CDP 2017 Water 2017 Information Request

CDP

Philip Morris International

Module: Introduction
Page: W0. Introduction
W0.1
Introduction
Please give a general description and introduction to your organization

Philip Morris International Inc. (PMI) is the leading international tobacco company, with its headquarters in New York City, New York, U.S.A. and Operations Centerin Lausanne, Switzerland.
On 31 December 2016, PMI owned and operated 48 manufacturing facilities and sold products in more than 180 markets.
In 2016, PMI recorded total cigarette shipment volume of 813 billion units, had revenues, including excise taxes, of US$ 74.9 billion, and held an estimated 27.9% of
the international cigarette market excluding the People's Republic of China and the U.S. PMI’s 2016 operating income was US$ 10.8 billion.
PMI has an unequalled brand portfolio led by Marlboro, the world’s number one international selling cigarette brand, and L&M, the third most popular brand.
Including Marlboro and L&M, six of our brands rank in the top 15 international cigarette brands in the world. We have a strong mix of international and local productsthat appeal to a wide range of adult smokers.
PMI’s global workforce of approximately 79,500 employees is extremely diverse. We have historically expanded our business through a mixture of organic growth,geographic expansion and acquisitions, and have a successful track record of acquiring and integrating companies.
PMI is driven by four long-term goals that guide us as we grow our business in a responsible manner. Those goals are:- to meet the expectations of adult smokers by offering innovative tobacco products of the highest quality available in their preferred price category;- to generate superior returns to our shareholders through revenue, volume, income, and cash flow growth and a balanced program of dividends and share
repurchases;- to reduce the harm caused by tobacco products by supporting effective evidence based regulation and by developing products with the potential to reduce the riskof tobacco-related diseases; and- to be a responsible corporate citizen and to conduct our business with the highest degree of integrity.
For more than a decade, PMI has dedicated significant resources to the development and scientific assessment of non-combustible alternatives to cigarettes. We
refer to these products as Reduced-Risk Products (see further information) because they have the potential to reduce the risk of smoking-related diseases.

We are committed to responsibly delivering long-term sustainable growth and applying high standards wherever we operate. We also aim to be an industry leader inenvironmental sustainability and have set clear and measurable targets to improve our environmental performance. In 2010, we set ourselves the goal of reducing
the carbon footprint of our value chain by 30% by 2020. Beyond 2020, we continue to work on developing company-wide emissions reduction targets based directly
on climate science. In 2016 we submitted and in 2017 we got approved our 2030 and 2040 Science Base Targets based on a new baseline footprint analysis and aforecast on how industry trends and our Manufacturing, Fleet, Leaf and supply chain emission reduction programs could achieve in the mid-long term.

W0.2
Reporting year
Please state the start and end date of the year for which you are reporting data

Period for which data is reported
Fri 01 Jan 2016 - Sat 31 Dec 2016

W0.3
Reporting boundary
Please indicate the category that describes the reporting boundary for companies, entities, or groups for which water-related impacts are reported

Companies, entities or groups over which operational control is exercised

W0.4
Exclusions
Are there any geographies, facilities or types of water inputs/outputs within this boundary which are not included in your disclosure?

Yes

W0.4a
Exclusions
Please report the exclusions in the following table

Exclusion

Please explain why you have made the exclusion

Offices (except main offices
in Switzerland) and someminor facilities.

We have excluded some offices and minor activities/facilities such as finished goods warehouses for which we have limited data
and where we consider our water footprint and risks to be very small. These exclusions are not significant to this disclosure andwe estimate that these sites represent less than 2% of our overall blue water usage based on a water footprint screening
performed by Quantis.

Further Information
RRPs is the term we use to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to theseproducts versus continued smoking. We have a range of RRPs in various stages of development, scientific assessment and commercialization. Because our RRPs
do not burn tobacco, they produce far lower quantities of harmful and potentially harmful compounds than found in cigarette smoke. We conduct rigorous scientificassessment of our RRP platforms to establish that they reduce exposure to harmful and potentially harmful constituents in smoke and, ultimately, that theseproducts present, are likely to present, or have the potential to present less risk of harm to adult smokers who switch to them versus continued smoking. We draw
upon a team of expert scientists and engineers from a broad spectrum of scientific disciplines and our extensive learnings of consumer preferences to develop andassess our RRPs. Our efforts are guided by the following key objectives: to develop RRPs that adult smokers who would otherwise continue to smoke find to besatisfying alternatives to smoking; for those adult smokers, our goal is to offer RRPs with a scientifically substantiated risk-reduction profile that approaches as
closely as possible that associated with smoking cessation; to substantiate the reduction of risk for the individual adult smoker and the reduction of harm to the
population as a whole, based on scientific evidence of the highest standard that is made available for scrutiny and review by external independent scientists andrelevant regulatory bodies; and, to advocate for the development of science-based regulatory frameworks for the development and commercialization of RRPs,
including the communication of scientifically substantiated information to enable adult consumers to make better health choices.

Module: Current State
Page: W1. Context

W1.1
Please rate the importance (current and future) of water quality and water quantity to the success of your organization

Water quality andquantity

Direct use
importance
ratingIndirectuse
importance
rating

Sufficient amounts ofgood quality freshwater
available for use

Important

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

ImportantPlease explain

This year, we worked with Quantis to conduct a water footprint screening of our organization to better
understand where the risks are. Of our blue water footprint, around 42% goes to our Leaf irrigation
program, 56% is used in our supply chain, and only 2% is used in our manufacturing sites. Direct: At
our manufacturing sites, water use is evenly divided between WASH facilities, landscaping, andmanufacturing process itself. At these sites, we are dependent on having sufficient amounts of highquality freshwater. Supply Chain: PMI has a large number of suppliers, but those most crucial to ourbusiness in terms of water risk are tobacco, paper and cellulose acetate based raw material suppliers.
Around 66% tobacco crops are rainfed and 33% require irrigation. All regions from where we source
tobacco and specially those irrigated are vulnerable to water-related risks in the form of drought, andrequire water to grow and harvest crops, therefore, we have given them a rating of important.
Direct: At our manufacturing sites, water is recycled from our waste water treatment plants and used
for gardening and process where is technically possible. Supply Chain: both our tobacco crops andother raw material suppliers like paper or cellulose acetate use every opportunity to treat and use
recycled or brackish water. Saving freshwater withdrawn by using recycled or brackish water improves
our direct and supply chain resilience to water scarcity and increases the water available for oursurrounding communities, therefore, we have given them a rating of important.

W1.2
For your total operations, please detail which of the following water aspects are regularly measured and monitored and provide an explanation as to why
or why notWater aspect% ofsites/facilities/operations

Water withdrawals- total
volumes76-100

Water withdrawalsvolume by sources

76-100

Water discharges- total
volumes76-100

Water discharges- volume
by destination

76-100

Water discharges- volume
by treatment method76-100

Water discharge quality
data- quality by standard
effluent parameters76-100

Water consumption- total
volume76-100

Facilities providing fullyfunctioning WASH
services for all workers

76-100Please explain

100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management for our sites and is emphasized by ISO14001 certification in 93% of
those sites. Monthly water data is input from all sites globally into our EHS data management system,
which is checked quarterly and third party verified annually.
100% of our operational (i.e. factory) sites are monitored for this water aspect and this is consideredpart of normal facility management and is emphasized by ISO14001 and OHSAS18001 (health andsafety management) certification in 93% of those sites. We use a global reporting requirement forwater data with a central data collection system for all sites. Audits and inspections are undertaken tominimum requirements set by our documented standards.

W1.2aWater withdrawals: for the reporting year, please provide total water withdrawal data by source, across your operations

SourceQuantity(megaliters/year)

How does total
water withdrawals
for this sourcecompare to thelast reportingyear?

Comment

Fresh surface water

2.0

Much lower

There was a surface water decrease, which is in line with programs to reduce water-use.
However, we expect that going forward; this number will increase since we just installed a
new project to switch some of our operations in Switzerland to use more fresh surface water.
The benefit is that instead of using drinkable water for the steam system, we will take about
160 megaliters of lake-water.

