Philip Morris International - Climate Change 2021
C0. Introduction

C0.1(C0.1) Give a general description and introduction to your organization.
Philip Morris International Inc. (PMI) is a leading international tobacco company. PMI has its executive headquarters in New York, US, its primary listing on the New York
Stock Exchange (NYSE: PM), and its Operations Center in Lausanne, Switzerland. PMI manufactures and sells cigarettes, smoke-free products and associated electronic
devices and accessories, and other nicotine-containing products in markets outside of the U.S. We have a wide range of cigarette brands, including the world’s best-sellinginternational cigarette Marlboro. Our smoke-free product portfolio includes heat-not-burn and nicotine-containing vapor products. In 2020, PMI net revenues amounted to USD
28.7 billion excluding excise taxes on products worth USD 47.4 billion, on a like-for-like basis; 23.8% of PMI’s net revenues in 2020 related to the sale of smoke-free products.
PMI’s 2020 total shipment volume for combustible products and smoke-free products was 730 billion (654 billion combustible products and 76 billion smoke-free products).
We are building our future on smoke-free products that are a much better consumer choice than continuing to smoke cigarettes. Our vision is that these products ultimately
replace cigarettes to the benefit of adult smokers, society, our company and our shareholders. This ambition is at the very core of our corporate strategy and sits atop oursustainability priorities. For PMI, sustainability is an opportunity for innovation, growth, and long-term value creation, and a means to minimize the negative externalities
associated with our products, operations, and value chain while maximizing operational efficiency and resource allocation. We have a global footprint: as of December 31,
2020, PMI had a workforce of close to 71,000 people worldwide and operated 39 production facilities globally. In 2020, our tobacco was sourced from over 285,900
contracted farmers across 23 countries, and our products were sold in over 175 markets.
Our sustainability materiality analysis helps us prioritize our focus where we can have the greatest impact. Climate protection, littering prevention and product eco-design andcircularity are tier 1 environmental topics that are prioritized in our sustainability strategy.
Engagement beyond our own operations is key, as this is where the most significant sustainability impacts occur, especially when it comes to climate change and carbon
emissions.
Our business has a significant, global supply chain organized by five main categories:
1. Agricultural products, including tobacco and other agricultural products, such as clove, menthol and guar gum.
2. Direct materials used to produce cigarettes and other tobacco products, such as acetate tow (for cigarette filters) and paper (both cigarette paper and for packaging
materials).
3. Machines for our cigarette and heated tobacco products factories.
4. Electronic devices for heated tobacco and vapor products.
5. Goods and services that are not specific to the tobacco business, but essential for any business, such as office equipment etc.
As a responsible business, we want to understand and continuously address potential sustainability issues in our global supply chain. We are working with business partners
to proactively identify, manage, and reduce risks, and create shared value. The description above is a summary and is qualified in its entirety by reference to the full text of
PMI’s Annual Report on Form 10-K for the year ended 2020 and 2021 Proxy Statement dated March 25, 2021, filed with the U.S. Securities and Exchange Commission, andthe full text of PMI’s Integrated Report 2020.
Remarks for this disclosure, in this submission:-“PMI,” “we,” “us” and “our” refer to Philip Morris International Inc. and its subsidiaries;-Trademarks and service marks in this submission are the registered property of, or licensed by, the subsidiaries of PMI Inc. and are italicized;-Expectations, aspirational targets and goals set forth in this submission do not constitute financial projections;-Smoke-Free Products or Reduced-Risk Products (RRPs) - the terms PMI uses to refer to products that present, are likely to present, or have the potential to present less riskof harm to smokers who switch to these products versus continued smoking. PMI has a range of RRPs in various stages of development, scientific assessment andcommercialization;-Materiality: In this submission and in related communications, the terms “materiality,” “material” and similar terms, when used in the context of economic, environmental, andsocial topics, are defined in the referenced sustainability standards, and are not meant to correspond to the concept of materiality under the U.S. securities laws and/or
disclosures required by the US Securities and Exchange Commission.
-Unless otherwise indicated, the scope of the data in this report covers our operations worldwide for the full calendar year 2020 or reflects the status as of December 31, 2020.
Where not specified, data come from PMI estimates.

C0.2

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(C0.2) State the start and end date of the year for which you are reporting data.

Reportingyear

Start dateEnd date

Indicate if you are providing emissions data for past reportingyears

Select the number of past reporting years you will be providing emissions data
for

January 1
2020

December 31
2020

No

<Not Applicable>

C0.3(C0.3) Select the countries/areas for which you will be supplying data.
Albania
Algeria
Argentina
Armenia
Australia
Austria
Bangladesh
Belgium
Bosnia & Herzegovina
BrazilBulgaria
CanadaChile
China
China, Hong Kong Special Administrative Region
China, Macao Special Administrative Region
Colombia
Costa Rica
CroatiaCuraçao
Czechia
Denmark
Dominican Republic
EcuadorEgypt
El Salvador
FinlandFranceGeorgia
Germany
GreeceGuatemala
Hungary
India
Indonesia
IsraelItaly
JamaicaJapan
JordanKazakhstan
KuwaitLebanonLithuania
MalawiMalaysia
MexicoMoroccoMozambique
Netherlands
New Zealand
Nicaragua
Nigeria
North Macedonia
NorwayPakistan
PanamaParaguay
Peru
Philippines
PolandPortugal
Republic of Korea
Republic of Moldova
RéunionRomania
Russian Federation
Senegal
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Serbia
Singapore
Slovakia
Slovenia
South Africa
Spain
Sri Lanka
SwedenSwitzerland
Taiwan, Greater China
ThailandTunisia
TurkeyUkraineUnited Arab Emirates
United Kingdom of Great Britain and Northern Ireland
United States of America
Uruguay
Venezuela (Bolivarian Republic of)Viet Nam

C0.4(C0.4) Select the currency used for all financial information disclosed throughout your response.
USD

C0.5
(C0.5) Select the option that describes the reporting boundary for which climate-related impacts on your business are being reported. Note that this option shouldalign with your chosen approach for consolidating your GHG inventory.
Operational control

C-AC0.6/C-FB0.6/C-PF0.6(C-AC0.6/C-FB0.6/C-PF0.6) Are emissions from agricultural/forestry, processing/manufacturing, distribution activities or emissions from the consumption of yourproducts – whether in your direct operations or in other parts of your value chain – relevant to your current CDP climate change disclosure?
Relevance
Agriculture/Forestry

Elsewhere in the value chain only [Agriculture/Forestry/processing/manufacturing/Distribution only]

Processing/Manufacturing

Both direct operations and elsewhere in the value chain [Processing/manufacturing/Distribution only]

Distribution

Both direct operations and elsewhere in the value chain [Processing/manufacturing/Distribution only]

Consumption

Yes [Consumption only]

C-AC0.6b/C-FB0.6b/C-PF0.6b(C-AC0.6b/C-FB0.6b/C-PF0.6b) Why are emissions from agricultural/forestry activities undertaken on your own land not relevant to your current CDP climatechange disclosure?
Row 1
Primary reason
Do not own/manage land
Please explain
We don’t own the tobacco farms or the land that supply us with tobacco leaf, but the farmers who run them are a crucial part of our economic, environmental, and social
footprint. We are working directly with them and our suppliers to promote sustainable farming and climate change mitigation initiatives as part of our Good Agricultural
Practices (GAP) program.

C-AC0.7/C-FB0.7/C-PF0.7

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(C-AC0.7/C-FB0.7/C-PF0.7) Which agricultural commodity(ies) that your organization produces and/or sources are the most significant to your business byrevenue? Select up to five.
Agricultural commodity
Tobacco% of revenue dependent on this agricultural commodity
More than 80%
Produced or sourced
SourcedPlease explain
100% of PMI heated tobacco units, cigarettes and other nicotine-containing products require tobacco
Agricultural commodity
Timber% of revenue dependent on this agricultural commodity
More than 80%
Produced or sourced
SourcedPlease explain
100% of PMI heated tobacco units, cigarettes and other nicotine-containing products require timber derivative products. Additionally, PMI uses board and paper for
packaging of the majority of PMI’s products.

C1. GovernanceC1.1(C1.1) Is there board-level oversight of climate-related issues within your organization?
Yes

C1.1a
(C1.1a) Identify the position(s) (do not include any names) of the individual(s) on the board with responsibility for climate-related issues.
Position of Please explain
individual(s)Board-levelcommittee

PMI’s Board of Directors (BoD) and its Committees, incl. the Nominating and Corporate Governance Committee (NCGC) and Audit Committee of the BoD, are responsible to foster the long-term
success of the company incl. setting broad corporate policies, strategic direction, and overseeing management, which is responsible for daily operations. The BoD considers that environmental,social and governance (ESG) factors, including climate change, are relevant to the company’s business and long-term success. As an example of climate-related decision-making process in 2020,
the BoD and its Committees approved the company’s annual budget and received updates on the company’s performance and targets against the budget throughout the year. The annual budget
factors in resources required to deploy GHG emission initiatives to achieve our carbon neutrality goal. Additionally, in early 2020, PMI’s BoD released PMI’s Statement of Purpose, which
acknowledges that certain key stakeholders (e.g. employees, investors, customers, civil society) are fundamental to its business transformation toward a smoke-free future. PMI focuses to protect theenvironment through sustainable practices across its business and to address both existing social and environmental challenges pertaining to its business transformation. As part of these initiatives,
PMI works towards lowering carbon emissions as a core element of PMI’s sustainable corporate strategy and decision-making processes. As PMI’s transition to a smoke-free future will require moreenergy to produce heated tobacco units compared to cigarettes and it could result in increased GHG emissions, it is important to reduce this potential impact through effective projects. Since 2018,
the BoD mandated the NCGC of the Board, composed of 5 BoD members in 2020, and at the time of the 2021 proxy statement publication, to oversee PMI’s sustainability strategies andperformance, including to provide recommendations to executive management on climate change-related issues, and on a set of initiatives aiming at actively reduce potential negative impacts of ourbusiness on the environment. PMI’s Integrated Report 2019—that constitutes the main external communication of PMI on sustainability performance, including regarding climate change—wascompleted with the support of PMI’s Board of Directors and extensively reviewed by its Executive Chairman.

Board-levelcommittee

In 2020, the Audit Committee of the Board, composed by 6 Board of Director members, at the time of the publication of the 2021 proxy statement, oversees the assessment and management of thecompany risks including to provide recommendations to executive management on those related to climate change such as natural disasters, water scarcity and agricultural instability, which maylead to increased pressure on natural resources and conflict with other users, affect our direct operations and/or our supply chain, and thus potentially impacting PMI’s ability to operate.

C1.1b

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(C1.1b) Provide further details on the board’s oversight of climate-related issues.
Frequency Governance
Scope of Please explain
withmechanisms boardwhich
into whichlevel
climateclimateoversight
relatedrelated issues
issues are are integratedascheduled
agendaitem
Scheduled Reviewing and <Not
– someguiding
Applicabl
meetings
strategye>Reviewing andguiding majorplans of action
Reviewing andguiding risk
management
policies
Reviewing andguiding annual
budgets
Reviewing andguidingbusiness plans
Setting
performance
objectives
Monitoring
implementation
andperformance ofobjectives
Overseeing
major capital
expenditures,acquisitions
anddivestitures
Monitoring andoverseeing
progressagainst goals
and targets foraddressing
climate-related
issuesThe Board of Directors (BoD) oversees PMI’s full range of activities including establishing broad corporate policies setting strategic direction, and overseeing management.
The BoD is responsible for the day-to-day operations of the company and takes into account climate-related issues as part of their oversight process. Part of the BoD’s
oversight is focused on management’s efforts to enhance shareholder value responsibly and sustainably. The BoD believes that environmental factors, including thoserelated to climate change, social, and governance (ESG) factors are relevant to the company’s business and important to PMI’s long-term success. Those factors are part of
the responsibility of the Board and considered in the evaluation of the annual performances of the company and its management. The BoD approves the company’s annual
budget and receives updates on the company’s performance and targets against the budget throughout the year including those related to the achievement of sustainability
and climate change targets. The BoD has established various standing Committees to assist with the performance of its responsibilities and is regularly informed on futureplans, and significant issues affecting the business, including the climate-related ones. The BoD meets typically 6 times per year with additional meetings held asnecessary. The BoD is advised on climate change-related issues by the Nominating and Corporate Governance Committee of the BoD, which oversees the Company’ssustainability strategies and performance. The committee met 4 times in 2020. The BoD oversees the management of risks relating to the Company’s business. Risk
oversight is conducted both by Committees of the BoD as well as by the full BoD. Management has identified and prioritized a number of key enterprise risks and, as part of
the risk management process, has established a Corporate Risk Governance Committee (“CRGC”) that comprised in 2020 the COO, the CFO, and other members of ourCompany Management and senior leaders from relevant functions. Management reports on these risks to the appropriate Committee and to the full Board whenappropriate. The Company conducted a full-scale reassessment of the strategic enterprise risk management program in 2018, assigned ownership of each of the prioritizedrisks to a member of Company Management, and the oversight of their management to a particular Board Committee; the same ownership assignments continued in 2020.
The Audit Committee of the BoD was assigned to oversee the management of climate change prioritized risk as it could result in natural disasters, water scarcity, agricultural
instability, which may impact PMI’s ability to operate; the Committee met 8 times in 2020. A member of the Company Management, the Senior Vice President Operations,
was tasked with the responsibility to address the climate change risk, including physical climate and water related risks.

C1.2(C1.2) Provide the highest management-level position(s) or committee(s) with responsibility for climate-related issues.
Name of the position(s) and/or committee(s)Reportingline

Other C-Suite Officer, please specify (Senior Vice
President, Operations)

Responsibility

Coverage of
responsibility

Frequency of reporting to the board on
climate-related issues<Not
Both assessing and managing climate-related risks and opportunities
Applicable><Not Applicable>

Quarterly

Chief Operating Officer (COO)<Not
Both assessing and managing climate-related risks and opportunities
Applicable><Not Applicable>

Quarterly

Other, please specify (Sustainability Committee)<Not
Other, please specify (Overseeing PMI’s sustainability work)
Applicable><Not Applicable>

Annually

Chief Sustainability Officer (CSO)<Not
Other, please specify (Leading the integration of sustainability, including
Applicable> environmental topics, across PMI.)<Not Applicable>

Annually

C1.2a

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(C1.2a) Describe where in the organizational structure this/these position(s) and/or committees lie, what their associated responsibilities are, and how climaterelated issues are monitored (do not include the names of individuals).

