United Nations Global Compact
Communication on Progress 2015

HUMAN
RIGHTS &LABOR RIGHTSENVIRONMENTANTI-CORRUPTION

PMI Communication on Progress 2015

Contents
1. LETTER FROM OUR CEO			

3

2. ABOUT PMI					43. SUSTAINABILITY AND OUR BUSINESS
6
Our Products					84. HUMAN RIGHTS AND LABOR RIGHTS
12
Overview					13Supply Chain					18The Agricultural Labor Practices (ALP) Program 18
ALP Due Diligence				22Supply Chain: Beyond Tobacco-Growing		
27
Workplace Integrity				29Policies					29Workplace Integrity: Due Diligence		
31
Product Development and Marketing		
38
Policies					38Product Development and Marketing:Due Diligence					40Remediation Processes			43Human Rights and Labor Rights Metrics
46

5. ENVIRONMENT				48Overview					49Climate Change and Energy			53
Water						55Waste					57Agricultural Environmental Practices		
58
Looking Forward				62Environment Metrics				636. ANTI-CORRUPTION				64Overview					65Anti-Corruption Training			67Interaction with Governments			
68
Anti-Illicit Trade Strategies			
70
Looking Forward				737. SUMMARY					74PMI AND THE UN GLOBAL COMPACTThe United Nations (UN) Global Compact is a voluntary public-private partnership aimed at advancing global
sustainability goals through business commitment to ten fundamental Principles relating to Human Rights, Labor Rights,
Environmental Responsibility, and Anti-Corruption measures.
This is our first Communication on Progress under the Global Compact and focuses on our progress during the calendar
year 2015. It illustrates how we manage our business with regard to the Ten Principles and describes our policies,
activities, measurements and future plans for key topics across our value chain. We provide links to further information at
the end of each section.
PMI is also taking action to support broader UN goals and to participate in local UN Global Compact Networks. At thistime, we have engaged at our market level with 22 local UN Global Compact networks.

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3 • SUSTAINABILITY AND OUR BUSINESSCONTENTS

Letter from our CEO
Philip Morris International (PMI) joined the UN Global Compact (UNGC) in 2015.
By doing so we committed ourselves to making the UNGC Principles part of thestrategy, culture and day-to-day operations of our company.
I am pleased to renew our commitment to the UNGC and to the implementation of
its Ten Principles. Preparing this Communication on Progress provided us with anopportunity to reflect on, and share our work in the areas of Human Rights, Labor
Rights, Environment and Anti-Corruption. We have areas of strong performanceacross each and every principle and are determined to play an active role in thesustainability agenda, while delivering long-term growth for our business. For instance,
in 2015 we achieved CDP “Climate ‘A’ List” status and 100% Carbon Disclosure rating.
We have shown leadership in the fight against child and forced labor and in supporting
farmers to improve the productivity of their crops and respect the environment.
Our efforts in tobacco-growing communities are unique and are also helping tobacco
farmers grow a range of alternative crops that will better sustain their livelihoods ina turbulent global economy. We have comprehensive compliance programs, signed
the United Nations Call to Action on Anti-Corruption, and continue to focus on thefight against illicit trade in tobacco. Finally, we continue to invest in the advancementof diversity and inclusion in our company, a key priority in terms of our organizational
development.

ANDRÉ CALANTZOPOULOS
CHIEF EXECUTIVE OFFICERPHILIP MORRIS INTERNATIONAL

While we are proud of these and many other initiatives, the greatest contributionthat PMI can and must make towards global sustainability is to address the impactof smoking on health. We recognize that combustible cigarettes are a dangerous
product, and the best way to avoid the harms of smoking is never to start, or to quit.
But much more can be done to reduce health risks for the world’s 1.1 billion smokers.
Technological innovation is transforming our industry with a wide range of noncombustible nicotine products that have the potential to significantly reduce healthrisks when compared to smoking. PMI has been, and will continue to be, a driving force
in this transformation.
Our ambition is to lead a full-scale effort to ensure that non-combustible products
ultimately replace cigarettes to the benefit of adult smokers, society, our company
and our shareholders.
We recognize the challenges ahead and that a collaborative approach is key tosuccess. We aim to be transparent regarding the issues we face, humble regarding
our progress and open to share, learn and engage with others. I cordially invite
you to comment, challenge, and guide us as we seek to continuously improve thesustainability of our business and contribute to the global sustainability agenda(sustainability@pmi.com).

1 • LETTER FROM OUR CEO

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PMI Communication on Progress 2015

About PMIRESEARCH & PRODUCTDEVELOPMENTFARMERS &OUR SUPPLIERS

CONSUMERSOUR VALUE CHAIN
MANUFACTURE& PACKAGINGRETAILSALES &
MARKETING

DISTRIBUTION& LOGISTICS

Research & Product Development
Over 400
We have over 400 dedicated scientists,scientists,
engineers and technicians working on theand assessment of Reduced
engineers and development
Risk Products across our two research anddevelopment sites in Neuchâtel, Switzerland
techniciansand Singapore.
& Marketing & Retail180 countries Sales
Our products are available to adultworldwide
consumers in more than 180 countries,
through many millions of third-party
retail outlets.

25,000vehiclesworldwide4

3 • ABOUT
2
SUSTAINABILITYPMIAND OUR BUSINESSDistribution & Logistics
We operate a fleet of around 25,000
vehicles as well as engaging with specialized
logistics partners to distribute our products
within our markets.

Farmers & Our Suppliers
Our business depends on quality agricultural raw materials. Each year, wepurchase in excess of 400,000 metric tons of tobacco from 450,000 farmers(mainly small-holders) and suppliers in close to 30 countries. Around 2.5
million people live or work on farms supplying to PMI and it is estimatedthat over 30 million people are involved in tobacco farming worldwide.
We support farmers in the implementation of practices to improve theproductivity and the quality of their crops, reduce the impact on theenvironment, and achieve safe and fair working conditions. Over 3,500
field technicians support farmers with knowledge transfer, access to inputs,
technology and financing, and monitor adherence to our standards.
In addition, paper/board and cellulose acetate filter material are significant
raw materials for our business — we purchase a wide variety of direct andindirect materials as well as services from over 40,000 suppliers.

450,000
smallholder
farmers

Over 80,000
people33 countries

working across ourglobal facilities.

We operate 48 production facilitiesin 33 different countries.

Manufacturing & Packaging

TAKING AN ACTIVE ROLE IN COMMUNITIESPMI has a long and proud history of partnering with not-for-profit and public sector organizations
around the world to advance the social and economic conditions of the communities where our
employees live and work and in the agricultural regions where we source tobacco.
According to local context and needs, theprograms we support can range from accessto quality education or vocational training, toincome generating and employment creation
entrepreneurship, or the promotion of women’s
leadership role in society.
In 2015, PMI provided over 29 million USD to support
projects across the world.
Throughout this Communication on Progress weprovide a few examples of projects we support
that are directly relevant to our commitment to the
UNGC Principles, but a more complete overview canbe found at www.pmi.com/contributions

PMI concentrates its efforts in four key areas:

Access to Education
Economic Opportunity
Empowering Women
Disaster Relief andPreparedness

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PMI Communication on Progress 2015

Sustainability and our Business
Embedding the Ten UNGC Principles into our day-to-day
work requires the commitment and active contribution of
all our employees.
To ensure alignment with the UNGC Principles and advance our work in thisarea, we have set up a Working Group of subject-matter experts from ourbusiness functions. This Group is supported by the functional leaders whoreport to our CEO and is coordinated by a Sustainability Team reporting
directly to our Senior Vice President for Corporate Affairs.
Integrating the UNGC Principles within our business also means assessing
our current programs for opportunities to improve, and putting in place
plans to achieve the desired results. Sustainability program results areincluded in the assessment of our annual company-wide performance thatis reviewed by the Compensation and Leadership Development Committeeof the Board of Directors. Accordingly, these results are included in ouroverall performance rating which determines the cash and stock bonus poolfor Senior Management and other eligible employees.

Metrics and Goals: One improvement area for us is the definition of metrics
and goals for the various sustainability topics. This will help us benchmark
against other companies and substantiate our progress. We will be using
the Global Reporting Initiative Guidelines to support that work and publish
our progress in future reports. We also welcome the recent adoption of the
Sustainable Development Goals (SDGs) as an additional reference for oursustainability journey. We aim to align our work to the SDGs and commit toplay our part in making them become reality.

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3 • SUSTAINABILITY AND OUR BUSINESS

Materiality: A key starting point was
to undertake a preliminary internal
review of the material sustainability
topics to our business, including
wider stakeholder perspectives.
We will complete this materiality
assessment over the next year, inthe meantime we have used ourpreliminary review to confirm the mostimportant elements for inclusion inthis Communication on Progress.

A Strong Foundation for our Commitments
Our Compliance systems underpin the way we work and how we upholdour commitments.
The related tools and processes help us consistently do business in amanner that reflects what the law and society expect from us, especiallygiven the nature of our products. Specifically, our Code of Conduct, known
as our Guidebook for Success, describes the fundamental beliefs that unite
and guide us in working for PMI. It describes our Core Principles — practicaland clear direction about how we work. The Guidebook is available in 45
languages and is complemented by 18 Compliance policies, known as
Principles and Practices.

CORE COMPLIANCERISK AREAS
Competition Law, Conflicts ofInterest, Environment, Health,
Safety & Security, Fiscal & Trade(including Anti-Illicit Trade),
Anti-Corruption, Information
Protection, Marketing & Sales, andWorkplace and Labor Practices.

We use training and communication to build the necessary understanding
and motivation, with employees completing around 200,000 compliancetrainings each year. In addition to classroom and online training, we engage
with employees through town halls, leadership communications and teamdiscussions. For example, 48,000 employees participated in supervisorled discussions, using real-life work situations, as part of the roll-out of our
Guidebook.
We have clear policies, regular training and robust processes to motivate
employees to speak up if things don’t seem right. Compliance concerns
can be raised with supervisors, other leaders, directly to our ComplianceDepartment or through a third-party operated Compliance Helpline
available all day, every day in all languages spoken at PMI.
We conduct regular risk assessments to identify, evaluate and mitigate therisks of misconduct. We continuously adapt, and stay-up-to-date by using
behavioral ethics research to enhance the effectiveness of our program.
We measure progress and identify improvement opportunities throughemployee opinion surveys on Compliance and Integrity. Our latest survey in2015 was available in 36 languages and was completed by more than 28,000
employees representing a response rate of 74%. Different feedback tools
are also provided for factory floor employees.
Finally, the adherence of company processes to our Principles and Practices
is monitored by our Internal Controls function as well as our independent
Corporate Audit function, which reports to the Audit Committee of theBoard of Directors.

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PMI Communication on Progress 2015

Our Products
No report on our commitment to sustainable businesspractices would be complete without first reflecting on, andacknowledging, the societal harm caused by our products.
PMI manufactures and sells over 800 billion cigarettes per year to an
estimated 150 million adult consumers in more than 180 countries. Smoking
cigarettes causes serious disease. Smokers are far more likely than nonsmokers to get heart diseases, lung cancer, emphysema and other diseases.
In addition, smoking is addictive, and it can be very difficult to stop.
The best way to avoid the harms of smoking is never to start, or to quit.
Based on World Health Organization estimates, over 1.1 billion people
currently smoke cigarettes. As a result of global population growth, thisnumber is projected to remain largely unchanged over the next decade
despite the considerable efforts to discourage tobacco use.
We are convinced that much more can be done to improve the health andquality of life of smokers by improving the product through science andinnovation. For over a century, the basic design and use of cigarettes has
not changed: shredded tobacco leaves are burned, which produces smoke.
The cigarette smoker inhales nicotine along with various toxic substances
contained in that smoke. While nicotine is addictive, it is the smoke generated
by burning the tobacco (combustion) that is the principal problem.
Now, a number of non-combustible nicotine products, including
e-cigarettes and heated tobacco products, have the potential tosignificantly reduce individual risk and population harm comparedto smoking cigarettes. We refer to these products as “Reduced Risk
Products“, or “RRPs“. To ensure that as many smokers as possible give up
cigarettes, we see the need for a broad range of RRPs to satisfy varied
consumer preferences.
Heated tobacco products are a relatively new category of RRPs. We
currently commercialize one product in this category under the brandname iQOS. Instead of burning tobacco and creating smoke, iQOS heats
tobacco just enough to release a vapor that provides consumers witha nicotine experience and tobacco flavor similar to that of a cigarette
but with a significant reduction of the harmful or potentially harmful
compounds found in cigarette smoke.

