities. This process was applied in the

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indicated manufacturing facility in Indonesia.

Cost of response
1,000,000

Explanation of cost of response
The cost of response ($ 1 million) is estimated based on 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. These assessments provide a
better understanding on the scale and nature of this risk and our insurance andbusiness continuity management plans are designed to mitigate the impacts from shortand medium-term (0-5 years) flooding events.

Country/Area & River basin
PolandWisla

Type of risk & Primary risk driver
PhysicalDrought

Primary potential impact
Reduction or disruption in production capacity

Company-specific description
Drought risk assessments are undertaken at the site level to understand how vulnerablesites are to local drought events through the use of WRI Aqueduct and IPCC Climate
Change Projections. We conduct environmental risk assessments in the frame of
ISO14001 to identify material risks and opportunities, which include drought risk
management and mitigation plans. From the Global risk assessment, PMI identified thatits manufacturing facility in the Wisla basin (Poland) is directly exposed to potential
disruptions in production capacity due to drought. This indicator has been identified as‘high risk’ according to the results from PMI’s risk assessment, and provided that thesole water source of the site is the third party provider, which, in case of drought, will
have to prioritize other users (i.e.: mainly households), in the city of Cracow where thesite is situated.
We estimate one week of water unavailability as a minimum threshold which could
cause a potential substantive impact.
In 2019, our manufacturing facility in the Wisla basin was responsible for the productionof around 10% of PMI’s total production of cigarettes. This facility was included due to
its relevance for the business based on its production capacity.

Timeframe
More than 6 years
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Magnitude of potential impact
Medium-low

Likelihood
Unlikely

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
800,000

Potential financial impact figure - maximum (currency)
6,700,000

Explanation of financial impact
We estimate the relative magnitude at the range of $0.8 million to $6.7 million in the longterm (more than 6 years) for our operations based on potential disruptions in production
capacity and current production data, as well as per our insurance’s estimations, nothaving experience yet such an event. PMI's range of potential financial impacts related
to water impacts is developed by estimating potential losses related to minor and major
business interruptions. This assessment is carried out on a per facility basis considering
the total cost of business interruption per day based on production costs (excluding raw
materials). These costs mainly represent labour costs from business disruption, as
production would not be able to continue. PMI's estimated range of financial impacts
can be broken down as in the formula below; the actual number of days of businessinterruption will depend on the site’s ability to recover from an event:Potential financial impact (minimum): number of days in minor event * cost of businessinterruption per day
Potential financial impact (maximum): number of days in major event * cost of businessinterruption per day

Primary response to risk
Adopt water efficiency, water reuse, recycling and conservation practices

Description of response
PMI’ s response has been focused on reducing water dependency on water withdrawals
through the implementation of water saving initiatives in our factory. Since 2013, PMI
has implemented several water efficiency, reuse, recycling and conservation projects
which specifically aim to reduce water consumption and make the site more resilient todroughts. In 2019 the factory in Poland decreased the water withdrawals by 4% vs.
2018.More specifically PMI has focused on investing in the following interventions:- simplification of Burley tobacco Processing treatment;- modernization of main Reversed Osmosis station;
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- aerators in sinks and showers installation in change rooms;- change in the suction vapor from pipe dryer;- reverse Osmosis unit modernization;- reduction of water consumption by HAAR and scrubber in tobacco expansion plant.

Cost of response
68,000Explanation of cost of response
The cost of response refers to the investment costs ($68,000) for the design andimplementation of the initiatives since 2013 as described above (i.e. the cost is one
unique figure referring to the total program budget and not calculated). The main
initiative in 2019 was the reduction of water use in the process and the air emissions
washing tower (scrubber) in tobacco expansion process. The cleaning frequency of wasreduced from weekly to once every 3rd week and we installed flowmeters on scrubbers,
adjusted to minimum water flow that will allow the good operation and performance ofthe equipment. These interventions during 2019 did not require any investment,
nevertheless generated additional water savings.
PMI re-evaluates the need for further investments on an annual basis and updates its
budget to manage water related risks in all factories, including in Poland.

Country/Area & River basin
Italy
Other, please specify
RenoType of risk & Primary risk driver
PhysicalIncreased water stressPrimary potential impact
Reduction or disruption in production capacity

Company-specific description
Water risk and opportunities assessment is undertaken at the site level to understandpotential issues with regards to a shared and sustainable management of the water
resources, following the ISO 14001 standard. At a global level PMI conducted a waterrisk assessment using of WRI Aqueduct and a climate change risks and opportunities
assessment following TCFD recommendations. These assessments aim to identify
material risks and opportunities, which include flood, drought, baseline water stress,
water depletion and water quantity limitations risk management and mitigation plans
discussed with our insurers and local stake holders. From the risk assessment, PMI
identified that its manufacturing facility in Zola Predosa (Italy) is directly exposed topotential disruptions in production capacity due to water stress and drought as these66

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indicators were identified as ‘very high risk’ according to results from PMI’s risk
assessment, which could impact PMI’s manufacturing operations during a dry year. Thisfactory relies 100% on a 3rd party water provider that might have to prioritize otherusers (i.e.: mainly households), in case of water unavailability. This heated tobacco units
manufacturing center is important in PMI operations, not for its manufacturing capacity,
but for the capability to evaluate manufacturing optimization practices, including theones related to water use, and therefore it is strategically significant for the business.

Timeframe
More than 6 years

Magnitude of potential impact
Medium-highLikelihood
More likely than not

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
15,000Potential financial impact figure - maximum (currency)
120,000

Explanation of financial impact
We estimate the relative magnitude at the range of $15 thousand to $120 thousandin the long term (more than 6 years) for our operations based on potential disruptions in
production capacity and current production data, as well as per our insurance’s
estimations, not having experience yet such an event.
PMI's range of potential financial impacts related to water impacts is developed byestimating potential losses related to minor and major business interruptions. This
assessment is carried out on a per facility basis considering the total cost of businessinterruption per day based on production costs (excluding raw materials). These costs
mainly represent labour costs from business disruption, as production would not be able
to continue. PMI's estimated range of financial impacts can be broken down as in theformula below; the actual number of days of business interruption will depend on thesite’s ability to recover from an event:Potential financial impact (minimum): number of interruption days in minor event * costof business interruption per day
Potential financial impact (maximum): number of interruption days in major event * costof business interruption per day
Even though the indicated financial impact figure is initially below our threshold for
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substantive financial impact, the risk has been evaluated as substantive due to the
manufacturing facility strategic relevance and connection to the manufacturing of RRP
products.

Primary response to risk
Amend the Business Continuity Plan

Description of response
PMI has a business continuity plan in place to prevent financial impacts from increased
water stress that could lead to reduction or disruptions in production capacity in its
manufacturing facility in Reno, Italy. PMI’s business continuity plan involves a temporary
shift of production from our manufacturing facility in Reno, to an alternative approved
facility in Europe which is already manufacturing the same products. As PMI’s
manufacturing operations in Reno are relatively small (these represent less than 1% of
the total PMI Heated tobacco units (HTU) production), this operational shift could beaccomplished in a very short period of time (less than two months), which would prevent
substantive financial impacts in the event of business interruptions materializing. PMI’salternative location has been assessed in terms of water risks and is not expected to be
impacted by drought, water stress, floods or any other water related disruptions in thelong term, as per the results of PMI’s risk assessment process using the WRI Aqueduct
and IPCC Climate Change Projections. PMI’s current plant considers a reallocation of
production of up to one year, however it could assess shifting operations permanently if
results from future water risks assessments require a different response.

Cost of response
500,000

Explanation of cost of response
The cost of response ($ 500,000) is estimated based on the expected increases in
production costs ($/ volume of production) associated to shifting production to PMI’salternative approved facility in Europe, for an estimated period of one year. The
expected increases would be linked to higher operational costs of the alternative facility,
mainly due to higher labour costs.

W4.2a(W4.2a) Provide details of risks identified within your value chain (beyond direct
operations) with the potential to have a substantive financial or strategic impact on
your business, and your response to those risks.

Country/Area & River basin
Indonesia
Other, please specify
Citarum River Basin & Brantas River Basin

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Stage of value chain
Supply chain

Type of risk & Primary risk driver
PhysicalOther, please specify
Drought

Primary potential impact
Supply chain disruption

Company-specific description
Physical risks due to climate change could have adverse impacts both on quality andyield of the crops we use, such as tobacco leaf and cloves. Suppliers of tobacco leaf inIndonesia are exposed to physical climate change risks, with drought and flooding being
most critical. Tobacco leaf growing is strongly influenced by physical climate changesuch as changes in temperature and precipitation. Specifically, in the markets where wesource from located in the tropics and subtropics, and more vulnerable to climatechange impacts, changes in precipitation patterns (too much or too little rain) could
impact PMI’s sourcing strategy due to crop losses, leaf quality degradation and supply
chain disruptions. Clove is an essential raw material for PMI to use in our local kretek
brands. Indonesia produces over 70% of the world’s cloves. Clove production solely
depends on rainfall for its water needs, making it highly reliant on well distributed rainfall
during the growing season. Clove yields fluctuate, with harvests varying up to 60% overa 4-year cycle . Climate changes causing conditions such as prolonged dry season andextreme rain events, which could impact clove growing areas and be detrimental to plant
productivity and cause yield volatility. Combined these factors could result in significant
crop losses for our suppliers, decreasing farmers’ revenue and reducing the supply of
tobacco and clove, as it has been experienced in the past particularly during El Nino
events. Reduced availability could drive price increase, impacting PMI’s manufacturing
operations and business directly in relation to the fact that PMI is one of the biggest
kretek cigarettes producer in Indonesia.