Brackish surface
water/seawater0

Not applicable

We do not currently use either brackish surface water or seawater.

Rainwater

0.6

Lower

Groundwater renewable1495.0

About the same0

Not applicable

We do not currently use non-renewable groundwater.

0

Not applicable

We do not currently use produced or process water.

1943.9Lower

Generally lower water withdrawal is in line with programs to reduce water-use. We estimatethat we saved 107 megaliters across the 13 projects that we installed in 2016. This equates
to approximately a 3% decrease in water use during a time when our production complexity
continues to increase. Our actual water savings from municipal supply was closer to 12%
suggesting that additional actions and behavior modifications occurred.

0

Not applicable

We do not currently use wastewater from another organization.

3441.6

Lower

Generally lower water withdrawal is in line with programs to reduce water-use. We estimate

Groundwater - nonrenewable
Produced/process
water

Municipal supply

Wastewater fromanother organization
Total

This number was lower than last year, which generally is in line with programs to reducewater-use; however, for rainwater the reduction is mainly due to local changes inprecipitation. Overall, is the amount of water we use in our direct operations is small.
There was a small increase, but this is considered insignificant in the context of our total
water use. Our groundwater sources come from wells and aqufiers, which are metered,reported and verified annually by external auditors.

Source

Quantity(megaliters/year)

How does total
water withdrawals
for this sourcecompare to thelast reportingyear?

Comment

that we saved 107 megaliters across the 13 projects that we installed in 2016. This equates
to approximately a 3% decrease in absolute water use during a time when our production
continued to increase. Our actual water savings was closer to 6% suggesting that additional
actions and behavior modifications occurred.

W1.2b
Water discharges: for the reporting year, please provide total water discharge data by destination, across your operations

Quantity(megaliters/year)

How does total
water discharged
to thisdestinationcompare to thelast reportingyear?

Fresh surface water

542.2

HigherAll water metrics are collected through our EHS data management system for all sites
globally. This data is input monthly and checked quarterly and annually. There is someuncertainty with water discharges because not all sites are metering the fresh surface water
discharge.

Brackish surface
water/seawater0

Not applicable

We do not currently discharge to either brackish surface water or seawater.

Groundwater

241.0

Lower

Municipal/industrial

1117.3

Lower

Destination

Comment

There is some uncertainty with water discharges because not all sites have this metered;however this reduction is generally from water reduction and reuse initiatives.
The majority of our operations are located in regions with Municipal or industrial wastewaterQuantity(megaliters/year)

Destination

How does total
water discharged
to thisdestinationcompare to thelast reportingyear?

wastewater treatment
plant

treatment plants. Optimizing our osmosis water treatment plants and reusing rejected water
are examples of initiatives implemented to reduce this water discharge in our factories.
There is some uncertainty with water discharges because not all sites have this metered;however this reduction is generally from water reduction and reuse initiatives.

Wastewater for anotherorganization

Total

Comment

01900.5

Not applicable

We do not currently provide wastewater to another organization.

Lower

There is some uncertainty with water discharges because not all sites have metereddischarges; however this overall reduction of around 30 Megaliters per year is generally
from water reduction and reuse initiatives. Optimizing our osmosis water treatment plants
and reusing rejected water are examples of initiatives implemented to reduce this water
discharge in our factories.

W1.2c
Water consumption: for the reporting year, please provide total water consumption data, across your operations

Consumption(megaliters/year)

1541.1How does thisconsumption figurecompare to the lastreporting year?

Lower

Comment

Generally, lower water consumption is in line with the programs to reduce water use and reuse water at oursites. We anticipate with the introduction of our new RRP’s which require more water for their manufacturing
process, that we will consume more water in the next few years. Programs have been put in place to reduce theincreased water impact over time.

W1.3
Do you request your suppliers to report on their water use, risks and/or management?

Yes

W1.3a
Please provide the proportion of suppliers you request to report on their water use, risks and/or management and the proportion of your procurement
spend this represents

Proportionofsuppliers
%

1-25

Total
procurement
spend %

1-25

Rationale for this coverage

Of our blue water footprint, 42 percent goes to our Leaf irrigation program, 56 percent is used in our supply chain, and only 2
percent is used in our manufacturing sites. PMI has a large number of suppliers, but those most crucial to our business in terms ofwater risk are tobacco suppliers and farmers. Through our use of life-cycle assessment and our use of Quantis water footprint
screening, we have identified our agricultural supply chain as currently having our largest potential environmental impacts. We
have therefore prioritized these areas to engage with on water issues through the implementation of Good Agricultural Practices(GAP) which covers all of the 450,000 farmers that we work with across 30 countries globally and are a contractual requirement for
tobacco suppliers doing business with PMI. GAP defines the principles and standards we expect to be met by all those who growand supply tobacco for PMI. Our GAP Implementation Guide lays out extensive agricultural environmental practices and guidancecovering sustainable water management and soil management/conservation. The results of these self-assessments is included inour supplier scorecards and used to make future decisions.

W1.3b
Please choose the option that best explains why you do not request your suppliers to report on their water use, risks and/or management

Primary reason

Please explain

W1.4
Has your organization experienced any detrimental impacts related to water in the reporting year?

No

W1.4a
Please describe the detrimental impacts experienced by your organization related to water in the reporting year

Country

River basin

Impact driver

ImpactDescriptionof impact

Length of impact

Overallfinancial
impactResponse
strategy

Description of
response
strategy

W1.4b
Please choose the option below that best explains why you do not know if your organization experienced any detrimental impacts related to water in thereporting year and any plans you have to investigate this in the futurePrimary reason

Future plans

Further Information
Water metrics are collected through our EHS data management system for all sites globally. This data is input monthly, checked quarterly and verified annually.
There is a very low level of uncertainty for water withdrawals as these sources are metered.

Module: Risk Assessment
Page: W2. Procedures and Requirements
W2.1
Does your organization undertake a water-related risk assessment?

Water risks are assessed

W2.2
Please select the options that best describe your procedures with regard to assessing water risks

Risk assessment
procedureComprehensive
company-wide risk
assessment

Coverage

Scale

Please explain

Directoperations andsupply chain

All facilities
andsuppliers

Managing water risks is essential to our business. Our approach includes several layers of risk
assessments to identify, mitigate and manage risks across the business at a corporate, site, andsupply chain level for our operations worldwide. We completed a Climate Change Risk Assessment

Risk assessment
procedure

Coverage

Scale

Please explain(CCRA) and high risk focus areas around the world were identified in our own operations, distribution
channels, and key suppliers. The CCRA covered all geographies where we do business. Extremes ofweather such as flooding and drought as well as gradual changes in precipitation and water scarcity
were all evaluated. As part of this assessment, we use the WRI Aqueduct Water Risk Tool to consider
water-related risks, and the WBCSD Global Water Tool to identify where our operations were subject
to watershed levelwater stress. We will continue to assess which of these tools (or new ones) are fit
for our purpose each year as they continue to evolve. In addition, water supply and flood risk
assessments are undertaken at each site (typically ISO14001 certified sites) to understand how
vulnerable these sites are to water related risk and local flooding events (e.g. Philippines). Water risk
management is a fundamental part of our Good Agricultural Practices and covers management
requirements for water quality, water abstraction, water efficiency and water discharges, all based onrisk assessment.

W2.3
Please state how frequently you undertake water risk assessments, at what geographical scale and how far into the future you consider risks for each
assessment

Frequency

Geographic
scale

How far into the
future are risks
considered?

Annually
AnnuallyCountry
River basin>6 years
1 to 3 years

Annually

River basin>6 yearsComment

Review of our Climate Change Risk Assessment
Facility long range planning
We have just embarked on a water shed risk assessment in a basin where vertically integrated leaf crops anda complex production facility are present. With its results we are planning to develop a broader water
stewardship strategy which will incorporate the findings from the climate risk assessment in order to better
understand our exposure to changes in water availability in the future at a catchment and thereby develop
measures to support farmers and/or remove the risk from our supply chain.