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3 • SUSTAINABILITY AND OUR BUSINESSWe have compiled a substantial amount of scientific evidence related
to iQOS. The results so far are very encouraging and point to theconclusion that the effects on adult smokers who switch to iQOS arevery close to those observed in people who quit smoking: a high standard
to meet in terms of individual risk reduction. We are fully committed
to the transparent sharing of our science for third-party verification.
Over the last five years, our scientists have published over 150 bookchapters and articles on RRP-related research in leading peer-reviewed
scientific journals, such as the American Journal of Physiology, Nature
Biotechnology, Scientific Data, and Toxicological Sciences.
We already announced our goal to lead a full scale effort to ensure that
RRPs ultimately replace cigarettes. Indeed, we envision a smoke-freeworld where a broad range of RRPs fully satisfy the continuing consumer
demand for tobacco and nicotine products. To make this future a reality,
all manufacturers should be encouraged to develop and commercialize
RRPs in all countries where they operate.
Government regulation and oversight remain key. First of all, measures toencourage smokers to switch to RRPs should complement, not replace, theregulatory efforts to reduce smoking prevalence. Second, because RRPs are
addictive and not harmless, measures should be taken to ensure that: (1)the public is accurately informed about the health risks of RRPs; (2) youth
does not consume nicotine in any form; and (3) products are taxed andregulated in proportion to the harm they cause. Finally, governments havea critical role in reviewing the science related to RRPs and in preventing
manufacturers from making unfounded claims.
At PMI, we understand that our vision of replacing combustible cigarettes
is unprecedented for a tobacco company. Some will question our
motives and others will question why PMI would seek to transform a very
profitable market for combustible cigarettes. The answer is simple: ourgoal of developing and commercializing less harmful products to replacecigarettes is completely aligned with the expectations of smokers, society
and our shareholders.

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PMI Communication on Progress 2015

Our success as a business was primarily built on offering smokers a great
choice of cigarette brands, including Marlboro, L&M and Chesterfield.
We are convinced that our continued success will depend, above all, on
our ability to offer smokers around the world less harmful alternative
products.
PMI recognizes the importance of the UN Sustainable Development
Goals and especially Goal 3 on health. We see our specific contribution to
Goal 3 in prioritizing the development and commercialization of RRPs.
Our industry is standing on the cusp of a true revolution. For commercial,
ethical and public health reasons, we aim to be the leader of thetransformation that lies ahead.

LEARN MORE
• Company Overview: www.pmi.com/overview• Our Management: www.pmi.com/management• Corporate Governance: www.pmi.com/governance• Guidebook for Success: www.pmi.com/guidebook• Financial reports and investor information: investors.pmi.com• PMI Science: www.pmiscience.com

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3 • SUSTAINABILITY AND OUR BUSINESSPMI’s R&D HQ in Neuchâtel, Switzerland.

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PMI Communication on Progress 2015

Human Rights and Labor Rights

should support and respect the protection of
01 Businesses
internationally proclaimed human rights
should make sure that they are not complicit in
02 Businesses
human rights abusesshould uphold the freedom of association and the03 Businesses
effective recognition of the right to collective bargaining
should uphold the elimination of all forms of
04 Businesses
forced and compulsory labor

05 Businesses should uphold the effective abolition of child labor
should uphold the elimination of discrimination in
06 Businesses
respect of employment and occupation

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3 • HUMAN
4
SUSTAINABILITY
RIGHTS AND
ANDLABOROUR BUSINESSRIGHTS

Overview
Respecting labor rights and human rights is a critical element of doing
business responsibly. That has been our strong belief for a long time. Now,
prompted by our commitment to the Global Compact, we are embarking
on a more systematic, rights-based approach in accordance with the UN
Guiding Principles on Business and Human Rights (Guiding Principles).
In line with the practical guidance issued by the Global Compact’s Human
Rights and Labor Working Group, the Guiding Principles will frame ourpath forward with regard to Global Compact Principles 1-6. We recognizethat there is much work for us to do and we intend to build on the lessons
we have learned through our longstanding commitment and culture of
doing business with integrity across our value chain.

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PMI Communication on Progress 2015

Introduction to our Human Rights Policies
Human rights naturally include labor rights, namely those
covered by the Global Compact’s Principles 3-6, which arerecognized in international human rights conventions.
Our related commitments are reflected in PMI’s Guidebook for Success andin a supporting network of policies which address the needs of our diverse
global operations, with a particular focus on our workplace and supply chain.
While we take pride in the policies and robust systems that we have put inplace, we are working with business and human rights experts to undertakea detailed and systematic gap analysis to determine where our policies andprocedures need to improve.
For this first Communication on Progress to the UNGC, we have adopted
the following interim Human Rights Policy Statement:“PMI is committed to respecting all internationally recognized humanrights in accordance with the UN Guiding Principles on Business andHuman Rights. We commit, in particular, to respect the relevant rights
embodied in the International Bill of Rights and the International Labor
Organization’s 1998 Declaration on Fundamental Rights and Principles at
Work throughout our operations, including our entire value chain — fromsupplier to consumer.
While we cannot promise that we will be able to anticipate andavoid all adverse human rights impacts, we will strive to implement
a comprehensive human rights risk management system. We will
progressively develop and implement policies and procedures to
identify, mitigate, and respond to adverse human rights impacts withwhich we are actually or potentially involved. We commit to doing sowith our foremost focus on risks to rights-holders.”

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4 • HUMAN RIGHTS AND LABOR RIGHTS

Based on internal and external engagement over the next year, weintend to develop a more detailed Human Rights Policy to fill any specificpolicy gaps and embed our commitment to human rights throughout thecompany, covering:
1. Our overarching human rights commitment
2. The oversight responsibilities of PMI senior management
3. Implementation responsibilities within line management and central functions
4. Our human rights impact assessment approach
5. Our approach to integrating assessment results in our operations
6. Our method for developing grievance mechanisms
7. Our approach to monitoring responses to actual and potential human rights impacts
8. Our approach to consistent reporting on our human rights impacts and responses
9. Our approach to prioritizing responses to human rights impacts
10. Our approach to remedying human rights impacts
11. How the Human Rights Policy interacts with other compliance and integrity policies

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PMI Communication on Progress 2015

Introduction to our Human Rights Due Diligence
Our human rights due diligence will include assessment,
integration, monitoring and reporting and will build on our
existing processes.
Line management is accountable for policy implementation and ourCompliance function supports management through communication, training,and other tools. Our Internal Controls and Corporate Audit functions checkthe adherence to our Principles and Practices.
We rely on a strong culture of internal reporting and investigate all reported
suspected violations of any of our Compliance Principles and Practices.
These reports can be made through multiple specified channels, including
anonymously via an independent and confidential Compliance Helpline.
We proscribe, with related disciplinary action, any retaliation or threats ofretaliation against any employee or participant in an investigation into any
suspected compliance violation.

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4 • HUMAN RIGHTS AND LABOR RIGHTSStructuring our Human Rights Reporting
Our human rights ambitions are grounded in the Guiding
Principles’ practical insight on how companies should respecthuman rights. We have tailored our reporting on Global
Compact Principles 1 to 6 around Guiding Principle 15:“In order to meet their responsibility to respect human rights,
business enterprises should have in place policies and processes
appropriate to their size and circumstance, including:(a) A policy commitment to meet their responsibility to respecthuman rights;(b) A human rights due diligence process to identify, prevent, mitigate andaccount for how they address their impacts on human rights;(c) Processes to enable the remediation of any adverse human rights
impacts they cause or to which they contribute.”

In the following sections we describe our existing efforts
to respect human rights through policies, due diligenceprocesses and remediation measures, across three material
dimensions of our operations: Supply Chain; Workplace
Integrity; and Product Development and Marketing.

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PMI Communication on Progress 2015

Supply Chain
A good example of our commitment to respect human rights
is the Agricultural Labor Practices (ALP) program, which welaunched in 2011 in the wake of stakeholder concerns aboutrisks to rights-holders in tobacco-growing.
The Agricultural Labor Practices (ALP) Program
PMI’s commitment is to progressively eliminate childlabor and other labor abuses where they are found, and toachieve safe and fair working conditions on all farms where
we source tobacco.
The ALP Code defines the labor practices, principles and standards we
expect to be met by all tobacco farmers with which PMI or PMI’s suppliers
have contracts to grow tobacco. It is organized around seven principles
relating to fundamental human rights and particularly notable risks torights-holders, and is based on the Standards of the International Labor
Organization (ILO) Declaration on Fundamental Principles and Rights at
Work and other relevant ILO conventions.
Farmers and suppliers are expected to apply the ALP Code (see pages
20-21) in a diligent and transparent manner, and to work with us oncontinuously improving practices. We recognize that labor abuse canoften have underlying systemic causes that require the serious and lastingcommitment from all actors in the supply chain as well as government andother stakeholders.

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4 • HUMAN RIGHTS AND LABOR RIGHTS

Addressing Child Labor Through Community
Initiatives and Operational Support to Farmers, Two
Complementary Efforts:
In Mexico, the PMI affiliate, PMM, collaborated with an array of
stakeholders — including the Secretaries of Social Development,
Health, and Education and two local NGOs (Save the Children in
Mexico and Desarrollo Rural de Nayarit) — to outfit and develop Child
Care and Education Centers (CAEIs) for children of tobacco workers
in the tobacco-growing areas of Nayarit. Since the program’s launch
in 2001, PMI has supported the establishment of eight CAEIs, which
provide full-day activities, education, balanced nutrition, and healthcare services to benefit approximately 6,900 children. Despite having
stopped direct sourcing of tobacco in Mexico in 2015, PMI continues
to support the program to this day.

Child Care and Education Center in Mexico.

In the Philippines, Pakistan and Indonesia, PMI’s local affiliates
developed a two-pronged program to reduce the risk of children
being involved in hazardous farm work. The local affiliates equip
farmers with a labor-saving technique in the form of devices called“clips”, which allow for more efficient preparation of tobacco leaves
for curing, simultaneously reducing the risk of children being involvedin the process. In parallel, these affiliates are running a summer school
program for farmers’ children during the harvest season.
To assess the efficacy of this program, our affiliates in the Philippines
and Pakistan implemented a detailed protocol of increased random
unannounced visits during peak season to groups of farmers who 1)
received only clips; 2) whose children were involved in the summer
school program; 3) were participating in both initiatives; and 4) acontrol group not involved in the program.
While further validation is needed, the 2015 assessments suggest
promising results. The risk of farmers relying on child labor appears
to have declined markedly for those who participated in the
program, particularly for those who participated in both initiatives.
The assessment will be repeated in the next crop seasons in thePhilippines and Pakistan and trialed in Indonesia, Thailand and India.

A farmer uses a labor-saving technique (known
as “clip-sticks”) to hang up tobacco leaves forcuring. PMI supports the introduction of“clip-sticks” on direct contract farms coupledwith after-school programs for children andregular, ad hoc monitoring by dedicated field
staff on tobacco farms to prevent child labor.

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The ALP Code Principles and Standards
i. ELIMINATE CHILD LABORThe ALP Code unequivocally states that there shallbe no child labor. Based on ILO Convention 138, it also
specifies clear “Measurable Standards” which allow
us to assess progress over time and to be precise incommunicating our expectations:• There is no employment or recruitment of child labor.
The minimum age for admission to work is not less than
the age for the completion of compulsory schooling and,in any case, is not less than 15 years or the minimum age
provided by the country’s laws, whichever affords greater
protection.
• No person under 18 is involved in any type of hazardous
work.
• In the case of family farms, a child may only help on his or
her family’s farms provided that the work is light and thechild is between 13 and 15 years or above the minimum
age for light work as defined by the country’s laws,
whichever affords greater protection.

• Work hours are in compliance with the country’s laws.
Excluding overtime, work hours do not exceed, on aregular basis, 48 hours per week.
• Overtime work hours are voluntary.
• Overtime wages are paid at a premium as required by thecountry’s laws or by any applicable collective agreement.
• All workers are provided with the benefits, holidays, andleave to which they are entitled by the country’s laws.

iii. FAIR TREATMENT
We expect farmers to ensure fair treatment of workers.
There shall be no harassment, discrimination, physicalor mental punishment, or any other forms of abuse.
Measurable Standards:• There is no physical abuse, threat of physical abuse, or
physical contact with the intent to injure or intimidate.
• There is no sexual abuse or harassment.

ii. FAIR INCOME AND WORK HOURS• There is no verbal abuse or harassment.

We expect of farmers that the income earned byworkers during a pay period or growing season
is enough to meet workers’ basic needs and shallbe of sufficient level to enable the generation of
discretionary income. Workers shall not be madeto work excessive or illegal work hours. Measurable
Standards:• There is no discrimination on the basis of race, color,caste, gender, religion, political affiliation, union
membership, status as a worker representative, ethnicity,pregnancy, social origin, disability, sexual orientation,
citizenship, or nationality.

• Wages of all workers (including for temporary, piecerate, seasonal, and migrant workers) meet, at a minimum,
national legal standards or agricultural benchmark
standards.
• Wages of all workers are paid regularly, with a minimum
frequency, in accordance with the country’s laws.