Timeframe
More than 6 years

Magnitude of potential impact
MediumLikelihood
LikelyAre you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
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5,000,000

Potential financial impact figure - maximum (currency)
18,000,000

Explanation of financial impact
The potential financial impact range is based on a long-term assessment of costs fromphysical climate change risks related to drought for the specific case of Indonesia. The
lower range derives from our comprehensive climate change risk assessment tool
combined with the threshold defined for the substantive financial impact, resulting in an
8% estimate (applied either to the sourced volume or spend). The upper range reflects
an estimation of 28% based on our modeling projection, based on our climate change
risk assessment tool (CCRA based on the IPCC and RCP8.5), of the expected impact
due to climate change (worst case scenario) for this country. We estimated the relative
magnitude between $5-18 million per year while we foresee this risk in the short to longterm (>6 years) for the Indonesian growers due to supply chain disruptions arising fromdrought and flood events during the growing season and combining estimated costs due
to disruption from crop losses, quality impacts and supply chain restrictions.

Primary response to risk
Supplier engagement
Promote the adoption of sustainable irrigation practices among suppliers

Description of response
As part of our tobacco procurement strategy, we require all tobacco suppliers to follow
our Good Agricultural Practices, which provide measures to mitigate water related risks
through the adoption of climate smart agriculture practices. We implement globally our
Local Risk Assessment (LRA) methodology utilizing granular local data to highlightwater-related risks and engaging local stakeholders including tobacco suppliers. PMI
utilizes the LRA results to implement initiatives with farmers to improve agriculturalresiliency to flooding and drought such as the case in Indonesia where the results of the2018 LRA led to the planning and implementation of interventions in 2019. Focus trial
projects to mitigate the effects of drought impacts on cultivated crops were deployed inclove and tobacco growing areas. In particular, drip irrigation systems have been tested
with farmers in clove production to increase resiliency, reduce dependency on rainfall
and avoid productivity losses. Another example is the improved water access throughthe installation of deep wells in a tobacco growing area to ensure the continuous
availability of water for crop irrigation and human consumption, in collaboration with our
local supplier, to avoid potentially negative impacts to the crop due to changing weather
patterns, supported by a thorough investigation of the deep well’s impact on the
groundwater level.
In order to ensure business continuity, PMI has substantial inventories of tobacco leaf
which can help mitigate short to medium term impacts (up to 5 years).

Cost of response
200,000

Explanation of cost of response70Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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The cost of response is based on the set yearly budget $0.2M (i.e. we set a single
amount and it is not possible to provide a breakdown) allocated in 2019 toenvironmental projects (mainly related to climate change, water security andbiodiversity) under the Good Agricultural Practices program implementation inIndonesia. The engagement with tobacco and clove suppliers to trial improvements incrop management practices in Indonesia it is included in the cost of response. The
expenditures represent approx. 4% of the 2019 global GAP budget. We have engaged
with our tobacco suppliers to improve crop management practices and arestrengthening our supply chain for tobacco at an overall cost of several tens of millions
of US$ (represented by the entire GAP budget). Similar yearly investment is expected
over the next 10 years considering projected climate change related impacts and thepotential scale-up of current projects.

Country/Area & River basin
BrazilRio Prado

Stage of value chain
Supply chain

Type of risk & Primary risk driver
PhysicalSevere weather events

Primary potential impact
Supply chain disruption

Company-specific description
In the short to long term most of PMIs sourcing regions face risks due to physicalclimate change events, such as cyclones, floods and others, potentially affecting ourtobacco suppliers’ capability to deliver on contracted volumes globally, e.g. in Brazil,
which is among PMI’s top 15 tobacco origins. Changes in precipitation patterns andextreme variability in weather patterns could affect the yield, quality and availability ofthe tobacco crops, triggering a substantive risk in case the potential financial impact isabove our threshold (1000 metric tons of tobacco leaves or $5.0 million), changing oursourcing plans and increasing operational costs, affecting PMI manufacturing operations
and business directly. In 2019 tobacco volumes were significantly impacted by extreme
weather events such as flood, hail, and extreme rainfall, causing relevant crop losses tocontracted farmers, e.g. in Brazil, where over 1,000 ha of production in Northeast andSouth regions were impacted in 2019 alone due to hail, drought and excess rain.
Extreme rainfall in the fields may require pumping of excess water; while extreme
droughts could require long-term irrigation, both of which would increase tobacco
production costs above our substantive financial impact threshold. Changes inprecipitation patterns could also affect local logistics, with extreme precipitation events
potentially leading to inaccessibility of road networks, disrupting the delivery of tobacco.

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Timeframe
More than 6 years

Magnitude of potential impact
MediumLikelihood
More likely than not

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
1,000,000

Potential financial impact figure - maximum (currency)
6,500,000

Explanation of financial impact
The potential financial impact range is based on a long-term assessment of costs fromphysical climate change risks related to extreme weather events in our tobacco origins
in Brazil in a given year. Based on previous years’ data on crop losses due to extreme
weather events, which could lead to decrease of revenues for our farmers from reduced
production capacity, combined with our comprehensive climate change risk assessment
tool, the range of potential financial impact is derived. Setting the basis as PMI thresholdfor substantive financial impact (1,000 metric tons of tobacco leaves or $5.0 million) for
the specific case of Brazil the lower range results in an estimate 3% (of the sourced
volume or spend). The upper range reflects an estimation of 10% (of the sourced
volume or spend) based on historical crop loss data (actual impacts reported) and ourmodeling projection. We estimated the relative magnitude at around $1-6.5M per year
while we foresee this risk in the short to long-term (>6 years) for the Brazilian growers
due to supply chain disruptions arising from extreme weather events such as excessive
rain fall, hail and drought, and combining estimated costs due to disruption from crop
losses, quality impacts and supply chain restrictions.
The costs’ estimation takes in account the above factors, however, due to their intercorrelation, our modelling provides a bottom and top range.

Primary response to risk
Supplier engagement
Promote adoption of waste water management procedures among suppliers

Description of response
PMI’s operations and supply chain are globally spread mitigating the effects of severe
climatic disruption, and business continuity management plans are designed to mitigate
the consequence of supply chain interruption and disruption. We have a thorough risk
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management process to inform our long-term business planning through different
assessments (e.g. water-related risk assessments and Good Agricultural Practices
program (GAP) assessments including soil health assessment). The results of theseassessments support business decisions, for example internal investments in soil
conservation practices among suppliers managed through dedicated trainings andtechnical support at farm level. Furthermore, PMI collaborates with its suppliers andengages with local communities towards water-related risks mitigation and resiliency.
In 2019 we updated our global water risk assessment and performed additional targeted
local water risk assessments in specific tobacco growing areas to better understand our
exposure to changes in water security and fine-tune our water stewardship strategy to
mitigate the risk in our tobacco supply chain. ,.In 2019, projects were implemented in
Brazil on water source protection and landscape conservation practices related totobacco farming by engaging farmers into creating vegetation buffers and physicalprotection barriers around water sources within their farmland, contributing to increasing
the resilience of the local agricultural system and protecting soil health, in response toincreasing occurrence of extreme weather events.

Cost of response
350,000

Explanation of cost of response
The cost of response is based on the yearly budget allocated in 2019 to environmental
projects (mainly related to climate change, water security and combat deforestation)
under the Good Agricultural Practices program implementation in Brazil, accounting for
approx. $350,000 in internal investments (i.e. the cost is one unique figure referring to
the total project budget and not calculated). In 2019 projects were implemented in Brazil
on water source protection and landscape conservation practices related to tobacco
farming, contributing to increasing the resilience of the local agricultural system, in
response to increasing climate change effects. PMI’s investment in these initiatives in
Brazil are included in the cost of response and represented approx. 8% of the global
2019 expenditure in environmental projects. Furthermore, PMI continued investing inresearch and trial of flood tolerant seed varieties, while adjusting our procurement
patterns, relocating tobacco crop growing areas and our substantial tobacco leaf
inventories, support mitigating short-term impacts.
An annual budget (i.e. the cost is one unique figure referring to the total project budget
and not calculated) is allocated to initiatives to promote the adoption of improved andinnovative practices by the farmers in our supply chain, similar yearly expenditure is
expected over the next 10 years.

Country/Area & River basin
Philippines
Other, please specify
Marikina river basin & San Juan river basin

Stage of value chain
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Supply chain

Type of risk & Primary risk driver
PhysicalOther, please specify
Drought, flooding and cyclones

Primary potential impact
Supply chain disruption

Company-specific description
Based on GermanWatch’s annual Climate Risk Index (2020), the Philippines is in the
top 5 countries most affected by climate change impacts (including cyclones andflooding) by 2018 resulting to an average loss of $3.1 billion in purchasing power parity
to the country from 1999 - 2018. The supplies and quality of tobacco leaf in Philippines,
one of the top 15 PMI’s tobacco sourcing countries, and supply chain manufacturing
disruptions influence PMI’s production and sourcing strategy, potentially posing asubstantive financial impact (above PMI’s threshold of 1,000 metric tons of tobacco
leaves or $5 million), considering volumes sourced and likelihood of extreme weather
events that affect the tobacco growing areas in the country. Tobacco leaf growing isstrongly influenced by physical climate change such as occurrence of drought andfloods. 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, affecting
PMI manufacturing operations and business directly.

Timeframe
More than 6 years

Magnitude of potential impact
MediumLikelihood
LikelyAre you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)

Potential financial impact figure - minimum (currency)
3,000,000

Potential financial impact figure - maximum (currency)
7,000,000

Explanation of financial impact
The potential financial impact range is based on a long-term assessment of costs fromphysical climate change risks related to drought, flooding and cyclones for the specific74Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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case of the Philippines. The lower range derives from our comprehensive climatechange risk assessment tool combined with the threshold defined for the substantive
financial impact, resulting in a 16% estimate (applied either to the sourced volume orspend). The upper range reflects an estimation of 32% based on our modelingprojection of the expected change for this country with climate change (worst casescenario). We estimated the relative magnitude between $3-7 million per year while weforesee this risk in the short to long-term (>6 years) for the Filipino growers due tosupply chain disruptions arising from physical risks such as drought, flooding andcyclones, and combining estimated costs due to disruption from crop losses, quality
impacts and supply chain restrictions.