A member of the Company Management (CM), the Senior Vice President Operations (SVP Operations) has been tasked with responsibility to address climate change risks
and opportunities across the company’s activities, including physical climate, and transition risks. As of May 5, 2021, our SVP Operations reports directly to PMI’s Chief
Executive Officer (CEO) and the position of the Chief Operating Officer (COO) no longer exists. SVP Operations is delegated with operational responsibility, including
maintaining robust business resiliency, risk assessment processes, and strategies to support business continuity. Our SVP Operations is responsible to ensure that climatechange risks and opportunities are assessed, managed, monitored, integrated into long-range plan and budget review process, and reported to the appropriate Committee
and the full Board throughout the year. PMI’s SVP Operations is strategically positioned within the company’s structure to be able to effectively engage the Board and specificdepartments on climate issues. For this reason, he was assigned with responsibility to address climate change risks that could impact PMI’s ability to operate such as natural
disasters, water scarcity, change in weather patterns and agricultural instability, which are considered during the annual Integrated Risk Assessment (IRA) process.
SVP Operations holds the responsibility that climate-related issues are integrated into normal business activities; this forms part of our annual Long-Range Planning process
which reviews and sets business direction, objectives and performance appraisal process. In 2020, the strategy was developed/reviewed based on prior year performance,sustainability commitments and objectives, regulatory/external developments, risk/opportunity assessments, stakeholder interest and business changes, through functional
management teams up to our CM.
CM provided the Board with insights on the reassessment process throughout 2020. SVP Operations leads the Operations Sustainability function reporting directly to him,
which drives environmental strategies and their full integration into the business, due to the strategic importance of climate-related issues within our operations. He receives
updates on progress towards objectives and their achievement, in monthly meetings with the Operations Management Team reporting to him, and during quarterly functional
reviews of the Operations Sustainability function.
In 2020, SVP Operations reported to PMI’s COO, also a member of PMI’s CM who reported to the CEO. The COO was updated regularly on climate change issues by the
SVP Operations as they may impact PMI’s ability to operate and effectively addressing these risks is critical to the achievement of PMI’s strategic objectives. In 2020, theCOO and SVP Operations were the highest management level responsible for climate-related issues. They were both responsible for monitoring and reviewing PMI’s
objectives, strategies, and action plans related to climate change with the CEO, and they reported their findings to the Nominating and Corporate Governance Committee(NCGC) and Audit Committee of the BoD.”
The Sustainability Committee – composed of the company’s CEO, CFO, Senior VP Operations, and other members of the CM – meets quarterly to review and validate PMI
strategy, commitments, goals, progress, and annual reporting.
PMI’s sustainability strategy is shaped by a formal sustainability materiality assessment, which was updated in 2019, re-prioritizing the most relevant sustainability topics for
PMI. To help manage these topics from a global and sustainability perspective, within our CM, members are responsible for driving progress and delivering on oursustainability targets within their respective functions (e.g. mitigate climate change decarbonizing our value chain to SVP Operations).
PMI’s CSO reports to our CFO and leads the strategy of integration of the most relevant sustainability topics, as prioritized based on PMI sustainability materiality assessment
and including climate-related issues, across our business. PMI’s CSO heads and manages PMI’s Corporate Sustainability Team, reports on progress to the Sustainability
Committee on a quarterly basis and updates the Board of Directors at least once a year.
From an operational perspective, our Operations Sustainability and Corporate Sustainability functions coordinate the company’s climate change-related activities. Most of thecoordination takes place in the context of sustainability working groups and with local market coordinators. This helps ensure that our global strategies and programs aremonitored, assessed and implemented down to the market level and that local realities are reflected in our global efforts.

C1.3(C1.3) Do you provide incentives for the management of climate-related issues, including the attainment of targets?
Provide incentives for the management of climate-related issues
Row 1

Comment

Yes

C1.3a(C1.3a) Provide further details on the incentives provided for the management of climate-related issues (do not include the names of individuals).

CDP

Entitled to incentive

Type of Activity
incentive inventivized

Comment

Chief Executive Officer(CEO)

Monetary Emissions
rewardreduction
targetCompany
performanceagainst a
climaterelated
sustainability
index

PMI’s compensation and benefits program supports business and financial objectives, including the achievement of sustainability efforts. PMI has defined
strategic priorities, among which to drive material and measurable progress in priority sustainability corridors. Operating with excellence and protecting theenvironment are strategic pillars of PMI sustainability strategy, covering tier 1 topics such as sustainable supply chain management and climate protection.
PMI’s BoD approves the company’s annual budget and receives updates on the company’s performance and targets against the budget throughout the year.
The BoD considers that environmental, social and governance (ESG) factors, including climate change as relevant to the company’s business and long-term
success. These factors are part of the responsibility of the Board and are considered in its evaluation of the annual performance of the company and its
management. The Compensation and Leadership Development Committee of PMI’s BoD more clearly reflected the Company’s commitment to having
sustainability at the core of its corporate strategy in the Company’s executive compensation program. Progress against the strategic priorities is included in ourcompensation program, for the management group (i.e., corporate executive team incl. CEO) and other eligible employees. Executive management covering
sustainability, including ESG topics, are specifically appraised each year for performance against targets, including those relating to climate change e.g.
emissions reduction target. Towards the end of the year PMI assesses progress towards its sustainability targets as the threshold of success, therefore
rewards are provided if progress is either linear to the overall target or exceeding a linear trend over the reporting year. These indicators were selected asthey are aligned with the company’s vision and they allow PMI to objectively quantify the progress of the company in the field of climate change andsustainability. We discuss our executive compensation program in more detail in our proxy statement filed with the U.S. Securities and Exchange Commission.

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Entitled to incentive

Type of Activity
incentive inventivized

Comment

Corporate executive team Monetary Emissions
rewardreduction
targetCompany
performanceagainst a
climaterelated
sustainability
index

PMI’s compensation and benefits program supports business and financial objectives, including the achievement of sustainability efforts. PMI has defined
strategic priorities, among which to drive material and measurable progress in priority sustainability corridors. Strategic pillars of PMI sustainability strategy
cover tier 1 topics including sustainable supply chain management and climate protection. PMI’s BoD approves the company’s annual budget and receives
updates on the company’s performance and targets against the budget throughout the year. The BoD considers that environmental, social and governance(ESG) factors, including climate change as relevant to the company’s business and long-term success. These factors are considered in its evaluation of theannual performance of the company and its management. Accordingly, progress against the strategic priorities is included in our compensation program forthe management group and other eligible employees. Executive management covering sustainability, including ESG topics, are specifically appraised eachyear for performance against targets, including those relating to climate change e.g. emissions reduction target and environmental leadership. The
assessment of ESG results (which includes annual performance against our carbon footprint reduction targets and target to maintain CDP Triple A score)directly influences the annual performance rating of our SVP Operations and certain members of the company executive management team. Towards the endof the year PMI assesses progress towards its sustainability targets as the threshold of success, therefore rewards are provided if progress is either linear tothe overall target or exceeding a linear trend over the reporting year. These indicators were selected as they are aligned with the company’s vision and they
allow PMI to objectively quantify the progress of the company in the field of climate change and sustainability.

Management group

PMI’s compensation and benefits program supports business and financial objectives, including the achievement of sustainability efforts. In its transformation
towards a smoke-free future, PMI has defined strategic priorities, which embed our operational sustainability efforts to build global societal support for RRP.
Operating with excellence and protecting the environment are strategic pillars, covering tier 1 materiality topics such as sustainable supply chain management
and climate protection. In PMI the Board of Directors (BoD) approves the company’s annual budget and receives updates on the company’s performance andtargets against the budget throughout the year. The BoD considers that environmental, social and governance (ESG) factors, including climate change as
relevant to the company’s business and long-term success. These factors are part of the responsibility of the Board and are considered in its evaluation of theannual performance of the company and its management. Accordingly, these results are included in our overall performance rating which determines the cash
bonuses for the management group and other eligible employees. Management group covering sustainability, including EHS topics are specifically appraised
each year for performance against targets, including those relating to climate change e.g. emissions reduction target. The assessment of EHS results (which
includes annual performance against our carbon footprint reduction targets) directly influences the annual performance rating of Management group including
for example the Chief Procurement Officer (CPO) and its business unit managers. This covers the annual cash incentive compensation elements for thoseroles. For example, specifically to Chief Procurement Officer, sustainability including climate-related issues is one of the top five objectives the variable
compensation of our CPO is determined upon.

Monetary Emissions
rewardreduction
targetChief Sustainability Officer Monetary Behavior(CSO)
rewardchangerelatedindicator
Company
performanceagainst a
climaterelated
sustainability
index

Our CSO, is responsible for driving Sustainability, including climate-related issues, across the organization: all functions and markets. This covers behavioral
change towards sustainability, including those relating to climate change, within the company Company’s commitment to having sustainability at the core ofits corporate strategy is part of our CSO mandate, which include to improve PMI’s ESG performance. CSO is incentivized against a set of predefined
objectives, which include the company’s performance in key ESG ratings that also cover environmental-related matters (incl. climate-related issues).

Buyers/purchasers

NonEnvironmental Tobacco leaf volume allocation depends, among other factors, on the performance of leaf suppliers that includes Good Agricultural Practices (GAP) program
monetary criteria
implementation as well as achievement of strategic initiatives targets such as carbon footprint reduction. If leaf suppliers in a region or a market perform well,rewardincluded in
the buyer responsible for this region/market will not be limited by GAP underperformance in his purchase options, and this would not influence thepurchases
achievement of his annual objectives and therefore his performance evaluation.

Energy manager

Monetary Energy
rewardreduction
targetManagers and team members have energy efficiency and carbon footprint reduction targets set out in their annual performance objectives and are assessedagainst those targets in their annual performance appraisal. Energy efficiency and CO2 emissions reduction targets are set annually for at least three years
for all of our manufacturing facilities.

Environment/Sustainability Monetary Energy
manager
rewardreduction
targetManagers and team members have energy efficiency and carbon footprint reduction targets set out in their annual performance objectives and are assessedagainst those targets in their annual performance appraisal. Energy efficiency and CO2 emissions reduction targets are set annually for at least three years
for all of our manufacturing facilities.

Procurement manager

Monetary Supply chain
rewardengagement

Procurement managers have energy carbon footprint engagement targets set out in their annual performance objectives and are assessed against thosetargets in their annual performance appraisal.

All employees

Monetary Other (please Specific company awards such as the CEO Award and Recognition for Excellence Awards, which are either cash or stock, are available for Energy
rewardspecify)Managers, EHS Managers, project teams and other employees who are responsible for climate change related initiatives and improvements.
(Climatechangemitigation
projects)

All employees

Monetary Emissions
rewardreduction
project

Specific company awards such as “Above and Beyond the Call of Duty” (ABCD) awards for best practice initiatives in the areas of climate change, energy
and carbon reduction.

All employees

NonBehavior
monetary change
rewardrelatedindicator

Annually many affiliates continue to perform voluntary awareness and promotion campaigns/programs in order to increase employees’ active participation in
Sustainability programs and to make carbon footprint reduction part of the company's culture. Awards and recognition for best practices form a core elementof such campaigns.

Other, please specify
Non(Operations employees
monetary(the largest business unit reward
within PMI, around 20,000
employees))

Other, please specify(Employees in our
Operations Center)

Emissions
reduction
project
Energyreduction
project
Efficiency
project
Supply chain
engagement

Monetary Behavior
rewardchangerelatedindicator

Operations employees also have the opportunity to earn awards for best practice initiatives in the areas of climate change, energy and carbon emission
reduction. This forms part of our Operations Department ABCD Award and “Lead, Lean and Learn” program which encourages innovation, continuous
improvement and employee engagement.

Employees from the Operations Center are encouraged to use public transportation. The annual fee for half-price railway subscription as well as a monthly
public transport allowance is paid by the company for those employees who choose to use public transportation rather than commute in their private cars towork, contributing to reduce our carbon emission footprint.

C2. Risks and opportunities

C2.1(C2.1) Does your organization have a process for identifying, assessing, and responding to climate-related risks and opportunities?
Yes

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C2.1a(C2.1a) How does your organization define short-, medium- and long-term time horizons?
From To
Comment(years) (years)
Shortterm

0

1

We evaluate short-term profits and losses as part of our annual financial reporting.

Medium- 1
term

5

Our annual Long-Range Planning process reviews and sets business direction over a 3 to 5-year horizon. Despite being called PMI’s Long-Range Plan, it equates to “medium-term” in
CDP terminology.

Longterm

15

The physical risks of climate change have the potential to materially impact our business. Therefore, we have conducted climate risk assessments with 2030 time horizon. We chose thistime horizon because it is hard for climate models to be more granular and to accurately interpret the data in a longer period.

5

C2.1b
(C2.1b) How does your organization define substantive financial or strategic impact on your business?

Alongside physical impacts such as rising sea-levels and changing weather patterns, there are transition risks such as new carbon-related regulations and taxes, changes inmanufacturing technology and evolving consumer preferences, which can affect business units or the organization due to stakeholder or customer concerns. Being at theforefront of addressing the global challenge of climate change also presents opportunities. Some correlate to good practices such as energy-use reduction and the protectionof forests and waterways; others arise through product eco-design and adaptation measures. PMI, alongside many of its suppliers, is working within a context of stabilizing the
global temperature rise to below the internationally agreed 1.5-degree Celsius scenario. We understand the potential impacts of climate change across all areas of ouroperations, particularly upstream in our supply chain.
The climate crisis, as acknowledged by the international community, threatens livelihoods, in particular the most vulnerable people around the world. It impacts humanpopulation movement, biodiversity, access to water, global health, food security, and other environmental changes such as soil degradation and desertification. Beyond its
human repercussions, climate change could threaten business continuity. This is especially the case for businesses involving an agricultural supply chain. For PMI, costs of
raw materials such as tobacco leaf and cloves may rise, and both consumers and our employees are becoming increasingly sensitized to the environmental impact ofcorporate actions. Upfront expenditures with longer-term returns are required. At the same time, PMI’s efforts to reduce its GHG emissions, such as through increased energy
efficiency, could alleviate potential costs and create a competitive advantage by meeting or exceeding the expectations of consumers, employees, and other stakeholders.
A substantive financial or strategic impact can vary depending on which of the above aspects of the business are considered as impacted and the potential combination ofthem. The level of criticality will have different threshold when comparing, for example, impact within our agricultural supply chain (engagement with hundreds of thousands offarmers) and the development of new products or the compliance with regulations on carbon emissions in our factories. Therefore, in PMI, as explained in the below
paragraph, we refer to a variety of factors that independently or in combination may affect the achievement of our smoke-free vision.
PMI evaluates a “substantive impact” (e.g.: financial or strategic impact) based on a variety of factors and quantitative indicators including but not limited to the potential
impact on financial performance as well as other strategic factors that may affect PMI’s efforts and/or delivery towards a smoke-free future, ultimately replacing cigarettes
with smoke-free products. The impacts reported as substantive strategic or financial impacts are defined as those identified and prioritized by management in our value
chain, through key enterprise risks based on four risk dimensions: the impact a risk could have on the organization if it occurs, the likelihood a risk will occur, the velocity withwhich a risk would affect the organization if it occurs, and the interconnectivity of a risk with other risks, that exceed defined thresholds at the corporate level.
As part of the Company’s annual Integrated Risk Assessment (IRA) process, we have in place an extensive risk control program by which we assess the climate change
physical risks. Specifically, in our operations, locations with values exceeding $30 million range are surveyed by engineers from our property insurer, who provide
recommendations to us on the magnitude of environmental risks, for example risk of flooding that could cause reduction or disruption in production capacity in specificlocations, and the cost of management. Recommendations for risk management are given if the expected reduction in the financial impact of the risk exceeds the cost to meetthe recommendations by a factor of 10 or more. Internally, we focus on recommendations above the $50 million range as management of identified risks can involve
substantial capital investment and disruption to operations including our supply chain.
In 2020+ risk forecasting terms, in relation to our tobacco supply chain, we assumed as substantive risks those with a potential impact in excess of $5 million or a raw
material impact in excess of 1000 metric tons of tobacco leaves. This definition is applicable to PMI’s agricultural supply chain.