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4 • HUMAN RIGHTS AND LABOR RIGHTS• Workers have access to a fair, transparent and anonymous
grievance mechanism.

iv. ELIMINATE FORCED LABORThe ALP Code provides that all farm labor must be
voluntary and that farmers must not rely on forcedlabor. Measurable Standards:• Workers do not work under bond, debt or threat and mustreceive wages directly from the employer.
• Workers are free to leave their employment at any timewith reasonable notice.
• Workers are not required to make financial deposits with
employers.
• Wages or income from crops and work done are
not withheld beyond the legal and agreed payment
conditions.
• Farmers do not retain the original identity documents ofany worker.
• The farmer does not employ prison or compulsory labor.

v. SAFE WORK ENVIRONMENT
We expect farmers to provide a safe environment toprevent accidents and injury and to minimize healthrisks. Accommodation, where provided, shall beclean, safe and meet the basic needs of the workers.
Measurable Standards:• The farmer provides a safe and sanitary working
environment, and takes all reasonable measures toprevent accidents, injury and exposure to health risks.
• No worker is permitted to top or harvest tobacco, or toload barns unless they have been trained on avoidance ofgreen tobacco sickness.
• No worker is permitted to use, handle or apply crop
protection agents (CPA) or other hazardous substancessuch as fertilizers, without having first received adequate
training and without using the required personal
protection equipment. Persons under the age of 18,

pregnant women, and nursing mothers must not handle orapply CPA.
• Workers do not enter a field where CPA have been
applied unless and until it is safe to do so.
• Workers have access to clean drinking and washing waterclose to where they work and live. Accommodation, where
provided, is clean, safe, meets the basic needs of workers,
and conforms to the country’s laws.

vi. FREEDOM OF ASSOCIATION
We expect farmers to recognize and respect workers’
rights to freedom of association and to bargain
collectively. Measurable Standards:• The farmer does not interfere with workers’ right tofreedom of association.
• Workers are free to join or form organizations and unionsof their own choosing and to bargain collectively.
• Worker representatives are not discriminated against andhave access to carry out their representative functions in
the workplace.

vii. COMPLIANCE WITH THE LAW
We expect farmers to comply with all applicable laws
in their country relating to employment. Measurable
Standards:• All workers are informed of their legal rights and theconditions of their employment when they start to work.
• Farmers and workers have entered into written
employment contracts when required by a country’s laws
and workers receive a copy of the contract.

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PMI Communication on Progress 2015

TOBACCO CURING
ALP Due Diligence
Implementing the ALP Code has been a tremendous
challenge and learning opportunity because of the vast sizeof our tobacco supply chain.
We source tobacco from around 450,000 farmers in close to 30 countries
around the world. Most farms are small scale, with the vast majority of
tobacco grown on two hectares or less. We are indebted to Verité, aninternationally renowned labor rights NGO, for their invaluable supportin helping us to design and implement a program to address issues andimprove conditions for an estimated 2.5 million people living or working on
tobacco farms from the United States to Brazil to Kazakhstan.

Our approach to ALP due diligence is built on four pillars:
1.	Training and operational support: Together with our suppliers, wehave trained more than 3,500 field technicians on the ALP Code. These
technicians are responsible for supporting farmers through visits atregular intervals throughout the growing season. The technicians draw
on their relationships of trust with the farmers to engage regarding theirconcerns, train them continuously on the ALP Code requirements, andprovide concrete support to help continuously improve farm practices(including technical know-how, access to inputs, new technologies,
financing, and health and safety equipment and training, among others).

Virginia-type tobacco is cured inheated barns. Most traditional curingbarns are made of brick or mud andthe heat needed to cure the tobacco
is distributed through flue pipes, oftenwith low energy efficiency. Together
with our suppliers, we are supporting
farmers to improve these traditional
methods, for example, by furnaceand flue modifications and improved
insulation and controls, which can leadto energy efficiency improvementsof up to 30%. Bulk barns are one
modern method of curing tobaccothat can be 60% more efficient than
traditional barns. In these barns,
fresh tobacco is loaded into racks
or cages and transferred into large,
insulated containers where heat andair is circulated over 6-7 days to curethe tobacco. Whilst implementationof bulk barns is not currently feasible
everywhere we source tobacco, weare supporting its introduction in
specific locations (e.g. Brazil).

2.	Monitoring: We have started by building detailed farm profiles to track
the socio-economic status of each contracted farm and are progressively
introducing systematic monitoring of farm labor practices through
PMI affiliates and supplier organizations, either with prioritized ALP
Code risks or defined geographic areas. The farm-by-farm monitoring(operationalized on the ground by the field technicians) is a cornerstoneof our approach and was designed to provide a clear picture of tangible
progress (or lack thereof) in the adoption of the ALP Code standards.

Virginia-type tobacco curing barn in Malawi.

224 • HUMAN RIGHTS AND LABOR RIGHTS

3.	Assessment: We supplement the internal monitoring
conducted by PMI affiliates and suppliers with independent,
external assessments conducted by Control Union
Certifications — assessors who have been trained, andoften accompanied, by representatives from Verité. These
assessments provide independent verification of how well the
ALP Code is understood and implemented.
4.	Reporting: We have embraced complete transparency regarding
the results of our ALP assessments, including the challenges
we continue to face. Control Union’s assessments are available
on the PMI website. In addition, we regularly publish detailed
progress reports on ALP’s global implementation. The mostrecent of these was published in March 2016 and is available on
our website.

“PMI continues to achieve a commendable level of disclosure.
During this reporting period, the company published on its
website third-party assessment reports on ALP implementationin Brazil, Mexico, Italy, the Philippines and the United Stateswith additional reports from audits conducted during 2014-2015
forthcoming. (…) This monitoring is done against 32 measurable
standards on over 450,000 farms in approximately 30 countries— a massive undertaking that bolsters the credibility and validityof PMI’s problem-solving interventions.”

ENSURING FOOD SECURITY
IN AFRICA
Assuring farming communities’
food security alongside cash crop
production is of vital importance inAfrica. Monitoring other crops thatare grown on tobacco farms not only
helps to gain a better understandingof food insecurity risks, but is also an
important way to measure progress ofvarious ongoing initiatives to promote
food security and crop diversificationthat are implemented by PMI’s
suppliers. In 2014, more than 300,000
tons of maize was produced on farms
supported by PMI’s suppliers. In
2015, approximately 180,000 tobacco
farmers in Mozambique, Malawi, andTanzania additionally grew food crops.
We have set a 2:1 ratio of food crops
to tobacco (on a weight basis) as an
overall target for our food security
initiatives. Currently we are assessing
the possibility of also having specifictargets for individual farms, considering
their production capacity and the needsof farmer families and workers.

- Dan Viederman, Verité’s former Chief Executive Officer

The establishment of direct contractual relationships withindependent farmers, either by us or by our suppliers, is the criticalenabler to effectively implement all the elements of PMI’s ALP due
diligence. PMI currently purchases around 88% of the tobacco it
needs through direct contracts, after having significantly reduced
purchases from the auction floor (e.g. in Malawi) or middlemen (e.g. inIndonesia), to gain visibility into farm level practices and to leverage
improvement of the overall conditions of production.

Direct contract farmers growing food crops(maize) alongside their tobacco in Malawi.

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PMI Communication on Progress 2015

Workplace Safety in Our Tobacco Growing Supply Chain
Safety of the work environment is another principle of our ALP Code,operationalized by measurable standards covering the key areas of risk
on a tobacco farm, including handling of crop protection chemicals andprevention of green tobacco sickness. We have implemented numerous
initiatives to help farmers meet the requirements set, including the
distribution of Personal Protective Equipment (PPE) and specialized
training to improve the understanding of hazards on the farm andpromote the adoption of risk avoidance behaviors. For example, in
2015, Field Technicians provided PPE kits and associated training toapproximately 127,000 farmers in Mozambique, more than 25,000
farmers in Malawi (representing 87% of farms contracted by our
suppliers), and approximately 44,000 farmers in Tanzania (80%).
Despite identified incidents related to health and safety remaining thesecond most prevalent issue monitored by Field Technicians in Africa(after child labor), the occurrence dropped by around 40% during
2014-2015.
In Brazil, PMI’s local affiliate introduced the program “+Campo” consistingof mobile units driven by health and safety experts, with media andpractical training capabilities, which visit tobacco-farming communities toprovide information and practical training on health and safety practices
to farmers and rural workers alike. Since May 2015, we have carried out
over 112 training sessions for 1,560 farmers in all three tobacco-growing
states, with very positive feedback from the communities.

One of the most salient human rights risks in our tobacco supply
chain is child labor. To address it effectively, we collaborate withmultiple stakeholders to change mindsets and behavior with regard
to this serious issue. In addition to working with Verité, we haveengaged consistently with many NGOs and government authorities
in the markets where we source tobacco to progressively address
this collective challenge. While much remains to be done, we areencouraged with the progress made so far, which includes significant
reductions in child labor in several countries (e.g. Mozambique, Turkey
and Brazil).

24

4 • HUMAN RIGHTS AND LABOR RIGHTSECLT FOUNDATION
Since 2002, PMI has been acontributing member of the
Eliminating Child Labor in Tobacco
Growing Foundation (ECLT), a
partnership between tobacco
growers and tobacco companies.
The International Labor Organization(ILO) and Save the Children serve asadvisors to the ECLT Board. ECLT
supports advocacy, research andpolicy initiatives, and promotes areabased projects in several countries,
to eliminate child labor in tobaccogrowing communities. A detailed
account of the foundation’s activities
can be found on its website(www.eclt.org).

Human Rights Watch (HRW) Report on Child LaborOn May 25th 2016, HRW issued a report highlighting the issue of children
exposed to hazardous work in tobacco-growing, mainly on smallholder
family farms in Indonesia.
While we see significant reductions in child labor incidence in the areas
where we have established our ALP program, we agree with HRW that
there is much work still to be done. We know that we cannot succeed
alone and remain committed to working with all stakeholders to bringa positive shift in the behavior and practices which are unfortunately
common across the agricultural sector.
We note that HRW acknowledges in its report that:“Transparency is a key element of effective and credible human rights
due diligence” and that “Among the companies we studied, Philip MorrisInternational appears to have taken the greatest number of steps to betransparent about its human rights policies and monitoring procedures,
including by publishing on its website its own progress reports as well as
several detailed reports by third-party monitors.”
For us, key to making improvements in Indonesia is progressively moving
away from the multi-layered purchasing system towards direct contracts
with independent farmers, which are coupled with agronomy extension
support and field staff monitoring. PMI’s tobacco leaf purchases fromcontracted farmers in Indonesia grew significantly from 12% in 2011 toapproximately 70% in 2015.
For more information on the HRW report, our strategy and ongoing
efforts, please see http://www.pmi.com/eng/media_center/Pages/PMI_
welcomes_Human_Rights_Watch_report.aspx

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PMI Communication on Progress 2015

Migrant Workers
We identified migrants working on tobacco farms as a particularly
vulnerable population with regard to human and labor rights abuses.
Approximately 27,000 of the 450,000 farms in our supply chain hiremigrant workers at some stage during the crop cycle, representing almost
100,000 migrants.
The issues and risks migrant workers face vary between countries
and migrant communities. We have found that the risks often involve
unscrupulous crew leaders or labor contractors. The risks are alsofrequently tied to traditional practices, such as season’s end payments.
PMI is committed to understanding these risks and addressing the needsof these migrant communities in a holistic and context-sensitive way.
In addition to prioritizing specific interventions and the ongoing work
under the ALP Program, PMI is also sensitive to the wider context inwhich these migration phenomena occur. Specifically in Europe, which isexperiencing a dramatic increase in migration and movement of peoples,
PMI is partnering with the International Organization for Migration (IOM)
to provide assistance to the most vulnerable migrants, and to reduce
exploitation and other forms of human rights abuses in the agricultural
sector in Italy including tobacco producing areas. The collaboration
promotes labor and social integration of migrant workers, supporting
better access to social services, addressing immediate needs, providing
legal counseling and psycho-social assistance. PMI has also provided
emergency support to IOM in Serbia and the Former Yugoslav Republic ofMacedonia to build winter-proof facilities for vulnerable migrants’ transit,
temporary stay, registration and assistance.