Primary response to risk
Supplier engagement
Promote the adoption of sustainable irrigation practices among suppliers

Description of response
As part of our procurement strategy, we require all tobacco suppliers to follow our Good
Agricultural Practices, which provide measures to mitigate water related risks, throughthe adoption of climate smart agriculture practices. We implement globally our Local
Risk Assessment (LRA) methodology utilizing granular local data to highlight waterrelated risks and engaging local stakeholders including local Leaf suppliers. PMI utilizes
the LRA results to implement initiatives with farmers to improve agricultural resiliency toflooding and drought such as the case in the Philippines where the results of the LRA
performed in 2019 led to the planning and implementation of interventions. A good
example is the irrigation viability project to ensure the lack of negative impact due towater discharge following irrigation in the growing stage of tobacco cultivation. It
addresses water availability and quality at local level, mitigating potential negative
impacts due to drought, flood and cyclones. In order to ensure business continuity, PMI
has substantial inventories of tobacco leaf which can help mitigate short term impacts.

Cost of response
110,000

Explanation of cost of response
The cost of response is based on the yearly budget allocated to the Philippines in 2019
for environmental projects (mainly related to climate change, water security andbiodiversity) under the Good Agricultural Practices program, accounting for approx.
$110,000 in internal investment (i.e. the cost is one unique figure referring to the total
project budget and not calculated). The engagement with tobacco suppliers to drive
improvements in crop management and environmental protection practices in thePhilippines are included in the cost of response and represented approx. 2% of the
global 2019 expenditure in environmental projects) of the 2019 GAP budget. In 2019
projects were implemented in the Philippines on water source protection, water
management practices and landscape conservation practices related to tobacco
farming, contributing to increasing the resilience of the local agricultural system, in
response to increasing physical risks such as drought, flood and cyclones.

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W4.3
(W4.3) Have you identified any water-related opportunities with the potential to have asubstantive 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 asubstantive 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. Improving water
efficiency means that less water withdrawal volumes are required for the same
production unit volume. A lower water consumption would improve PMI resilienceespecially in the locations where we operate which are facing water related issues suchas water availability and water quality, and could generate additional financial benefit,
when the payback period of investment costs of water efficiency interventions arecovered.
As PMI is aiming to increase the production of RRP, the company sees improved water
efficiency as a strategic priority, especially due to the fact that our RRP requireapproximately 4 to 5 times more water per unit of product than conventional products
and water efficiency is a relevant opportunity to reduce this ratio. As more productionlines will be converted in the future to RRPs, the technological and process know-how
acquired from the successfully implemented solutions will become an asset for thecompany and the financial savings will grow with a multiplicative factor.
For this reason, PMI is aiming to optimize all new processes by increasing water
recycling and defining specific water quality by use. To seize these opportunities, PMI is
implementing technologies such as reverse osmosis and EDI, and a series of initiatives
to reduce water use. In 2019, PMI implemented other initiatives to reduce water use andincrease water recovery and our average water consumption decreased from 5.35 m3 in2010 to 4.74m3 of water for every million units of product equivalent. As the new
manufacturing process matures, we are incorporating new technologies to recycle andreuse water to limit the increase of water discharge. It should take us around 1-3 years
to realize these opportunities. Our improvements in water efficiency at PMI
manufacturing facilities are driven by a water withdrawal reduction target. In 2019 PMI
implemented 16 water efficiency projects across its manufacturing operations. An
example of this is the Cold Plasma air emissions System (Pilot Phase) in RRP factory
Italy, which aims to replace water for tower washing operations with an electricity-based
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technology. This project is expected to save up to 14,510 m3 per year.

Estimated timeframe for realization
1 to 3 years

Magnitude of potential financial impact
Low-medium

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
2,000,000

Potential financial impact figure – maximum (currency)
3,000,000

Explanation of financial impact
Results from PMI’s water footprint assessment carried out by Quantis indicate that
potential financial savings linked to water efficiency are around US$2 - 3 million in thenext 1 - 3 years. The estimates are calculated through direct financial savings thatwould be experienced by PMI once investment costs of water efficiency interventions
are covered.
The Quantis update of the water footprint of our RRP will provide us with a better
understanding of opportunities on how to increase water efficiency. In our industry, thepotential financial impact that could result by the direct cost of water is medium-low.

Type of opportunity
Resilience

Primary water-related opportunity
Increased resilience to impacts of climate change

Company-specific description & strategy to realize opportunity
Opportunities exist to increase PMI’s resilience to the impacts of climate change fromdirect operations. PMI business objective is to achieve our smoke free vision, andtherefore over time production of RRP will increase. Our RRP production requires
approximately 4 to 5 times more water per unit of product than conventional cigarettes
therefore the company will not only need to increase efficiency within its operations, butalso ensure that it is resilient to impacts of climate change such as flooding, droughts,
water stress, extended heatwaves and others that could impact its manufacturing
operations.
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dependent on water withdrawals and increase the company’s resilience. In 2019
120,000 cubic meters of water were recycled internally (vs 73,000 in 2018), with further
increments planned for 2020. PMI implemented 10 projects to increase the use ofrecycled water in Europe, Asia and Latin America. These will be replicated at other sites
in the future.
In March 2018, our pilot factory became the first factory in Brazil to be AWS certified,
and we are expanding its application across our global operations. Until the end of
2019, we certified another 5 sites according to the AWS Standard– in Italy, Portugal,
Indonesia, Russia, and Turkey – as part of the program to certify all factories by 2025,with the first eleven targeted by 2020. The AWS certification process supported theidentification of risks and opportunities, the management of projects implementation as
well as the engagement with local communities and stakeholders on water issues.

Estimated timeframe for realization
1 to 3 years

Magnitude of potential financial impact
Low

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
1,000,000

Potential financial impact figure – maximum (currency)
2,000,000

Explanation of financial impact
The cost of AWS certification varies, however based on cost of AWS assessments andcertification audits, it could cost more than $8.5 thousands per factory. We do see thisas a long-term investment that will increase our resilience to water risks due to climatechange and it is difficult to determine exactly how much this will save PMI. Based on
potential water savings analyzed and projected by our sites as well as potential
investments, we estimate this to be around $1,000,000 for all our operations until 2025.
In addition, the AWS process of consulting local communities and stakeholders on water
issues helps retain our social license to operate which has a high value even though not
quantifiable in dollar terms. We use here $1,000,000 as a proxy until we will have aninternal specific valuation of those non-monetary opportunities.

Type of opportunity
Resilience78Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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Primary water-related opportunity
Increased supply chain resilience

Company-specific description & strategy to realize opportunity
PMI estimated that above 90% of its water footprint can be linked to its agricultural
supply chain, therefore it is there that the biggest margins for reducing and managing
risks related to water issues are. With the risk monitoring system in place, both at global
and local levels, combined with the annual water related data collection at farm level, we
have access to reliable data to support business decisions towards implementing
interventions to improve local conditions within the supply chain and increase theresilience of farming communities linked to our operations. A more resilient supply
chain, especially in relation to water conditions in the watershed can lead to more
continuity in the business, better capabilities in tackling extreme events and conditions,and more efficiency in the usage of resource water for tobacco growing. By increasing
supply chain resilience, PMI is expecting to improve farmers’ conditions, and to prevent
physical climate risks such as droughts, extended heatwaves and others from impacting
the production of raw materials. PMI’s strategy has focused on establishing GAP as astandard for suppliers and providing technical assistance to partners in the supply chain
to prevent and/or mitigate water risks from materializing. To seize these opportunities,
PMI yearly assesses its water risks within its supply chain and shares results with key
suppliers. In 2019 we extended the roll out of our local water risk assessments incollaboration with our suppliers in seven designated areas in Canada, India, Mexico,
Mozambique, North Macedonia, Philippines and Turkey. PMI uses the results toimplement initiatives on irrigation and soil conservation practices with farmers to
improve agricultural resiliency to water-related negative impacts such as flood anddrought. Collective action with our tobacco suppliers and NGOs includes watershedmanagement, e.g. in Brazil the development of drought and flood tolerant seed varieties,
as well as access to water, sanitation, and hygiene (WASH) services for farmers andtheir workers, e.g. in Mozambique. By increasing supply chain resilience, PMI is
expecting to improve farmers’ conditions, and to prevent physical climate risks such as
droughts, extended heatwaves and other water-risks from impacting the production of
raw materials, which could impact PMI’s business.

Estimated timeframe for realization
More than 6 years

Magnitude of potential financial impact
Low-medium

Are you able to provide a potential financial impact figure?
Yes, an estimated range

Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
3,000,000

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Potential financial impact figure – maximum (currency)
12,500,000

Explanation of financial impact
Sustainable water and irrigation management has a positive effect on crop yield andhelps minimize uncertainty in supply. PMI estimates potential financial impacts to be
between $3-12,5 million with long-term impacts (>5 years). This estimation is done byusing financial information from gains in efficiency and crop productivity generated by
the implementation of best in class water management practices, among which drip
irrigation and drought resistant seed varieties, to avoid crop losses and improve yield.
PMI’s previous water related projects in its supply chain, as well as data annuallygathered through the GAP program (for example, baselines on water practices as wellas potential for development of water projects) are further contributing to informing
decisions and raising awareness to deliver better results.

W5. Facility-level water accounting
W5.1(W5.1) For each facility referenced in W4.1c, provide coordinates, water accounting
data, and a comparison with the previous reporting year.

Facility reference number
Facility 1

Facility name (optional)
IT (PM MTB RRP GF)

Country/Area & River basin
Italy
Other, please specify
Samoggia and Reno

Latitude44.55151

Longitude
11.16038

Located in area with water stress
Yes

Total water withdrawals at this facility (megaliters/year)
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Lower

Withdrawals from fresh surface water, including rainwater, water fromwetlands, rivers and lakes
0

Withdrawals from brackish surface water/seawater0

Withdrawals from groundwater - renewable0

Withdrawals from groundwater - non-renewable0

Withdrawals from produced/entrained water0

Withdrawals from third party sources
433.18

Total water discharges at this facility (megaliters/year)
186.94Comparison of total discharges with previous reporting year
Lower

Discharges to fresh surface water0

Discharges to brackish surface water/seawater0

Discharges to groundwater0

Discharges to third party destinations
186.935

Total water consumption at this facility (megaliters/year)
246.25Comparison of total consumption with previous reporting year
HigherPlease explain
The water consumption increased from 227.72 megaliters to 246.25 megaliters resulting
in a 8% increase.