C2.2

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(C2.2) Describe your process(es) for identifying, assessing and responding to climate-related risks and opportunities.
Value chain stage(s) covered
Direct operations
Upstream
Downstream
Risk management process
Integrated into multi-disciplinary company-wide risk management process
Frequency of assessment
More than once a year
Time horizon(s) covered
Short-term
Medium-termLong-term
Description of process
PMI has an interconnected three-step assessment process to identify, assess and manage risks and opportunities that can have a substantive financial or strategic impact
on the company's operations. Substantive strategic or financial impacts are defined as those identified and prioritized by management in our value chain, through key
enterprise risks based on four risk dimensions: the impact a risk could have on the organization if it occurs, the likelihood a risk will occur, the velocity with which a risk
would affect the organization if it occurs, and the interconnectivity of a risk with other risks, that exceed defined thresholds at the corporate level. E.g., in 2020+ risk
forecasting terms, in relation to our tobacco supply chain, we assumed as substantive risks those with a potential impact in excess of $5M or raw material impact in excess
of 1000 metric tons of tobacco leaves. This process takes place every year, covering short, medium- and long-term time horizons. Each step involves multiple stakeholders
and results in different types of actions: 1) Strategic Enterprise Risks (SER) management - The SER is PMI's highest-level risk and opportunity assessment process whichis conducted by both the Committees of the Board with respect to their areas of responsibility as well as by the full Board. To identify and assess climate-related risks, PMI
Company Management (CM) has identified and prioritized key enterprise risks based on four risk dimensions as mentioned above: impact, likelihood, velocity andinterconnectivity. The SER covers a wide range of topics that are relevant to PMI's value chain such as environmental, economic, geopolitical, technological and societal
ones. PMI CM conducts a reassessment of SER on a yearly basis. Ownership of each of the prioritized risks is assigned to a member of CM, and oversight of the
management of each risk is assigned to a specific Board Committee or to the full Board. Results from the SER identified climate change as a substantive issue that could
result in natural disasters, water scarcity, change in weather patterns, agricultural instability, reputational damage, shifts on market preferences and other impacts that could
directly affect PMI's ability to operate. Our Senior Vice President (SVP) Operations has been tasked with responsibility to address climate change risks and opportunities
across the company, including physical climate, and transition risks. Our SVP Operations is responsible to ensure that these risks and opportunities are assessed,
managed, integrated into long-range plan and budget review process, and reported to the appropriate Committee and the full Board throughout the year. The identified SER
are considered during the annual Integrated Risk Assessment if they are deemed to have a substantive financial or strategic impact on the business. 2) Integrated Risk
Assessment (IRA) process - The IRA is PMI's second process to identify and manage risks and opportunities in direct operations and supply chains. The IRA builds oncompany-wide findings from the SER to further assess how these can impact PMI's operations at a department level on an annual basis. When it comes to climate related
events, PMI focuses on the evaluation of physical and transition risks as per recommendation of the TCFD. To date, PMI has mapped 149 climate change risks andopportunities across materiality and certainty, and classified in: 'Proactive', 'Reactive', 'Non-material', 'Watch' and 'Potential quick wins'. After further analysis, PMI is now
focusing on the 'Proactive' category as it was identified that these events have the highest certainty and materiality level. As part of the IRA, PMI developed an extensive
risk control program to assess and mitigate physical risks from climate change; locations exceeding $30M range are surveyed by engineers from our property insurer, whoprovide risk management recommendations. 3) Environmental Risk Management (ERM) process - The ERM is PMI's main process to identify and manage substantial risks
and opportunities at the operational level. The ERM builds on the IRA to further analyze operational implications from the identified risks and opportunities. Results from the
ERM are used by PMI's stakeholders to develop programs, roadmaps, action plans, targets and budgets to either prevent substantial risks from materializing, or to seize
opportunities. Results from the ERM are monitored by each of PMI's relevant department and communicated to the relevant stakeholder on a monthly basis, e.g., to the
SVP Operations. In the case of climate change, the SVP Operations is responsible for communicating progress on PMI's climate-related actions to the Board and its
Committees, and subsequently re-inform steps 1 and 2 of process. An example of PMI's processes applied to the identification and management of transition risks andopportunities is the development of PMI's Science Based Target. Using the four-risk dimensions as part of SER management and once decided to focus on risks andopportunities classified as 'Proactive' through the IRA process, PMI's Board, its Committees and CM identified and assessed a critical need to meet the 2015 Paris Climate
Agreement Goals. Failure to achieve these goals can result in substantial impacts to global agricultural supply chains, and subsequently impact PMI's operations. PMI
acknowledged these risks, and recognized corporations had concrete opportunities to lead climate action. In 2016, PMI developed emission reduction targets for its scopes
1, 2 and 3 which were approved by the Science Based Targets Initiative (SBTi) in 2017. In 2020 our revised absolute reduction targets aligned with the 1.5°C scenario,
have been again approved by SBTi. PMI commits to climate action in line with best climate science, to seize opportunities related to operational efficiency (e.g.: energy
efficiency, on-site investments for renewables generation and/or sourcing) and has been able to mitigate transition risks such as reputational impacts, shifts in market
preferences and policy changes related to inaction. Another example of PMI process to identify, assess and respond to physical climate risks and opportunities is Good
Agricultural Practices (GAP) program. PMI identified and assessed physical climate risks within its tobacco supply chain incl. drought and seasonal variability as relevant to
62% of our sourced tobacco which is rainfed. PMI tackles those risks through GAP program by implementing mitigation and adaptation practices. In 2020, PMI engaged
285,900 tobacco suppliers and contracted farmers through GAP providing them with a set of climate-smart agriculture practices, action plans and monitoring tools to
promote a more resilient supply chain to impacts from climate change such as drought, floods, and fires. GAP also supports farmers switching to low carbon curing fuels,
minimizing their dependency on fossil fuels for curing and potential impacts due to price fluctuations.

C2.2a(C2.2a) Which risk types are considered in your organization's climate-related risk assessments?
Relevance Please explain&
inclusion

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Relevance Please explain&
inclusion

CDP

Current
regulation

Relevant,
alwaysincluded

We are subject to international, national and local environmental and climate-related laws and regulations in the countries where we operate; regulations which are considered in our
climate-related risk/opportunity assessment process. In 2019, we finalized our evaluation of climate change risks aligned with TCFD recommendations, confirming its application in 2020;
this allowed the identification of transition risks for PMI related to an increase in carbon pricing affecting operations manufacturing and logistics, and regulation on energy efficiency levels
affecting our factories processes in the short term. Examples of these risks are the potential expansion of: -the EU emissions trading scheme will include additional PMI sites – i.e., ourfactory in Romania was included in 2020 due to increased production capacity. This could lead to an increase in PMI’s operating costs of purchasing allowances in the future, particularly inhigh emitting locations in EU. -carbon pricing mechanism across all the markets in which PMI operates. We particularly monitor countries with a local ETS scheme already in place, i.e.,
Canada, Switzerland, South Africa and South Korea. In those countries the risk is rather moderate at the moment due to the emission profile of our manufacturing sites vs. the minimum
threshold needed to have a significant financial impact. We closely monitor regulations on minimum threshold and signals of changes in these schemes, and we consider those aspects inthe strategic deployment of our manufacturing and supply chain networks including investments to increase energy efficiency. We monitor current regulations in those markets also due tothe potential risk they can pose in case we would decide to expand the production capacity of our manufacturing sites located there; especially in relation to our RRP products which are
more energy intensive compared to conventional products and resulting in increased GHG emissions. The potential impact of this risk is related to higher operating costs. - Increase ofcarbon prices within the EU Trading Scheme which would have a potential impact in our operations if it materializes. This would expose our operations to requirements for increased capital
expenditures, taking in consideration the potential for combined heat and power, renewable energy and buildings upgrade, to reduce emission profiles of our sites and mitigate the risk
posed by EU ETS carbon prices increase impacting operating cost.

Emerging
regulation

Relevant,
alwaysincluded

Our operations throughout the globe are subject to various climate-related regulations, which we consider in our climate-related risk/opportunity assessment process. There is a clear
international trend towards proliferating and stricter climate-related regulations which could increase our operational costs. In 2019, we finalized our evaluation of climate change risks
aligned with TCFD recommendations, and we reviewed it in 2020.This exercise allowed the identification of mid and long term transition risks for PMI business related to technology. In thiscategory, PMI mostly incurs risks related to an increase in carbon pricing affecting operations manufacturing and logistics, and regulation on energy efficiency requirements affecting ourfactories or mechanized farming processes in the mid and long term. Examples of risks include: - EU Emission Trading Scheme (ETS): risks linked to widening the EU ETS carbon trading
market to include EU accession countries where PMI has facilities. - Energy taxes; regulation on Energy Efficiency; Infrastructure/Buildings Directive; promoting energy reduction at source(like in our EU factories); regulations in emerging market, exposing our operations to requirements for increased capital expenditures taking in consideration the potential for combined heatand power; renewable energy and buildings upgrade. - Regulations on energy efficiency in the heavy machinery and heavy-duty transport sector are expected to tighten, and the speed ofthis change in regulation will be heavily depending on the rate of low carbon transition. Mechanical equipment used on farms is currently both energy intensive and heavily reliant on fossil
fuels as an energy source. In particular, these regulations could result in an increase in the speed of the replacement cycle of machinery and equipment by the farmers resulting in higher
annual expenditure on replacement to keep pace with efficiency standards. This in turn would cause an associated indirect increase in procurement costs as the price for tobacco will
respond to upward pressure on the cost of production. Those regulations could also expose our operations to requirements for increased capital expenditures to mitigate their impact.
affecting operating cost.

Technology Relevant,alwaysincluded

In 2020 the review of the evaluation of climate change risks aligned with TCFD recommendations conducted in 2019, allowed to further identify mid and long term transition risks for PMI
business related to technology. The identified risks relate to technology improvements resulting in existing equipment becoming either non-compliant with upcoming energy regulations
and/or too expensive to run due to the higher costs of fossil-fuel within our own operations and supply chains. Existing equipment would need to be replaced with associated costs ofadopting new tech, exposing our operations to requirements for increased capital expenditures. In addition, in 2020 we submitted our revised absolute reduction Science Based Targets(SBT) aligned with a 1.5 °C scenario, which were approved by SBT initiative. PMI’s decarbonization path to achieve new SBTs will need to be more aggressive, while RRP production
growth will drive increase in energy consumption and related GHG emissions. A strong investment in new tech will be needed to achieve the decarbonization path that we have committed
to, with the risk that despite our investments we may not be able to achieve our SBT commitments due to RRPs being more energy voracious. PMI’s risks also relate to not following
technological advancements (e.g. low energy efficiency equipment), investing in obsolete technologies (e.g. non-regenerative agricultural practices) and higher costs/polluting technologies(e.g. fossil-fuel based tech) when developing new drivetrain technologies, new farming and curing techniques and equipment, new tech in retail and new product design. All these risks
exist, and PMI needs to ensure neither it nor its suppliers invest in obsolete technology to remain up to date with technological development within its own operations and supply chains.
This can be costly and potentially impact operating costs if not mitigated. We continuously assess risks related to technological improvements that support the transition to a lower-carbon
and energy-efficient business model. An example of this risk is related to our electronics manufacturing suppliers which are key to achieve our smoke-free future goal. We assessed through
LCAs the risk of carbon footprint increase due to new electronics suppliers and the impact if they would not invest in low carbon technologies to mitigate the emissions in their processes
and resulting in PMI potentially not being able to meet its carbon reduction SBT commitments.

Legal

Relevant,
alwaysincluded

We are subject to international, national and local environmental laws and regulations in the countries we operate. We have specific programs across our business units designed to meet
applicable environmental compliance requirements to reduce our carbon footprint, wastage, water and energy consumptions and prevent any climate-related mitigation claims. Our
subsidiaries expect to continue and/or increase expenditures in order to drive improved performance and maintain compliance with environmental laws and regulations, as first of all,compliance which such policies and regulations are core to the way PMI operates; moreover as non-compliance could results in fines, or even in partial or total withdrawal of the operation
permit. We assess and report the compliance status of all our legal entities on a regular basis. Based on the management and controls we have in place and our review of climate changerisks (both physical and regulatory), environmental expenditures have not had, and are not expected to have, a significant adverse effect on our consolidated results of operations, capital
expenditures, financial position, earnings or competitive position. In 2019, we finalized our evaluation of climate change risks aligned with TCFD recommendations, and we confirmed it in2020.This exercise allowed the identification of mid and long-term legal transition risks for PMI business, including those triggered by changes in climate policy or regulations. Legal
compliance to such policies and regulations changes are core to the way PMI operates but may result in increased operational costs for PMI, such as: - increasing procurement costs
linked to higher cost of raw materials and the cost of production; - impacting logistics and operations through increased carbon pricing; - affect mechanized farming processes through new
regulation on energy efficiency requirements; and - impacting tobacco curing activities through additional regulation on fuel type. PMI has not been subject to significant fines, in thereporting year, related to environmental regulations specific to climate change.

MarketRelevant,
alwaysincluded

In 2020, we continued our evaluation of climate change risks aligned with TCFD recommendations, which confirmed the identification of transition risks for PMI business related to market
changes, such as shifts in supply and demand for certain commodities, products and services. For PMI this includes risks of increasing costs of sourcing (including materials such as waterand diesel) and increasing costs for suppliers, resulting in higher procurement costs. It also includes increasing competition for agricultural land, leading to less available or more expensive
land for tobacco growing. Other market risks are related to PMI’s investors and financial performance and include the inclusion of climate risk metrics by credit rating agencies, affecting
PMI’s score, and a general trend of investors moving away from carbon-intensive sectors. Finally, downstream market risks are associated with shifting consumer demands for lowercarbon products. Two concrete examples of how risks are assessed are described below: 1. Diesel is widely used in many farming practices. PMI’s agricultural supply chain and the related
purchases of raw materials are influenced by the cost of production for farmers. Energy is a significant cost in farming practice in relation to the mechanical equipment used. If diesel prices
increase, the overall cost of producing raw tobacco at directly contracted farms, as well as the cost of sourcing tobacco from third-party leaf suppliers, will increase as a result. This in turnwould cause an associated indirect increase in procurement costs as the price of tobacco will respond to upward pressure on the cost of production. A key factor in diesel prices is global
oil prices, which are expected to have different developments depending on the transition pathway taken at a global level. Under transition pathways aligned to 2 degrees scenario or
below, the oil demand will be lower than under scenarios associate with greater temperature increases. As such the expected increase in oil prices and indirectly tobacco prices paid by
PMI would be lower in a 2-degree scenario. 2. We track commodities (pulp, aluminum, glycerin, ethylene, mint crystals, guar seeds, coconut shell to name a few) through market indicator(RISI, ICIS, IHS or MCX) that provide price and supply chain scenario analysis of the commodities allowing PMI to track the source of its product and ensure the suppliers comply with
relevant (industry, regional, international) regulation(s).

Reputation Relevant,alwaysincluded

Stakeholder interest and expectations in climate change adaptation are increasing as the effects of climate change become more apparent, society is asking businesses to become part ofthe solution changing their practices. NGOs campaigns can impact companies’ reputation and have business consequences on license to operate and bottom line. PMI aims to combat
climate change and set actions to act upon it. Those actions are conducive to substantiate PMI’s leadership in sustainability as integral part of the success of its business transformation.
Thus climate-related reputational risk is included into PMI’s risk assessments considering the potential risk it could have on the long term success of the company. In 2020, we continued
our evaluation of climate change risks, aligned with TCFD recommendations and identify transition risks related to the reputation of PMI as a sustainability leader in the area of climatechange; this evaluation included a survey of opinions of certain PMI stakeholders on how PMI contributed to or detracted from the transition to a lower-carbon economy. PMI identified that
reputational risks can be driven by multiple factors including financial performance, investors’ priorities, reporting requests, internal workforce concerns around sustainability, andchallenges related to raising capital for the agriculture sector as a carbon intensive one. E.g., PMI identified failure to address enhanced reporting requests as a potential reputational risk
for the company. Increased reporting not only requires additional internal resources, but also exposes the company to a broader stakeholder community and sectoral benchmarking. PMI
manages this risk by having an internal reporting team that coordinates reporting initiatives, as well as engagement with external consultants to ensure consistency through multiple
reports, transparent communication, effective benchmarking against relevant sustainability ratings and the use of best practice methodologies and standards. We also conduct periodicallya sustainability materiality assessment with a broad range of stakeholders. We strengthened our communication through our reporting. Our Integrated Report 2020, which covers oursustainability work, sought to align with the IIRC, GRI and SASB frameworks as well as with the recommendations of the TCFD and requirements of the CDP and other sustainability
ratings; those documents and additional content can be consulted in our website.

AcutephysicalExtreme weather events due to climate change have the potential to significantly impact our operations, buildings and suppliers, therefore having a substantive impact on our supply chain
and on our business continuity plan. Flooding or typhoons can damage our buildings and goods, as well as the crops of our farmers and our logistics networks. In 2015, PMI performed acomprehensive Climate Change Risk Assessment (CCRA) for corporate and asset level physical risks and opportunities up to 2025-2030. This assessment was reviewed in 2020, to alignwith TCFD recommendations, and complemented with the water physical risks in 2020. The Water risk assessment was conducted using the WRI Aqueduct tool to determine the global risk
factors that affect the areas where we operate and source tobacco from. The risk assessment process included key assets such as factories/warehouses, supplier’s processing
facilities/warehouses, as well as ports, and tobacco growing regions. Some of the risks identified in our own operations, and tobacco supply chain were those resulting from flooding andcyclones, e.g., in Brazil, Philippines, and Indonesia, which could lead to building and goods’ damage, as well as crop losses to our farmers and disruptions to our logistics networks. In our
manufacturing site in Indonesia, this could cause damage due to business interruption in the range of $0.4 million to $3.5 million, while in our tobacco growing areas in Brazil andPhilippines could cause interruptions in our supply chain with a financial impact ranging from $3 million to $17 million This information is reviewed regularly with top management; it enables
risk/opportunity identification and management at the company and asset level, and includes regulatory climate change aspects and geopolitical risk. Our substantial tobacco leaf
inventories can help mitigate short to medium term impacts.