Detailed information about all the ongoing initiatives, progress andchallenges with the implementation of our ALP program can be found in
the latest progress report covering the period 2014-2015 available on our
website: www.pmi.com/ALPprogress26

4 • HUMAN RIGHTS AND LABOR RIGHTSSupply Chain: Beyond Tobacco-Growing
With respect to suppliers in general, we follow a riskbased approach.
Depending on the country and sector in question, we include specificcontractual clauses to mandate standards relating to, amongst
others, child labor, forced labor, income, work hours and safe working
conditions. In addition, we have retained specialized external auditors
to carry out risk based assessments — we follow up and take action
on findings. We also contractually require all third parties — including
business partners and contractors — who carry out tasks at ourfactories, or on behalf of PMI, to comply with our Environmental,
Health, Safety and Security requirements.
These approaches will be further developed and integrated in
a comprehensive set of Responsible Sourcing Principles (RSP)
to align with the Guiding Principles. The RSP will set clear
expectations for our suppliers regarding their responsibility
to respect human rights, the environment and anti-corruption
measures. Based on internal engagement, we are preparing apreliminary version of the RSP which we will use to gather feedback
from external stakeholders and key business partners to ensurethat our expectations are legitimate and credible. We intend toroll out the RSP to suppliers, starting with engagement with key
selected suppliers by early 2017.

LABOR PRACTICE AUDITS
IN THE NON-TOBACCO
SUPPLY CHAIN
We also continuously audit suppliersin our non-tobacco supply chainsusing third-party experts. In 2015,
we assessed 37 higher risk supplierlocations. Three of those assessments
identified severe issues, resulting ina red-flag audit. As one of those wasa new supplier location, we did notenter into a business relationshipwith that site. The other two red-flag
audits referred to health and safety
and compensation issues, based on
which we suspended our business
relationship with those suppliers. We
afforded each of those suppliers one
year to remedy the identified issues
and improve their social compliance
performance. After that time, we will
re-audit each supplier to evaluate if
the identified audit findings have been
remedied and whether to re-start thebusiness relationship.

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PMI Communication on Progress 2015

In line with our UNGC commitment, we have started the process of informing
our suppliers that we expect them to progressively implement appropriate
sustainability measures. With over 40,000 suppliers in scope, we have firstprioritized communication with our top suppliers by spend. Our letter
specifies that our ambition is to source all our products exclusively fromsuppliers who also commit to respecting the UNGC Ten Principles, noting:“If you have not already done so, we encourage you to look into the UN
Global Compact and the Guiding Principles and consider how these canaffect your current practices with a view to adapting and implementing
sustainability policies and procedures appropriate to your size andcircumstances. Your commitment will help ensure our shared success.
We intend to formalize specific supplier expectations and develop
processes in line with the Guiding Principles to honor our Global Compact
commitment in due course. We look forward to working with you to ensure
practical implementation of an industry-leading sustainability strategy.”

While we respect our suppliers’ autonomy as independent enterprises, weare committed to a collaborative approach to ensure that human rights,
as well as the environment and anti-corruption measures, are respected
throughout our supply chain.

CONFLICT MINERALSPMI has established an internal policy and due diligence process on
Conflict Minerals, this relates to components that may be included
in our electronic products. According to SEC rules we report on ourefforts to refrain, to the extent possible, from, directly or indirectly,
taking or supporting any action which contributes to the financing ofarmed groups that are committing human rights abuses in the regionof the Democratic Republic of the Congo (DRC). Specifically, PMI will:• not knowingly procure Gold, Tin, Tungsten and Tantalum thatoriginates from the DRC region, unless it is certified as “conflictfree”; and• ask its suppliers to undertake reasonable due diligence with their
supply chains to assure that they do not knowingly procure Gold,Tin, Tungsten and Tantalum that originates from the DRC region
unless it is “conflict free”.

28

4 • HUMAN RIGHTS AND LABOR RIGHTSWorkplace Integrity
Policies
At PMI, Workplace Integrity means fostering andprotecting a corporate environment that is inclusive, safe,and professional.
To this end, we have adopted a suite of Principles and Practices tocomplement the expectations set out in the Guidebook, including:•	Comprehensive Employment Principles and Practices: We set mandatory
requirements for all employees of PMI, including its direct and indirect
subsidiaries. We make employment decisions only on merit. We have notolerance for any form of discrimination or harassment. We do not employ
or condone forced or child labor anywhere we operate. We will not employ
persons below the age of fifteen, or the local minimum employment
age or mandatory schooling age, whichever is higher, except for official
apprenticeship programs authorized under local laws and regulations.
We will not employ persons below the age of eighteen for any hazardous
work. We make safety of all our employees and those who might beaffected by our operations a priority. We recognize our employees’ rightto freedom of association and to collective bargaining. There are no
exceptions to this policy.
•	Labor Relations Principles: PMI’s goal is to enable fair working conditions
by observing high standards of employment and labor relations. Our
Labor Relations Principles guide our Human Resources teams aroundthe world in the promotion of effective and consistent engagement withtrade unions, works councils and other employee representative bodies
to ensure fair working conditions for all our employees.

29

PMI Communication on Progress 2015•	Diversity and Inclusion Program: Diversity and inclusion are essential
to compete and perform successfully in today´s dynamic, global andincreasingly connected environment. Our Diversity and Inclusion
Program is built on a merit-based approach to all employment-related
decisions. We do not limit people´s opportunity to contribute oradvance based on age, childcare responsibilities, disability, ethnicity,
gender, gender expression, sexual orientation, religion, pregnancy, orother protected personal characteristics. We actively seek to create
the enabling conditions for women to progress to senior management
positions, to ensure a more representative PMI leadership.
•	Workplace Safety and Wellbeing: Our commitment to safety is
captured in our Environment, Health, Safety and Security (EHSS)
Principles, which sets out mandatory practices based on risk
assessment. The EHSS Principles and Practices bind us to continuously
improve safety performance by meeting or exceeding applicableregulatory and company safety requirements and provide a safe andsecure work environment for all employees, contractors, visitors andothers with whom we interact in the course of business. Our safetyvalues are captured in our “Mission Zero” program where we outline ourvision of zero lost time injuries at work — we believe that all accidents
can be prevented and we put safety first. The Mission Zero program
also provides the tools and guidance to materialize this vision.
We believe that a motivated and satisfied workforce is a key enabler ofindividual and business performance. This is why in every market we provide
career and development opportunities, with diverse and exciting working
experiences. Our Compensation & Benefits Policy in every market is at or
above market median and in 2015 our company-wide recognition programs
rewarded over 12,000 employees at all levels.

30

4 • HUMAN RIGHTS AND LABOR RIGHTSWorkplace Integrity: Due Diligence
The Human Resources (HR) Leadership Team is
accountable for creating the culture and practices
to enable a professional workplace that is free fromdiscrimination, harassment and workplace violence.
Working together with line management, our HR organization across
PMI is responsible for creating the relevant processes and tools, andfor their implementation.
In 2015, over 8,460 employees (including contractors) received either
online or classroom training on the standards set by our Employment
Principles and Practices, and over 4,350 employees were trained on
our Environment, Health and Safety Principles and Practices. Our
Corporate Audit function reviews both these areas and, as an example,
conducted nine separate country-level assessments against ouremployment policy, covering approximately 44 percent of our total
employees. Brazil, Turkey, Indonesia and Ukraine were amongst thelargest audits by employee population.

Labor Relations

EUROPEAN WORKSCOUNCIL
Our European Works Council
dates back from 1996 and consistsof management and employees
representing PMI’s affiliates in theEuropean Union. In 2015, to improvethe competitiveness and efficiencyof our business in the region welaunched a significant restructuring
covering important areas of theorganization, including Commercial,
Operations, Finance and HR. During
this process, the European Works
Council has proven its function as aforum for constructive dialogue andconsultation between management
and employee representatives.
The constructive dialogue allowed
a successful transition to the neworganizational model while minimizing
the impacts on our employees.

Our HR teams manage labor relations around the world.
Collective Labor Agreements (CLA) with trade unions and employee
representatives govern terms and conditions at work, which may
include working hours, occupational health and safety, holidays, wages,
rights and duties of the employers and employees, and procedures for
dispute resolution. We regularly monitor collective bargaining activities
and agreements in our affiliates. In 2015, we had in place 86 collective
labor agreements in 34 countries, covering 67% of our employees.
Our HR teams have access to a labor relations assessment toolkit thathelps enable sensitive and consistent engagement to establish andmaintain trustful and constructive relationships with employees andtheir representatives.

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PMI Communication on Progress 2015

Diversity and Inclusion
As part of our wider diversity and inclusion efforts, PMI
seeks to increase the proportion of female employees inmanagement positions, with a goal to reach 40% by 2022.
•	We piloted workshops in Turkey, Indonesia and Mexico to educate ourmanagement on inclusive leadership and to define and prioritize future
activities. In addition, we launched our Diversity and Inclusion Guidelines,
a toolkit to support markets in practically achieving our ambitions.
•	We undertake efforts for non-discriminatory candidate attraction and hiring
processes to achieve a gender balanced hiring for senior specialist andmanagerial positions by the end of 2017. This includes a verification of job
advertisement against our internal guidelines for non-discriminatory hiring
procedures and specific interview skills training for line managers.
•	Flexible work arrangements are another important component of thismission. They support our employees in their efforts to balance workcommitments with their individual living circumstances and needs. We
have already implemented flexible work arrangements in 25 countries
and plan to continue increasing this number.

PMI’s Diversity & Inclusion Guidelines Booklet.

32

4 • HUMAN RIGHTS AND LABOR RIGHTSIn 2015, we received external recognitions for our extensive efforts ongender equality:• Mexico – Gender Equity Model certification by the Instituto Nacional delas Mujeres (National Women Institute);• Australia – ‘Employer of Choice for Gender Equality’ award by theAustralian Government´s Workplace Gender Equality Agency;• Switzerland – Certification by the Equal-Salary Foundation covering all
our employees in Switzerland.

THE WOMANITY FOUNDATIONOur commitment to gender equality also extends to our community
programs. One example is the three-year partnership PMI
established with the Womanity Foundation, a non-profit that
“undertakes to empower girls and women in developing countries toshape their future”. We are supporting the WomenChangeMakers(WCM) fellowship program, which identifies, supports and connects
promising female social entrepreneurs across India and Brazil. The
main objectives of this intervention are to advance (1) women´seconomic participation and opportunity; (2) women´s social andpolitical leadership; and (3) women´s health and wellbeing. The
WCM program helps fellows to scale up their enterprise, to develop
synergies with professional experts, strategic program partners
and other stakeholders, and, if relevant, to replicate their businessmodel to significantly increase their impact. As of December 2015,
the program has a consolidated network of 27 active program
partners, such as non-governmental organizations and multinational
companies, offering technical support to 14 social entrepreneurs.

33

PMI Communication on Progress 2015

Workplace Safety and Wellbeing
We embed our strong commitment to workplace safety
through a risk-based approach that enables continuous
improvement.
Our commitment is practically demonstrated in Mission Zero, a program
we launched in 2012 to deliver a step-change and pursue our vision ofzero Lost Time Injuries at work. Mission Zero touches all critical areas
covering safe working environment, mindset, competence and culture.
At the heart of our integration process is risk assessment — understanding
the potential hazards associated with work tasks and delivering thephysical, procedural, competence-based controls, protective equipment
and working culture to reduce working risk to a low level.

Safety Climate Survey
Safety Ownership
Programs
Safety Leadership
Programs
EHS Minimum
Requirements

Technical
Environment

A systems-based approach to improve health and safety practices and conditions
across our operations.

34

4 • HUMAN RIGHTS AND LABOR RIGHTS

To implement Mission Zero, we work to:•	assign suitably qualified and trained persons to implement, manage
and coordinate EHSS activities, initiatives and management systems;
including coverage of third parties and contractors;•	identify, assess and manage compliance with all applicable regulations
and Company requirements;•	undertake risk assessments to identify and assess EHSS risks andimpacts and implement appropriate measures to control, reduce or
mitigate those risks;•	train employees and communicate with them on relevant work related
EHSS matters, risks and applicable legal and Company requirements;•	provide the resources and promote a culture where EHSS
considerations form an inherent part of PMI’s business and arerecognized as an integral management responsibility;•	report up and investigate incidents and take appropriate corrective,
preventive and improvement actions; and• monitor and report on EHSS performance.
The program has delivered significant results, especially in our factories.
In 2015, our Lost Time Injury (LTI) rate — the most widely used benchmark
to assess the prevalence of serious work-related injuries — was 0.11 per
200,000 hours worked on average, and 0.05 in factories.
This is one of the lowest levels across our corporate peer group.

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PMI Communication on Progress 2015

Improving Driving Safety
Given our global value chain, ground transportation
represents our most important safety risk outside factories.
Our field forces in over 100 countries operate more than 25,000 company
vehicles. We have delivered safety guidance and training programs — throughsimulators, driving schools, and other interactive programs — to more than 80
percent of drivers engaged in everyday field work. The results are tangible:
our continuous improvement is evidenced by a 40 percent reduction ininjuries associated with driving our vehicles in 2015. In October 2014, Fleet
Europe awarded us the International Fleet Safety Award, which recognized
the progress that we have made in vehicle safety through a focus on safety
leadership, training and local awareness programs.