Facility reference number
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Facility 2

Facility name (optional)
IT (PM MTB RRP ZP)Country/Area & River basin
Italy
Other, please specify
Reno

Latitude44.49783

Longitude
11.23614

Located in area with water stress
Yes

Total water withdrawals at this facility (megaliters/year)
70.8

Comparison of total withdrawals with previous reporting year
HigherWithdrawals from fresh surface water, including rainwater, water fromwetlands, rivers and lakes
0

Withdrawals from brackish surface water/seawater0

Withdrawals from groundwater - renewable0

Withdrawals from groundwater - non-renewable0

Withdrawals from produced/entrained water0

Withdrawals from third party sources
70.8

Total water discharges at this facility (megaliters/year)
23.29

Comparison of total discharges with previous reporting year
Lower

Discharges to fresh surface water82

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0Discharges to brackish surface water/seawater0

Discharges to groundwater0

Discharges to third party destinations
23.29

Total water consumption at this facility (megaliters/year)
47.51

Comparison of total consumption with previous reporting year
Much higher

Please explain
The water consumption increased from 31.83 megaliters to 47.51megaliters resulting in
a 49% increase, when the production volume increase was more than double (100%increase)

Facility reference number
Facility 3

Facility name (optional)
Philip Morris Indonesia Karawang

Country/Area & River basin
Indonesia
Other, please specify
Citarum

Latitude-6.35877

Longitude107.28877

Located in area with water stressNo

Total water withdrawals at this facility (megaliters/year)
197.11Comparison of total withdrawals with previous reporting year
Lower

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Withdrawals from fresh surface water, including rainwater, water fromwetlands, rivers and lakes
1.91

Withdrawals from brackish surface water/seawater0

Withdrawals from groundwater - renewable0

Withdrawals from groundwater - non-renewable0

Withdrawals from produced/entrained water0

Withdrawals from third party sources
195.2

Total water discharges at this facility (megaliters/year)
117.05Comparison of total discharges with previous reporting year
Lower

Discharges to fresh surface water0

Discharges to brackish surface water/seawater0

Discharges to groundwater0

Discharges to third party destinations
117.05

Total water consumption at this facility (megaliters/year)
80.06

Comparison of total consumption with previous reporting year
Lower

Please explain
The water consumption decreased from 88.72 megaliters to 80.06 megaliters resulting
in a 9.8% decrease

Facility reference number
Facility 484

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Facility name (optional)
Philip Morris Polska

Country/Area & River basin
PolandWisla

Latitude50.07172Longitude
20.02136

Located in area with water stressNo

Total water withdrawals at this facility (megaliters/year)
178.79Comparison of total withdrawals with previous reporting year
Lower

Withdrawals from fresh surface water, including rainwater, water fromwetlands, rivers and lakes
0

Withdrawals from brackish surface water/seawater0

Withdrawals from groundwater - renewable0

Withdrawals from groundwater - non-renewable0

Withdrawals from produced/entrained water0

Withdrawals from third party sources
178.79Total water discharges at this facility (megaliters/year)
105.01Comparison of total discharges with previous reporting year
Lower

Discharges to fresh surface water0

Discharges to brackish surface water/seawater85

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0Discharges to groundwater0

Discharges to third party destinations
105.01

Total water consumption at this facility (megaliters/year)
73.78

Comparison of total consumption with previous reporting year
Lower

Please explain
The water consumption decreased from 77.96 megaliters to 73.78 megaliters resulting
in a 5.4% decrease.

W5.1a(W5.1a) 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?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site not ISO certified is certified according to AWS protocol (so100% sites certified with one or the other standard).

Water withdrawals – volume by source% verified
76-100What standard and methodology was used?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site non ISO certified yet, it is certified according to AWS protocol

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(so 100% sites certified with one or the other standard).

Water withdrawals – quality% verified
76-100What standard and methodology was used?
97.5% of our sites have been ISO 14001 & OHSAS 18001 certified in 2019, covering
75% of the facilities in W5.1, and the only site not ISO certified is certified according to
AWS protocol (so 100% sites certified with one or the other standard).

Water discharges – total volumes% verified
76-100What standard and methodology was used?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site not ISO certified yet is certified according to AWS protocol (so100% sites certified with one or the other standard).

Water discharges – volume by destination% verified
76-100What standard and methodology was used?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site not ISO certified yet is certified according to AWS protocol (so100% sites certified with one or the other standard).

Water discharges – volume by treatment method% verified
76-10087

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What standard and methodology was used?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site not ISO certified yet is certified according to AWS protocol (so100% sites certified with one or the other standard).

Water discharge quality – quality by standard effluent parameters% verified
76-100What standard and methodology was used?
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only cite not ISO certified is certified according to AWS protocol (so100% sites certified with one or the other standard). We are constantly measuring ourwater discharge quality in all our affiliates and we are beyond local requirements.
Around 51% of our sites have been reviewed by local authorities. Going forward, we areplanning to verify them externally as part of our verification process

Water discharge quality – temperature% verified
76-100What standard and methodology was used?
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site not ISO certified is certified according to AWS protocol (so100% sites certified with one or the other standard). We are constantly measuring ourwater discharge quality in all our affiliates and we are beyond local requirements.
Around 51% of our sites have been reviewed by local authorities. Going forward, we areplanning to verify them externally as part of our verification process

Water consumption – total volume% verified
76-100What standard and methodology was used?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities

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in W5.1, and the only site not ISO certified yet is certified according to AWS protocol (so100% sites certified with one or the other standard).

Water recycled/reused% verified
76-100What standard and methodology was used?
100% of sites had EHS&S data verified by external party (SGS) according to ISO
14064-3, in the frame of the Green House Gas verification.
97.5% of our sites have been ISO 14001 certified in 2019, covering 75% of the facilities
in W5.1, and the only site not ISO certified yet is certified according to AWS protocol (so100% sites certified with one or the other standard).

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.
ScopeContent

Row Company- Description of business1
wide
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

Please explain
PMI is well aware of the importance of water forthe company. Water is used in our manufacturing
facilities, our agricultural supply chain, and in the
production of other raw materials and supplies,
such as paper, electronic devices, and packaging
materials. For this reason, PMI has adopted acompany-wide water policy, which effectively
integrates all the relevant water dimensions of
the business.
PMI’s water policy describes the company’sbusiness dependency on water, impacts, waterrelated performance standards for direct
operations and suppliers (in line with PMI’s GAP

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Commitment to align withand Sustainable Tobacco Program) andpublic policy initiatives, such as recognizes the linkages between water and otherthe SDGs
environmental issues such as climate change
and biodiversity conservation. PMI uses
Commitments beyond
international standards and widely recognizedregulatory compliancewater initiatives, such as the AWS Standard.
Commitment to water-related
innovation
PMI is an active member of the AWS; following a
successful pilot in Brazil, we are implementing
the AWS Standard across all our factories, toCommitment to waterpromote a more sustainable use of water in the
stewardship and/or collective
communities where we operate. PMI has active,
actiontime bounded water related targets and goals,
Commitment to safely
and is committed to align its efforts with othermanaged Water, Sanitation and public initiatives such as the SDGs. For example,
Hygiene (WASH) in the
SDG 6 is embedded in our Sustainability andworkplace
Good Agricultural Practices (GAP) programs.
Commitment to safely
PMI has additional commitments which go
managed Water, Sanitation and beyond regulatory compliance, including
Hygiene (WASH) in local
implementing innovative practices in water usage
communities
in agriculture, capacity building for farmers andAcknowledgement of thelocal communities, providing access to water andhuman right to water andsanitation, and taking collective water
sanitation
stewardship action. In our supply chain, water
related procurement standards are set forth
Recognition of environmental
through our GAP program, our risk assessment
linkages, for example, due toprocess, Water Insights data collection, andclimate change
Responsible Sourcing Principles. Beyond our
Other, please specify
efficiency targets in factories, we have outlined a
Roll-out anti-litteringroadmap for taking action with our suppliers andcampaigns in cooperation
with local stakeholders tostakeholders, including watershed action and the
reduce the amount ofdevelopment of tobacco seed varieties that arecigarette butts reachingdrought and flood tolerant.
waterways and the oceans.
Commitment to stakeholder
awareness and education

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) (do not include any names) of the individual(s) on theboard with responsibility for water-related issues.

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Position ofindividual

Please explain

Board-levelcommittee

PMI’s Board of Directors (BoD) and its Committees are responsible to foster the longterm success of the company including setting broad corporate policies, strategic
direction, and overseeing management, which is responsible for daily operations.
The BoD considers that environmental, social and governance (ESG) factors,
including climate change and water resources as relevant to the company’s businessand long-term success.
As an example of a water-related decision making process in 2019, the BoD and its
Committees approved the company’s annual budget and received updates on thecompany’s performance and targets against the budget throughout the year including
those related to the achievement of sustainability and climate change targets, andwater related matters. The annual budget factors in resources required to deploy
water related initiatives to achieve our goals.
Starting from 2018, the BoD mandated the Nominating and Corporate GovernanceCommittee (NCGC) of the Board, composed by 6 BoD members, at the time of the
publication of the 2020 proxy statement, to oversee PMI’s sustainability strategies
and advises the board on sustainability matters, including to provide
recommendations to executive management on climate change-related issues, and aset of initiatives aiming to actively reduce unfavourable impacts of our business on theenvironment and water resources, as well as to increase resilience of our businesstoward water resources in terms of quality and availability.
As an example of a water-related decision-making process, in 2019, the NCGC
reviewed the 2018 Sustainability Report which represent the PMI’s mainstream
external communications on its sustainability performances including water resources.
The Committee reflected on potential audiences for the engagement based on theinformation in the report and made a recommendation to the CSO for suchengagement.