Relevant,
alwaysincluded

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Relevance Please explain&
inclusion
Chronic
physicalRelevant,
alwaysincludedLonger term weather shifts due to climate change have the potential to significantly impact our operations, assets and supply chain therefore having a substantive impact on our supply
chain and on our business continuity plan. In 2015, PMI performed a comprehensive Climate Change Risk Assessment (CCRA) for corporate and asset level physical risks andopportunities up to 2025-2030. This assessment was confirmed in 2020, to align with TCFD recommendations, and complemented with the water physical risks in 2020. The Water risk
assessment was conducted using the WRI Aqueduct tool to determine the global risk factors that affect the areas where we operate and source tobacco. The risk assessment processincluded key assets such as factories/warehouses, supplier’s processing facilities/warehouses, as well as ports, and tobacco growing regions. Results from the risk assessment process
are reviewed regularly with senior management, enabling risk/opportunity identification and management at the company and asset level as well as in our logistic networks and supply
chains. For instance, drought and water stress may impact our manufacturing operations, e.g. our facilities in Italy and Poland, due to the fact that water is essential for our production
processes (products and for utilities), and therefore exposing our operations to requirements for increased capital expenditures to prevent business disruption due to water unavailability.
The business interruption cost in our own operations are estimated in the range of $2.4 million to $19.2 million over the long term. The same risk in our tobacco supply chain in the growing
regions of Indonesia, where we source tobacco and clove, could have adverse impacts both on quality and yield and result in potential financial impact of $4 million to $14 million over along-term period. Similar issues would occur with accelerated land degradation in Africa due to droughts or accelerated desertification of areas where deforestation is taking place. This is
one of the core problems that PMI is addressing through its Good Agricultural Practice program.

C2.3(C2.3) Have you identified any inherent climate-related risks with the potential to have a substantive financial or strategic impact on your business?
Yes

C2.3a
(C2.3a) Provide details of risks identified with the potential to have a substantive financial or strategic impact on your business.
Identifier
Risk 1
Where in the value chain does the risk driver occur?
Direct operations
Risk type & Primary climate-related risk driver
Current regulation

Carbon pricing mechanisms

Primary potential financial impact
Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification<Not Applicable>
Company-specific description
Our operations throughout the globe are subject to various climate-related regulations. There is a clear international trend towards increasing and stricter climate-related
regulations which could increase our operational costs. These include but are not limited to CO2 related trading schemes such as the EU Emission Trading Scheme (EUETS). As of December 31, 2020, PMI owned and operated a total of 3 factories in the Netherlands, Italy and Romania covered by the EU ETS, with total verified emissionsof over 40,000 metric tons of CO2e. PMI doesn’t have, for the time being, other factories in the EU and EU accession countries which could become subject to EU ETS.
Although the cost of EU ETS carbon credits has been lower in the past several years due to a large surplus of allowances, the cost of allowances has increased lately and is
expected to further rise. According to the European Commission, allocation to industrial installations received 80% of the free allowances in the 2013. This proportion has
been decreasing gradually year-on-year, down to 30% in 2020. The revision for phase 4 (2021-2030) of the revised EU ETS directive will trigger more stringent greenhousegas emissions reduction target with a mix of interlinked measures, among which, an increase of the pace of emissions cuts at an annual rate of 2.2% as of 2021. This could
lead to an increase in PMI’s operating costs of purchasing allowances in the future, particularly in high emission locations in EU markets. The potential identified risk is tosee the production prices increase impacting operating costs. We closely monitor if regulations on minimum threshold in these schemes are changing and signals of new
emerging regulations and we consider those aspects in the strategic deployment of our manufacturing and supply chain networks including investments to increase
efficiency. If this impact reveals to be substantial, we would focus our efforts to increase energy efficiency in those factories.
Time horizon
Medium-term
Likelihood
LikelyMagnitude of impact
Medium-low
Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
2800000
Potential financial impact figure – maximum (currency)
5600000
Explanation of financial impact figure
Although the cost of EU ETS carbon credits has been lower in the past several years due to a large surplus of allowances, the cost of allowances is expected to increase
due to stricter regulations and more significant long-term reforms to reduce oversupply. According to the European Commission allocation to industrial installations received
80% of the free allowances in the 2013. This proportion has been decreasing year-on-year, which could lead to an increase in our operating costs of purchasing allowancesin the future. Based on a comprehensive review of policies and methodologies (price corridor from ICPC), we recognize the importance of defining a carbon price per ton of
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CO2e that will remain stable over time and ensures that climate transition risks are embedded in capital expenditure decisions (i.e., in order to allocate capital for the best
return in terms of carbon reduction and cost-effectiveness). In 2020, as we are stepping up our ambition to reduce carbon emissions, aligned with the 1.5-degree trajectory,
we developed an internal methodology to model a Shadow Carbon Price integrating in today’s shadow carbon price evaluation, the transition risks 10 years in advance for
a forward-looking approach. In 2020 exercise, for example, the PMI’s shadow carbon price was set at $65 per ton of CO2e. We estimate the potential financial impact to be
between $2.8 million and $5.6 million considering: - the above and a worst-case scenario of constant emissions as of 2020 (whereas emissions due to the growth of
production capacity are evened out by improvements in energy efficiency and other mitigation measures); - the carbon footprint profiles of our 3 factories in EU ETS
scheme in 2020 and applying an annual cost of emissions allowances forecast to be between $40 and $80/tCO2 in the medium term. The calculation applied is thefollowing: 70,000 t/CO2e (representing the emissions of the 3 factories) * $40 = $2,800,000 70,000 t/CO2e (representing the emissions of the 3 factories) * $80 =$5,600,000 Mitigation measures have been anticipated to ensure that carbon tax will be kept as minimal as possible.
Cost of response to risk
10200000
Description of response and explanation of cost calculation
Mitigation measures have been anticipated and the plants have undergone an energy efficiency program to ensure that despite being over the EU ETS threshold in energy
consumption the carbon tax will be kept as minimal as possible, even aiming to go back to below threshold in the future and be exempted from the scheme. We manage therisk through our Energy Management Program (EMP), which consists of energy consumption monitoring and investments in energy conservation and efficiency
improvement projects. We have an energy monitoring and targeting system in place, with an annual cost of $200k. Drivers like EU ETS and EU EED led us to consider
process changes (e.g., replacement of outdated combustion equipment to more efficient equipment that can potentially reduce our energy load to below the 20MW
regulatory threshold). From 2014-2018 we delisted certain sites from EU ETS as they fell below the total combustion capacity threshold. Wider best practice sharing andenergy/GHG reduction projects are part of EMP, and they involve specific investments for an annual set budget of around $10M. Our EMP enables us to analyze
consumptions and serve as basis for potential carbon tax exemptions and “cost to comply” reductions with the EU ETS. We use a shadow carbon price set at $65 per ton ofCO2e as an internal lever designed to accelerate carbon emissions reduction by ensuring that the company’s investment decisions reflect all costs, including environmental
ones. We use this price to better understand the potential impact of external carbon pricing (e.g., carbon taxes) on the profitability of a project, or an investment, and hence
drive and prioritize investments that accelerate CO2 emissions reduction. PMI’s shadow carbon price is integrated into the financial evaluation and preparation of businesscases that will impact our carbon emissions (favorably or unfavorably); in 2020, it was instrumental in the approval of 13 additional carbon emission reduction projects aspart of our energy saving initiatives program in our manufacturing sites. Our annual cost of management is the sum of investments in energy conservation and efficiency
initiatives (approx. $10M) and the energy monitoring system operating costs ($200k).
Comment
The EU ETS scheme has been an additional driver for the implementation of our energy efficiency program at global scale to anticipate the clear international trend towards
increasing and stricter climate-related regulations which could increase our operational costs. Our activities in this area fall under the scope of our Drive 4 Zero program,which aims to eliminate economic losses caused by inefficient energy use. Under the program, we look for industrial and manufacturing solutions such as heat recovery andmanufacturing-process optimization. We also promote behavioral change through our Zero Loss Mindset program to eliminate energy losses. Design standards include low
GHG building practices, e.g., for materials and efficient lighting. In our factory in Russia, for example, it was necessary to drain around one percent of the steam that ourboiler produced to maintain the desired water-quality parameters. This meant heat loss. We found a way to recover the wasted heat by installing a heat exchanger, whichused the heat to generate steam. In that same factory, the water used for domestic purposes and radiators was heated by inefficient electric heaters, leading to avoidable
losses. We installed a thermal pump that was five times more efficient, leading to a reduction of 210 tons of CO2e per year. Meeting our energy and CO2 reduction targets
means that our Russia factory will already fulfill or exceed new state regulations such as the “energy conservation and improving energy efficiency in the period up to 2020”law. Our Swiss affiliate emissions have been consistently below the allowances’ threshold thanks to the implementation of energy saving program such as theimplementation of a heat pump and more innovative technology such as pyrolysis of factory’s organic waste to generate energy. The latter is a “Drive 4 Zero” initiative tosupport the carbon neutrality target and also to optimize waste management; the pyrolysis plant is expected to contribute to cut GHG emissions of the site by 63%.
Identifier
Risk 2
Where in the value chain does the risk driver occur?
Upstream
Risk type & Primary climate-related risk driver
Acute physical

Increased severity and frequency of extreme weather events such as cyclones and floods

Primary potential financial impact
Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification<Not Applicable>
Company-specific description
In the short- to long-term most of PMIs sourcing regions face risks due to physical climate change events, such as cyclones, floods and others, potentially affecting ourtobacco suppliers’ capability to deliver on contracted volumes globally, e.g., in Brazil, which is among PMI’s top 15 tobacco origins. Changes in precipitation patterns andextreme variability in weather patterns could affect the yield, quality and availability of the tobacco crops, triggering a substantive risk in case the potential financial impact isabove our threshold (1000 metric tons of tobacco leaves), resulting in sourcing plans modification and increasing operational costs. A substantive impact in Brazil could
have the potential to delay deliveries of tobacco affecting significantly the production cycle all the way to the product. Considering that Brazil volumes represent 45% of thetotal tobacco volumes at risk of climate change related losses, the impact on the business when floods, droughts, and hail impact our tobacco growing areas is relevant. In
2020 tobacco volumes were significantly impacted by extreme weather events, causing relevant crop losses to contracted farmers, e.g., in Brazil, where over 2,300ha ofproduction in the South regions were impacted due to extreme weather events such as flood, hail and mainly drought. The volume losses experienced by tobacco farmers
were volumes already contracted by PMI. We had to work on a contingency plan with our suppliers to fulfil our volumes to requirements. The volumes had to be booked in ashort time window thus reducing the power of negotiation that is typical of pre-booked volumes and potentially impacting the price above the substantive impact threshold of$5 M. Extreme rainfall in the fields may require pumping of excess water; while extreme droughts could require long-term irrigation, both of which would increase tobacco
production costs above our substantive financial impact threshold. Changes in precipitation patterns could also affect local logistics, with extreme precipitation events
potentially leading to inaccessibility of road networks, disrupting the delivery of tobacco.
Time horizon
Long-term
Likelihood
More likely than not
Magnitude of impact
MediumAre you able to provide a potential financial impact figure?
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Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
4000000
Potential financial impact figure – maximum (currency)
17000000
Explanation of financial impact figure
The potential financial impact range is based on a long-term assessment of costs from physical climate change risks related to extreme weather events in our tobacco
origins in Brazil in a given year. The range of potential financial impact is derived from previous years’ data on crop losses due to extreme weather events, which could leadto increase tobacco production costs as PMI has to look for alternative volumes to be purchased in a short time window, combined with our comprehensive climate change
risk assessment tool. Setting the basis as PMI threshold for substantive financial impact (1,000 metric tons of tobacco leaves) for the specific case of Brazil, the lower range
results in an estimate 3% (of the sourced volume or spend). The upper range reflects an estimation of 10% (of the sourced volume or spend) based on historical crop loss
data (actual impacts reported) and our modelling projection. We estimated the relative magnitude in a range of around $4-17M per year while we foresee this risk in the
short to long-term (>6 years) for the Brazilian growers due to supply chain disruptions arising from extreme weather events such as excessive rain fall, hail and drought, andcombining estimated costs due to disruption from crop losses, quality impacts and supply chain restrictions. The costs’ estimation takes into account the above factors,
however, due to their inter-correlation, our modelling provides a bottom and top range.
Cost of response to risk
250000Description of response and explanation of cost calculation
The cost of response is based on the set yearly budget allocated in 2020 to environmental projects under the Good Agricultural Practices (GAP) program implementation in
Brazil. GAP program is PMI’s main initiative to tackle physical climate risks within the company's tobacco supply chain, as identified through our Strategic Enterprise Risks
and Company’s Integrated Risk Assessment processes. GAP program provides suppliers with a set of climate-smart agriculture practices, action plans and monitoring tools
to promote a supply chain that is more resilient to impacts from climate change such as drought, floods, and fires. Under GAP program, projects were implemented in
Brazil’s southern region in 2020, near PMI’s manufacturing facility in Santa Cruz do Sul, focusing on increasing the resilience of natural ecosystems to better protect local
communities and their economic activities in the tobacco growing areas. Around 47,500 contracted farmers supply tobacco to PMI (directly or via third-party suppliers)
within the region and the focus of GAP initiatives is on water source protection and landscape conservation practices related to tobacco farming with planned monitoring andtraining at farm level. In Brazil around 330 field technicians work year-round with the contracted farmers and suppliers of tobacco to PMI, visiting the farms on average fivetimes during the crop season to monitor projects implementation. Additionally, technology is also being deployed; for example, PMI is using drones to map and scout
tobacco fields in North-East Brazil, generating live data for decision making on crop management. In 2020, The cost of these initiatives was around $250,000 which
includes the total cost of on farm water management and water stewardship activities (e.g., spring protection projects) at landscape level, together with the roll out of a
specific “on farm and next to the farm” biodiversity conservation program. 50% of the expenditure is coming from the implementation of forest protection, renewable fuels
and good agricultural practices programs that include training, stakeholder engagement and verification of the results reported. PMI’s investment in these initiatives is
included in the cost of response and represented approx. 5% of the global 2020 expenditure in environmental projects, similar yearly expenditure is expected over the next
10 years to further support mitigating short to medium term impacts.
Comment
Identifier
Risk 3
Where in the value chain does the risk driver occur?
Upstream
Risk type & Primary climate-related risk driverMarketIncreased cost of raw materials

Primary potential financial impact
Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification<Not Applicable>
Company-specific description
Increased production costs for farmers in the supply chain can be due to changing input prices, specifically diesel costs. For PMI this has an impact on procurement
expenditure on tobacco from third-party leaf suppliers and directly contracted farmers. Due to fuel cost relevant weight over the other cost components, an increased cost offuel for agriculture could result in an increase of the final tobacco price. Diesel is widely used in many farming practices, including transportation and the operation of
mechanical equipment. PMI and its supply chain purchases of tobacco are influenced by the cost of production for farmers, whereas energy used to run mechanicalequipment represents a significant part of that cost. Approximately 80% of our purchased volume comes from mechanized farms consuming between 100 and 300 liters ofdiesel per hectare of tobacco, depending on the mechanized activities and the soil type. If diesel prices increase, the overall cost of producing raw tobacco at directly
contracted farms, as well as the cost of sourcing tobacco from third-party leaf suppliers, will increase as a result. Based on data collected though surveys in farms where
diesel expenditure represented up to 10% of the overall cost of production, this in turn would cause an associated indirect increase in procurement costs as the price of
tobacco would respond to upward pressure on the cost of production. Specific markets may be more susceptible to fuel price fluctuations as they are characterized byfarms more dependent on mechanized activities, for example in tobacco farming in Argentina, US and Italy where the adoption of mechanized activities is above the global
average; the three markets are within PMI’s top 15 sourcing markets causing the sourcing strategy to be likely affected by a significant fluctuation in diesel price for
agriculture. A key factor in diesel prices is global oil prices, which are expected to have different developments depending on the transition pathway taken at a global level.
Under transition pathways aligned to 2 degrees scenario or below, the oil demand will be lower than under scenarios associated with greater temperature increases. As
such the expected increase in oil prices and indirectly tobacco prices paid by PMI is lower in a 2-degree scenario.
Time horizon
Long-term
Likelihood
More likely than not
Magnitude of impact
Medium-low