But we still have more to do.
Having made significant progress in our factories, we aspire to ensure thatsafety performance across all our global operations comes to the same level.
We are increasing our focus on accountability, engagement and culture
across non-factory activities, as well as on proactive measurement,
covering minor injuries or near-misses in the workplace and our
performance across all our business.
Behavioral safety management is a key contributor to further
improvement. We are therefore cultivating pre-emptive mindsets in
PMI employees to enable potential hazards to be anticipated before
they actually materialize in a near-miss or an actual accident. We arealso assessing our organizational safety culture with “Climate Surveys”
to understand organizational dynamics and develop targeted actions toenhance our safety culture.

36

4 • HUMAN RIGHTS AND LABOR RIGHTS

Wellbeing
Complementing our commitment to safety, PMI is also
seeking to improve the health and wellbeing of ouremployees.
As an example, we have recently established minimum requirements
for implementing and promoting health and wellbeing programs andinitiatives in the workplace. These requirements include training andcommunication to ensure that the programs actively involve employees,
are designed based on risk, have objectives and results, and include
feedback of information to employees.
More broadly, we are also establishing local Wellbeing Committees, which
consist of cross-functional teams and include employee representatives.
To date, such committees have been implemented in 9 countries, their role
being to prioritize wellbeing programs while considering local circumstancesand facilitating use by employees.
Our wellbeing programs mainly focus on four areas:• Illness and disease prevention (e.g. flu shots, medical screenings)• Promotion of physical fitness (e.g. exercise programs, discounted gyms)•	Promotion of healthy eating (e.g. education around healthy eating
habits, healthy food available to employees)•	Stress management and Work-Life-Balance (e.g. education or resourceson resilience, programs that promote balance between work and life)

Awareness raising poster of PMI’s ‘cycle to work’ program.

37

PMI Communication on Progress 2015

Product Development and Marketing
Policies
PMI competes with other companies for market share among adult smokers,
and we do so based on quality and product differentiation.
We recognize that cigarettes and other conventional tobacco productspose serious health risks. Accordingly, we understand and respect that
tobacco companies have a special obligation to develop and market
their products responsibly.
For PMI, this responsibility goes beyond respecting the law and complying
with applicable regulations. When manufacturing and marketing conventional
tobacco products, we adhere to the following fundamental principles:
1.	We verify that the use of any particular additive or combination of
additives or change in product design does not increase the inherent
risks associated with smoking.
2.	We market only to adult smokers.
3.	Our marketing must be honest, accurate and not misleading. We informconsumers about the health effects of our products and disclose thecontents of our products to regulators and the general public. Even
where the law does not require it, we ensure that all advertising andconsumer packaging has clear health warnings.

38

4 • HUMAN RIGHTS AND LABOR RIGHTSSpecific policies and guidelines spell out in more detail what theseprinciples mean in practice. For instance, our employees follow specificrules on the toxicological assessment of new additives; the handling ofcomplaints and inquiries by consumers; how to conduct market research;
age verification for direct communications to consumers; placement ofhealth warnings in marketing materials; and the use of company websites.
In countries where these rules go above and beyond existing regulatory
requirements, we always hold ourselves to the stricter standard.
Our responsible marketing policies extend to the third-parties — including
agencies, retailers, and promoters — with whom we work to market our
products. We require each of them to honor PMI’s strict standards ofconduct.
Importantly, our special responsibility as a tobacco company has
also been the driver for our strong commitment to develop, assess
and market Reduced Risk Products (RRPs) that have the potential
to reduce individual risk and population harm relative to traditional
cigarette consumption. In a world where large numbers of people
would otherwise continue to smoke cigarettes, providing them witha scientifically validated, less harmful alternative is by far the mostpromising way of addressing the health risks associated with smoking.
Current tobacco control efforts to prevent initiation and promote
cessation can and should be complemented by making a range of RRPs
available to smokers. Of course, RRPs contain nicotine and are not riskfree. We therefore strongly support the enactment of regulations
to govern how these products are marketed, developed and assessed,
consistent with these principles: the public is accurately informed
about the health risks of RRPs; youth does not consume nicotine in any
form; and products are taxed and regulated in proportion
to the harm they cause.

39

PMI Communication on Progress 2015

Product Development and Marketing: Due Diligence
PMI’s robust and thorough toxicological testing and research
program with respect to additives used in our conventional
tobacco products has been in place since 1999.
The testing approach we apply is consistent with ICH (“International
Conference on Harmonization of Technical Requirements for Registrationof Pharmaceuticals for Human Use”), the UK Department of Healthprocedure on ‘‘the approval and use of new additives to tobacco productsin the United Kingdom’’ (Scientific Committee on Tobacco and Health— SCOTH, 1998) and the German Standards Institute’s guidelines DIN
SPEC 10133:2014-09 (“Toxikologische Bewertung von Zusatzstoffen fürTabakprodukte“).
The Product Stewardship group is responsible for overseeing thetoxicological assessment process and regulatory compliance of all
ingredients used in PMI products. Internal review and approval are
centralized for all of PMI’s product development activities, and decisions
allowing the use of a new additive require the approval of the Director
Product Stewardship. We have been rigorous and transparent about our
research and testing approach in submissions to regulators and in respectedscience journals. In May 2011, for instance, PMI scientists Dempsey et al.
published “Toxicological assessment of cigarette ingredients” in the peerreviewed journal, Regulatory Toxicology and Pharmacology.
Reduced Risk Products: PMI’s comprehensive assessment program
follows relevant scientific precedents, the FDA’s Draft Guidance for
Modified Risk Tobacco Product Applications and international scientifictesting standards and practices such as Good Laboratory Practices andGood Clinical Practices. The assessment methods are similar to thoseused by the pharmaceutical industry, including product design controls,a range of toxicological tests, clinical studies, premarket consumer
perception and behavior studies and post-market assessments. PMI’s
aspiration is to demonstrate that its novel products have a risk-reduction
profile approaching that of cessation, referred to by the U.S. Institute ofMedicine as the “gold standard” for assessing risk reduction.

40

4 • HUMAN RIGHTS AND LABOR RIGHTSIn addition to the expertise provided by PMI’s team of more than 400
scientists and experts on staff, our research is assisted by an external
Scientific Advisory Board of leading independent scientists.
Since 2010, our scientists have published more than 150 RRP-related studies
in respected, peer-reviewed science journals. We have set up a dedicatedwebsite (www.pmiscience.com) where we share detailed information about
our efforts to develop RRPs, our approach to their scientific assessment, as
well as a wealth of scientific information, including clinical data, which wehave gathered in relation to our portfolio of products. Our studies on oneof our heated-tobacco products, iQOS, are well advanced and PMI intends
to file a modified risk tobacco product application with the U.S. Food andDrug Administration (FDA) by the end of 2016. We are fully committed
to the transparent sharing of our RRP science for unbiased third-party
verification of both our product technologies and risk assessment science.

The PMI Science website provides a detailed overview of the rigorous scientific researchthat is the foundation of PMI’s Reduced Risk Product (RRP) portfolio of products.
More details can be found at www.pmiscience.com.

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PMI Communication on Progress 2015

Marketing: PMI’s commitment to responsible marketing is deeply
embedded in our compliance culture. We have robust processes toensure that our marketing activities — from point-of-sale advertisements,
to package designs, to direct communications with consumers — comply
with applicable law and our internal policies, and are not directed tothose below the legal age. At affiliate level, both the Law and Corporate
Affairs functions must review each proposed activity, and the affiliate’s
management is accountable for approving (or rejecting) the proposal.
Depending on the geographical and commercial scope of a proposed
marketing activity, additional layers of review and approval at the regionaland corporate level are required.
We train PMI employees across functions to ensure a thoroughunderstanding of the various policies and guidelines and, equallyimportant, why those matter to PMI. Trainings include online learning
programs as well as classroom sessions for marketing professionals,
including for relevant third parties. In 2015, over 35,000 staff from PMI
and relevant third parties participated in class room sessions; in addition,over 4,000 staff completed an online training. Centers of expertise,including a specialized team from our Law and Compliance functions at
the Operations Center, provide further tailored guidance to marketing
professionals regarding specific situations on an ongoing basis.
The actual implementation of these marketing-related processes issubject to reviews by both the Internal Controls function as well as
Corporate Audit. For instance, in 2015, Corporate Audit conducted 15
reviews of direct and trade marketing across our affiliates. Our marketing
activities are also subject to constant scrutiny by regulators and otherexternal stakeholders. We welcome opportunities to evaluate, explain,
and refine our approach as part of our mission to market responsibly.

A poster from the youth smoking prevention retail campaign
in the UK reinforcing the message of ‘No ID, no sale’.

42

4 • HUMAN RIGHTS AND LABOR RIGHTSYOUTH SMOKINGPREVENTION IN THE UK
PMI has set up a Responsible Retailer
Program in the United Kingdom
together with industry peers to
support small and independent
retailers in adopting best practice toprevent under age sales of cigarettes.
Using mystery shoppers, the program
identifies retailers who may be atrisk of providing tobacco products
to minors and offers them additional
staff training, materials, and support
to improve their sales systems andprocedures of all age-restricted
goods. More specifically, the program
spreads best practice procedures
among retailers such as the ‘Challenge
25’ where anybody looking younger
than 25 years old is required to provetheir legal age. Since its start in 2015,
4,812 mystery shopping visits anddirect trainings were delivered to
912 retailers across the North ofEngland, the Midlands and Wales. In
addition, more than 11,000 ‘No ID, No
Sale’ advice and support packs were
provided to retailers. The program iscurrently being rolled out in the southof England, Scotland and Northern
Ireland and will cover the entire
United Kingdom by early 2017.

Remediation Processes
We recognize that, no matter how effective our due
diligence processes, we will not be able to avoid every
adverse human rights impact.
We will work progressively to build and improve our remediation
capabilities, including through the use and development of grievancemechanisms aligned with the Guiding Principles.

Our Supply Chain
In the case of non-compliance with our ALP Codestandards for tobacco farmers, PMI’s response is casespecific, and depends on a variety of factors, including thenature and severity of the impact.
Our preferred enforcement approach is to work with both farmers andsuppliers to address any issues identified and to improve their practices.
However, in cases of severe violations, or if there is no clear commitment
to corrective actions, or a persistent lack of action and improvement, PMI
will terminate the contract. In all actions concerning children, the bestinterests of the child are the primary consideration.
With Verité’s support and guidance, we have also invested in developing
pilot grievance mechanisms in many markets, and intend to expand these
programs in the coming years. We endeavor with these mechanisms to
go beyond just creating a channel for workers to file their complaints
and grievances. In a context of mainly smallholder farms, our grievancemechanisms are better understood as farmer and worker support services
consisting of two main components:•S olving conflicts and problems: enabling workers to raise questions
and/or issues about labor practices to a trusted and neutral third-party
that can advise and follow up when appropriate (e.g., mailboxes, toll-freelines, visitor centers, and/or specialized field staff that can visit farms,
talk to farmers and workers, make referrals to relevant official agencies,
to local mediators, “ambassadors”, etc.); and,43

PMI Communication on Progress 2015•P
 roviding additional services: providing assistance to workers andfarmers to build trust, capacity, and improve labor and business practices
through services tailored to their needs (e.g., training on labor laws, help
with health and safety topics, registering workers, psychological, legal orother counseling support).
Verité guides us in defining, implementing and evaluating the effectivenessof those mechanisms in the different countries. Starting in 2013 with
Brazil, Macedonia and Mexico, we have established or promoted access toexisting support mechanisms in 13 countries.

“As a result, workers and farmers have access to help in solving
problems as they arise on farms. Verité believes this is the first timea major agricultural buyer has implemented such tailored and locallyoriented mechanisms on such a scale.”- Dan Viederman, Verité’s former Chief Executive Officer

We still consider ourselves at the early stages of our supply chain grievancemechanism ambition. Our projects are pilots from which we hope to learn
valuable lessons. Their form and complexity varies greatly. In Colombia, we
worked to promote the use of COLabora, a mechanism run by the Ministryof Labor. In the Philippines, by contrast, our local affiliate participated ina multi-stakeholder initiative to develop an entirely new service, working
with the Department of Labor and Employment, worker representatives,and a local NGO. In other countries we have worked to leverage or build
the capacity of local NGOs to process grievances. We endeavor in eachcase to tailor the mechanism to local circumstances and stakeholder
expectations. Our early results are encouraging regarding the value ofsuch mechanisms, but we recognize that this will be a long-term anditerative learning process.