Board-levelcommittee

The Audit Committee of the BoD, composed by 6 BoD members, at the time of the
publication of the 2020 proxy statement, oversees the assessment and managementof the company risks including to provide recommendations to executive managementon those related to climate change, and water-related issues such as flood or drought,
supply chain potential disruption, water scarcity, increased pressure on water
resources and conflict with other water users affecting our direct operations and/or our
supply chain, which may impact PMI’s ability to operate.

W6.2b(W6.2b) Provide further details on the board’s oversight of water-related issues.
Frequency thatwater-related
issues are ascheduled
agenda item

Governancemechanisms into
which water-related
issues areintegrated

Please explain

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Row Scheduled 1
some meetings

The Board of Directors (BoD) oversees PMI’s fullrange of activities including establishing broad
corporate policies, setting strategic direction, andoverseeing management, which is responsible forOverseeing
the day-to-day operations of the company. Part ofacquisitions andthe BoD’s oversight is focus on management’s
divestiture
efforts to enhance shareholder value responsibly
Overseeing major
and sustainably. The BoD approves the company’s
capital expendituresannual budget each year and receives updates on
Providing employee
the company’s performance and targets against the
incentives
budget throughout the year including those related
Reviewing andto the achievement of sustainability and water
guiding annual
targets. The BoD has established various standing
budgets
Committees to assist with the performance of its
Reviewing andresponsibilities and is regularly informed on future
guiding businessplans, and significant issues affecting the businessplans
including the water related ones. The BoD meets
Reviewing andtypically 6 times per year with additional meetings
guiding major plans of held as necessary. The BoD believes that
actionenvironmental factors, including those related to
Reviewing andwater resources, social, and governance (ESG)
guiding risk
relevant to the company’s business are important tomanagement policies PMI’s long-term success. Those factors are part of
the responsibility of the Board and considered in the
Reviewing andevaluation of the annual performances of theguiding strategy
company and its management. The BoD is advised
Reviewing andon Sustainability matters, including water
guiding corporate
responsibility strategy resources-related issues, by the Nominating andCorporate Governance Committee of the BoD,
Reviewing
which oversees the Company’s sustainability
innovation/R&D
strategies and performance, including water. The
priorities
committee met 3 times in 2019. The BoD oversees
Setting performancethe management of risks relating to the Company’s
objectives
business. Risk oversight is conducted both by theCommittees of the BoD as well as by the full BoD.
Management has identified and prioritized anumber of key enterprise risks. As part of the risk
management process, the Company has
established a Corporate Risk GovernanceCommittee (“CRGC”) comprising the COO, theCFO, the Vice President and Controller, the Vice
President Corporate Audit, and the Vice President
and Chief Ethics & Compliance Officer.
Management reports on these risks to theappropriate Committee and to the full Board. In
Monitoring
implementation andperformance92

Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 20202018, the Company conducted a full-scalereassessment of the strategic enterprise risk
management program Ownership of each of theprioritized risks is assigned to a member ofCompany Management, and the oversight of their
management is assigned to a particular Board
Committee; the same ownership assignment
continued in 2019 The Audit Committee of the BoD
was tasked with overseeing the risk management ofclimate change as it could result in natural
disasters, water scarcity, change in weather
patterns, agricultural instability, which may impact
PMI’s ability to operate. The committee met 7 times
in 2019. A member of the Company Management,
the Senior Vice President Operations has beentasked with the responsibility to address the climatechange risk, including water resources related risks.

W6.3(W6.3) Provide the highest management-level position(s) or committee(s) withresponsibility for water-related issues (do not include the names of individuals).

Name of the position(s) and/or committee(s)Chief Operating Officer (COO)

Responsibility
Both assessing and managing water-related risks and opportunities

Frequency of reporting to the board on water-related issues
Quarterly

Please explain
The Chief Operating Officer (COO) is a member of PMI’s Company Management (CM)and reports to the CEO. In 2019, the COO and SVP Operations were the highest
management level responsible for water related issues including management of risks
and opportunities; specifically, they are responsible for monitoring and reviewing PMI’s
objectives, risk assessment processes, business continuity strategies, and action plans
related to climate change, incl. water related issues and physical risks. Together with
the CM, they report on these issues to the Nominating and Corporate GovernanceCommittee and Audit Committee of the BoD on a quarterly basis. The COO is a memberof PMI’s Corporate Risk Governance Committee which drives PMI’s risk management
process; in this role, he also reports on climate and water risks that can result in
disruptions to PMI’s value chain, to the Audit Committee and to the full Board as
required through the year.

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Name of the position(s) and/or committee(s)Other C-Suite Officer, please specify
Senior Vice President, Operations

Responsibility
Both assessing and managing water-related risks and opportunities

Frequency of reporting to the board on water-related issues
Quarterly

Please explain
The Senior Vice President, Operations (SVP Operations) member of the Company
Management, is tasked with addressing climate change risk, including physical water
risks, across all activities of the company, because it could result in natural disasters,
water scarcity, and agricultural instability, which may impact PMI’s ability to operate.
Our SVP Operations is delegated with operational responsibility, including maintaining
robust business resiliency, risk assessment processes, and strategies to support
business continuity; he examines, monitors and reports to the Board, on water related
issues ensuring the integration of risk assessment and management into long-range
plan, objectives, budget and performance review processes. Effectively addressingthese risks is critical to the achievement of PMI's strategic objectives and as such isconsidered during the annual Integrated Risk Assessment process. Management
provided the Board with insights on the reassessment process thru 2019.

Name of the position(s) and/or committee(s)Other, please specify
External Engagement Committee

Responsibility
Other, please specify
Overseeing PMI’s sustainability work

Frequency of reporting to the board on water-related issues
Quarterly

Please explain
The External Engagement Committee (EEC) – composed of the company’s CEO,COO, and President External Affairs and General Counsel, as well as senior leadersfrom various functions – has the mandate of for developing and deploying strategies
and programs to propel better choices for consumers. Its mandate includes theoversight of PMI’s sustainability work. PMI’s sustainability materiality analysis was
updated in 2019, re-prioritizing the most relevant sustainability topics for PMI,
considering both internal and external perspectives.
To help manage these topics from a global and sustainability perspective, the EEC
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decided on Jan 9, 2020, to allocate Company Management ownership for each priority
sustainability topic. The respective Company Management members are expected toorganize from time to time topic specific “sustainability board” meetings to review
progress and decide on next steps related to the sustainability topic for which they areaccountable.

Name of the position(s) and/or committee(s)Chief Sustainability Officer (CSO)

Responsibility
Other, please specify
Leading the integration of sustainability, including environmental topics, across PMI.

Frequency of reporting to the board on water-related issues
Annually

Please explain
The Chief Sustainability Officer (CSO), reports to the President External Affairs andGeneral Counsel, a member of the Company Management. The CSO leads theintegration of sustainability across our business, aiming to actively reduce unfavourable
impacts of our business on the environment and water resources, as well as to increase
resilience of our business toward water resources in terms of quality and availability. He
heads PMI’s sustainability team. He is a member of the External Engagement
Committee (EEC) and, at least once a year, updates the Nominating and Corporate
Governance Committee of the Board on progress.
From an operational perspective, our Operations Sustainability and Corporate
Sustainability functions coordinate the company’s climate change-related activities,
including the water resources-related ones This helps ensure that our global strategies
and programs can be implemented at the market level and that local realities arereflected in our global efforts.

W6.4(W6.4) Do you provide incentives to C-suite employees or board members for the
management of water-related issues?
Provide incentives for management of water-related issues
Row 1

Comment

Yes

W6.4a(W6.4a) What incentives are provided to C-suite employees or board members for the
management of water-related issues (do not include the names of individuals)?

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Role(s) entitled
to incentive

Performanceindicator

Monetary
rewardChief Executive
Officer (CEO)Reduction of water
withdrawals

Nonmonetary
rewardOther, please
specify

Reduction of water
withdrawals

Sustainability
Managers,
Employees

Please explain

PMI’s compensation and benefits programsupports its business and financial objectives,
including the achievement of sustainability
Improvements inefforts such as reduction of water withdrawals
efficiency - direct
and water efficiency in direct and indirect
operations
operations. In its transformation towards a
Improvements insmoke-free future, PMI has defined strategic
efficiency - supply
priorities, among which to build global societal
chain
support for RRP, where our operational
Implementation ofsustainability efforts are embedded. Operating
employeewith excellence and protecting the environment
awareness
are strategic pillars.
campaign or training
The BoD considers that environmental, social
programand governance factors, including protecting
Increased access tothe environment and water resources areworkplace WASH
relevant to the company’s business and longterm success. These factors are part of the
responsibility of the Board and are consideredin its evaluation of the annual performance ofthe company and its management.
Accordingly, progress against the strategic
priorities is included in our overall performance
rating which determines the cash bonuses forthe management group and other eligible
employees. Executive management covering
sustainability, including EHS topics, arespecifically appraised each year for
performance against targets, including thoserelating to water resources and related issues.
We discuss our executive compensation
program in more detail in our proxy statement
filed with the U.S. Securities and Exchange
Commission (which includes annual
performance against our water reduction
targets).