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Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
110000000
Potential financial impact figure – maximum (currency)
225000000
Explanation of financial impact figure
Diesel price was modelled between 2017 and 2030 using the International Energy Agency (IEA) scenario data for projected oil price, and the assumption that the ratio
between oil and diesel price would remain constant. The cost of diesel to farmers as a portion of total cost of production was estimated using an internal model and a proxybased on diesel and oil prices from public data sources on typical cost shares for similar agricultural commodities applied to the mechanization profile of PMI’s farmer base(pro-rata based on volumes sourced yearly). This share was then applied to the current and future forecasted procurement spend on tobacco by PMI each year. It was thenassumed that the PMI tobacco procurement expenditure would remain constant in a business-as-usual scenario and increase by the same rate as diesel price underclimate change scenarios. The result after the application of the aforementioned calculation methodology, and factoring farmers’ uptake of new technologies, renewables
and future forecasted tobacco requirements, was that the potential financial impact of the risk is estimated in a range of $110 million to $225 million per year if not mitigated,while we foresee this risk in the short to long-term (>6 years). PMI’s response and mitigation strategy are described below.
Cost of response to risk
5000000
Description of response and explanation of cost calculation
Since 2002 PMI has implemented the Good Agricultural Practices (GAP) program. GAP is a program with mandatory requirements for our tobacco suppliers and theircontracted farmers, which provides specific guidance on initiatives to mitigate tobacco growing risks and impacts related to climate change. Strategic initiatives include
improving efficiency and switching to low-carbon energies, making tobacco suppliers, their farmers and PMI more resilient to price increments on diesel. The cost of
response is based on the yearly budget allocated to environmental projects in 2020 (mainly related to climate change, water security and biodiversity) and crop efficiency
improvement projects under the GAP program implementation across all regions, accounting for approx. a set annual budget of $5 million in expenditures for initiatives
within our tobacco supply chain including but not limited to the adoption of improved and innovative practices by the farmers. Within the GAP budget we consider relevant
for mitigating direct costs the initiatives that have been approved by the sustainable agriculture steering committee in line with the strategy to decrease the use of crop
inputs without influencing negatively farm outputs (e.g., yield per hectare). Due to force majeure causes linked to the Covid-19 pandemic, 57% of the total budget approvedi.e., $5 million, has been spent for driving efficiency in agriculture in 2020. Specifically, agricultural best practices such as reduced tillage and no-tillage are fostered, which
generate a wide range of benefits, such as decrease in intensity of mechanized activities at field stage thus reducing the dependency on fuel and to the overall cost of
production. In 2020, gradual switch to renewable sources and barn efficiency improvements led to: - 67% of flue-cured tobacco we purchased was cured using renewable
and traceable fuels (mainly in Pakistan, the Philippines, Italy, Spain, Malawi, Mozambique, Mexico, Brazil and Argentina); - 45% of the fuel was sustainably sourced
firewood (and 22% other biomass); - flue-curing GHG emissions intensity was 77% lower (vs. 2010); - reduction of 240,204tons of CO2e (vs. 2019); - the improvement of
tobacco curing barn efficiency lowering fuel consumption; - increased collaboration with PMI Leaf suppliers fostering additional collaboration on climate change relatedrisks, and in other areas with potential positive impact on our business and share value with society.
Comment
PMI plans to maintain similar level of investment over the next 10 years.
Identifier
Risk 4
Where in the value chain does the risk driver occur?
Upstream
Risk type & Primary climate-related risk driver
Acute physical

Increased severity and frequency of extreme weather events such as cyclones and floods

Primary potential financial impact
Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification<Not Applicable>
Company-specific description
Based on Germanwatch’s annual Climate Risk Index (2021), the Philippines is in the top 5 countries (4th) most affected by climate change impacts (including cyclones andflooding) resulting to an average loss of $3.2billion in purchasing power parity to the country from 1999 - 2019. The supplies of tobacco leaf in Philippines (one of PMI’s top
15 tobacco sourcing countries), coupled with negative impacts on tobacco crop quality, and supply chain manufacturing restrictions due to increased severity and frequencyof extreme weather events could impact PMI’s production and tobacco sourcing strategy, leading to increase in direct costs for PMI, suppliers and farmers. Tobacco leaf
growing can be strongly affected by small changes in physical climate conditions such as changes in temperature and precipitation. Furthermore, yield, quality andavailability of the tobacco crop could be negatively impacted by changes in precipitation and periods of drought, which are increasing in frequency in recent years. This
could affect our access to tobacco supplies, impacting our crop buying pattern and increasing operational cost, affecting PMI manufacturing operations and businessdirectly. We consider a range for the increase in our operational cost between 16% and 32% given by our modelling and estimation of medium-long term impact of adverse
extreme climate events on our supply chain in the Philippines. In case of significant damage to the crop we would be forced to look for alternative sourcing areas within the
country in a short time, impacting significantly our power of negotiation. This would also cause additional effort in defining the logistics and the approach to the supply chain
thus driving the total cost of tobacco above the budgeted price for Philippines.
Time horizon
Long-term
Likelihood
LikelyMagnitude of impact
MediumAre you able to provide a potential financial impact figure?
Yes, an estimated range
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Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
3000000
Potential financial impact figure – maximum (currency)
6000000
Explanation of financial impact figure
The potential financial impact range is based on a long-term assessment of costs from physical climate change risks related to drought, flooding and cyclones for the
specific case of the Philippines. The lower range derives from our comprehensive climate change risk assessment tool (CCRA based on the IPCC and RCP8.5) combinedwith the threshold defined for the substantive financial impact, resulting in a 16% estimate (applied either to the sourced volume or spend). The upper range reflects anestimation of 32% based on our modelling projection of the expected climate change for this country (worst case scenario). We estimated the relative magnitude between$3-6 million per year and we foresee this risk in the short to long-term (>6 years) for the Philippine growers due to supply chain disruptions arising from cyclones, drought
and flood events during the growing season and combining estimated costs due to disruption from crop losses, quality impacts and supply chain restrictions.
Cost of response to risk
160000Description of response and explanation of cost calculation
As part of our procurement strategy, we require all tobacco suppliers to follow our Good Agricultural Practices (GAP), which provide measures to mitigate water relatedrisks, through the adoption of climate smart agriculture practices. We implement globally our Local Risk Assessment (LRA) methodology utilizing granular local data tohighlight water-related risks and engaging local stakeholders including Leaf suppliers. PMI utilizes LRA results to implement initiatives with farmers to improve agriculturalresiliency to flooding and drought such as the case in the Philippines where the results of the LRA in 2019 led to planning and implementation of interventions. To ensurebusiness continuity, PMI has substantial inventories of tobacco leaf which can help mitigate short to medium term impacts. The cost of response is based on the set yearlybudget (i.e. we set a single investment amount into the program and it is not possible to provide a breakdown) allocated to the Philippines for environmental projects in 2020
(mainly related to climate change, water security and biodiversity) under the GAP program, accounting for approx. $160 thousand for initiatives in our tobacco supply chain.
The engagement with tobacco suppliers to drive improvements in crop management and environmental protection in the Philippines were included in the cost of response
and represented approx. 3% of the global 2020 expenditure in environmental projects for the GAP budget. In 2020, we developed a targeted study to map the potential ofnature-based solutions (NBS) in our tobacco supply chain and evaluate nature-based carbon sinks in the context of our carbon neutrality ambition. The focus was on
testing multiple methodologies in three markets (Brazil, Mozambique, and the Philippines) where we believe opportunities are significant and investments could yield thebest return in carbon removals generated. The methodologies that we selected are internationally recognized and aligned with the strategy of promoting more resilient
forests and sustainable agriculture. We applied reforestation, afforestation, and adoption of sustainable agricultural land management methodological approaches. The
study was useful to define the lines of intervention and the scale we will be adopting for future NBS projects in our supply chain, through improved conservation practices
and rehabilitation of natural ecosystems we aim at more stable landscapes where extreme events will impact less on crop losses.
Comment
Identifier
Risk 5
Where in the value chain does the risk driver occur?
Direct operations
Risk type & Primary climate-related risk driver
Chronic physical

Other, please specify (Increase water stress, droughts and riverine flood)

Primary potential financial impact
Increased indirect (operating) costs
Climate risk type mapped to traditional financial services industry risk classification<Not Applicable>
Company-specific description
In early 2020 we reviewed and assessed our water related physical risks, that are also integrated in our TCFD Climate Change Risks and Opportunities (CCRO)
assessment. This water risk assessment was performed with the use of WRI Aqueduct. The identified water risks related to climate change were physical (chronic &acute). Throughout the overall portfolio of the manufacturing sites, 4 strategically significant factories were identified at “high risk” or “extremely high risk” toward water
stress, droughts and/or flood (by flood we mean riverine flood), as result to the shift on the precipitation patterns. At our manufacturing sites, high quality freshwater is used
for WASH (Water Access Sanitation and Hygiene) services, and for manufacturing processes including the preparation of flavors, liquid products, in several stages of thetobacco processing, among others. Good quality fresh water is also an ingredient in the manufacturing process of our RRP products which are expected to have an
increased importance in PMI’s strategy in the future. PMI expects its direct dependency on water to increase in the short to medium term (up to 5 years), as the company
will transition to RRP which are more water-intensive in their manufacturing processes. More specifically, our manufacturing facilities in: a) Italy, 2 sites, are directly
exposed to potential disruptions in production capacity due to water stress and drought. One site was responsible for about half of PMI’s total production of heated tobacco
units (HTUs). Our second site is a HTUs manufacturing centre and is important in PMI operations, not for its manufacturing capacity, but for the capability to evaluate
manufacturing optimization practices. b) Indonesia, one site responsible to produce around 9% PMI’s total cigarettes production, is exposed to riverine flood. c) Poland, one
site, responsible to produce around 11% of PMI’s total cigarettes production, is exposed to drought. Several water efficiencies, reuse, recycling and conservation projects
have been implemented in order to increase resilience in drought and water stress and in Indonesia, our insurance and business continuity management plans aredesigned to mitigate the impacts from short and medium-term flooding events.
Time horizon
Long-term
Likelihood
More likely than not
Magnitude of impact
MediumAre you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
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Potential financial impact figure – minimum (currency)
2820000
Potential financial impact figure – maximum (currency)
22620000
Explanation of financial impact figure
We estimate the relative magnitude at the range of $2.8 million to $ 22.6 million in the medium to long term (4-6 years) for our operations based on potential disruptions in
production capacity and current production data, as well as per our insurance’s estimations (i.e.: in case of a minor event to all four sites, the sum of the cost of disruption isabout $2.8M and in case of a major event to all four sites the sum of the cost of disruption is about $22.6M; the financial impact was estimated based on the size of eachone of the four manufacturing sites and the respective business disruption period, in the case of minor and a major event; the impact in each site ranges from $0.40M forminor event in the smaller site in Reno, Italy, up to $11.8M for a major event in the biggest of these manufacturing sites, again in Italy in Samoggia river basin), not having
experienced yet such an event. This impact is split 54% in our facilities in Italy, 15% in our facility in Indonesia and 31% in our facility in Poland. PMI's range of potential
financial impacts related to water impacts is developed by estimating potential losses related to minor and major business interruptions. This assessment is carried out on a
per facility basis considering the total cost of business interruption per day based on production costs (excluding raw materials). These costs mainly represent labour costs
from business disruption, as production would not be able to continue. PMI's estimated range of financial impacts can be broken down as in the formula below; the actual
number of days of business interruption will depend on the site’s ability to recover from an event: Minimum financial impact = Number of interruption days in minor event *non avoidable operating cost per day Maximum financial impact = Number of interruption days in major event * non avoidable operating cost per day
Cost of response to risk
4493000
Description of response and explanation of cost calculation
The cost response to the water risks, is calculated separately in each site and reported here as a sum of around $4.493 million, allocated as 76% in Italy, 22% in Indonesia
and 2% in the facility in Poland. More specifically, in Italy, since 2018, several water efficiency, reuse, recycling, and conservation projects have been implemented in order
to increase resilience in drought and water stress. These technologies have been tested and implemented and will continue to be implemented in the following years. The
investment in these technologies amounted $1.2 Million in 2018 and $1.7 million in 2019, while in 2020, and due to COVID 19 pandemic restrictions, only 3 initiatives where
implemented and didn’t require significant investment. Specifically, in 2020, PMI implemented in Italy: - a project for the cooling of the boiler blowdown with re-used water; a modification in the production process operational parameters settings, in order to reduce water losses: - a modification in the operational parameters of the water
scrubbers settings in order to reduce water losses. . Furthermore, in the event of business interruption in the smaller manufacturing facility in Italy, we will follow ourbusiness continuity plan to temporary shift the small production volumes to our alternative approved facility ($500 thousand) in Switzerland. In 2020 the major factory in Italy
decreased the water withdrawals by 14% vs. 2019 and 30% of its water needs came from recycled water. In Indonesia, this is an estimated recurring cost for external
providers called to assess flood and business continuity risk annually and the related staff costs. Flood risk assessments are undertaken at the site level to understand how
vulnerable sites are to cyclones/local flooding events. Understanding the scale and nature of this risk and conducting a risk assessment, our insurance and business
continuity management plans are designed to mitigate the impacts from short and medium-term (0-5 years) flooding events ($1 million). In Poland, since 2013, several
water efficiency, reuse recycling and conservation projects have been implemented ($93 thousand including 2020 initiatives cost), including several modernization
initiatives. In 2020 the implementation of water saving initiatives intensified, with additional 8 completed projects, expecting to yield another 4200 m3 in water withdrawals
reduction per year (the total cost of these initiatives in Poland in 2020 amounted around $25 thousand).
Comment
Identifier
Risk 6
Where in the value chain does the risk driver occur?
Upstream
Risk type & Primary climate-related risk driver
Chronic physical

Changes in precipitation patterns and extreme variability in weather patterns

Primary potential financial impact
Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification<Not Applicable>
Company-specific description
Physical risks due to climate change could have adverse impacts both on quality and yield of the crops we use, such as tobacco leaf and cloves. Suppliers of tobacco leaf
in Indonesia are exposed to physical climate change risks, with drought and flooding being most critical. Tobacco leaf growing is strongly influenced by physical climatechange such as changes in temperature and precipitation. Specifically, in the markets where we source from located in the tropics and subtropics, and more vulnerable toclimate change impacts, changes in precipitation patterns (too much or too little rain) could impact PMI’s sourcing strategy due to crop losses, leaf quality degradation andsupply chain disruptions. Clove is an essential raw material for PMI to use in our local kretek brands. Indonesia produces over 70% of the world’s cloves and PMI
purchases 100% of clove supplies from Indonesian farms (purchasing about 18% of the total clove grown in Indonesia), making it a substantial market. Compared totobacco in 2020, clove made up 27% of total volumes purchased in Indonesia. Clove is 100% rainfed, making it highly reliant on well distributed rainfall during the growing
season. Yields fluctuate historically, with harvests varying up to 60% over a 4-year cycle. Climate changes causing conditions such as prolonged dry season and extreme
rain events could impact clove growing areas and be detrimental to plant productivity and cause yield volatility. Combined these factors could result in significant crop losses
for our suppliers, decreasing farmers’ revenue and reducing the supply of tobacco and clove, as it has been experienced in the past particularly during El Nino events. El
Niño and La Niña impacted growing areas can still produce cloves but with a significant reduction in volumes due to drought and flood cycles that are detrimental to theclove tree; crop is consequently sold at higher prices after market fluctuations. Indonesia being the main clove market and in a predominant position for commercial clove
for kretek, any negative impact on clove productivity is material for PMI since alternative sourcing origins were assessed as not suitable for our products. Reduced
availability could drive price increase, impacting PMI’s manufacturing operations and business directly in relation to the fact that PMI is one of the biggest kretek cigarettes
producer in Indonesia.
Time horizon
Long-term
Likelihood
LikelyMagnitude of impact
MediumAre you able to provide a potential financial impact figure?