W2.4
Have you evaluated how water risks could affect the success (viability, constraints) of your organization's growth strategy?

Yes, evaluated over the next 1 year

W2.4a
Please explain how your organization evaluated the effects of water risks on the success (viability, constraints) of your organization's growth strategy?

We completed a Climate Change Risk Assessment (CCRA) with the company ERM across our value chain and focus areas have been identified in both our own
operations, distribution channels and key suppliers. Extremes of weather such as flooding and drought as well as gradual changes in precipitation and water
scarcity were all evaluated in our CCRA in terms of their corresponding business impact and how that impact is likely to change in the short, medium, and long term.
For example, as a result of the CCRA, we decided to implement the Alliance for Water Stewardship (AWS) standard at river basin level (as relevant for factories andtobacco growing) as a key step in implementing our strategy. Brazil, has been chosen as a pilot due to PMI's complex factory operations and vertically integrated
local farms so that we can develop our knowledge and tools to drive the implementation of the AWS standard at the pilot location and thereafter globally.
A water footprint screening done with Quantis across our value chain, highlighted the importance of water in our paper and cellulose acetate suppliers. As a result,
we have designed a plan to engage with different key suppliers to better understand their water usage, sourcing and manufacturing location, projects for water
reduction and how can we collaborate to further reduce their impact. In a near future, we are developing the concept of a supplier scorecard that considers CO2 andwater usage as part of our supplier selection criteria.
Besides, the CCRA was used to map those sites with the highest water stress and water drought risks. Using the recently approved central governance forenvironmental investments, projects from these higher risks sites will be prioritized and local budget restrictions will be overcome.
In order to identify water opportunities, a water self-assessment tool was developed containing those initiatives that have been proved as the most efficient in saving
water. The tool was used to assess all our sites last year and as a result specific local action plans were created and several local projects were implemented or arein the process to be implemented.
Our growth strategy has not been influenced, but the information collected the risks assessments allows us to influence in the selection of future sites, productdesign and sourcing and better allocate resources to water stressed areas.

W2.4b

What is the main reason for not having evaluated how water risks could affect the success (viability, constraints) of your organization's growth strategy,
and are there any plans in place to do so in the future?

Main reason

Current plans

Timeframe until evaluation

Comment

W2.5
Please state the methods used to assess water risks

MethodInternal company
knowledge
WRI Aqueduct
Other: Company-wide
climate change risk
assessment

Please explain how these methods are used in your risk assessment

PMI has several initiatives and methods to assess and manage water risks. Internal company knowledge and expertise is used to
identify and prioritise the most critical sites (e.g. by production volume, distribution or previously experienced events) and value chain
operations for PMI. In addition, site specific flood risk assessments, ISO 14001 certification and our Good Agricultural Practices(standards for tobacco suppliers and farmers who supply to PMI), are used by business managers to identify and manage water
risks. These are all brought together through a company-wide risk review process. PMI has also commissioned independent
experts to complete a climate change risk assessment (CCRA), which was updated in July 2015. This study identified futurechanges in climate and water factors (drought, flooding, cyclones) for all regions where PMI’s direct operations and value chain
operations are highlighted areas of risk. To look at water risks beyond just climate change, we also used the WRI Aqueduct tool toassess all manufacturing, port, and leaf production sites. The internal prioritization according to business risk, aqueduct risk, andCCRA were analysed to shortlist locations with a higher water related risk.

W2.6
Which of the following contextual issues are always factored into your organization's water risk assessments?

Issues

Choose option

Current water availability and quality
parameters at a local level

Relevant,
included

Current water regulatory frameworks
and tariffs at a local level
Current stakeholder conflicts
concerning water resources at a local
level

Relevant,
included

Current implications of water on yourkey commodities/raw materials

Relevant,
included

Current status of ecosystems andhabitats at a local level

Relevant,
included
Relevant,
included
Relevant,
included
Relevant,
included
Relevant,
included
Relevant,
included

Current river basin management plans
Current access to fully-functioning
WASH services for all employees
Estimates of future changes in water
availability at a local level
Estimates of future potential regulatorychanges at a local level
Estimates of future potential
stakeholder conflicts at a local level
Estimates of future implications ofwater on your key commodities/raw
materials

Relevant,
included

Relevant,
included

Please explain

Relative to other industries, we withdraw small volumes of water for use at our manufacturing
facilities and a large proportion of the use is for staff and green spaces rather than being processrelated. This is factored into company level risk assessment initiatives through use of internal
company knowledge of local conditions and regulations.
This is factored into company level risk assessment initiatives through use of internal company
knowledge on water abstraction and discharge consents.
This is factored into company level risk assessment initiatives through use of internal company
understanding of supply and demand issues. Another important part of our precautionary approachto environmental challenges is dealing with water quality and scarcity.
We are expanding our water programs by first assessing current and future water-related risks more
broadly across our value chain. These risks include water scarcity and water quality in tobacco
growing regions, flood risk in major tobacco warehouse locations and ports, and water demand incities where we have manufacturing facilities. Since our products are based on agricultural raw
materials and paper-based materials are also important. This is factored into company level risk
assessment initiatives through our Good Agricultural Practices and engagement activities with key
tobacco and clove suppliers, CCRA, and use of water risk tools. As with other agriculturalcommodities, the price of tobacco leaf and cloves can be influenced by imbalances in supply anddemand, and crop quality can be influenced by variations in weather patterns, including thosecaused by climate change. Any significant change in tobacco leaf and clove prices, quality andquantity could affect our profitability and our business.
This is factored into company level risk assessment initiatives as part of our Good Agricultural
Practices.
This is factored into company level risk assessment initiatives and as part of our Good Agricultural
Practices and use of water risk tools such as the WRI Aqueduct tool.
This is factored into company level risk assessment initiatives as part of our ISO14001 andOHSAS18001 programs and minimum EHS requirements.
This is factored into company level risk assessment initiatives through our long term climate change
risk assessment (CCRA) and as part of our Good Agricultural Practices.
This is factored into company level risk assessment initiatives through use of internal company
knowledge on water abstraction and discharge consents.
This is factored into company level risk assessment initiatives through use of internal company
understanding of supply and demand issues.
Our products are based on agricultural raw materials and paper-based materials are also important.
This is factored into company level risk assessment initiatives through our Good Agricultural
Practices and engagement activities with key tobacco and clove suppliers, CCRA and use of waterrisk tools.

Issues

Choose option

Estimates of future potential changes
in the status of ecosystems andhabitats at a local level
Scenario analysis of availability ofsufficient quantity and quality of water
relevant for your operations at a local
level
Scenario analysis of regulatory and/or
tariff changes at a local level
Scenario analysis of stakeholder
conflicts concerning water resources at
a local level

Please explain

Relevant,
includedThis is factored into company level risk assessment initiatives and as part of our Good Agricultural
Practices.

Relevant,
includedThis is factored into company level risk assessment initiatives through long term climate change risk
assessment, as part of our Good Agricultural Practices and by using water risk tools.

Relevant,
includedThis is factored into company level risk assessment initiatives through use of internal company
knowledge on water abstraction and discharge consents.

Relevant,
includedThis is factored into company level risk assessment initiatives as appropriate through use of internal
company understanding of supply and demand issues.

Scenario analysis of implications ofwater on your key commodities/raw
materials

Relevant,
included

Our products are based on agricultural raw materials and paper-based materials are also important.
This is factored into company level risk assessment initiatives through our Good Agricultural
Practices and engagement activities with key tobacco and clove suppliers, CCRA and use of waterrisk tools.

Scenario analysis of potential changes
in the status of ecosystems andhabitats at a local level

Relevant,
includedThis is factored into company level risk assessment initiatives as appropriate and as part of ourGood Agricultural Practices.

Other

Not relevant,explanation
provided

There are no other water related issues that we have identified.

W2.7
Which of the following stakeholders are always factored into your organization's water risk assessments?