44

4 • HUMAN RIGHTS AND LABOR RIGHTSWorkplace Integrity, Product Development
and Marketing
We believe our employees and their strong culture of integrity
and speaking-up is our best asset to ensure we become awareof, and take action to ensure respect for our human rights
commitments across all our operations.
They know and understand it is their duty to speak-up when they see
something that does not seem right, or if it appears that our Guidebook
for Success, one of our Principles and Practices, or legal requirements arebeing compromised. Issues are raised directly and openly, as evidenced
by the fact that the vast majority of compliance allegations are reported
directly to supervisors, other leaders, or the Compliance Department. We
have grievance processes and investigation procedures, including a thirdparty operated Compliance Helpline.
For example, in 2015 we received 336 reports of suspected complianceviolations of our Employment Principles and Practices. All reports
were investigated by our compliance teams and 154 violations of ourpolicy were substantiated. All 150 involved employees were disciplined,
including 45 separations from the company.

Our Future Remediation Processes
Over the next year we will launch new pilot projects toimplement ALP grievance mechanisms in Indonesia andPakistan.
As we progressively align our policies and practices with the Guiding
Principles, we will start exploring how best to leverage these mechanisms andour employee grievance processes to address all human rights concerns.
We intend to engage with stakeholders to ensure that the mechanisms andprocesses we develop align with the Guiding Principles’ effectiveness criteria.

45

PMI Communication on Progress 2015

METRICS

COVERAGE

2013

2014

2015

Total number of employees

All PMI

91,00082,50080,200

Employees undergoing training on
employment principles(including contractors)

All PMI

15,383

10,9398,463% of management positions held
by women

All PMI

28.6

29.5

31

% of employees covered byCollective Labor Agreements

All PMI

N/A

67.7

67.0

Lost Time Injury (LTI) Rate
LTIs per 200,000 hours worked

All PMI

0.11

0.14

0.11

<0.1

Fleet Crash rate
Vehicle crashes per million
km driven

PMI vehicles

6.6

5.9

5.3

<4

% of manufacturing facilities withOHSAS 18001 certification

PMI factories

86

91

93

100

% of tobacco purchased by directcontract (by our affiliates or our
suppliers)*

Tobacco supply
chain — totalpurchases

80

87

88

>90

Systematic monitoring of labor
practices (% coverage)*

Tobacco farmers N/A
supplying PMI
affiliates or our
suppliers via
direct contract

N/A

32.5

100

Number of farms within thescope of external assessments
by year**

Tobacco supply
chain

23,87011,04324,313

LONG-TERM
GOAL

40

by 2022............................................................................................................................
Number of supplier locations
assessed

Coverage of suppliercommunication on Sustainability(% of total spend)

Non-tobacco
materials andservices

5

5

6

2016

2017

2018

In
90***
progress

>90

>5

>90

* Data relates to crop seasons which may span more than one year — for example 2015 data relates to the 2014-2015 crop season.
**The number of farms within the scope of assessment varies according to the crop-size and number of contracts in a given supplier location.
*** In the remaining 10%, no individual supplier represents more than 0.1% of the total annual spend.

46

4 • HUMAN RIGHTS AND LABOR RIGHTSAs we develop our approach to labor and human rights, we will be considering
additional metrics, as listed below. This list is preliminary and not exhaustive;
we note that it already covers topics where we have activities in place but do
not currently measure results as specific KPIs.
(1) Employees trained on Workplace Integrity (including Employment
Principles and Practices, EHSS, Diversity & Inclusion)(2) Employees trained on Product Development and Marketing Principles(3) Employees trained on Supply Chain Responsibility(4) Human rights-related Corporate Audits conducted(5) Human rights-related Supplier Audits conducted(6) ALP Grievance Mechanisms implemented(7) ALP Grievances filed(8) Substantiated workplace conduct violations

We intend to refine these metrics over the next year on thebasis of expert advice and stakeholder engagement.

LEARN MORE
• ALP Code: www.pmi.com/ALPcode• ALP Program: www.pmi.com/ALPprogram• ALP Progress Report: www.pmi.com/ALPprogress• Workplace Safety: www.pmi.com/safety• Guidebook for Success: www.pmi.com/guidebook

47

PMI Communication on Progress 2015

Environment

should support a precautionary approach to
07 Businesses
environmental challenges
should undertake initiatives to promote greater
08 Businesses
environmental responsibility
should encourage the development and diffusion of
09 Businesses
environmentally friendly technologies

48

5 • ENVIRONMENTOverview
From tobacco farming to our factories, right up to distribution and logistics,
to retailers and ultimately our consumers, environmental sustainability
is key for our long term business success. We have assessed theenvironmental impact that we have on the world around us, and in turn how
the changing environment can impact our value chain. In this section wesummarize the key programs that we have put in place to mitigate and adapt
to those environmental impacts.
Effective environmental management across our operations and value chain
ensures that PMI complies with laws and regulation, promotes efficiency
and savings, ensures security of raw material supplies and minimizes
environmental impacts. It’s also something that all our employees andpartners can get behind with a passion to do well for the planet as well as
for our business.

49

PMI Communication on Progress 2015

Our environmental strategy is split into two main areas:1) M inimizing our impact on the environment through carbon footprint
reduction, water use reduction, waste minimization and other mitigation
initiatives.
2) U nderstanding and adapting to potential future business impacts ofmajor environmental trends, such as climate change and water scarcity.
We undertake risk assessments to quantify the impacts of these trends
along our value chain. Based on the results, we develop management andadaptation strategies.
To deliver on these objectives, we have established global programs that cover:• Environmental management and related standards for our factories andfacilities• Value chain carbon reduction, climate change impacts and CDP (formerly
known as Carbon Disclosure Project) reporting• Energy and Water management• Agricultural Environmental Practices

Environmental Management
We have the following activities in place to manage environmental impacts
in our operations• Environmental management systems (EMSs): We have strong
environmental management arrangements, ranging from our overarching
Principles and Practices to our voluntary adhesion to the international
ISO14001 standard for environmental management in our factories.
This includes risk assessment, standard operating procedures, goals,
metrics and initiatives for continuous improvement of environmental
performance. Our environmental management arrangements coverchemical and hazardous material storage requirements and emergency
preparedness and response procedures and equipment.
• Dedicated environmental staff: We have trained, professional
environmental staff at our Operations Center, in our regions and all our
major facilities to identify, manage, and reduce our environmental impacts.
Our Senior Vice-President Operations has overall accountability forenvironmental management and is supported by our Director EHS.

50

5 • ENVIRONMENTSustainability in the tobacco supply chain means promoting good
agricultural practices that support farmers to improve productivity
and the quality of their crops, respect the environment, and achievesafe and fair working conditions. Since 2002, we have adopted andcontinually developed a Good Agricultural Practices program (GAP), theimplementation of which constitutes a contractual requirement for doing
business with PMI. GAP defines the principles and standards we expect
to be met by all those who grow and supply tobacco for PMI.
These principles and standards are organized around three focus areas(pillars): Crop, Environment, and People (our ALP program).
Our GAP Implementation Guide lays out extensive agriculturalenvironmental practices and guidance covering crop rotation, pesticideand fertilizer handling and use, land use and deforestation/reforestation,
farm worker training, energy efficiency and sustainable fuels, water
conservation, soil quality, and waste management amongst other areas.
This is particularly important because through life-cycle assessment, we
identified our agricultural supply chain as currently having our largest
potential environmental impact.
In other areas we work with suppliers on environmental improvement
programs such as raw material and packaging reduction, the energy
efficiency of our equipment, logistics optimization and the fuel efficiencyof our own fleet of over 25,000 vehicles.
In addition, through the CDP Supply Chain program, we are working
with key partners across our supply chain to identify opportunities forcollaboration and innovation. In 2015, we invited over 30 suppliers toparticipate, covering more than 70% of our spend on non-tobacco raw
materials as well as key tobacco leaf and distribution/logistics providers.

51

PMI Communication on Progress 2015

A Precautionary Approach
Planning and preparing for what is coming next is key togood business management and environmental challenges
are no different.
In addition to our environmental management arrangements and active
programs, we have identified 3 main areas where we take a precautionary
approach (as per Principle 7):• Developing Science-Based Targets: We are committed to developing
science-based carbon reduction targets that go beyond continuous
improvement and ensure we play our part in delivering the sustained
Solar panels to generate clean energy at our Global
reduction in greenhouse gas emissions needed to keep global
Operations Center in Lausanne, Switzerland.
temperature rise to under 2°C from pre-industrial levels. These efforts
are part of our participation in the “We Mean Business Coalition” and also
relate to our support in 2015 for the ambitious deal reached at the Paris
UNFCCC meeting “COP21”.
• Proactively seeking to understand climate risks: We have undertakena climate risk assessment to better understand the actual and potential
future impacts of a changing climate on PMI and key nodes in our value
chain. It covers 85 facility types and nodes across six categories, such as
manufacturing, supply chain or ports, and considers change in impacts
relating to drought, flood, cyclone, temperature and precipitation.
• Using Lifecycle Assessment: We use LCA to understand the shareof environmental impact from different areas of our value chain and toprioritize improvements. We are also using both simple and complex
environmental assessment when considering both new products andproduct developments so that we can make the right informed choices.

52

5 • ENVIRONMENTClimate Change and Energy
PMI has established ambitious emission reduction targets which
include a long-term commitment to tackle climate change centeredon a 20% reduction in fossil-fuel related energy and greenhousegas (as equivalent carbon dioxide (CO2)) emissions from ourmanufacturing operations by the end of 2015, and a 30% reductionin our carbon footprint across our whole value chain by 2020 on aunit product basis. In 2014, through energy reduction and the useof greener energy in our EU-based factories, we reduced the annual
carbon emissions from our operations by 10%, or 80,000 metric tons,
our largest annual reduction to date. This gave us the momentum toachieve further improvement in 2015 — a 7% absolute reduction of
55,000 metric tons. On a unit product basis we surpassed our 20%
reduction target for our manufacturing operations by achieving a 24%
reduction of CO2 emissions in 2015 from 2010.
•T he majority (9 out of 12) of our manufacturing facilities in the EU
source 100% of their electricity from certified renewable resources.
•G lobally, we ran over 200 energy saving projects during 2014-2015,
which have helped save more than 1 million Gigajoules of energy
since 2010. These savings could supply energy for one year to
around 100,000 households.

RENEWABLE ENERGY
We don’t just focus on reducing
our energy use through theimplementation of new technologies,
we also have a program to make surethat the type of energy we use isprogressively more environmentallyfriendly. For example, our Sahiwal
and Kotri factories in Pakistan
became the first PMI manufacturing
sites to substantially use solar energy
for production purposes. The newly
installed solar panels have a peakcapacity of 458.6 kilowatts providing
around 2,430 Gigajoules of clean
energy or a carbon saving of over 360
metric tons each year.
This also complements the leadingedge development of “Tri-generation”
facilities producing power, steam andair conditioning utilities at our Kotri
factory.

• I n Lithuania, our factory has moved from traditional boilers that are
fueled by oil or gas, to boilers that are fueled by sustainably sourced
wood pellets. This effort will replace 1.6 million m3 of natural gas
each year with wood pellets, delivering a reduction of around 3,000
tons of CO2.

53

PMI Communication on Progress 2015

SAVING CARBON ACROSS OUR FACTORIES
Improvement projects in our factories range from small, even zero
cost, measures up to large-scale process changes. All of them areessential to learn and continually improve — and contribute to the
55,000 metric tons CO2 annual saving we made — just some of the
project highlights across our regions from 2015 included:
Installation of low or no-energy (natural) lighting – Indonesia,
Kazakhstan, Russia, Ukraine, Poland, Lithuania, Colombia, Argentina,
Brazil, Mexico, Dominican Republic
Heat recovery from process equipment – Indonesia, Russia, Poland,
CanadaSteam system optimization or reduction – Indonesia, Argentina,
Poland, Switzerland, Canada, Germany, Lithuania, Russia, Pakistan
Chiller system improvements – Indonesia, Kazakhstan, Russia
Air compressor, vacuum or ventilation improvements – Indonesia,
Mexico, Poland, Russia
More Efficient Humidification – Turkey, Canada

Linked to our Operations Performance and Engagement (OPEN) model,
we have an Energy Management Program, expanded in 2015 to include
Water Saving Initiatives, which we use to share ideas and best practices
between our affiliates including those mentioned here in our examples.
We also look after the fuel efficiency of our fleet of vehicles. Through a
Fleet Management and Optimization Project we have improved the fuelefficiency of our vehicles by 10% since 2013, with a 7% improvement in2015 alone.

54

5 • ENVIRONMENT

Inside one of PMI’s factories.