Reduction in
consumption
volumes

Behavior change related indicator. Annually
many affiliates continued to perform voluntary
awareness and promotion campaigns/
programs in order to increase employees’
active participation in sustainability and EHS
programs and to make water stewardship partof the company's culture. Awards and96Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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Improvements inefficiency - direct
operations

recognition for best practices form a coreelement of such campaigns Water reduction
project; Operations employees also have theopportunity to earn awards for best practice
Improvements ininitiatives in the areas of water consumption
efficiency - supply
reduction and water efficiency. This forms partchainof our Operations “Lead, Lean and Learn” (3L)
Implementation ofprogram which encourages innovation,
employeecontinuous improvement and employee
awareness
campaign or training engagement. Reduction of water intensity,
efficiency projects and targets, and increasing
programaccess to workplace WASH were selected as
Supply chain
indicators of success as they are aligned withengagement
the company’s vision and they allow PMI to
Increased access toobjectively quantify the progress of theworkplace WASH
company in the field of water and sustainability.
Implementation ofwater-related
community project

W6.5(W6.5) Do you engage in activities that could either directly or indirectly influence
public policy on water through any of 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 andindirect activities seeking to influence policy are consistent with your water
policy/water commitments?
PMI operates within an overarching Code of Conduct, which we call our Guidebook for
Success, and a set of internal policies. This Code of Conduct and policies cover our mandatory
requirements and processes in relation to Sustainability including Environment, Health and
Safety, which comprises our water strategy; corporate contributions; and interaction withgovernment officials, amongst others. 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 thesegroups 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 theseorganizations and groups complies with applicable laws and our own principles. We routinely
evaluate our participation to ensure that the groups’ objectives align with the long-term interestsof PMI and its shareholders, and that their activities continue to reflect PMI’s values andstandards of conduct. There are times when we may not agree with certain positions adopted
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by the organizations we support. In these instances, we may choose to withdraw ourparticipation or support. PMI also could withdraw its support, or participation if inconsistencies
with its Code of Conduct or policies are discovered.

W6.6(W6.6) Did your organization include information about its response to water-relatedrisks in its most recent mainstream financial report?
No, but we plan to do so in the next two years

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?
Are waterLong-term Please explain
related issues time
integrated?
horizon(years)Long-termbusiness
objectives

Yes, waterrelated issues
are integrated

16-20

PMI’s long-term business objective is to deliver asmoke-free future, by replacing cigarettes with smokefree alternatives. Part of this transformation is thedevelopment of a more strategic and forward-looking
corporate sustainability strategy with RRPs at its core,
while integrating other material social andenvironmental topics such as water stewardship. Water
issues are integrated in our long-term businessobjectives, mainly through the identification andmanagement of water risks and opportunities such as
droughts, floods and cyclones which can directly impact
PMI’s value chain. We have also set water efficiency
targets in manufacturing and, in line with our strategy,
we will develop water reduction targets for RRPs. Our
Sustainability Team reviews annually the long-termbusiness goals and their connection with water andother environmental risks and opportunities, which
determine future management actions. Since thephysical risks of climate change which include
disruptions to water availability and security, mightsignificantly impact our business and supply chains, we
conducted climate risks assessments considering 2030
and 2040 scenarios since that is when we start seeing
climate trends shift. This time horizon was selected as it

98Philip Morris International CDP Water Security Questionnaire 2020 Monday,
August 24, 2020is also aligned with our risk planning and climatechange Science Base Targets, allowing us to implement
actionable goals with tangible long-term effects that
impact our business (16-20 years vs. 50 years).
Strategy forachievinglong-term
objectives

Yes, waterrelated issues
are integrated

16-20

Driving world-class sustainability programs to build aresilient value chain and answer our stakeholders’concerns is one of our core strategies to deliver asmoke-free future. Our materiality assessment is the
backbone of our sustainability strategy development;water stewardship is part of our material environment
topics and is integrated in our long term objectives. Our
strategy is aligned with our annual Long Range
Planning process and includes water issues such as
water efficiency in manufacturing and water use inagriculture to increase resiliency of our business.
Examples are the development of water targets andprojects in our tobacco supply chain; the AWS
certification of all our factories by 2025 and theinvestment in technologies to reduce, reuse and recycle
water in manufacturing. In 2018, the Board of Directors
was formally mandated to oversee sustainability
objectives, including water related issues, andmanagement’s efforts to enhance shareholder value
responsibly and sustainably, as this is important for ourcompany’s long-term success. With the ongoingchallenge of water security, we find it important to lookfurther into the future by conducting climate risks
assessments which look out to time horizon 2030 and
2040 for two reasons, 1) it is when we start seeing
climate trends shift, 2) it is aligned with our risk planningand climate change goals, enabling us to set actionable
goals with tangible long-term effects for our business(16-20 years vs. 50 years).

Financialplanning

Yes, waterrelated issues
are integrated

16-20

As PMI is working towards achieving its sustainability
goals, OPEX and CAPEX for water related issues areincluded in our financial planning; e.g. PMI has planned
financial resources to 1) implement technologies inmanufacturing to minimize the use of water; 2)
implement its long term GAP program in its tobacco
supply chain to achieve sustainable tobacco production,incl. activities with tobacco suppliers to address water
related risks, among others. These activities focus on
improvement of crop management practices, incl.
investment in more sustainable irrigation practices,
water and soil conservation plans, and development of99

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drought and flood tolerant varieties. 3) Conduct waterrisk assessment, for which PMI annually allocates abudget, and the results are used to inform thecompany’s business and sourcing strategies in the mid
and long term to prevent risks of supply disruption
and/or potential increase in procurement cost. PMI’s
risk assessment looks out to 2030 and 2040 as this iswhen the majority of risks are expected to materialize inthe absence of successful mitigation measures. The
indicated time horizon was selected as it is aligned with
our risk planning and climate change goals, allowing us
to set actionable goals with tangible long-term effects
for 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 anticipatedtrend for the next reporting year?
Row 1
Water-related CAPEX (+/- % change)-18

Anticipated forward trend for CAPEX (+/- % change)-43

Water-related OPEX (+/- % change)-11

Anticipated forward trend for OPEX (+/- % change)-10

Please explain
CAPEX: In 2019 we invested in technologies to reduce, reuse and recycle water in 15
factories, decreasing our expenditure by 18% vs 2018. 2018 and 2019 projects areunder validation prior further expenditure can be allocated, reason of the decrease in
2019. If they prove efficient, we will deploy them in 2021 and subsequent years. Due tothat we expect a reduction in investment of 43% in 2020 and potentially an increase in
2021 when we will deploy investments focusing in our RRP factories.
OPEX: a net decrease of 11% in our OPEX driven by around 80% by improvements
done in our RRP facilities in Italy and the Netherlands. This decrease is the fruit of our
expenditure in 2018, aiming to reduce water withdrawals and discharge, which are themain drivers of our OPEX water related costs. In 2018 we had anticipated a 10%
decrease, that we slightly exceeded in 2019. In 2020 we expect this cost to reduce 10%
more. Water-related OPEX is not significant to our business (less than 0.1%)
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W7.3
(W7.3) Does your organization use climate-related scenario analysis to inform its
business strategy?
Use ofclimaterelated
scenario
analysisRow Yes1

Comment

As our business relies on agricultural crops, physical risks are the primary
driver for us. We conducted a physical climate risk analysis of our direct
operations and our leaf suppliers growing regions using IPCC physical risk
scenarios. The climate risk analysis evaluated impacts from the reasonableworst case (RCP 8.5), a prudent application when assessing these risks.
Additionally, in 2018 PMI conducted a climate change risk assessment in linewith TCFD recommendations. In it PMI identified risks and opportunities for its
business under a reference scenario (exploring a decarbonization approach
under the existing climate and energy policies) and a 2 degree scenario(aligned with an average global temperature increase below 2 degrees). The
assessment considered the importance of water resources for PMI’s direct
and indirect operations and looked into several water elements including
projected prices of water and their implications, changes in water supply,
water stress and others.

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

W7.3b
(W7.3b) What water-related outcomes were identified from the use of climate-related
scenario analysis, and what was your organization’s response?
ClimateDescription of possible waterrelated
related outcomes
scenariosand models
appliedRow Other,1
pleasespecify
RCP 8.5

Our evaluation of water security
impacts uses the IPCC RCP 8.5
scenario which allows us to modeland better understand the potential
worst-case impacts across ourCompany response to possible
water-related outcomes

We continue to support and invest in
growing practices that enable thetobacco crop to be resilient to thechanging water scenarios. Through ourengagement with our tobacco supply

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operations and value chain. The
scenario analysis uses various
metrics including crop loss, businessdisruption to contextualize risks to ouroperations in the future. Some of thechallenges identified include
increased risk of drought andcyclones in some of our tobacco
growing regions as well as some of
our facilities. For example, in thePhilippines, based on our scenario
analysis, there is an increasing risk ofcrop loss from droughts, with losses
estimated greater than 10 percent,and cyclones. Our new RRP facilities
in Italy and our factory Poland arelikely be affected by increased water
stress and drought, and we anticipate
potentially increasing downtime andtemporary geographical shift ofoperations in some cases.

chain stakeholders we continuously
assess water related indicators with ourglobal and local water risk assessment
methodologies, to have the most
updated scenario and to better drive
responses on water management
through our GAP program with theimplementation of best practices andtailored interventions. Within our Water
Stewardship program in Leaf we aredeveloping quantifiable targets with atimeline to 2030 focusing on reduction
and replenishment indicators to mitigate
water related issues and trigger
generation of positive impact in thegeographies we source tobacco fromalong with increased resiliency fororigins like the Philippines where
extreme weather events are likely tocontinue to pose a risk for tobacco
production.
In our manufacturing facilities, water is
not a major input to conventional
product manufacturing. We continue toreduce water use in our facilities throughimprovement in water efficiency byimplementing new process designs,
conservation, and reusing or recycling
water where possible. Our water related
initiatives implementation has been
intensified since 2018, to anticipate
shortages in water availability, including
those in Italy and Poland. The expected
full implementation, including theevaluation of pilot projects andexpansion is forecasted by 2025.

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

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Please explain
As member of Value Balancing Alliance (VBA) we explore the Triple bottom line
accounting concept which focus on the balance between environmental, social, andeconomic issues. Water is a relevant topic included in the VBA’s valuation metrics, andwe expect through the participation to this working group to assess the relevance to use
an internal price on water. Today, as well as many other organizations, we evaluate
performance in a broader perspective to create greater business value using reports
and indicators based on different sources such as Global Reporting Initiative (GRI) andSAM CSA.
We joined the Alliance for Water Stewardship (AWS) in 2017 and by the end of 2019 we
certified 6 factories. We plan to certify by 2020 eleven factories which ranked highest in
our previous water risk assessment and to extend the AWS certification to the rest of
our factories by 2025. As PMI moves forward on its certification targets we will explore
water valuation practices in more detail.