Stakeholder

Customers

Choose option

Relevant,
included

Please explain

We are increasingly using life-cycle assessment (LCA) thinking to evaluate options for reducing environmental
impacts throughout the entire life-cycle of our products. This means looking at the environmental impact associatedStakeholder

Choose option

Employees

Relevant,
included

Investors

Relevant,
included

Local communities

Relevant,
included

NGOs

Relevant,
included

Other water users at
a local level

Relevant,
included

Regulators

Relevant,
included

Please explain

with product use and packaging. Considering the transformation of our business with the introduction of our new
product offering, Reduced-Risk Products (RRPs), we will expand our LCA to cover the new suite of products
including review of water risks.
We engage our employees in water usage and water saving initiatives. Through our objective setting, Long-Range
Planning process and via employee communications, sharing of tools, guidance and best practices. We gave senior
management briefings to all operations employees on sustainability in 2016 and run specific focus days andcampaigns. An example of awareness sessions are annual eco-weeks held in our sites including initiatives likeplanting trees, recipes for homemade natural soap or advices on saving water at home. Specific company awards
such as the Chairman’s Award and Excellence Awards, which are either cash or stock, are available for EHS
Managers, project teams and other employees who are responsible for water related initiatives and improvements.
We receive numerous requests annually for information on our sustainability programs as a whole and have opted torespond to the CDP Water Information Request to provide investors with more information and transparency aroundour water risk management for our direct operations and supply chain.
Over the next year, we hope to work with communities on three basic principles - water preservation, innovation, andengagement. Especially for tobacco-growing, we expect our affiliates and suppliers to have a water management
plan that takes into account the use and management of water for tobacco production to minimize adverse impacts
to other users 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.
We work on the UN Global Compact and have published our first communication on progress to the United Nations
Global Compact, reporting comprehensively on our sustainability practices across human rights, labor rights,
environment and anticorruption. We remain committed to the UN Global Compact which we signed-up to in 2015
and issued our first Communication on Progress in June 2016 which we use as an engagement tool along withsigning up to UNGC Local Networks around the world; our next Communication on Progress will be published in
September 2017. We are also part of the World Business Council for Sustainable Development (WBCSD), theWeMeanBusiness coalition, and since participating in the UNFCCC COP21 in Paris, we have continued to engage
externally regarding our commitments on climate change adaptation and water, including our support for the Paris
Agreement.
Over the next year, we hope to work with communities on three basic principles - water preservation, innovation, andengagement. Especially for tobacco-growing, we expect our affiliates and suppliers to have a water management
plan that takes into account the use and management of water for tobacco production to minimize adverse impacts
to other users 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.
Beyond just thinking about the community, we are also considering other water users at the local level and working
to retain our social license to operate.
Effective environmental management across our operations and value chain ensures that PMI complies with laws
and regulations. In particular, some of the regulations that we are subject to includes water abstraction, managementand discharge consents.

Stakeholder

Choose option

River basin
management
authorities

Relevant,
included

Statutory special
interest groups at a
local level

Relevant,
included

Suppliers

Relevant,
included

Water utilities at a
local level

Relevant,
included

Other

Not relevant,explanation
provided

Please explain

We work with river basin management authorities when appropriate. Annually all our factories are assed by
ISO14001 allowing our sites to align with current and upcoming local river basin management regulations associatedwith water withdrawals and wastewater.
We work with local special interest groups as appropriate. For example, through specific contributions in 2016, PMI
supported projects to protect and enhance natural resources, implement conservation agriculture, provide cleanwater, cater for food security, and improve the livelihoods of people living in rural communities. Working with the
Ethiopia Red Cross Society, PMI provided food and clean water to young children and pregnant mothers in responseto the severe drought that hit the country. The project also included awareness-raising on good sanitation practices
and the provision of hygiene materials. In response to PMI’s donation, the Ethiopian Deputy Prime Minister
recognized our company for being the first multinational to step forward and contribute.
By engaging with suppliers, we are working with them to be more resilient. This is factored into company level risk
assessment initiatives through our Good Agricultural Practices and engagement activities with key tobacco and clove
suppliers, CCRA, and use of water risk tools.
We work closely with local water utilities to track and manage our water usage at large facilities. Where possible, we
work to integrate water efficiency projects and reduce our footprint. A water self-assessment tool has beendeveloped and is used to assess annually all our manufacturing centers serving as a great source for water saving
initiatives.
There are no other water related stakeholders that we work with at this time

W2.8
Please choose the option that best explains why your organisation does not undertake a water-related risk assessment

Primary reason

Further Information

Please explain

Module: Implications
Page: W3. Water Risks
W3.1
Is your organization exposed to water risks, either current and/or future, that could generate a substantive change in your business, operations, revenue
or expenditure?

Yes, direct operations and supply chain

W3.2
Please provide details as to how your organization defines substantive change in your business, operations, revenue or expenditure from water risk

In relation to substantive change, we refer to materiality - material issues are identified in a multidisciplinary way and include those which:• have the highest potential impact and a realistic probability of occurrence;• are most relevant to our enterprises and geographic locations; and• are most important to our stakeholders.
In 2020+ risk forecasting terms, higher level risks are defined as those with a potential impact in excess of US$5M or a raw material impact in excess of 1000 metrictonnes of tobacco leaves. These apply to both our direct operations and our tobacco supply chain.
Over the last couple of years, we have been expanding our water programs by first assessing current and future water-related risks more broadly across our value
chain. These risks include water scarcity and water quality in tobacco growing regions, flood risk in major tobacco warehouse locations and ports, and water demandin cities where we have manufacturing facilities.

W3.2a
Please provide the number of facilities* per river basin exposed to water risks that could generate a substantive change in your business, operations,revenue or expenditure; and the proportion of company-widefacilities this representsCountry

PolandIndonesia
Philippines

River basin

Wisla
Other: RIVER BASINSOther: RIVER BASINS

Number of facilities exposed
to water risk

1
1
2

Proportion of companywide facilities that thisrepresents (%)

Comment

1-5
1-5
1-5

W3.2b
For each river basin mentioned in W3.2a, please provide the proportion of the company's total financial value that could be affected by water risks

Country

River basin

PolandWisla

Indonesia

Other: RIVER BASINS

Philippines

Other: RIVER BASINS

Financial reporting
metric% global production
volume% global production
volume% global production
volumeProportion ofchosen metric that
could be affected

Comment

6-10
6-10
6-10

W3.2c
Please list the inherent water risks that could generate a substantive change in your business, operations, revenue or expenditure, the potential impact
to your direct operations and the strategies to mitigate themCountry

Poland

River
basin

Wisla

Risk
driverPhysicalFlooding

Potential
impactPlant/production
disruption
leading to
reduced output

Description ofpotential impact

Despite amunicipal plan
started in 2007
to prevent
flooding, in 2010,a major floodcaused several
deaths andaffected homes,
roads andinfrastructure.
Potential forflooding of ourmanufacturinglocation, basedon company
assessment oflong term climatechange risk
updated in 2015.

Timeframe Likelihood>6 years

Unlikely

Magnitudeofpotential
financial
impactLow

Response
strategy

Costs ofresponse
strategy

Developflood
emergency
plans
Infrastructure
maintenance
PromoteLess than
best practice $1M
andawareness
Water
management
incentives

Details ofstrategy andcosts

The cost of
response
strategies is
estimatedbased on thecost ofexternal
providers
used toassess floodand business
continuity riskeach year andrelated staff
costs. Floodriskassessmentsareundertaken at
the site levelto understandhowvulnerablesites are to
local flooding
events.
Understanding
the scale andnature of thisrisk is an
importantinitial step inmanaging theCountry

River
basin

Risk
driverPotential
impactDescription ofpotential impact

Timeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

risk. As wellasundertaking arisk
assessment
process, ourinsurance andbusiness
continuity
management
plans aredesigned tomitigate theimpacts
associatedwithdisruptions
that mayresult fromflooding
events. Ouroperations arewidelydistributed
across theworld, helping
to mitigate theeffects of any
disruption.
We have a
sophisticatedcapacity andfootprint
planning
process which

Country

Indonesia

River
basin

Other:RIVER
BASINS

Risk
driverPhysicalFlooding
PhysicalProjectedwaterstressPotential
impactPlant/production
disruption
leading to
reduced output

Description ofpotential impact

Potential forflooding of
manufacturinglocation, basedon company
assessment oflong term climatechange risk
updated in 2015.