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Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
4000000
Potential financial impact figure – maximum (currency)
14000000
Explanation of financial impact figure
The potential financial impact range is based on a long-term assessment of costs from physical climate change risks related to drought for the specific case of Indonesia.
The lower range of financial impacts derives from our comprehensive climate change risk assessment tool combined with the threshold defined for the substantive financial
impact, resulting in an estimated 8% increment in production costs (applied either to the sourced volume or spend). The upper range reflects an estimated 28% incrementin production costs based on our modelling projection and our climate change risk assessment tool (CCRA based on the IPCC and RCP8.5), of the expected climatechange impact (worst case scenario) for this country. We estimated the relative magnitude between $4-14 million per year while we foresee this risk in the short to long-term(>6 years) for the Indonesian growers due to supply chain disruptions arising from drought and flood events during the growing season and combining estimated costs due
to disruption from crop losses, quality impacts and supply chain restrictions.
Cost of response to risk
93000
Description of response and explanation of cost calculation
As part of our tobacco and clove procurement strategy, we require all tobacco and clove suppliers to follow our Good Agricultural Practices (GAP), which provide water
related risks mitigation through the adoption of climate smart agriculture practices. We implement globally our Local Risk Assessment (LRA) methodology utilizing granularlocal data to highlight water-related risks and engaging local stakeholders including tobacco suppliers. PMI utilizes the LRA results to work with farmers to improve
agricultural resiliency to flooding and drought like in Indonesia where the results of our 2020 LRA led to planning and implementation of interventions that will continue in thenext years. Focus trial projects to mitigate the effects of drought impacts on cultivated crops were deployed in clove and tobacco growing areas. Drip irrigation systems
have been tested with farmers in clove production to increase resiliency, reduce dependency on rainfall and avoid productivity losses. As a result, the physiology of the crop
has been better understood and the water relationship including stress thresholds and optimal water uptake have been systematically tested and more efficient irrigation
protocols, for more consistent productivity, derived. Another example is the improved water access through the drilling of deep wells for tobacco growing to ensure thecontinuous availability of water for crop irrigation and human consumption, to avoid potentially negative impacts linked to changing weather patterns, supported by athorough investigation of the deep well’s impact on the groundwater level. Drilling deep well has been positive in the provision of clean, drinkable water for the local
communities as well as improved water for irrigation with a more reliable supply during dry spells. In order to ensure business continuity, PMI has substantial inventories oftobacco leaf which can help mitigate short to medium term impacts (up to 5 years). The cost of response is based on a $93 thousand budget allocated to environmental
projects in 2020 (related to climate change, water security and biodiversity) under the GAP program implementation in Indonesia. The engagement with tobacco and clove
suppliers in crop management practices in Indonesia it is included in the cost of response. The expenditures represent approx. 2% of the 2020 global GAP budget.
Comment
Similar investment is expected over the next 10 years considering projected climate change and the potential scale-up of current projects.

C2.4(C2.4) Have you identified any climate-related opportunities with the potential to have a substantive financial or strategic impact on your business?
Yes

C2.4a
(C2.4a) Provide details of opportunities identified with the potential to have a substantive financial or strategic impact on your business.
Identifier
Opp1
Where in the value chain does the opportunity occur?
Direct operations
Opportunity type
Resilience
Primary climate-related opportunity driverParticipation in renewable energy programs and adoption of energy-efficiency measures
Primary potential financial impact
Reduced direct costs
Company-specific description
By mapping energy consumption profiles of our manufacturing sites worldwide and available technologies, PMI has identified through its manufacturing engineering team,the opportunity to switch to renewables and implement renewable energy self-generation. The opportunity includes to potentially leverage on participation in renewableenergy programs and adoption of energy-efficiency measures supported by national policy and sometime incentive schemes. From the mega trends, electrification andthrough the various stimuli to accelerate the transition to a low carbon economy it is anticipated that policy levers to reduce cost barriers for deployment of renewable
technologies will be required. This is likely to include the introduction of subsidies for energy generation which have already been a feature in many markets and usedsuccessfully to support the commercialization of renewable technologies making them cost competitive with conventional alternatives. The scale of these subsidies andcorresponding total cost of energy for renewables is expected to be higher under a 2-degree scenario (2DS). Subsidies for renewable energy self-generation in different
countries are factored into our cost-benefit analyses for pertinent projects so that improved return on investment can potentially be delivered. Cost-Benefit analysis andrenewable energy assessments have been performed in our facilities located in Italy, Turkey, Lithuania, Ukraine, Serbia, Greece, Indonesia, Romania, Philippines,
Portugal, Switzerland, Brazil and Mexico. These analyses proved that not only PMI was able to decarbonize its energy needs by self-generating energy, e.g., throughphotovoltaic technology, use of sustainable fuel like biomass, but equally important to drive variability of energy costs and dependency down, and ultimately supporting ourtransition toward a low-carbon business model. PMI could access subsidies for renewable energy generation in its operations in different countries, for example in Italy and
the Philippines, and any unused energy could be sold back to the grid, creating a new source of revenue for PMI as well as significant savings on energy costs. This is

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embedded into our environmental strategy, annual and long range plans to increase the use of renewable energy in our manufacturing sites, increasing either selfgeneration and/or purchases. In 2020, the self-generation of electricity increased to 4% vs the overall PMI consumption.
Time horizon
Long-term
Likelihood
Very likely
Magnitude of impact
Medium-high
Are you able to provide a potential financial impact figure?
Yes, a single figure estimate
Potential financial impact figure (currency)
98000000
Potential financial impact figure – minimum (currency)<Not Applicable>
Potential financial impact figure – maximum (currency)<Not Applicable>
Explanation of financial impact figure
The levelized cost of energy (LCOE) for renewable and non-renewable sources was modelled between 2017-2020, drawing from scenario data under 2-degree scenario.
This LCOE metric is a useful summary of the lifetime cost of energy incorporating a range of factors (IEA's Fuel input electricity and heat generation (PJ), for biomass,hydro, geothermal, wind, solar PV, solar CSP and hydrogen) associated with the type of generating asset including subsidies. The LCOE has been used to compare thebenefit of moving to renewables for energy generation, such as photovoltaic and biomass, with the current operational expenditure on energy at PMI sites assumed toremain constant in business as usual (BAU) scenario. This LCOE is applied to the current PMI operational energy spend to compare the cost of energy of the BAU scenario
with a fully renewable uptake over the time horizon considered. The approximate financial impact of this analysis is based on PMI’s global operations study results andestimations included in our 2019 Climate Change Risks and Opportunities Assessment. In the assessment PMI focused on the evaluation of physical and transition risks as
per recommendation of the Taskforce on Climate-Related Financial Disclosures and the approximate potential financial impact estimated for this opportunity, in a 2DS, wasthat PMI would have a saving up to $97 million. We also estimate the overall impact of subsidies for renewable energy generation to our various locations throughout the
globe to be over $1 million based on the incentives considered in the renewable projects planned.
Cost to realize opportunity
120000000
Strategy to realize opportunity and explanation of cost calculation
Self-generation of renewable energy is part of PMI’s “carbon neutrality in manufacturing” strategy, which includes the increase in: - operational efficiency and elimination oflosses; - use of renewable energy; - self-generation through investment in renewable energy. We apply technologies to generate renewable energy across our
manufacturing sites, such as photovoltaic panels, biomass boilers, heat pumps, and tri-generation processes (combining cooling, heat, and power). Options to self-generate
and/or purchase renewables are evaluated based on analysis of local facilities data, our Energy Management Program and regulatory radar screen. Decisions to mitigate
climate-related transition risk due to increased cost to source energy for our operations is taken with the support of an internal shadow carbon price ($65 per ton CO2e).
PMI’s shadow carbon price is an internal lever designed to accelerate carbon emissions reduction by ensuring that the company’s investment decisions reflect all costs,
incl. environmental ones. PMI’s shadow carbon price is integrated into the financial evaluation and preparation of business cases that will impact our carbon emissions. In
2020 we installed pyrolysis technology in our factory in Switzerland, which generate syngas from operational waste to be used instead of fossil energies to produce steam
and hot water. It will be operational in 2021, and we will communicate results in our next report. Another example, in 2020 our photovoltaic installation at our factory in Italy
reached its full capacity, generating around 4% of the total energy used on the site in a year. In 2020, we reached a 34% of total energy consumption (incl. fuels andelectricity) from renewable sources. This will contribute to achieve our target to use 100% of green electricity in our factories by 2025. We are on track on this target
reaching 78% in 2020. These projects enabled PMI to increase the share of energy self-generated, decarbonize its energy needs, via photovoltaic technology andbiomass, and to drive variability of energy costs and dependency down. We estimate a cost of management of $120M (a set annual budget for CAPEX is approved by the
PMI’s Operations Management Team in a range of $16-20M over a 6-7 years’ timeframe), based on previous investments and number of facilities to switch to renewables.
The cost to realize the opportunity is a range $120M +/- $20M: cost is the average between $96M ($16M*6 years) and $140M ($20M*7years).
Comment
Identifier
Opp2
Where in the value chain does the opportunity occur?
Upstream
Opportunity type
Resilience
Primary climate-related opportunity driverParticipation in renewable energy programs and adoption of energy-efficiency measures
Primary potential financial impact
Other, please specify (Reduced dependency from fossil fuel and favorably impact farmers profitability and increased their resiliency )Company-specific description
As cost competitive alternatives to fossil fuels become more readily available, it becomes attractive for tobacco farmers to switch to low carbon energy sources. Farms may
become more efficient thanks to new technologies; if PMI continues to invest in programs to improve agricultural practices and encourage the uptake of low carbon
equipment, farmers’ expenditure on fuel and energy inputs will fall. The speed of fall in costs will depend on global trends in fossil fuel prices due to oil markets andimplementation of carbon pricing mechanisms. A fall in costs of production should reflect increased revenues for the farmers. The reduced dependency of our tobacco
supply chain on fossil fuels is an opportunity in the short term for tobacco farmers and supports PMI’s GHG emissions reduction targets in medium to long term. For PMI’s
the opportunity lies in intangible benefits such as enhancing its corporate reputation by minimizing its supply chain environmental impact. A good example is theimplementation of PMI’s Renewable Curing Fuel Program, which defines a best-practice approach to be implemented in all flue-cured markets, with a focus on the transition
from fossil fuels to low carbon fuels and the implementation of barn improvement initiatives. The program results are globally monitored annually by a third-party, focusing
on the compliance with our internal standard and fostering continuous improvements. Where the fuel transition results in a switch towards woody biomass, our standard
prescribes fuel sustainability and traceability (i.e., from a sustainably managed forest). With the progressive implementation of our program suppliers have effectivelytransitioned to low carbon fuels for curing in many countries. Focus remains in countries where curing practices are still heavily dependent on fossil fuels, e.g., coal in
China. Through a multi-stakeholder engagement, a pilot project was implemented in the provinces Guangzhou and Yunnan to progressively convert curing barns from coal
to woody biomass, generating less dependency from fossil fuels but also contributing to significantly curb GHG emissions. The focus of incentivizing best practice in PMI’s
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supply chain responds to increasing interest for environmental issues from our stakeholders and could enhance PMI’s reputation and create corporate value. Throughinvestment in programs to improve agricultural practices, PMI is expecting to ameliorate farmers’ conditions and resilience to climate change risks.
Time horizon
Long-term
Likelihood
LikelyMagnitude of impact
MediumAre you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
110000000
Potential financial impact figure – maximum (currency)
225000000
Explanation of financial impact figure
The potential financial impact range represents an opportunity for suppliers and farmers in our tobacco supply chain due to decrease in farmers’ costs of production andreflects the estimates of their potential increased revenues. The benefit sought by PMI is not financial, but rather to build stronger resilience within our supply chain bysupporting farmers to switch from fossil to low-emission fuels and it is designed to remain with the farmers as part of the Good Agricultural Practice program. Throughinvestment, engagement and collaboration in programs to improve agricultural practices, PMI is expecting to ameliorate farmers’ conditions and resilience to climate changerisks,. The reduced dependency of our tobacco supply chain on fossil fuels is an opportunity in the short term for tobacco farmers and supports PMI’s GHG emissions
reduction targets in the medium to long term. The range for the potential financial impact figures has been estimated as follows. Diesel price was modelled between 2017and 2030 using the International Energy Agency (IEA) scenario data for projected oil price, and the assumption that the ratio between oil and diesel price will remain
constant. According to an internal model, the cost of diesel to farmers as a portion of total cost of production was estimated on a pre-determined cost allocation used forsimilar agricultural commodities and using a proxy based on the diesel and oil prices from public data sources. The cost output was applied to the mechanization profile of
PMI’s farmer base (pro-rata based on volumes sourced yearly). This share was then applied to the current and future forecasted cost of production of tobacco farmers
based on annual PMI purchased volumes. It was then assumed that tobacco farmers’ cost of production would remain constant in a business-as-usual scenario andincrease by the same rate as diesel price under climate change scenarios. The result after the application of the aforementioned calculation methodology, and factoring
farmers’ uptake of new technologies, renewables and future forecasted tobacco requirements, was that the potential financial impact of the opportunity for our tobacco
suppliers and farmers globally could be in a range of $110 to $225 million per year. Taking in account our ambition to a carbon-neutral value chain by 2050, all emissions
reduction within our scope 3 may have a potential financial impact in time. It has not been estimated due to the timeframe of the objective.
Cost to realize opportunity
5000000
Strategy to realize opportunity and explanation of cost calculation
Since 2002 PMI implements its Good Agricultural Practices (GAP), a program with mandatory requirements for our tobacco suppliers and their farmers, which provides
specific guidance on initiatives to mitigate tobacco growing risks and impacts related to climate change. Strategic initiatives include the Renewable Curing Fuel Programwith a focus on curing efficiency and switching to low carbon curing fuels, making tobacco suppliers and their farmers more resilient to price increments on fossil fuels. The
reduced dependency on fossil fuels is an opportunity in the short term for tobacco farmers and supports PMI’s GHG emissions reduction targets in the medium to long term.
The cost of response is based on a set yearly budget allocated to initiatives to promote the adoption of improved and innovative practices by the farmers in our supply chain.
Within GAP program, such budget is approved on a yearly basis by the sustainable agriculture steering committee and to be accepted it needs to demonstrate clear
impacts on the climate footprint of the company in line with the strategy to decrease the use of crop inputs without influencing negatively farm outputs. Due to force majeurecauses linked to the Covid-19 pandemic, only 57% of the total budget approved has been utilized in 2020 totalling about $5 million. PMI plans to maintain similar level ofinvestment over the next 10 years. The focus of incentivizing best practice in PMI’s supply chain responds to increasing interest for environmental issues from ourstakeholders and could enhance PMI’s reputation and create corporate value. Moreover, through investment in programs to improve agricultural practices, PMI is expecting
to ameliorate farmers’ conditions and resilience to climate change risks, strengthening our engagement and collaboration with them. In 2020, gradual switch to renewablesources and improved barn efficiency led to: - 67% of flue-cured tobacco we purchased was cured using renewable and traceable fuels (mainly in PK, PH, IT, SP, MW, MZ,
MX, BR and AR) - 45% of the fuel was sustainably sourced firewood (22% other biomass) - flue-curing GHG emissions intensity was 77% lower in 2020 (vs. 2010) reduction of 240,204 tons of CO2e (vs. 2019) - increased collaboration with PMI Leaf suppliers strengthening working relationship and fostering additional collaboration on
climate change related risks, and in other areas that may have a positive impact on our business and share value with society.
Comment
Identifier
Opp3
Where in the value chain does the opportunity occur?
Upstream
Opportunity type
Resilience
Primary climate-related opportunity driver
Other, please specify (Insetting represents the actions taken by an organization to fight climate change within its own value chain in a manner which generates multiple
positive sustainable impacts.)
Primary potential financial impact
Other, please specify (Benefit to operating cost and supply chain value creation.)
Company-specific description
In 2020, PMI strengthen its ambitious goal: to be carbon neutral by 2030 for Scope 1 and 2. PMI i implemented a carbon levy to support its 2030 goal throughcompensation of unavoidable Scope 1 and 2 emissions, supported by Science Based Targets as guiding principles. PMI’s carbon levy is used to virtually charge selectedbusiness units for their respective GHG emissions and establish an internal fund to finance the strategy of the Portfolio of climate investments that focuses on high quality
GHG emission reduction projects within PMI’s supply chain (insetting projects) as well as purchasing of quality offsets. PMI will prioritize the development of insetting
projects that are aligned with its Good Agricultural Practices (GAP) program and that promote sustainable development in line with the company’s priorities in the fields ofclimate, forest conservation and/or reforestation, water, low carbon agriculture, household projects or others. An example of an existing project concept is PMI’s work in