W8. Targets
W8.1(W8.1) Describe your approach to setting and monitoring water-related targets and/or
goals.
Levels for
Monitoring at Approach to setting and monitoring targets and/or goals
targets and/or corporate levelgoals
Row Company-wide Targets are
1
targets andmonitored atgoals
the corporate
Business level levelspecific targets Goals are
and/or goals
monitored at
the corporate
Site/facility
specific targets level
and/or goals

PMI is committed to be a good water steward by minimizing
water use and effluent discharge in our factories; assessing
water risks where we operate and working with stakeholders
in shared watersheds towards the five water stewardshipoutcomes (good water governance, sustainable waterbalance, good water quality, habitat protection and WASH);
and implementing good agricultural practices in our tobacco
supply chain. We understand that setting company-widescience-based targets for GHG carbon reductions, doesn'tcover water withdrawal on which consumption, and pollution
typically have an impact only in the basin in which theyoccur. That's why our approach to reduce PMI’s impact onwater resources is focused on reducing water intensity perunit manufactured (cigarette or heated tobacco unit) and toensure that we apply water stewardship principles. We work
to understand the water risks in our operations, agriculturaland non- agricultural supply chain and then create specifictargets to mitigate any risks. An example is our target to103Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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certify all our top 11 highest water stressed factories by end
2020 against the Alliance for Water Stewardship standard,with all other factories targeted by 2025.

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 withdrawals

Level
Company-wide

Primary motivation
Water stewardship

Description of target
In 2015, we exceeded our goal to reduce by 20% our water withdrawals in all our
manufacturing facilities from a 2010 baseline. Since 2016 we have focused on futurewater demands that PMI will face from transitioning to RRP and the company set aninterim company-wide target to annually reduce total water withdrawals by 1%. Thistarget is measured per unit of production (sold cigarette equivalent). PMI set this target
to focus on achieving a better understanding of its future operational water demands, aswell as to achieve water security by identifying and reducing water demand in key partsof the manufacturing process. As we convert more factories to produce RRP, we will beresetting our target baseline to reflect the new production process and relative
difference in water withdrawals. PMI water reduction targets will continue to focus in
reducing the company’s overall water withdrawals at the company wide level.

Quantitative metric
Other, please specify% reduction per unit of product soldBaseline year
2010

Start year
2018

Target year
2019

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% of target achieved
100

Please explain
In 2019, we improved our water intensity and we exceeded our target of annual
reduction of 1%, by decreasing our intensity withdrawals by 6% vs 2018.
Despite the increase of production of our new RRP which requires approximately four tofive times more water per unit of product than conventional cigarettes, we managed toreduced withdrawals by improving water efficiency throughout that process andimplementing new technologies to recycle and reuse water, and by using rainwater
harvesting where feasible, with a view to minimize water discharge.

Target reference number
Target 2

Category of target
Water withdrawals

Level
Company-wide

Primary motivation
Water stewardship

Description of target
In 2015, we exceeded our goal to reduce by 20% our water withdrawals in all our
manufacturing facilities from a 2010 baseline. We focus on future water demands that
PMI will face from transitioning to RRP and, the company set an interim target toannually reduce total water withdrawals by 1%, from 2016 to 2019. PMI set this target tofocus on achieving a better understanding of its future water demands, as well as toachieve water security by identifying and reducing water withdrawals from new
manufacturing processes. As we convert more factories to produce RRP, we will beresetting our target baseline level to reflect the new production process and relative
difference in water withdrawals.

Quantitative metric% reduction in total water withdrawals

Baseline year
2010

Start year
2018

Target year
2019

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% of target achieved
100

Please explain
In 2019, we were able to improve our water withdrawn average volumes from 2010
baseline of 4,998,953 m3 to 4,009,062 m3, decreasing by 8.3% vs 2018. The result has
been achieved thanks to our efforts to improve water efficiency through implementing
new technologies to recycle and reuse water, and by using rainwater harvesting where
feasible, with a view to minimum water discharge partially compensated by the increaseof production of our new RRP which requires approximately four to five times morewater per unit of product than conventional cigarettes.

Target reference number
Target 3

Category of target
Community engagement

Level
Site/facility

Primary motivation
Risk mitigation

Description of target
The AWS Standard is a globally applicable framework for major water users tounderstand their water use and impacts as well as to work collaboratively for sustainable
water management in a catchment context. PMI uses this Standard to engage local
communities and other users in the catchment area such as local authorities, farmers
and others on different water issues such as good water governance, sustainable waterbalance, WASH, good water quality and others. Achieving an effective water
management at the catchment level will allow PMI to avoid water conflicts and achieve
water security PMI created a roadmap to assess and certify its 11 manufacturing
facilities with the highest water risks
under the Alliance for Water Stewardship by 2020. After our first pilot in Brazil we plan toextend our efforts globally by 2025 and hope this commitment will inspire othercompanies 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
2018

Start year
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2018

Target year2025

% of target achieved
15

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 to be certified
by AWS in the country. Based on the results and learnings from this pilot, we started toroll out the AWS Standard globally and by the end of 2019 we had 6 factories certified to
the AWS standard. As a priority, we plan to certify by 2020 the eleven factories whichranked highest in our previous risk assessment and to extend to the rest of ourfactories by 2025, aligning with our ISO 14001 scope: all factories above 3 million
cigarette equivalent annual production volume.

Target reference number
Target 4

Category of target
Water pollution reduction

Level
Other, please specify
Tobacco supply chain

Primary motivation
Reduced environmental impact

Description of target
We are aware that the use of fertilizers and pesticides in our agricultural supply chain
can cause water pollution, which would damage natural ecosystems and affect thecompany’s operations, and other water users. To prevent negative impacts on water
ecosystems, maintain water quality and achieve long term water security PMI has set
targets to eliminate WHO TOX1 pesticides by 2018, and other Highly Hazardous
Pesticides (HHPs) as defined by FAO/WHO guidelines by 2020. PMI set these targets
following the FAO and WHO recommendations on the classification of highly hazardous
pesticides . PMI engages its tobacco supply chain through its Good Agricultural
Practices program, and monitors progress on this target annually at the supplier level.

Quantitative metric% reduction in concentration of pollutants

Baseline year107Philip Morris International CDP Water Security Questionnaire 2020 Monday,
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2015

Start year
2015

Target year
2020

% of target achieved
92

Please explain
PMI is testing 100% of its tobacco purchased for pesticides residues. PMI has madeimportant steps towards the elimination of WHO TOX1 and other HHPs. In 2019, 100%of our tobacco purchase was free of WHO TOX1 and 92% was free from HHPs.

Target reference number
Target 5

Category of target
Water use efficiency

Level
Company-wide

Primary motivation
Water stewardship

Description of target
In 2015, we exceeded our goal to reduce 20% our water withdrawals in all our
manufacturing facilities from a 2010 baseline. We focus on future water demands that
PMI will face from transitioning to RRP, and we set a company-wide target to achieve awater ratio of 3.1 m3 of water withdrawn per million cigarettes equivalent produced by2022, with an interim target of 4.4 m3 of water withdrawn per million cigarettes
equivalent produced , by 2020 . Our baseline remains 2010 with 5.35. m3 of water
withdrawn per million cigarettes equivalent produced. PMI set this target to focus on
mitigating its future operational water demands increase due to RRP production, as wellas to increase resiliency with regard to water related risks by identifying and reducing
water demand in key parts of the manufacturing process. As we convert more factories
to produce RRP, we will be resetting our target baseline level to reflect the new
production process and relative difference in water withdrawals.

Quantitative metric
Other, please specify
Water ratio (water withdrawn in m3 per million cigarettes equivalent produced)

Baseline year
2010
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Start year
2019

Target year2022

% of target achieved
27

Please explain
This is a new target: from 2019 onwards, water intensity is measured in m³ per million
cigarettes equivalent produced. Despite the increase of production of our new RRP
which requires approximately four to five times more water per unit of product thanconventional cigarettes, we managed to reduced withdrawals by improving water
efficiency throughout the process and implementing new technologies to recycle andreuse water, and by using rainwater harvesting where feasible, with a view to minimize
water discharge. In the first year (2019) we managed to follow the reduction trajectory,
and we are on track to achieve the target in 2022.

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
The AWS Standard is a globally applicable framework for major water users tounderstand their water use and impacts as well as to work collaboratively for sustainable
water management in a catchment context. PMI uses this Standard to engage suppliers
and other users in the catchment area such as local authorities, local communities andothers on different water issues such as good water governance, sustainable waterbalance, WASH, good water quality and others. It is key for PMI to achieve an effective
water management at the catchment level as it will allow PMI to avoid water conflicts
and achieve water security objectives.
As part of the local Alliance for Water Stewardship roll out in our factories, we areengaging local suppliers (tobacco suppliers, farmers or direct material suppliers) topromote the standard and exchange best practices. By 2020, we plan to have 11 of oursites AWS certified and all our major sites by 2025. This is an important goal because it
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promulgates the use of the AWS international standard for sustainable water use within
the organization and beyond. This reinforces our commitment to a rigorous and data
driven approach to evaluating water. Our AWS team and our employees on site are fully
engaged to ensure that our factory meets the AWS standard, including engaging withlocal authorities, the farming community and civil society groups.

Baseline year
2018

Start year
2018

End year
2025

Progress
In 2017, we started to pilot the Alliance for Water Stewardship (AWS) Standard,
successfully certifying our site in Brazil in 2018. Furthermore throughout 2019, we
expanded the certification versus the AWS Standard at a further five sites – in Italy,
Portugal, Indonesia, Russia, and Turkey, as part of the program to certify all factories by2025. PMI uses the number of certified sites as indicator of success. The progressagainst the target is measured by the number of sites successfully AWS certified and in
the process of being AWS certified, being in line with our target. PMI considers 11
factories certified by 2020 and the full adoption of the standard in the remaining factories
by 2025 as the threshold of success. Through the AWS certification process, we
engaged actively with more than one supplier per site in the catchment area including
water suppliers, tobacco farmers/suppliers or paper suppliers, in line with our goal.