Timeframe Likelihood>6 years

Unlikely

Magnitudeofpotential
financial
impactLowmediumResponse
strategy

Costs ofresponse
strategy

Developflood
emergency
plans
Engagementwithsuppliers
InfrastructureLess thanmaintenance$1M
Promotebest practiceandawareness
Water
management
incentives

Details ofstrategy andcosts

mitigates
against local
or regional
operations
disturbances.
The cost of
response
strategy isestimatedbased on thecost ofexternal
providers
used toassess floodand business
continuity riskeach year andrelated staff
costs. Floodriskassessmentsareundertaken at
the site levelto understandhowvulnerablesites are to
local flooding
events.
Understanding
the scale andnature of thisCountry

River
basin

Risk
driverPotential
impactDescription ofpotential impact

Timeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

risk is an
importantinitial step inmanaging therisk. As wellasundertaking arisk
assessment
process, ourinsurance andbusiness
continuity
management
plans aredesigned tomitigate theimpacts
associatedwithdisruptions
that mayresult fromflooding
events. Ouroperations arewidelydistributed
across theworld, helping
to mitigate theeffects of any
disruption.
We have a
sophisticatedCountry

Philippines

River
basin

Other:RIVER
BASINS

Risk
driverPhysicalFlooding

Potential
impactPlant/production
disruption
leading to
reduced output

Description ofpotential impact

Potential for
impacts from
cyclones causing
loss tomanufacturinglocations andassociatedsupply chain
disruption, basedon long term
climate change
risk assessment
updated in 2015.

Timeframe Likelihood>6 years

Probable

Magnitudeofpotential
financial
impactMediumResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

capacity andfootprint
planning
process which
mitigates
against local
or regional
operations
disturbances.
The cost of
response
strategy isestimated
Developbased on theflood
cost ofThe threat ofemergency
external
flooding andplansproviders
cyclones inInfrastructureused tothemaintenanceassess flood
Philippines
Promoteand businesscould cause
best practicecontinuity risk
damage inandeach year andourawarenessrelated staff
manufacturing
Use of risk
costs. Floodandtransferrisk
warehouse
instruments
assessments
sites
Water
are
(estimatemanagement
undertaken at
US$10-20M).
incentives
the site levelto understandhowvulnerablesites are to
local floodingCountry

River
basin

Risk
driverPotential
impactDescription ofpotential impact

Timeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

events.
Understanding
the scale andnature of thisrisk is an
importantinitial step inmanaging therisk. As wellasundertaking arisk
assessment
process, ourinsurance andbusiness
continuity
management
plans aredesigned tomitigate theimpacts
associatedwithdisruptions
that mayresult fromflooding
events. Ouroperations arewidelydistributed
across theworld, helping
to mitigate theCountry

River
basin

Risk
driverPotential
impactDescription ofpotential impact

Timeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

effects of any
disruption.
We have a
sophisticatedcapacity andfootprint
planning
process which
mitigates
against local
or regional
operations
disturbances.
Also ourSpecialSituation
Management
System for
dealing with
unforeseen
impacts.

W3.2d
Please list the inherent water risks that could generate a substantive change in your business operations, revenue or expenditure, the potential impact toyour supply chain and the strategies to mitigate themCountry

Indonesia

River
basin

Other:RIVER
BASINS

Risk
driverPhysicalClimatechangePhysicalFlooding

Potential
impactDescription ofpotential
impactSupplychain
disruption

The supplies oftobacco leaf inIndonesia areexposed tophysical climatechange risks,with cyclones
and flooding
being mostcritical. Croplosses, quality
impacts andsupply chain
manufacturing
restrictions
could impact
PMI’s
production andsourcing
strategy. This
could change
our crop buying
pattern andresult inincreased
operationalcost. Also,
clove is an
important raw
material for PMI
to use in our
local kretek
brands.
Indonesia
produces over

Timeframe Likelihood>6 years

Probable

Magnitudeofpotential
financial
impactMediumResponse
strategy

Engagementwith suppliers
Infrastructure
investment
Supplier
diversification

Costs ofresponse
strategy

Details ofstrategy andcosts

We haveengaged with our
clove suppliers
to improve crop
management
practices and arestrengthening
our supply chain
for clove at an
overall cost of
several tens of
millions US$.
The estimatedcost is also
based onprogrammanagement for
Good
Agricultural
Practices
implementation.

The potential
impacts are
based on a longterm climatechange risk
assessment.Our
tobacco supply
chain is widely
spread around theworld, whichhelps to mitigate
against climate
related risks;
there is also someflexibility in termsof the potential torelocate tobacco
crops if somegrowing areas
become morefavorable thanothers. In
addition, oursubstantial
inventories oftobacco leaf canhelp to mitigate
against short term
impacts. We haveengaged with our
clove suppliers to
improve crop
management
practices and arestrengthening ourCountry

Pakistan

River
basin

Other:RIVER
BASINS

Risk
driverPhysicalClimatechangePhysicalDrought

Potential
impactSupplychain
disruption

Description ofpotential
impact

70% of theworld’s cloves.
Clove yields arecomplex;harvests canvary by up to
60% over a 4
year harvest
cycle. Clove
production is
weathersensitive,
climatechanges suchasintensification of
the wet season
could impact
clove growing
areas. This
would reduce
the supply andincrease theprice of cloves.
Tobacco leaf
growing isstrongly
influenced byphysical climatechange such aschanges intemperatureandprecipitation.

Timeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

supply chain forclove at an overall
cost of several
tens of millions
US$. Theestimated cost isalso based onprogrammanagement forGood Agricultural
Practices
implementation.

>6 years

Unlikely

Low

Engagementwith suppliers
Infrastructure
investment
Supplier
diversification$1-5M

The potential
impacts are
based on a longterm climatechange risk
assessment.
Our tobacco
supply chain is
widely spreadaround the world,

Country

River
basin

Risk
driverPotential
impactDescription ofpotential
impactTimeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Increaseddrought /flooding could
disturb thetobacco leaf life
cycle stages(seedling,transplanting,growing,
harvesting).
The yield,
quality andavailability ofthe tobacco
crop could be
influenced bychanges inprecipitationand periods ofdrought. This
could change
our crop buying
pattern andresult inincreased
operational
cost.

Philippines

Other:

Physical-SupplyThe supplies of>6 years

Probable

MediumEngagement$10M +

Details ofstrategy andcosts

which helps tomitigate against
climate relatedrisks; there is also
some flexibility interms of thepotential torelocate tobacco
crops if somegrowing areas
become morefavorable thanothers. In
addition, oursubstantial
inventories oftobacco leaf canhelp to mitigate
against short term
impacts. Also,
through our Good
Agricultural
Practices weinclude water
management
actions andsupport farming
communities withwater supply
projects at a
global cost of
several million
US$.
Our tobacco

Country

River
basin

Risk
driverPotential
impactRIVER
BASINSClimatechangePhysicalDrought
PhysicalFlooding

chain
disruption

Description ofpotential
impacttobacco leaf in
Philippines are
exposed tophysical climatechange risks,with flooding,drought andcyclones being
possible. Croplosses, quality
impacts andsupply chain
manufacturing
restrictions
could impact
PMI’s
production andsourcing
strategy. This
could change
our crop buying
pattern andresult inincreased
operational
cost.

Timeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

with suppliers
Infrastructure
investment
Supplier
diversification

Costs ofresponse
strategy

Details ofstrategy andcosts

supply chain is
widely spreadaround the world,which helps tomitigate against
climate relatedrisks; there is also
some flexibility interms of thepotential torelocate tobacco
crops if somegrowing areas
become morefavorable thanothers. In
addition, oursubstantial
inventories oftobacco leaf canhelp to mitigate
against short term
impacts. We
have engaged
with our tobacco
suppliers to
improve crop
management
practices and arestrengthening our
supply chain for
tobacco at an
overall cost of
several tens of
millions US$. The

Country

River
basin

Risk
driverPotential
impactDescription ofpotential
impactTimeframe Likelihood

Magnitudeofpotential
financial
impactResponse
strategy

Costs ofresponse
strategy

Details ofstrategy andcosts

estimated cost isbased on program
management forGood Agricultural
Practices
implementation.

W3.2e
Please choose the option that best explains why you do not consider your organization to be exposed to water risks in your direct operations that could
generate a substantive change in your business, operations, revenue or expenditure

Primary reason

Please explain

W3.2f
Please choose the option that best explains why you do not consider your organization to be exposed to water risks in your supply chain that could
generate a substantive change in your business, operations, revenue or expenditure

Primary reason

Please explain

W3.2gPlease choose the option that best explains why you do not know if your organization is exposed to water risks that could generate a substantive
change in your business operations, revenue or expenditure and discuss any future plans you have to assess thisPrimary reason

Future plans

Further Information

Page: W4. Water Opportunities
W4.1
Does water present strategic, operational or market opportunities that substantively benefit/have the potential to benefit your organization?

Yes

W4.1a
Please describe the opportunities water presents to your organization and your strategies to realize them

Country
or region

Opportunity

Strategy to realize opportunity

Estimated
timeframe

Comment

Countryor region

Companywide

Companywide

Companywide

Opportunity

Increasedbrand value
Improvedcommunity
relationsSocial licenceto operate

Improved water
efficiency

Ensuring
supply chain
resilience
Improved water
efficiency

Strategy to realize opportunity

PMI targets continuous improvement in environmental sustainability performance,
including water issues, through our Good Agricultural Practices program, our EHS
Principles and Practices, environmental strategy and related objectives.
Environmental Sustainability also forms part of our charitable giving programs.

We set water use reduction targets for all PMI manufacturing facilities to drive
progress towards our goal to achieve a 20% reduction in water use by 2015 (permillion cigarettes equivalent, from a 2010 baseline). In 2015, we beat that target,achieving a 24% reduction and now focusing on a minimum 1% year-year
reduction in the short term, with additional focus on operations present in water
scarce areas. Our improvements in water efficiency, conservation and recycling at
PMI manufacturing facilities are driven by a water reduction target. Through thewater reduction projects we saved 107 megaliters and approximately $155,000 in
2016. As an example, since 2010, our Quebec facility has decreased its water
consumption by over 81% - by the end of 2016 it saved more than 450,000 m3 ofwater. The main project that led to this reduction was the implementation of closed
loop cooling systems. Though these opportunities are not currently considered
substantial in relation to PMI’s operations, revenue or expenditure, opportunities
are still sought out because meeting our targets and becoming more efficient areimportant to us.
Since the majority of our water risks are in our supply chain, we have been working
with our farmers to promote sustainable water management practices. Since
2002, we have developed a Good Agricultural Practices program (GAP), anddefined as a contractual requirement for doing business with PMI. GAP defines theprinciples and standards we expect to be met by all those who grow and supply
tobacco for PMI. Our GAP Implementation Guide lays out extensive agriculturalenvironmental practices and guidance covering sustainable water management
and soil management/conservation. PMI supports and expects all of its’ suppliers
to continuously improve in the implementation of GAP. Suppliers conduct annual
self-assessments of their GAP implementation and are provided with amanagement tool and set of measurable standards against which they ratethemselves. Further, the information resulting from the farm by farm monitoring is
consolidated into Key Performance Indicators that are used to assess suppliers’
improvement in GAP over time. GAP is also monitored by third parties to verify

Estimated
timeframe

Comment

1-3 years

We expect that by tacklingsustainability and climatechange issues appropriately,
our company reputation could
be enhanced.

1-3 years

We expect that by tacklingsustainability and climatechange issues appropriately,
our company reputation could
be enhanced>6 years

Good water and irrigation
management has a positiveeffect on crop yield and helps
minimize uncertainty in supply.

Countryor region

Opportunity

Strategy to realize opportunity

Estimated
timeframe

Comment

supplier self-assessments every 3 years. We support farmers in theimplementation of practices to improve the productivity and the quality of theircrops, reduce the impact on the environment, 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 ourstandards.

W4.1b
Please choose the option that best explains why water does not present your organization with any opportunities that have the potential to provide
substantive benefit

Primary reason

Please explain

W4.1c
Please choose the option that best explains why you do not know if water presents your organization with any opportunities that have the potential toprovide substantive benefit

Primary reason

Please explain

Further Information

Module: Accounting
Page: W5. Facility Level Water Accounting (I)W5.1
Water withdrawals: for the reporting year, please complete the table below with water accounting data for all facilities included in your answer to W3.2a

Facility reference
numberCountry

Facility 1

PolandFacility 2

Indonesia

Facility 3

Facility 4

Further Information

River
basin

Wisla

Other:RIVER
BASINS
Other:
Philippines RIVER
BASINS
Other:
Philippines RIVER
BASINS

Facility
nameTotal water
withdrawals(megaliters/year)
at this facility

How does thetotal water
withdrawals at
this facility
compare to thelast reportingyear?

Philip Morris
Polska

162.7

Lower

PT Philip
MorrisIndonesia

796.3

About the same

PMFTC
Batangas

197.1

Lower

PMFTC
Marikina

215.1

Much lower

Please explain

We reduced water use by increasing osmosis plant
filtration effectiveness by 20% by installation of
additional set of membranes. This allowed us to savemore than 2 megaliters/year.
A successful set of projects including recovering
backwash from our Waste Water Treatment plantallowed us to keep water consumption flat.
Different initiatives for reducing water use andincreased water recovery allowed us to save more than
16 megaliters/year (8%) vs last year.
Different initiatives for reducing water use and increasewater recovery along a slight production volume
reduction allowed us to save 66 megaliters/year (24%)
vs last year.

Page: W5. Facility Level Water Accounting (II)W5.1a
Water withdrawals: for the reporting year, please provide withdrawal data, in megaliters per year, for the water sources used for all facilities reported in
W5.1

Facilityreference
numberFacility 1
Facility 2
Facility 3
Facility 4

Freshsurface
water

0
2.0
0
0

Brackishsurfacewater/seawater

Rainwater

Groundwater(renewable)

Groundwater(nonrenewable)

Produced/process
water

0
0
0
0

0
0
0
0

0
511.2
171.4
0

0
0
0
0

0
0
0
0

Municipal
water

162.7
283.0
25.7
215.1

Wastewaterfrom anotherorganization

Comment

0
0
0
0

W5.2
Water discharge: for the reporting year, please complete the table below with water accounting data for all facilities included in your answer to W3.2a

Facilityreference
numberTotal water discharged(megaliters/year) at thisfacility

How does the total
water discharged
at this facility
compare to the lastreporting year?

Facility 1

120.0

About the same

Facility 2

477.8

About the same

Please explain

No change
Substitution of water cooled for air cooled vacuum pumps and Backwash WTP recovery
reduced water discharged that was compensated by an increase in the factorycomplexity.

Facilityreference
numberTotal water discharged(megaliters/year) at thisfacility

How does the total
water discharged
at this facility
compare to the lastreporting year?

Facility 3

94.5

Lower

Facility 4

8.1

About the same

Please explain

Multiple water reduction projects including process optimizations were carried out in thefactory
No change

W5.2a
Water discharge: for the reporting year, please provide water discharge data, in megaliters per year, by destination for all facilities reported in W5.2

Facilityreference
numberFacility 1
Facility 2
Facility 3
Facility 4

Fresh surface water

0
307.4
0
0

Municipal/industrial
wastewater treatment plant

120.0
170.3
94.5
8.1

Seawater

00
00Groundwater

0
0
0
0

Wastewater for
another organization

0
0
0
0

W5.3
Water consumption: for the reporting year, please provide water consumption data for all facilities reported in W3.2a

Comment

Facilityreference
numberConsumption(megaliters/year)

How does thiscompare to the lastreporting year?