Water
Water is a fundamental natural resource for ourbusiness, essential for growing tobacco and operating
our factories.
We are committed to the responsible and sustainable managementof water to help conserve this resource globally. In tobacco-growing,
we expect our affiliates and suppliers to have a water management
plan that takes into account the locations that are most at risk fromwater scarcity and promotes efficient water use and renewabilityof sources. These plans address the use and management of water
for tobacco production to minimize adverse impacts to otherusers within water catchment areas, including local communities.
The plans also cover access to adequate, clean water for drinking,cooking, bathing, and cleaning purposes for local communities,
workers, and their families. Over the next year, we will develop a
Water Stewardship Strategy for our tobacco supply chain that will
include a strategic mix of three basic principles, water preservation,
innovation, and engagement.

Irrigation pond from water harvesting on a
tobacco farm in Colombia.

For our own operations, in 2010, we set the goal of reducing water
consumption in our manufacturing facilities by 20% per unitof product by 2015, and we beat that target, achieving a 24%
reduction. To help us do this, we follow the 3R Concept — Reduce,
Reuse, Recycle — in our manufacturing operations around the world.

55

PMI Communication on Progress 2015

For the first time in 2015, PMI recognized factories for outstandingachievements in minimizing water use and their contribution to reaching
our goal of reducing water consumption in our manufacturing facilities by
20% by 2015 from 2010.

The 2015 PMI Water Awards received a total of 71 submissions across all
our regions. The winning entries were:
The biggest improvement over the previous year: Even with a hot summer
and increased production volumes, our factory in Berlin managed to
improve water-use efficiency by 14%, using a combination of focused
workshops, awareness programs and monthly energy team meetings withall main departments involved.
A second winner was also celebrated — our Tobacco leaf processing
operation in Colombia for showing that smaller facilities can also make big
improvements in this case by implementing daily consumption monitoring
and leak detection, behavioral change and implementation of low cost
solutions like flow inhibitors to save water.
The most effective single project: there were also 2 winners here — our two
Russian factories tied for the Award:
Our factory in St Petersburg reduced water consumption by the factorychiller system, through harvesting rainwater to feed the system. In Krasnodar
our factory upgraded a water scrubbing system using biological filtration to bemuch more water efficient.
Both projects provide savings of over 25,000m3 of water per year — enoughto fill 10 Olympic-size swimming pools from each project.
PMI’s overall champion for water efficiency: The most impressive resultsin terms of absolute amount of water saved, the biggest improvementin efficiency and the consistency of improvements (since our watermeasurement program started in 2010) were obtained by our factoryin Canada. Since 2010, our Quebec facility has decreased its water
consumption by over 79% — by the end of 2015 it saved more than
300,000 m3 of water. The main project that led to this remarkable reduction
was the implementation of closed loop cooling systems.

56

5 • ENVIRONMENTWasteWe have targets to reduce the waste from our manufacturing
facilities (such as packaging waste and other materials) andincrease our recycling rate from 80% in 2010 to 85% by 2015.
In 2015 we beat our target and achieved a rate of 87% recycling. We
have a waste management program to promote reduction, reuse, andrecycling before the final option to dispose of waste is taken. Practices
active in 2015 included:• In our Turkish operation, a series of measures on waste segregation andelimination have reduced the waste per cigarette manufactured by 25%
and increased the recycling rate to 97%.
• In the Philippines, we reuse the cartons used to transport tobacco
leaf as storage bins for tobacco farmers that can also be further used
as insulation in curing barns. This project helped distribute more than
11,000 storage bins made from recyclable cardboard to farmers.

57

PMI Communication on Progress 2015

Agricultural Environmental Practices
Changes in climate and the environment which could impact
the crops we depend on (such as tobacco and clove) are
important for our current and future strategy.
We share common interests with the communities where our tobacco leaf
is grown and processed, and in addition to our own efforts to achieve theefficiency and low environmental impact of our operations, we also workwith tobacco farmers to improve.
While topics include improving farming techniques, chemical safety,
biodiversity, water stewardship and waste, for example working withtobacco farmers to improve the recycling of plastic materials; a key
element is helping deliver our 2020 target for CO2 reduction in our value
chain. Following an internal assessment of our entire carbon footprint, wefound that around 40% of our carbon emissions come from our tobacco
supply chain, mainly driven by the use of fuel on the farms in curingcertain tobacco types.
As a result, a key part of our carbon emission reduction strategy is tosupport farmers on improving Agricultural Environmental Practices, with afocus on curing practices, through the implementation of GAP.
This includes strategic initiatives revitalized in 2015 to:• Reduce the tobacco curing fuel consumption rate via curing barn
efficiency improvement and optimization programs (including thedevelopment and diffusion of environmentally friendly technologies suchas digital curing barn controls);

TOBACCO CURING
Virginia-type tobacco is cured inheated barns. Most traditional curingbarns are made of brick or mud andthe heat needed to cure the tobacco
is distributed through flue pipes, oftenwith low energy efficiency. Together
with our suppliers, we are supporting
farmers to improve these traditional
methods, for example, by furnaceand flue modifications and improved
insulation and controls, which can leadto energy efficiency improvementsof up to 30%. Bulk barns are one
modern method of curing tobaccothat can be 60% more efficient than
traditional barns. In these barns,
fresh tobacco is loaded into racks
or cages and transferred into large,
insulated containers where heat andair is circulated over 6-7 days to curethe tobacco. Whilst implementationof bulk barns is not currently feasible
everywhere we source tobacco, weare supporting its introduction in
specific locations (e.g. Brazil).

• Move to more sustainable curing fuel sources (e.g. traceable sources ofwood fuel); and• Encourage fuel-switching to less polluting fuels and the use of biomass as
an alternative fuel where appropriate.

Virginia-type tobacco curing barn in Malawi.

58

5 • ENVIRONMENTSpecifically by 2020, we aim to:• Be 70% more efficient in CO2 emissions per kilogram of cured
tobacco leaf compared to our 2010 baseline.

BIOMASS IN ITALY• Have zero coal usage for tobacco curing.
• Ensure no deforestation of old growth forest due to the growing
and curing of tobacco we purchase.
We have implementation programs for these initiatives across all
regions where we source tobacco. For example:• Using mango tree prunings as a fuel in Mexico, which saved using
over 10,000 cubic meters of native firewood in 2015.
• Installing “bulk barns” for curing in Brazil which are both more fueland cost efficient.
• Continuing forestation activities, such as in Pakistan, Philippines
and Indonesia where around a million trees were planted orprovided to farmers in each country in 2015.
• Upgrading curing barns in Indonesia — an additional 1,143 barns
upgraded across Indonesia in 2014-5. This includes furnace,
insulation and flue pipe improvements.
During 2015, PMI and its suppliers planted more than 29 million
trees and implemented programs to achieve a level of 26% of thetotal fuel consumed for tobacco curing coming from renewableenergy sources, up from 24% in 2014. Currently we believe thatbiomass and traceable sources of wood fuel are the most costeffective renewable energy options, however we continue to review
the potential of new technologies, for example pilot projects on
using solar energy in curing barns.

In Italy we worked with local farmers
to open a biomass center, composedof 68 curing barns with capacity tocure approximately a million kilogramsof Flue Cured Virginia tobacco using
an innovative technology basedon advanced heat generators. By
using an integrated heating systemthat uses pre-heated water from abiodigester and burns sustainably
sourced woodchip, this curing center
considerably reduces the impact on
the environment, increases energy
efficiency and maintains moresustainable curing costs over a longer
period.

59

PMI Communication on Progress 2015

Crop Protection

AMERICAN FARM SCHOOLIN GREECEPMI has implemented an Integrated Pest Management (IPM) program
to: 1) reduce safety risks to farm workers and minimize the impact ofchemical products on the environment resulting from the use of Crop
Protection Agents (CPAs) and 2) demonstrate the financial benefits
resulting from optimization of crop yields and quality. PMI has engaged
the support of the Centre for Agriculture and Biosciences International(CABI), an international not-for-profit organization applying scientificexpertise to solve problems in agriculture and the environment.

In Greece, PMI supports the American
Farm School, an institute dedicatedto teaching legal age adult farmers
how to practice sustainable landstewardship through good cultivation
practices. In addition, the school
also supports the development ofentrepreneurial skills. The 58 hour
program began in 2014 with 128
tobacco growers and is currently
reaching another 277 tobacco
growers; PMI is committed tocontinuing its funding beyond 2016.

In 2014, a base assessment of CPA usage was performed in 12 key
countries from which PMI procures tobacco, representing 77% of oursourcing footprint. This was followed in 2015, with workshops in 8
countries to develop action plans with CABI. We are currently focusing
on training in responsible CPA usage to minimize risks and apply bestpractices, the elimination of WHO toxicity class 1 pesticides, ensuring
safe disposal of CPA containers, building knowledge about tobacco pests
and diseases, and gaining the buy-in of farmers and field technicians.
We continue to roll out our IPM program in 2016 and have also targeted
to discontinue the use of all WHO toxicity class 1 pesticides for tobacco
we purchase by 2018.

60

5 • ENVIRONMENTReporting on our Progress
We regularly report on our progress via CDP, aninternational NGO promoting public disclosure oforganizational carbon reduction and management.
The CDP ratings provide a tool for institutional investors andstakeholders to assess corporate efforts to mitigate climate change
and associated risks. We also report on our water stewardship
activities through the CDP Water program. In 2015, we wereawarded Band A performance in CDP’s Global Climate Change
Report and were the only consumer staples company in the S&P
500 index to be both in the CDP Climate “A” list for top performers
and the Climate Disclosure Leadership Index, achieving 100% for
the quality and transparency of our reporting.

61

PMI Communication on Progress 2015

Looking Forward
2015 has been a successful year for our environmental results,
achieving targets that we set ourselves and performing well in
the CDP results.
However, we are conscious that significant work remains to be done and newchallenges need to be addressed. For example, the downturn in oil prices
during 2015 means that some renewable energy programs become lessattractive financially. We therefore have to plan for the long term and that’s
why we are reviewing the potential role that an internal price on carbon canplay to optimize our decision-making and support continued reduction of ourcarbon footprint.
Another important part of our precautionary approach to environmental
challenges is dealing with water quality and scarcity. We will further evolve ourwater stewardship activities through 1) Agricultural Environmental Practices
and 2) considering the availability of clean water in the locality of our own
operations.
In addition, we are increasingly using life-cycle assessment (LCA) thinking
to evaluate options for reducing environmental impacts throughout theentire life-cycle of our products. This means not just looking at our supply
chain and manufacturing activities, but also the environmental impact
associated with product use and packaging. In particular, building on
existing country-level programs, we will develop a company-wide positionand comprehensive activities related to product waste, specifically
including cigarette butt litter. Considering the transformation of ourbusiness with the introduction of RRPs, we will expand our LCA andproduct waste work to cover the new suite of products including review ofprograms for end-of-use electronic equipment recycling.

62

5 • ENVIRONMENTMETRICS

COVERAGE

2013

2014

RESULTS GOALS

2015

2015

% of manufacturing facilities
certified to ISO 14001

PMI factories

86

91

93

100

CDP Climate Change Score

All PMI

97B

96A

100A

Total CO2 (Scope 1 and 2)
Metric tons

All PMI facilities 828,407 746,286 691,044

Total Water consumption,
thousand m3

PMI factories

4,314

Total Waste, Metric Tons

PMI factories

131,748 133,488 127,361

CO2 kg per million units ofproduct equivalent

PMI factories

727

3,886

661

(Long-term
goal)

3,654

603

635
(-20%
from 2010)

Water consumption m3 per million PMI factories
units of product equivalent

4.67

Recycling Waste (%)

PMI factories

82

85

87

Vehicle CO2 emissions(gCO2 per km driven)

PMI fleet

239

230

215

4.35

4.05

4.27
(-20%
from 2010)

85

LEARN MORE
• CDP Climate Change and CDP Water Reports: www.cdp.net• Sustainability: www.pmi.com/sustainability• Climate Change: www.pmi.com/carbon• Environmental Performance: www.pmi.com/environment• Good Agricultural Practices: www.pmi.com/GAP• We Mean Business Coalition: www.wemeanbusinesscoalition.org

63

PMI Communication on Progress 2015

Anti-Corruption

should work against corruption in all its forms,
10 Businesses
including extortion and bribery

64

6 • ANTI-CORRUPTION

OverviewAny form of corruption is completely at odds with PMI’s standards of
doing business. It is contrary to free markets, undermines the rule of law,and dilutes public trust in business and government. We recognize that
our refusal to participate in corrupt activities may make doing businessmore difficult in some markets, but bribery is simply unacceptable at PMI.
And we have proven time and time again that we can ultimately achieve
our business objectives without resorting to inappropriate short cuts.