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Mozambique, where farmers and their communities traditionally rely on the use of firewood to sanitize fetched water to drinking water, resulting in GHG emissions. PMI iscontributing to the provision of access to safe and clean water by establishing and rehabilitating boreholes with solar pump technology in its farmers’ communities, which
besides contribute to GHG emissions abatement. The carbon credits generated through insetting projects will be primarily used by PMI to compensate those unavoidable
Scope 1&2 emissions (e.g. which are not currently possible to reduce due to technical or financial viability). In the absence of insetting projects, PMI would need to acquire
carbon offsets in the international market, being exposed to market volatility, particularly in the context of the implementation of CORSIA (Carbon Offsetting and Reduction
Scheme for International Aviation) and the related expected impact in terms of carbon credit demand. The insetting projects represent an opportunity for PMI to be more
resilient to market volatility, potentially harvesting benefit in terms of operating cost, as well as to generate co-benefits in the supply chain. PMI is planning to start
implementing insetting projects in 2021 with a delay of one year on the schedule caused by restrictions related to Covid-19 pandemic, prioritizing farmers with the highest
needs of water management practices, climate change adaptation and co-benefit potential.
Time horizon
Long-term
Likelihood
Very likely
Magnitude of impact
Medium-low
Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
1000000
Potential financial impact figure – maximum (currency)
10000000
Explanation of financial impact figure
We aim to reduce our absolute GHG emissions through efficiency improvements and investing in renewable energy sources and use compensation measures as a lastresort. Based on our estimation, for PMI to become carbon neutral for scope 1 and 2 by 2030, a consistent amount of credits for an unlimited period will be necessary.
Aligned with our carbon neutrality objective for scope 1 and 2 emissions by 2030, a sustainable business strategy was first defined in 2019 leveraging on theimplementation of insetting projects. PMI’s 2020 direct emissions accounted for 412,999 tCO2e. Based on our emissions reduction strategy scenarios and simulations, we
calculated our potential financial impact on 200,000 tCO2e/year by 2030. PMI is not willing to invest in large scale renewable projects generating millions of credits (e.g.,hydro in India, China or Brazil) due to their relative distance from our tobacco supply chain in terms of benefits and their lack of positive demonstrable impact on the natural
ecosystems. Attention will be focused more to small-medium scale ecosystem interventions in the field of Voluntary Emission Reduction scheme, with credit prices ranging
between $5 and $50 depending on the biodiversity and social benefits embedded in the project outcomes. To fulfil our carbon neutrality commitment in 2030, we would
need to invest between $1 million (200k * $5) and $10 million (200k * $50), taking into account the likelihood of price inflation and considering future volatility of the market
with the upcoming implementation of CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation). By investing in a portfolio of insetting projects, PMI
aims to generate the credits required at a fixed price. The strategy will be based on three main strategic initiatives, Nature Based Solutions, Supply chain and Community
projects and Technological climate solutions. Each initiative is different in complexity, execution time and quantity of offsets generated per dollar of investment, the objectiveof the portfolio is to design the investment mix to fulfil the offsetting needs for Scope 1 and 2 while promoting technological evolution in the field of carbon removal
cascading the co-benefits as much as possible on PMI’s supply chain and especially its rural communities. It is important to note that the financial impact mentioned here
doesn’t take into account all the co-benefits related to reputation, compliance, supply chain resilience to name a few of them.
Cost to realize opportunity
6000000
Strategy to realize opportunity and explanation of cost calculation
To realize this opportunity, in 2020 we further developed the concept of an insetting project that would provide access to clean and safe drinking water to rural communities
within the tobacco growing areas of Mozambique, where tobacco farmers part of PMI supply chain are located. The project is in line with our water, access, sanitation, andhygiene (WASH) program, and will also benefit the schools we support through school feeding initiatives. We determined that the best approach would be to pilot 10 water
access sites, building or rehabilitating boreholes with solar pump technology, to determine how well the selected technology works within the local context and its potential
to scale up. Ideally, the project will qualify for certification by the Gold Standard Foundation, thereby generating internationally recognized verified emission reductions,which over time will compensate our residual direct emissions and contributing to achieve PMI’s carbon-neutrality target for Scope 1 and 2 by 2030. According to our
feasibility assessment, the installation of 10 boreholes could benefit around 35,000 beneficiaries and avoid 865,000 tons of CO2 emissions over 10 years, providing
approximately 245 cubic meters of safe drinking water per day. We have defined our approach and we have been forced to delay the start of the project implementation due
to Covid-19 pandemic related restrictions, our aim is to report on its progress next year. The co-benefits of such project(s) are: - to strengthen our supply-chain not only byproviding co-benefits to the beneficiaries but also by being more resilient toward water related issues; - to align our strategy with international expectation such as the Paris
Agreement, by taking ownership of our carbon neutrality ambitions, by being self-sufficient in carbon credit generated and cost-efficient; - to demonstrate leadership byinternalizing the cost of externality due to climate change. The cost provided is an estimation for a set budget (i.e., we set a single investment amount into the program andit is not possible to provide a breakdown) to be allocated to the initiative, as the project is still under development and not finalized yet. We estimate the cost to be approx. $6
million which will include the cost of building the boreholes (geological survey, pilot drilling, preparation work and construction), the solar pump technology, the management,
monitoring and certification fees.
Comment
In our strategic approach, we are also monitoring closely Nature-Based Solutions to support carbon removals that will further contribute towards our journey to achieve ourlong-term target of our whole value chain to be carbon neutral (GHG Scope 1, 2 and 3) by 2050. At the moment we are focusing on avoided deforestation in Brazil’s Mata
Atlantica, in reforestation and improved forest management in Argentina and in scoping a joint initiative with our farmers in the Philippines related to better forest
management practices to sequester carbon versus a calculated baseline.
Identifier
Opp4
Where in the value chain does the opportunity occur?
Direct operations
Opportunity type
Products and services
Primary climate-related opportunity driver
Development and/or expansion of low emission goods and services

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Primary potential financial impact
Reduced direct costs
Company-specific description
PMI has a history of successful packaging innovation, and packaging is an important aspect of sustainable design (i.e.: eco-design). With respect to our smoke-free
products, our 2025 eco-design and circularity ambitions related to packaging, aim reducing the carbon footprint of smoke-free products in line with our science-basedtargets. In packaging, more than 90% of our materials were paper and cardboard in 2020. The primary function of packaging is to contain and protect products from thepoint of manufacture to the retail store or end user, as well as to provide product information. We are addressing our packaging strategy with a multipronged approach,including awareness-raising training for our Pack developers, ongoing research into alternatives to plastic based packaging, and improved design of packaging. Governanceof eco-design and circularity is guided by our design and development teams and is fully embedded within our innovation process, including regular checkpoints with senior
management. We are committed to evaluating sustainability characteristics and making design choices that will continually enhance the performance of all our products andpackaging. Life cycle assessment (LCA) and/or other relevant environmental assessments are performed prior to launch of any new product and results presented ininternal decision-making forums, in accordance with our sustainable design governance programs. Research are constantly performed on packaging design to identify newtechnologies and materials that could enhance the overall sustainability of our smoke-free product portfolio as well as conventional portfolio. Internal cross-functional teams
are already hard at work establishing these innovation pipelines. As an example, we are actively working in developing an innovative packaging design solution for oursmoke free products addressing material consumption by lowering the weight and the number of secondary packaging components in use, through packaging material
substitution. This initiative estimates a potential magnitude of packaging components reduction of 16% of complete bundle, including packs and outer, as well as 67% of
pulp-based material weight consumption, and 57%% of plastic packaging weight consumption. As a return, by lowering the total consumption of secondary packaging
requirements through complete redesign, we shall optimize the CO2 footprint of our smoke free products by approx. 1500 tons of CO2e.
Time horizon
Medium-term
Likelihood
About as likely as not
Magnitude of impact
Medium-low
Are you able to provide a potential financial impact figure?
Yes, a single figure estimate
Potential financial impact figure (currency)
8900000
Potential financial impact figure – minimum (currency)<Not Applicable>
Potential financial impact figure – maximum (currency)<Not Applicable>
Explanation of financial impact figure
As we are reducing the total amount of packaging requirements to produce the same amount of smoke free products, we are generating financial savings. The yearly
potential financial impact of the opportunity relies on the SVC (Standard Variable Cost in $ per thousand of smoke-free product units) variation between current solution andinnovation applied to the market contemplated number of smoke free product units. Based on volumetric price of materials involved in both new and current solutions
factored by the yearly consumption of smoke-free products Stock Keeping Unit (SKU) selected, we modelled expected savings resulting in a magnitude of $8.9 million. [(current material price per Kg * current material quantity per SKU – new material price per Kg * new material quantity per SKU) * SKU volume = savings i.e.: $8.9 million.
Formula example with generic numbers: [ ($10/Kg*100Kg) – ($9/Kg*80Kg) * 100 000 SKU = $28,000,000]
Cost to realize opportunity
5800000
Strategy to realize opportunity and explanation of cost calculation
Following Management validation of the proposed innovation solution and associated business case that is expected within the next 6 months, our engineering,procurement and manufacturing solutions teams, as well as our suppliers of direct material and packing machinery, will collaborate to realize this project following ourstandard stage gate process. PMI will implement the standard Industrialization Stage Gate process which includes: detailed specifications creation, involvement of supply
chain partners, Capex activation and machine park upgrade, manufacturing and quality deployment process through quality and machinability tests and last but not least
validation protocols. When it comes to Capex, investigations were conducted by our Engineering Solutions teams in collaboration with OEMs [Original Equipment
Manufacturers] which packing machines are used for the production of our smoke-free products to identify the magnitude of machine modification required to implement thispackaging change ensuring the highest level of quality, runability and machine efficiency. The results of these costs investigations at machine level in the ideation stage isestimated at an average of $96.7 thousand per machine and is then multiplied by the number of respective machines in use [60] in our affiliates for the packing process ofour smoke-free products which would be part of the project (i.e.: at the moment estimated 60 machines * $96.7 thousand in average per machine resulting in about $5.8
million). Through all these preparation and machinery upgrade actions, we shall then be in the position to deploy the new innovative secondary packaging solution, bringing
estimated consumption reduction of 67% of pulp-based material weight, 57% of plastic packaging weight, cost optimization of $8.9 million, and CO2 emissions reduction byapprox. 1,500 tons of CO2e.
Comment
Identifier
Opp5
Where in the value chain does the opportunity occur?
Direct operations
Opportunity type
Resource efficiency
Primary climate-related opportunity driver
Use of more efficient production and distribution processes
Primary potential financial impact
Reduced direct costs
Company-specific description
Driving energy efficiency is core to our strategy. Transition toward a low-carbon business model is a priority within PMI strategy to achieve our carbon neutrality objective
and deliver financial productivities. Our activities in this area center on our Drive for Zero (D4Ø) global program, which aims to eliminate economic losses caused byinefficient energy use. Under the program, we look for industrial and manufacturing solutions such as heat recovery and manufacturing-process optimization. We also
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promote behavioral change through our Zero Loss Mindset program. To support our D4Ø program, an Energy Saving Initiatives (ESIs) program has been started in 2019,
triggering more than 500 projects worldwide including among many others LED lighting, HVAC upgrade, chilled water optimization and heat recovery projects. In line with
the implementation of our internal carbon pricing approach, the application of an internal shadow carbon price improves the ROI of the project facilitating the approval whenpresented to senior management. The opportunity of embracing new technologies and discontinue obsolete ones present several benefits among which but not limited to: improved financial productivity in the medium-long term, even more considering the increasing energy requirements due to the ramp up of production of our smoke-free
products which are more energy voracious than conventional products; - enhanced opportunity in trading schemes. New technologies are fast evolving and requires
thorough and continuous monitoring to seize opportunities. We recognize that more energy is required to produce IQOS heated tobacco units compared with cigarettes,
with a consequent increase in greenhouse gas emissions. We are seeking to reduce this impact through these appropriate investments.
Time horizon
Medium-term
Likelihood
Very likely
Magnitude of impact
Medium-high
Are you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
30000000
Potential financial impact figure – maximum (currency)
40000000
Explanation of financial impact figure
The PMI’s energy dashboard tool includes more than 500 energy saving projects with the potential to be implemented in our factories. The financial impact of suchopportunity considers the financial savings of the projects’ implementation calculated in the PMI’s energy dashboard tool, which has been estimated between $30 million
and $40 million as aggregated total estimated figures. The enhanced productivity in our manufacturing sites triggers saving related to energy and water annual
consumption costs. In order to evaluate relevant financial saving as well as capital and operational expenditures, prior project implementation, we take under consideration
data input and assumption such as costs of energy in the countries where we operate and expected reduction in energy consumption, estimation of technical performancefor equipment and/or intervention and cost of technologies and/or intervention. To calculate the financial impact, we have used the total quantity of expected energy saved
factored with the average cost of energy relevant to the various jurisdictions where PMI operates (ΣGJ saved x average cost $/GJ). At 2025 we expect to save approx. 1.5
TWh from these initiatives. The potential of trading surplus of carbon credits allocated to PMI in Cap & Trade schemes (such as EU ETS for example) has not been
quantified due to the upcoming changes with phase IV of the EU-ETS and has not been accounted for in that case. The financial impact range is provided by the sum of thelower brackets estimates ($30M) and the higher ones ($40M).
Cost to realize opportunity
77000000
Strategy to realize opportunity and explanation of cost calculation
Driving energy efficiency is core to our carbon neutrality strategy in manufacturing and to deliver a step-change in financial performance to PMI. Under D4Ø program, andthe Energy Saving Initiatives (ESIs) program, each PMI factory have been reviewed and prioritized. The ESIs program started in 2019 and includes 3 waves: - Wave 1
focuses on the top 15 factories with the highest energy footprint and ESIs with return on investments (ROI) below 3 years to leverage on quick win projects; - Wave 2
covers all factories and ESIs with ROI below 4 years and include every projects subject to save energy within our manufacturing sites portfolio; - Wave 3 looks at energy
savings and energy efficiency technologies with a longer ROI (generally between 3 and 8 years), e.g., process heat recovery, and disruptive technology which will further
drive our factory toward carbon neutrality. The ESIs wave 1 and 2 program includes more than 500 projects globally, e.g., LED lighting, HVAC upgrade, chilled water
optimization and heat recovery. The cost to realize this opportunity is based on the deployment forecast of the 3 waves for the next 3 to 4 years with an objective to havethem all implemented by end of 2025 and contribute to deliver substantial energy saving equivalent to more than 56,000 t/CO2e reduction. The $77 million cost to realize theopportunity covers the full D4Ø program including ESIs program for all the PMI’s manufacturing sites globally, and behavioral change trainings seeking to empower every
worker to look for losses and recommend and implement solutions. The cost is a set budget for the sum of all projects and it is not possible to provide a breakdown byinitiative. The cost is revised periodically by Operations management team due to the routinely assessment of several parameters such as specification changes,
prioritization, re-estimation based on technology evolution and fuel prices. We applied the PMI’s shadow carbon price ($65 per ton CO2e) to assess and prioritized 13
projects to drive the implementation of technologies with the higher impact in CO2 emissions reduction. In 2020, the program triggered more than 140 projects worldwide,
ranging from chilled water optimization, heat-recovery projects, and LED lighting to heating, ventilation, and air conditioning system upgrades. Overall, our efficiency
initiatives and behavioral changes helped drive around 10% reduction in carbon emissions across our manufacturing facilities in 2020 versus 2019.
Comment
We recognize that more energy is required to produce IQOS heated tobacco units compared with cigarettes, with a consequent increase in greenhouse gas emissions. We
are seeking to reduce this impact through these appropriate investments. Our initiatives don’t apply solely to our manufacturing sites, in our tobacco supply chain we focus
on three areas: reducing fuel consumption by improving curing-barn efficiency, promoting the switch from fossil fuels to biomass fuels, and ensuring sustainable andtraceable firewood (leading to an absolute reduction in in 2020 of 240,204 tons of CO2e versus 2019); in this opportunity here we only accounted the impact in our direct
operations.
Identifier
Opp6
Where in the value chain does the opportunity occur?
Direct operations
Opportunity type
Resource efficiency
Primary climate-related opportunity driver
Use of more efficient modes of transport
Primary potential financial impact
Reduced indirect (operating) costs
Company-specific description
PMI runs an extensive fleet of approximately 23,000 vehicles, among which 75% are working tool cars (WTC), to support the day-to-day business whilst the remaining are
benefit cars assigned to defined seniority grades within the company. WTC are assigned to employees that use them for an average period of four years before the leasing
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contract ends and the car is replaced with a new one. Our estimated mileage is around 400 million kilometres a year for the entire PMI’s fleet. Typically, WTC are medium
sized passenger cars run on either gasoline or diesel fuels and their characteristics need to lead to an efficient match between usability, driving comfort and performance interms of safety, durability, and economy. In 2020, leveraging on technological improvements achieved by the car industry in the field of passenger cars CO2 emissions, PMI
decided to evaluate the possibility of investing in renewing lease contracts by switching the drivetrain choice for WTC to hybrid technology and in particular to full hybrid
system. The opportunity considered PMI’s internal carbon price of $65/ton of CO2 emitted as one of the factors to compare the full cost of ownership impact and therefore
the potential savings of a hybrid vehicle vs. an internal combustion engine. The investment assessment led to a case assessment on converting the WTC fleet in Taiwan tofull hybrid starting from 2021. We plan to apply the same approach to the global PMI’s fleet aiming at a progressive full conversion to lesser polluting and better cost
performing vehicles not only for WTC but also for benefit cars with a target of having 50% of our WTC as hybrid or even less polluting drivetrains by 2025. The benefit will
be twofold, i) a positive impact on the overall emissions for Scope 1 for fleet that will follow the reduction curve defined by lower emissions linked to hybrid technology, ii)
increased savings on operational costs due to the reduced fuel consumption and in many geographies also tax liabilities that lower emission vehicles are subject to.
Time horizon
Medium-term
Likelihood
LikelyMagnitude of impact
MediumAre you able to provide a potential financial impact figure?
Yes, an estimated range
Potential financial impact figure (currency)<Not Applicable>
Potential financial impact figure – minimum (currency)
900000Potential financial impact figure – maximum (currency)
12200000
Explanation of financial impact figure
For the Taiwan experience two gasoline powered car options have been compared with a full hybrid alternative. The hybrid powertrain was chosen for a compact model thatwas compared with two lower segment subcompact alternatives. The hybrid resulted in 30% and 34% less CO2 emission on a yearly basis with an equivalent decrease infuel consumption compared to the gasoline options. For the calculation of the cost saving from switching drivetrain we added the cost avoidance of choosing a lower
emission car by multiplying, as a cost component for investment decisions, the additional tons of CO2 emission of the gasoline car by the internal carbon price PMI has set;
PMI internal carbon price is $65 per ton of CO2e avoided. Considering the better mileage of the hybrid car and adding the impact of the internal carbon price to the more
emitting gasoline cars, overall, each hybrid car guarantees a saving in total cost of ownership per year quantified in approx. $150. The work in Taiwan included a relatively
small fleet of 51 cars which brought to PMI over $7 thousand in cost saving and over 50 tons CO2 of reduced emissions to be accounted for in Scope 1, we consider this tobe a proxy for the lower estimate for our cost saving estimation on the total car fleet of PMI at 2025 totaling $ 900 thousand. A similar case in Australia led us to a different
reduced cost estimation due to price dynamics for the lease car market. After one year of running a part of the WTC as hybrid we could estimate an average reduction of
CO2 emissions of 33% and a decrease of consumption of 47% compared to the full gasoline cars. This resulted in a reduction of total cost of ownership (including theimpact of the internal carbon price applied to both vehicles and favoring the hybrid) of $2.5 thousand per car. We consider the Australian results as a proxy to calculate theupper range of the potential financial impact and applying it to the conversion target PMI has for 2025, we estimate a saving of $12.2 million.
Cost to realize opportunity
0
Strategy to realize opportunity and explanation of cost calculation
Driving efficiency in reducing CO2 emissions is key in all business areas of PMI that contribute to its carbon footprint. Working tool cars (WTC) do not appear in the top5
CO2 contributors of the company footprint, however their emissions are really important to address because they constitute a daily and constant impact to the environment.
Tackling WTC emissions is a tangible action and demonstration of sustainability leadership, as well as it is an important driver of behavioral change since cars are part ofthe daily routine of the majority of the markets where PMI operates. Transformation strategies start from behavioral changes and PMI wants to be a catalyst in each area ofimprovement, we have a three-step approach to improving our CO2 performance with regards to our fleet: - optimize fuel consumption and fuel efficiency via eco driving
training and telematics; - switch to use of alternative power drive trains and minimize the use of fossil fuels; - offset remaining unavoidable GHG emissions. In 2020 we haveupdated our company car policy prioritizing the lease of hybrid and electric cars over more polluting internal combustion engines, the application of the new policy is global
on both WTC and benefit cars, driving the establishment of a less CO2 emitting car fleet across all the geographies. Switching to hybrid and electric cars will bring a benefit
in terms of CO2 emissions as well as cost reduction for the ownership of the vehicles. Significant progress has been achieved in making accessible alternative powertrains,
like hybrid, to users at a cost competitive leasing structure compared to petrol/diesel engines; we estimate no cost impact in converting our fleet to hybrid. The residual
value of hybrid cars in several markets is already higher than that of equivalent gasoline cars making the lease contract of the former more convenient. The conversion will
be gradual for two reasons: i) the residual leasing time we will have to complete for petrol vehicles contracted after 2017; ii) the unavailability of hybrid vehicles respecting
all the PMI’s criteria for eligibility as WTC in some markets. The incorporation of the internal shadow carbon price, $65 per ton of CO2e, to the calculation of the cost saving
opportunity provided further support to the approval of the policy for the conversion. The roadmap defined has the aggressive target of having at least 50% (2020, 4.7%) of
WTC converted to hybrid or even less polluting drivetrains by 2025.
Comment