Facility 1

42.7

Lower

Facility 2

318.5

About the same

Facility 3

102.5

Lower

Facility 4

206.9

Much lower

Please explain

The water consumption decreased from 47.3 to 42.7 megaliters, resulting in a decrease of
10%.
No change
The water consumption decreased from 108.9 to 102.5 megaliters, resulting in a decrease of
6%.
The water consumption decreased from 273.7 to 206.9 megaliters, resulting in a decrease of
24% as a result of different initiatives for reducing water use and increase water recycling
along a slight production decrease.

W5.4
For all facilities reported in W3.2a what proportion of their water accounting data has been externally verified?

Water aspect

Water withdrawals- total
volumes
Water withdrawals- volume bysources
Water discharges- total volumes
Water discharges- volume bydestination
Water discharges- volume bytreatment method
Water discharge quality dataquality by standard effluent%
verification

What standard and methodology was used?

76-100100% of manufacturing sites had their water KPIs verified by SGS United Kingdom Limited (SGS) to theirsustainability data assurance process during annual verification.

Not verified

We do not verify water withdrawals.

Not verified
Not verified
Not verified
1-25

Water discharges are monitored at some sites and others are estimated. Then all of them are reported
centrally. We do not verify externally water discharges as part of our assurance procedures.
Water discharges are monitored at some sites and others are estimated. Then all of them are reported
centrally. We do not verify externally water discharges as part of our assurance procedures.
Water discharges are monitored at some sites and others are estimated. Then all of them are reported
centrally. We do not verify externally water discharges as part of our assurance procedures.
Individual facility data may be verified by local regulators according to legal requirements. Not all sites
globally have metered water discharges

Water aspect%
verification

What standard and methodology was used?

Not verified

Some affiliates have an online global metering and targeting system (GEMT) installed and are able tocalculate water consumption and report this data centrally, other sites just estimate their water consumption.
We do not verify externally water consumption as part of our assurance procedures.

parameters
Water consumption- total
volumeFurther Information

Module: Response
Page: W6. Governance and Strategy
W6.1
Who has the highest level of direct responsibility for water within your organization and how frequently are they briefed?

Highest level of direct responsibility forwater issues

Frequency ofbriefings on water
issuesBoard of individuals/Sub-set of the Board orother committee appointed by the Board

Scheduled - twice
per year

W6.2
Is water management integrated into your business strategy?

Comment

The Board is given an update at least twice a year on environment-related progress andfuture steps with regards to the environment and climate change, including related risks
and opportunities

Yes

W6.2a
Please choose the option(s) below that best explains how water has positively influenced your business strategy

Influence of wateron businessstrategy

Establishment ofsustainability goals

Introduction of water
management KPIs

Please explain

Changes in climate and water availability, which could impact (i.e. reduce yields and/or quality) sensitive crops such as tobacco andclove, are important for our business strategy. The outcome of this impact is that PMI has developed a water strategy that is split into two
main areas: (i) Minimizing our impact on the environment through water use reduction initiatives; and (ii) Minimizing the futureenvironmental impact on our business through a water and climate change risk assessment process. In 2015, for the first time, PMI
recognized its factories for outstanding achievements in minimizing water use, and for their contributions to our 2015 goal of reducing
water consumption in our manufacturing facilities by 20% vs 2010 levels. From the 71 entries received from across our regions,
Germany, Colombia, and Canada were awarded top honors. Our factory in Berlin managed to improve water-use efficiency by 14%,through a combination of focused workshops, awareness programs, and focus meetings. Our tobacco-leaf processing operations in
Colombia demonstrated that smaller facilities can also make big improvements by implementing daily consumption monitoring, leakdetection, behavioral changes, and low-cost solutions such as flow inhibitors to save water. Since 2010, our Quebec facility has
decreased its water consumption by 79%, and by the end of 2015 it saved 300,000 m3 of water. https://www.pmi.com/sustainability/pmiand-the-environment/sustainable-water-management
We set water use reduction targets for all PMI manufacturing facilities to drive progress towards our goal to achieve a 20% reduction inwater use by 2015 (per million cigarettes equivalent, from a 2010 baseline). In 2015, we beat that target, achieving a 24% reduction andnow focusing on a minimum 1% year-year reduction in the short term, with additional focus on operations present in water scarce areas.
Our improvements in water efficiency, conservation and recycling at PMI manufacturing facilities are driven by a water reduction target.
Through the water reduction projects we saved 107 megaliters and approximately $155,000 in 2016.

W6.2b
Please choose the option(s) below that best explains how water has negatively influenced your business strategy

Influence ofwater onbusinessstrategy

Please explain

Increased capital
expenditure

The level of negative influence of water is not currently material to our business although some increased capital expenditure has to bementioned. Water cost are in general low in the countries we operate and extra effort needs to be put in order to overcome long or no
paybacks. In 2017 we have established a central governance for sustainability projects that will enable to push forward water related
projects. In 2016 in Indonesia with a USD 0.05/m3 water cost we replaced some of the underground piping in our factory to reduce 600
m3/year of water losses. Reducing emissions to water has driven increased capital expenditures into wastewater treatment plants andanalytical instrumentation. Our factories in Poland, Germany and Indonesia have gone through optimization process to recover water
backwash water and our factory in Zola Predosa (Italy) is equipped with an online WWTP inlet/outlet monitoring to detect chemical oxygen
demand continuously and to be able to take measures if necessary. We continue to actively manage water opportunities and risks and willcontinue to assess our vulnerabilities to water risks. We note that we discuss broader influences on our business within our CDP Climate
Change disclosure.

W6.2c
Please choose the option that best explains why your organization does not integrate water management into its business strategy and discuss any
future plans to do soPrimary reason

Please explain

W6.3
Does your organization have a water policy that sets out clear goals and guidelines for action?

Yes

W6.3a
Please select the content that best describes your water policy (tick all that apply)

Content

Please explain why this content is included

Publicly available
Company-wide
Performance standards for direct
operations
Performance standards for
supplier, procurement andcontracting best practiceCommitment to customer
education
Incorporated within groupenvironmental, sustainability or
EHS policy
Acknowledges the human rightto water, sanitation and hygiene

We are committed to the responsible and sustainable management of water to help conserve this resource globally as we
public declare in our Communication on Progress to the UN Global Compact. In tobacco-growing, we expect our affiliates andsuppliers to have a water management plan that takes into account the locations that are most at risk from water scarcity andpromotes efficient water use and renewability of sources. These plans address the use and management of water for tobacco
production to minimize adverse impacts to other users 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. To track performance, we set minimum requirements for our own direct manufacturing facilities
in terms of water-use efficiency and to cover water use in relation to Good Agricultural Practices. We are committed todevelop programs that educate our customers to reduce waste in the use phase and thus reduce water contamination. An
example is a pilot launched to recover RRP's heat sticks from consumers. As part of the agricultural water strategy
developed with the company South Pole Group, an action plan to enable WASH services in all farms and surrounding
communities was created with the aim to identify WASH problems faced by farmers and their families and define priority
areas for action.

W6.4
How does your organization's water-related capital expenditure (CAPEX) and operating expenditure (OPEX) during the most recent reporting year
compare to the previous reporting year?

WaterCAPEX (+/% change)

0

Water
OPEX (+/% change)-1

Motivation for these changes

OPEX - a net decrease of 1% in our OPEX driven by different initiatives to reduce water consumption. Water-related OPEX is not
significant to our business (less than 0.1%). CAPEX - we only segregate CAPEX that is water-related in certain circumstances,often the project drivers are varied and the water-related element is not financially significant. The level of projects compared to2015 is similar and therefore 0% change has been entered for CAPEX.

Further Information

Page: W7. Compliance
W7.1
Was your organization subject to any penalties, fines and/or enforcement orders for breaches of abstraction licenses, discharge consents or other water
and wastewater related regulations in the reporting year?