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Our Principles and Practices address a broad array ofanti-corruption and anti-bribery topics.
These include:• giving and receiving gifts and entertainment;• facilitating payments (which we specifically prohibit);•	non-charitable contributions involving or connectedwith government officials;•	third parties that interact with government officials
on behalf of PMI;
• membership in organizations;• lobbying; and• reporting and record-keeping.
To deliver on our commitments, we have a robust anti-corruption and antibribery program that consists of: (1) regularly identifying corruption andbribery risks relevant to the business; (2) providing clear policies and tools
to mitigate those risks, including avenues for raising concerns; (3) training
for internal and external audiences, via e-learning and in-person sessions;and (4) requiring an extensive documentation process, reviewed by ourinternal controls department. Our Corporate Audit team also regularly
checks compliance with our government relations program — for example
12 country-level audits were undertaken in 2015 covering interactions
with government officials and business partners.

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Anti-Corruption Training
We undertake training and communication efforts to build awareness andunderstanding among our employees on anti-corruption and anti-bribery, so
as to guide their behavior.
Part of our training is also about encouraging our employees and business
partners to report any concerns or suspected violations of our standards
and Principles and Practices. The content and format of courses completeddepends on risk profiles of individual employees, with those in higher risk
positions receiving more intensive training. Between 2013 and 2015 over
49,000 e-trainings (over 12,300 in 2015) and nearly 14,000 classroom
trainings (over 4,600 in 2015) were completed on anti-corruption andanti-bribery topics. We also trained nearly 3,000 third-party participants.
In 2016, we are focusing on refreshing our training materials. These areintended to provide a tailored, practical, and interactive training experience.
For example, training materials for “front-line” employees focus on realworld situations that may be encountered in a specific market, and provide
both the appropriate (lawful) response to the situation as well as how
employees can obtain timely help and support from local management
and the Law and Compliance Departments. In particular, we are providing
robust and interactive anti-corruption and anti-bribery training toemployees in countries where we previously did not have a presence andwhere we assess higher potential risks of local corruption.

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Interaction with Governments
As a global leader in a highly regulated industry, we believethat it is our responsibility to share our technical expertise andviews regarding policies, laws or regulations that may impact
our business. We believe that we have a right to express ourlegitimate interests in dialogue with governments.
We conduct our public affairs activities with transparency and integrity,and in compliance with all applicable laws and our own corporate policies.
We comply with rules for, and support the registration of, lobbying
activities with political institutions, including in the United States,
where we file quarterly reports on our lobbying activities, and in the EU,
where we participate in the voluntary register for lobbyists with the EU
Commission. Recent submissions in the U.S. and EU can be found here:
www.pmi.com/transparency
In the limited cases where we make political contributions, we publicly
disclose both the recipients and amounts of those contributions:www.pmi.com/politicalcontributions
We are also committed to ensuring transparency when others act on ourbehalf. PMI and its affiliates are members of many industry and trade groups
around the world. We work with these groups because they represent our
industry and the larger business community in policy discussions on issues
where we have a common interest or objective. Our website includes a listof several of the main trade and business associations to which we belong:www.pmi.com/stakeholderengagement
As set out in our Guidebook for Success, we are transparent about our rolein developing materials that seek to influence policy decisions of interest to
the company. This includes the results of work we have funded on the health
implications of our products, as well as when we have financed third parties
who present data or views on our behalf, in order to inform policy decisions.

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All employees are required to comply with our internal rules regarding theprevention of bribery and corruption in interactions with government officials
and private individuals. We also require our external consultants to comply
with our internal policies and Guidebook when they act on our behalf. Whenpresenting information or data to government officials or other third parties,
we commit to providing information that is up-to-date, truthful and reliable.
We support the principle of transparency set forth in Art. 5(3) of the
Framework Convention on Tobacco Control. We believe in the simple
proposition that dialogue is better than exclusion, and especially so in
the area of Reduced Risk Products, which are uncharted territory forgovernments and industry alike. Of course, engagement of the private
sector with government must be based on transparency and integrity.
We support laws and regulations that apply these principles to the lobbying
activities of all industries, companies and organizations. The OECD’s
Principles for Transparency and Integrity in Lobbying provide a usefulframework for governments that are considering enacting or improving their
existing lobbying regulations, as well as for companies, organizations andprofessionals who regularly engage in dialogue with government.

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Anti-Illicit Trade Strategies and Prevention
Preventing the illegal sales of tobacco products is one of

Our anti-illicit trade strategy covers three main objectives:

our core business strategies. For us, it is a key elementof sustainability because reducing illicit trade is not only
good for our business but also important to mitigate thedevastating consequences illicit trade has on governments,society and communities.
Fighting illicit trade is directly linked to fighting corruption,
as well as improving human rights, labor rights andenvironmental standards for doing business — principles
that organizations involved in illicit trade are likely to ignore.
Illicit trade accounts for 10 to 12% of consumed cigarettes
worldwide and deprives governments of tax revenues
valued at 40-50 billion USD annually, while financing
organized crime and not abiding by tobacco regulations.
The profits generated and the cross-border nature of theillegal tobacco trade increase corruption. Wrongdoers
exploit large-scale trafficking routes and often pave their
way by corrupting government officials across borders.
They use the same distribution networks to fund othercriminal activities such as drug and human trafficking.
Curbing corruption is therefore an essential prerequisite
to effectively fight the illegal tobacco trade and otherrelated crimes. As corruption is both a key enabler
and a consequence of the proliferation of illicit trade,
implementing effective anti-illicit trade solutions will
inevitably contribute to reducing corruption.

•	Ensure that effective supply chain control measures
are in place to prevent the illegal diversion of our own
products;•	Stop the spread of “illicit whites”. Illicit whites arecigarettes that are produced legally in one country, butwith the sole purpose of being smuggled into and soldillegally in another market; and•	Advocate for implementation of anti-illicit trade
regulations, including the control of key inputs andimplementation of tracking and tracing systems.
We implement these objectives by:

Training and Awareness Raising
Raising public awareness about illicit trade and its
consequences is key to tackling the demand for illegal
cigarettes. To understand the size and impacts of illicit
trade in tobacco products, we conducted researchstudies in 95 countries and issued two regional reports in2015, see: www.pmi.com/anti-illicit
We promote awareness campaigns in several countries
that are designed to inform the public and raisegovernments’ attention to the negative consequences ofillicit trade. We also educate retailers about the serious
implications of selling illegal cigarettes and offer advice on
how to avoid becoming involved in the illicit trade.
Our Product Intelligence and Security team provides
technical trainings to law enforcement officers in several
countries to help them improve their ability to perform
preliminary assessment of the authenticity of products
bearing our brands. To date, we have trained over 11,000
law enforcement officers worldwide.

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Advocacy and Partnering
In order to effectively fight illicit trade across the industry,a multi-stakeholder approach and collaboration between
public and private partners is key.
PMI is a founding member of the Digital Coding andTracking Association (DCTA). In October 2015, theDCTA signed a Memorandum of Understanding
with the United Nations Conference on Trade andDevelopment (UNCTAD), the aim of which is to cooperateand strengthen the operational capacity of customs
administrations in monitoring and controlling the trade ofexcisable goods, including tobacco products.
To date, we entered into public private partnerships,
through Memoranda of Understanding with governments
and customs authorities in over 30 countries worldwide tofacilitate joint activities against illicit trade.

Supply Chain Controls and Action on
Illicit Whites
We implement strong controls in our own value chain,such as track and trace procedures, volume monitoring
and customer due diligence procedures. These measures
not only have yielded tangible results, but have also
become the industry standard. According to the European
Commission, between 2006 and 2014, the volume ofillegal PMI products seized in the EU has dropped by 85%.

We advocate for better controls of Free Trade Zones,
engage with international organizations to fight illicit
whites and promote know-your-customer policies for
suppliers of key raw materials (tobacco, paper, and filters).

Implementing Product Tracking and Tracing
A track-and-trace regime can contribute to preventing thediversion of tobacco products into illegal channels.
We are pioneers in the area of product tracking andtracing, and stay at the forefront by continuously investingin the development and implementation of innovativetechnologies and processes. The technology we use is aproven international solution operating across nationalboundaries for more than ten years. To date, it has tracked
the movement of more than 500 million master cases ofour products in over 120 countries. Specifically: in 2015,
124 out of our 180 markets have master case (container of
10,000 cigarettes) tracking systems in place while already98 markets have carton (container of 200 cigarettes)
tracking systems in place; tracking at cigarette pack leveltakes place in 48 markets. According to the European
Commission, PMI’s tracking and tracing systems “haveallowed OLAF [the European Anti-Fraud Office] and theMember States rapidly to recreate the route taken by
genuine smuggled cigarettes from the factory into thehands of the smugglers.”

Regulation of the legal tobacco market should assist in
identifying when products are being manufactured, sold,or distributed outside of the legitimate supply chain.
Today, most of the illicit whites are produced in just a few
main hubs, namely Paraguay, the United Arab Emirates,
Russia and Belarus, which together account for more than
60% of global illicit whites production.

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LAUNCH OF PMI IMPACT
After years of fighting the illegal tobacco trade, we believe that
eradicating illegal trade even in one product category, or thecorruption that is inextricably linked with cross-border illegal trade,are goals too challenging for any one group, government, or company
to pursue alone. Achieving sustainable results against illegal traderequires more focus, more coordinated actions, and more resources.
It also requires an inclusive approach for governments, the private
sector and civil society to work together to address the issue in its
entirety — across a range of illegally traded goods and by tackling
crimes often linked to illegal trade, including corruption. Effective
government policy and enforcement, the private sector’s resourcesand experience, civil society initiatives — all are vital to achieve
concrete and lasting results.
As part of our commitment to fight illegal trade, we have launched
a new initiative in 2016. The initiative, named PMI IMPACT, aims to
be a catalyst for a more holistic approach against the illegal tobacco
trade, corruption and organized crime. PMI IMPACT will fundprojects in three focus areas — Research, Education and Awarenessand Action. It will provide resources for innovative projects that
improve knowledge on the illegal tobacco trade, organized crimeand corruption, and enable public entities, the private sector,
and civil society to implement comprehensive solutions against
these persisting issues. Public organizations, private entities, andnon-governmental organizations have been invited to submit theirproject proposals for funding. Projects are selected through an open
and defined evaluation process, led by a council of independent
experts. For more information about PMI IMPACT, seewww.pmi-impact.com

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6 • ANTI-CORRUPTIONPMI Impact is a global initiative with a 100 million
USD fund to support public, private and nongovernmental organizations in tackling illicit trade.

Looking Forward
PMI is currently bringing innovative new products to themarket that may, in time, dramatically change the way
people use and experience tobacco.
It is imperative that all of our efforts in this new area — from working
with new business suppliers to engaging with government officials on
appropriate regulation — are in strict compliance with our standards for
conducting business honestly and transparently. Furthermore, we are
expanding our business into countries where we previously did not havea presence — meaning new affiliates, new partners and new parties withwhom we do business. While international corruption indices raise concern
about practices in some of these countries, we are striving to ensure that
our commitment to anti-corruption and anti-bribery is fully adopted andimplemented internally and by all our business partners.

LEARN MORE
• Government Advocacy: www.pmi.com/advocacy• Anti-Illicit Trade: www.pmi.com/anti-illicit• Stop Illegal Cigarettes: www.stopillegalcigarettes.com• Tobacco Regulation: www.pmi.com/regulation• Compliance: www.pmi.com/compliance• OECD’s Principles for Transparency and Integrity in Lobbying:
http://www.oecd.org/gov/ethics/oecdprinciplesfortransparencyandintegrityinlobbying.htm• PMI Impact: www.pmi-impact.com

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7 • SUMMARY

Summary

Although this is the end of PMI’s first Communication on Progress, it’s only
the starting point in sharing our sustainability journey.
We outlined to what extent the Ten Principles of the UN Global
Compact are already part of our business today. We are committed tofurthering our activities in the areas of Human Rights, Labor Practices,
Environmental Responsibility, and Anti-Corruption and have defined our
key priorities to build on existing areas of strength:1)	Developing and expanding sustainability metrics and goals, witha particular focus on the transformation of our business towards
Reduced Risk Products2)	Embedding a comprehensive sustainability strategy across ourvalue chain, including external reporting in line with international
standards and best practices3)	Developing a comprehensive Human Rights Policy and related due
diligence and remediation processes4)	Engaging with our non-tobacco suppliers on human and laborrights as well as on environmental protection and anti-corruption
measures5)	Implementing innovative approaches for environmental
improvement such as science-based targets for carbon reduction
and product waste programs
In September 2015, the United Nations adopted the SDGs to guide global
development over the next 15 years. We have highlighted activities where
we contribute to sustainable development and will use the SDGs as
guidance during the development of our sustainability strategy. In futurereports we will provide information on how we have aligned with and areworking towards the achievement of the SDGs.
We look forward to engaging with you, our stakeholders, as we seek tocontinuously improve the sustainability of our business and contribute to
the global sustainability agenda. As highlighted by our CEO, we invite you
to feedback to us at sustainability@pmi.com

75Philip Morris International
Avenue de Rhodanie 50
1007, Lausanne
Switzerland
www.pmi.com