Goal
Promotion of sustainable agriculture practices

Level
Basin level

Motivation
Risk mitigation

Description of goal
Water scarcity is a global issue linked with climate change, which could have a direct
impact on PMI’s agricultural supply chains. PMI has identified that more than 90% of its
water footprint can be linked to its supply chain (tobacco suppliers alone are responsiblefor 51% of the water footprint), where suppliers use it as a key element for the
production of raw materials. Seen as PMI’s business security is wholly dependent upon
its raw materials in the supply chain, promoting sustainable agricultural practices thatmitigate water risks is key for the company’s long-term water and business security. PMI
is committed to achieving a sustainable management of water resources at the basin
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level. Thus, PMI is working with all its agricultural suppliers through its Good Agricultural
Practices (GAP) program. As part of GAP, PMI engages suppliers to develop andimplement water conservation plans that achieve rational use of water resources andincorporate best available irrigation practices at the local level, including efficientirrigation systems such as drip irrigation, timing, and amount of water distributed, basedon water use efficiency measurements. PMI rolled out GAP in 2002 and monitors its
success on an annual basis.

Baseline year
2007

Start year
2007

End year
2030

Progress
PMI measures progress for this goal on an annual basis, through the use of water
related indicators as part of the Good Agricultural Practices (GAP) program. The set ofindicators, as well as the specific goals vary within basins, as production conditions are
significantly different within PMI’s agricultural supply chain. Some of the measured
indicators include reductions in water withdrawal rates, number of farmers adopting drip
irrigation (or other smart irrigation practices) and other similar metrics. An example ofthis is the monitoring of farmers’ progress on the adoption of sustainable water
management practices. PMI monitors adoption rates of drip irrigation practices for
tobacco production and, we estimate that our engagement has resulted in 98% of thearea used to produce the tobacco purchased in 2019 from the Verona region (Italy)
applying drip irrigation systems. PMI aims to continue engaging with local farmers in theregion to achieve a 100% adoption of drip irrigation in Verona province by 2030 ,reaching our threshold of success.

W9. Verification
W9.1(W9.1) Do you verify any other water information reported in your CDP disclosure (notalready covered by W5.1a)?
Yes

W9.1a
(W9.1a) Which data points within your CDP disclosure have been verified, and which
standards were used?
Disclosure
moduleData verified

Verification
standard

Please explain

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W1 Current
state

The STP process includes: •Other, please
Annual self-assessments
specifycompleted by tobacco suppliers
Sustainable
Tobacco(reviewed by AB Sustain); • OnProduction
site audits conducted by AB
verification by
Sustain to a sample of contracted
AB Sustain
farmers; and • Comprehensive
review of tobacco suppliers’
policies, procedures, anddocumentation; and monitoringand proof demonstrating the levelof STP/GAP implementation.

GAP has been in place since
2002, and since 2016 we havebeen assessing conformity of
tobacco suppliers and farmers
with our GAP standards throughthe industry-wide Sustainable
Tobacco Program (STP)
managed by AB Sustain, an
independent supply chain
management specialist. One ofthe outcomes of the assessment
is an independent performance
rating against all STP criteria. In
order to focus on developing a
new STP 2.0 program, theindustry did not run collective
assessments with AB Sustain in
2019, and it is expected toresume them in the coming
years.
100% of PMI sourcing countries
had been audited on a 3-year
cycle from 2016 to 2018 and, in
2019, PMI continued to assess
conformity through annual selfassessments by all our
suppliers.

W3
Procedures

The STP process includes: •Other, please
Annual self-assessments
specifycompleted by tobacco suppliers
Sustainable
Tobacco(reviewed by AB Sustain); • OnProduction
site audits conducted by AB
verification by
Sustain to a sample of contracted
AB Sustain
farmers; and • Comprehensive
review of tobacco suppliers’
policies, procedures, anddocumentation; and monitoringand proof demonstrating the levelof STP/GAP implementation.

GAP has been in place since
2002, and since 2016 we havebeen assessing conformity of
tobacco suppliers and farmers
with our GAP standards throughthe industry-wide Sustainable
Tobacco Program (STP)
managed by AB Sustain, an
independent supply chain
management specialist. One ofthe outcomes of the assessment
is an independent performance
rating against all STP criteria. In
order to focus on developing a
new STP 2.0 program, theindustry did not run collective
assessments with AB Sustain in

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2019, and it is expected toresume them in the coming
years.
100% of PMI sourcing countries
had been audited on a 3-year
cycle from 2016 to 2018 and, in
2019, PMI continued to assess
conformity through annual selfassessments by all our
suppliers.
W4 Risks
The STP process includes: •Other, please
andAnnual self-assessments
specify
opportunities completed by tobacco suppliers
Sustainable
Tobacco(reviewed by AB Sustain); • OnProduction
site audits conducted by AB
verification by
Sustain to a sample of contracted
AB Sustain
farmers; and • Comprehensive
review of tobacco suppliers’
policies, procedures, anddocumentation; and monitoringand proof demonstrating the levelof STP/GAP implementation.

GAP has been in place since
2002, and since 2016 we havebeen assessing conformity of
tobacco suppliers and farmers
with our GAP standards throughthe industry-wide Sustainable
Tobacco Program (STP)
managed by AB Sustain, an
independent supply chain
management specialist. One ofthe outcomes of the assessment
is an independent performance
rating against all STP criteria. In
order to focus on developing a
new STP 2.0 program, theindustry did not run collective
assessments with AB Sustain in
2019, and it is expected toresume them in the coming
years.
100% of PMI sourcing countries
had been audited on a 3-year
cycle from 2016 to 2018 and in
2019 PMI continued to assess
conformity through annual selfassessments by all our
suppliers.

The STP process includes: •Other, please
Annual self-assessments
specifycompleted by tobacco suppliers
Sustainable
Tobacco(reviewed by AB Sustain); • OnProduction
site audits conducted by AB
verification by
Sustain to a sample of contracted
AB Sustain

GAP has been in place since
2002, and since 2016 we havebeen assessing conformity of
tobacco suppliers and farmers
with our GAP standards throughthe industry-wide Sustainable

W7 Strategy

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W8 Targets

farmers; and • Comprehensive
review of tobacco suppliers’
policies, procedures, anddocumentation; and monitoringand proof demonstrating the levelof STP/GAP implementation.

Tobacco Program (STP)
managed by AB Sustain, an
independent supply chain
management specialist. One ofthe outcomes of the assessment
is an independent performance
rating against all STP criteria. In
order to focus on developing a
new STP 2.0 program, theindustry did not run collective
assessments with AB Sustain in
2019, and it is expected toresume them in the coming
years.
100% of PMI sourcing countries
had been audited on a 3-year
cycle from 2016 to 2018 and in
2019 PMI continued to assess
conformity through annual selfassessments by all our
suppliers.

The STP process includes: •Other, please
Annual self-assessments
specifycompleted by tobacco suppliers
Sustainable
Tobacco(reviewed by AB Sustain); • OnProduction
site audits conducted by AB
verification by
Sustain to a sample of contracted
AB Sustain
farmers; and • Comprehensive
review of tobacco suppliers’
policies, procedures, anddocumentation; and monitoringand proof demonstrating the levelof STP/GAP implementation.

GAP has been in place since
2002, and since 2016 we havebeen assessing conformity of
tobacco suppliers and farmers
with our GAP standards throughthe industry-wide Sustainable
Tobacco Program (STP)
managed by AB Sustain, an
independent supply chain
management specialist. One ofthe outcomes of the assessment
is an independent performance
rating against all STP criteria. In
order to focus on developing a
new STP 2.0 program, theindustry did not run collective
assessments with AB Sustain in
2019, and it is expected toresume them in the coming
years.
100% of PMI sourcing countries
had been audited on a 3-year
cycle from 2016 to 2018 and in114

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conformity through annual selfassessments by all our
suppliers.
W1 Current
state

Water consumption volumes from Other, please
manufacturing facilities, including specify
water in and water out.
ISO 14064-3

In the frame of the Green House
Gas verification, carried out by
SGS, we also verified ourmanufacturing centers water
volumes data, both in and out,
and this is clearly described in
the verification statement issued
by SGS.

W8 Targets

Water consumption volumes from Other, please
manufacturing facilities, including specify
water in and water out.
ISO 14064-3

In the frame of the Green House
Gas verification, carried out by
SGS, we also verified ourmanufacturing centers water
volumes data, both in and out,
and this is clearly described in
the verification statement issued
by SGS.

W8 Targets

Manufacturing facilities AWS
certification.

We have become a member ofthe Alliance for Water
Stewardship to better
understand how to conserve thewatersheds where we operate,and six factories have been
already certified against theAWS Standard by the end of
2019, by SGS. We havecommitted to certify at least 11
facilities by 2020 and all
facilities by 2025.

Alliance for
Water
Stewardshipcertification

W10. Sign off
W-FI(W-FI) Use this field to provide any additional information or context that you feel isrelevant to your organization's response. Please note that this field is optional and is
not scored.

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W10.1
(W10.1) Provide details for the person that has signed off (approved) your CDP water
response.
Row 1

Job title

Corresponding job category

Chief Executive Officer (CEO)

Chief Executive Officer (CEO)

W10.2(W10.2) Please indicate whether your organization agrees for CDP to transfer yourpublicly disclosed data on your impact and risk response strategies to the CEO Water
Mandate’s Water Action Hub [applies only to W2.1a (response to impacts), W4.2 andW4.2a (response to risks)].
Yes

Submit your response
In which language are you submitting your response?
EnglishPlease confirm how your response should be handled by CDP
I am submitting my response

I am submitting to

Public or Non-Public Submission

Investors

PublicPlease confirm below
I have read and accept the applicable Terms

116