Yes, not significant

W7.1a
Please describe the penalties, fines and/or enforcement orders for breaches of abstraction licenses, discharge consents or other water and wastewater
related regulations and your plans for resolving them

Facility
nameFrequencyofoccurrence
in reportingyear

Financial
impactIncident

Incident description

PhilipMorrisPolandPenalty

Wastewater quality- increased
level of maximum allowable
concentration of easy
sediment suspension.

1

10249

USD($)The reason of this incident was too narrow filtration tapes inscrubbers (Primary & DIET department). After replacing thefiltration tape with the proper width, we don't observe any
increased level of wastewater quality

PhilipMorrisRomania

Penalty

Delays in payment

11

1457

USD($)

Monthly follow-up with accounts payable teamPhilipMorrisUkrainePhilipMorrisUkrainePM Kuban

Currency

Penalty

Wastewater quality increased levels of
detergents, phosphates,
ammonium nitrogen above
relatively tight limits for thesesubstances in Ukraine.

1

9222

USD($)

Penalty

Wastewater quality increased levels of
detergents, phosphates,
ammonium nitrogen above
relatively tight limits for thesesubstances in Ukraine.

2

3827

USD($)

Penalty

Wastewater quality increased level of maximum
allowable concentration ofcontaminants above relatively
tight limits in Russia.

3

18411

USD($)

Incident resolution

Authorities conduct an analysis and, based on the results,
calculate fines for exceeding relatively tight limits. Arbitrary
measurements were carried out in three laboratories. The
results do not show excess in sewage, however, because of the"rules" approved by the local water authority, fines arecalculated on the basis of a diet between arbitrary measurement
results and the results of control measurements conducted by
local water authorities. We disputed this penalty and now we
expect a review of the penalty amount. The expected fine basedon the results of the re-selection with the participation of anotherlaboratory - approximately 1000 US$
Were identified reasons that caused excess of the limits in
wastewater (since in accordance with internal regulations, thecollection of waste water for analysis can occur at any time
without prior notice to our company, the pick-up occurred during
the washing of equipment in the Primary and the cleaning of thefilters at the water treatment plant). So we continue to review
operational practices and treatment improvement opportunities
to minimize impacts.
We continue to review operational practices and treatment
improvement opportunities to minimize impacts.

W7.1bWhat proportion of your total facilities/operations are associated with the incidents listed in W7.1a?

10%

W7.1c
Please indicate the total financial impacts of all incidents reported in W7.1a as a proportion of total operating expenditure (OPEX) for the reporting year.
Please also provide a comparison of this proportion compared to the previous reporting year

Impact as % of OPEX

0.01

Comparison to last year

No change

Further Information

Page: W8. Targets and Initiatives
W8.1
Do you have any company wide targets (quantitative) or goals (qualitative) related to water?

Yes, targets and goals

W8.1aPlease complete the following table with information on company wide quantitative targets (ongoing or reached completion during the reporting period)
and an indication of progress madeCategory oftargetReduction of
product water
intensity

Motivation

Description of target

Quantitative
unit ofmeasurement

Water
stewardship

In 2015, we exceeded our goal to reduce 20% our water consumption in
our manufacturing facilities from a 2010 baseline. Due to the recent
uncertainty on RRPs impact, in 2016 we set an interim target of additional
1% reduction year on year and to shift focus from general water savings
approach in manufacturing and leaf to a focus on water scarce areas andto extend to our entire value chain.

% reduction perunit of production

Baseline
year

Targetyear

Proportionof targetachieved, %
value

2015

2016

100%

W8.1b
Please describe any company wide qualitative goals (ongoing or reached completion during the reporting period) and your progress in achieving these

Goal

Motivation

Description of goal

Engagement with
suppliers to help
them improve water
stewardship

Water
stewardship

Implementation of Good Agricultural Practices(GAP) by tobacco suppliers and farmers. Quality
water is essential for growing tobacco and forfarming communities, which is why GAP
specifically covers measures for water quantityand quality management.

Providing access to
WASH in local
communities

Water
stewardship

Enable WASH services on all farms and in thesurrounding communities.

Progress

Since 2002, we have adopted and continually developed a Good
Agricultural Practices program (GAP), the implementation of whichconstitutes a contractual requirement for doing business with PMI.
Tobacco Farmers’ and suppliers’ progress in GAP implementation ismonitored both internally and externally by third parties who complete
a formal GAP assessment every three years, to verify tobacco
supplier annual self-assessments.
As part of our leaf program, we have embraced water stewardship forthe tobacco leaf supply chain. It will embark us for a long term journeywith a horizon up to 2030. In 2016 we have developed our mission
and vision for this journey. We have also performed a high level risk

Goal

Watershed
remediation andhabitat restoration,
ecosystem
preservation

Sustainableagriculture

Motivation

Description of goal

Water
stewardship

Support sustainable watershed management ingrowing regions with high water stress.

Water
stewardship

Encourage good agricultural practices that
preserve local and global water resources.
Support growing practices that enable thetobacco crop to be resilient to changing water
scenarios.

Progress

assessment and identified WASH as a key area where to start
implement interventions.
A pilot watershed site has been identified based on choosing acountry were tobacco leaf crops are present close to a complex
operations site and were local qualified resources are available.
During 2017 we will learn and develop tools to be exported to othercountries.
As part of our leaf program, we have embraced water stewardship forthe tobacco leaf supply chain. It will embark us for a long term journeywith a horizon up to 2030. In 2016 we have developed our mission
and vision for this journey. We have also performed a high level risk
assessment and identified key sustainable agriculture practices to be
deployed in risk tobacco growing areas.

W8.1c
Please explain why you do not have any water-related targets or goals and discuss any plans to develop these in the future

Further Information

Module: Linkages/Tradeoff
Page: W9. Managing trade-offs between water and other environmental issues
W9.1
Has your organization identified any linkages or trade-offs between water and other environmental issues in its value chain?

Yes

W9.1a
Please describe the linkages or trade-offs and the related management policy or action

Environmental issues

Linking energy and water
reduction in our factories.

Linkageortradeoff

Policy or action

Linkage

Energy is often required to drive water-consuming processes, and by improving the efficiency of processes and equipment
both water and energy consumption can be reduced. Our Energy Management Program (EMP) was developed to help
achieve our CO2e reduction target of 20% by 2015 compared to our 2010 baseline for our manufacturing affiliates. This
program, although focusing on energy, also delivers water savings in specific examples. The management focus provided
by the EMP provides a context for general resource optimization. Examples: • Optimization of steam systems results indecreases in both energy and water use. • Installation of energy and water metering devices at all facilities allows abetter understanding of water consumption and allows targeted improvement actions. • Development and use of a
“Ready mode” on specific equipment has helped to reduce the consumption of electricity, gas, steam and water. •Installation of new high efficiency chillers to improve both electricity and water consumption. For example, in our Indonesia
factory, we upgraded our chilled water system and saved energy, water, and money.

Further Information

Module: Sign Off
Page: Sign Off
W10.1
Please provide the following information for the person that has signed off (approved) your CDP water response

Name

Andre Calanlzopoulos

Job title

Chief Executive Officer

Corresponding job category

Chief Executive Officer (CEO)W10.2
Please indicate that your organization agrees for CDP to transfer your publicly disclosed data regarding your response strategies to the CEO Water
Mandate Water Action Hub.
Note: Only your responses to W1.4a (response to impacts) and W3.2c&d (response to risks) will be shared and then reviewed as a potential collective
action project for inclusion on the WAH website.
By selecting Yes, you agree that CDP may also share the email address of your registered CDP user with the CEO Water Mandate. This will allow the Hubadministrator to alert your company if its response data includes a project of potential interest to other parties using water resources in the geographiesin which you operate. The Hub will publish the project with the associated contact details. Your company will be provided with a secure log-in allowing it
to amend the project profile and contact details.
Yes

Further Information
CDP 2017 Water 2017 Information Request