C3. Business Strategy

C3.1(C3.1) Have climate-related risks and opportunities influenced your organization’s strategy and/or financial planning?
Yes, and we have developed a low-carbon transition plan

C3.1a

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(C3.1a) Is your organization’s low-carbon transition plan a scheduled resolution item at Annual General Meetings (AGMs)?
Is your low-carbon transition plan ascheduled resolution item at AGMs?
Row No, but we intend it to become a1scheduled resolution item within the next
two years

Comment
PMI has been developing its organization’s low-carbon transition plan. PMI intends to communicate publicly its organization’s low-carbon transition plan in 2021.
Internal discussion is ongoing to consider the document for inclusion as a scheduled resolution item at the Annual General Shareholders’ Meeting in the future.

C3.2(C3.2) Does your organization use climate-related scenario analysis to inform its strategy?
Yes, qualitative and quantitative

C3.2a(C3.2a) Provide details of your organization’s use of climate-related scenario analysis.
ClimateDetails
relatedscenariosand models
applied
2DS
PMI has used climate-related scenario analysis in different occasions starting from our 2015 climate change risk assessment (CCRA), to the integration of it in 2019 with TCFD recommendations to
RCP 4.5
provide transparency on the financial impacts of the evaluated scenarios (2DS, NDCs, RCP 4.5 & RCP8.5) always following a consistent process to assess the importance of climate change risks
RCP 8.5and opportunities (CCRO) to PMI business. The process included key assets such as factories, supplier’s processing facilities and tobacco growing regions. Information was sourced from the
Nationally
Coupled Model Inter-Comparison Project - Phase 5 (CMIP5). This assessment focused on the evaluation of future climate change impacts to an updated list of 85 key PMI facilities and supply chain
determined nodes (ports, tobacco growing areas and direct materials) to reflect PMI’s structure. In 2017, 2DS scenario informed PMI’s business strategy by serving as a benchmark to set up our Science Based
contributions Targets (SBT). We mapped 149 CCROs and then divided them according to PMI’s categories: proactive, reactive, nonmaterial, watch & quick wins. It was decided to prioritize the proactive CCROs,(NDCs)
as they have the highest certainty and materiality levels. For 18 CCROs we analyzed, the estimated financial value-at-stake under two climate scenarios – 2DS in alignment to the Paris Agreement
goal (below 2°C) and a reference policy scenario (RS) based on the pathway outlined in RCP 4.5 and including policies aligned to the achievement of NDC. The chosen time horizon considered
projections for the 2030 timeframe under the ‘high emissions’ scenario RCP8.5 to prepare PMI for medium-long term major physical CCRO and it also defines the timeframe for assessing
opportunities for new tobacco growing areas. The 2DS scenario informed PMI’s business strategy by serving as a benchmark to set up our SBTs (time horizon 10 years, by 2030), thus theirrelevance. The areas considered in the analysis included Sustainability and environmental focused teams, Risk & Insured losses, External Affairs, Science & Innovation. The outcome of the CCRA,
especially the potential exposure of tobacco farmers and PMI’s factories to water stress, supported several decisions among which to develop a local water risk assessment tool for our tobacco
growing areas to better understand local risks and drive mitigation actions, as part of our Good Agricultural Practice program. To implement Alliance for Water Stewardship standard in our factories
with the objective to certify all of them by 2025 (11 sites certified by 2020), aiming to further mitigate risks and enhance stakeholders’ engagement in the catchment area. To invest in factories where
local risks have been identified, e.g., droughts in AR, BR, ID and PH. Implementation of above processes and findings enabled our strategies to focus on and prioritize initiatives in collaboration with
our tobacco suppliers that had not yet in place a mitigation strategy aligned with our scenario analysis, e.g., practices to reduce water consumption at farm level in ID and PH. The application of thestrategy has led to less stress sensitive tobacco growing areas and more stability in PMI’s tobacco sourcing strategy. One of the CCROs resulting from our analysis was the increase in drought incountries like Brazil, informing PMI’s tobacco sourcing strategy to geographies that will be less impacted by climate change. In 2020 tobacco volumes were significantly impacted by extreme weather
events, causing relevant crop losses to contracted farmers in BR (over 2,300ha of production were impacted due mainly to drought events in Brazil alone). Farmers’ losses were volumes alreadycontracted by PMI which had to adopt a contingency plan searching for alternative volumes in a short time window thus reducing the power of negotiation and potentially impacting the price above
PMI’s threshold of $5 M.

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(C3.3) Describe where and how climate-related risks and opportunities have influenced your strategy.
Have climate- Description of influence
related risks
andopportunities
influenced
your strategy
in this area?
Products
andservices

Yes

For PMI, sustainability means creating long term value while minimizing the negative externalities associated with our products, e.g., through Lifecycle Assessments (LCAs), new productand packaging design. Following a more in-depth CCRO assessment aligned with the TCFD recommendations, we evaluated climate risks and opportunities in relation to our Products &Services, such as shifts in supply & demand and downstream market risks associated with shifting consumer demands for lower-carbon products. In 2020 we conducted marketresearch studies with our RRP consumers and legal age smokers; results indicated that environmentally friendly products and services have an impact on purchasing decisions andrepresent an opportunity for us to accelerate our transformation into a smoke-free future. Results from these studies allowed PMI to carry out a cost/benefit analysis to design andcommercialize more sustainable products and services, used to inform a roadmap for our RRP products, prioritize initiatives, influencing PMI’s long-term strategy. Climate-change
influences setting of sustainability targets for our products and services at the short and medium term. To control environmental and social impacts across the life cycle of our smokefree products, we set our 2025 eco-design and circularity ambitions, which extend to electronic devices, accessories, consumables, and packaging, incl.: - provide access to collection
and recovery for device and its consumables to all IQOS users - Continue to reduce the carbon footprint of our smoke-free products in line with our science-based targets - Achieve ecocertification for all our PMI smoke-free electronic devices introduced on the market as of the end of 2025. Potential benefits include energy savings, reduced use of natural resources,
waste reduction, and, typically, a longer product lifespan. In 2020 we spent approx. $350k on LCAs focusing e.g., to change the battery technology for our IQOS charging units. Our newbattery chemistry offers the same performance with a reduced carbon footprint versus our previous version. This change was incorporated in the IQOS 2.4+ and IQOS 3 DUO chargers,
resulting in a 9% reduction in the product’s CO2 footprint. To achieve our 2025 eco-design ambition, as we release new product versions, we will keep improving battery technology tofurther reduce emissions and product's footprint.

Supplychain
and/or
value
chain

Yes

Physical climate change risks could affect, with a medium impact, our own operations and those of our suppliers globally. Changes in precipitation patterns and extreme variability inweather patterns could affect the yield, quality and availability of key crops, such as tobacco leaves and cloves, changing our buying patterns and increasing operational costs.
Increased drought/flooding could disturb the tobacco leaf life cycle stages in several countries from where we sourced from in 2020, driving strategy interventions in impacted areas.
Flooding may require pumping of excess water; similarly, extreme droughts may require long-term irrigation, increasing energy consumption and production costs. The financial
implications of these risks vary depending on the impacted asset. E.g., in our tobacco growing areas in Brazil and Philippines they could cause interruptions in our supply chain with afinancial impact ranging from $3 million to $17 million. To prevent these impacts from materializing, PMI has adapted its management strategy at the short-medium term. We take into
consideration those risks in the strategic decision and annual planning of our tobacco leaf inventories which can help mitigate short to medium term impacts. To support addressing theserisks PMI embedded environmental sustainability considerations in Good Agricultural Practices (GAP) and Responsible Sourcing Principles (RSP) since 2002 and 2017 and required
suppliers to comply with them. PMI actively engages with its suppliers and we plan to embed the elements of our carbon neutrality strategy in the programs with our suppliers as we moveto the achievements of PMI’s targets for 2030. In the strategic decision and annual planning of our tobacco leaf inventories we include consideration on the impact that GAP initiatives
had since its implementation to mitigate those risks and its increasing influence over time in the short to medium term. e.g., PMI has invested around $500k in 2020 to support farmers in
Brazil, the Philippines and in Indonesia with more efficient technologies (e.g., drip irrigation) contributing to climate change mitigation efforts. In the long-term our business strategy
focuses on physical adaptation and long-term emissions reduction in accordance with our approved Science-Based Targets, based on 1.5°C pathway, to reduce our value chain
absolute carbon footprint.

Investment Yes
in R&D

Increasing climate change risks consumers’ awareness can generate fluctuations in supply & demand and create downstream market risks and opportunities associated with shifting
consumer demands for lower-carbon products. In 2020 we conducted market-research studies with our RRP consumers and legal age smokers (LAS) to quantify their Heated Tobacco
Units (HTUs) disposal behavior and impact on purchasing decisions linked to perceived environmental issues, including climate change. Results enabled a cost/benefit analysis todevelop and commercialize more sustainable products and services that will be used to build a long-term roadmap for our RRPs and prioritize our initiatives. Product eco-design andcircularity is now integral part of our R&D work and embedded in our long-term strategy to support our smoke-free future vision. With respect to our smoke-free products, in 2020 we set
our 2025 eco-design and circularity ambitions, which extend to electronic devices, accessories, consumables, and packaging. In the area of product innovation, we aim to have all our
new electronic devices commercialized as of end 2025 certified to validated standards for eco-design. We are also working toward the inclusion of recycled content in all devices by2025. In our operations, eco-design principles inform how we use life-cycle analysis (LCA) to assess the comparative carbon footprint of our products, from tobacco sourcing to end-oflife impacts. We have analyzed IQOS devices, heated tobacco units, and packaging. In 2020, we finalized the results for our new e-vapor product, IQOS VEEV. This new version has alower carbon footprint due to efforts to reduce the overall product size and decrease material use. We are working to close the gap between combustible and smoke-free products, interms of carbon emissions intensity, through intensive R&D in improved manufacturing processes, extending the usable life of our electronic devices, and decreasing the total CO2
footprint through innovative material selection guided by the application of LCAs and eco-design practices. Over the past two years, we have reduced the overall CO2 impact of oursmoke-free products through improvements in manufacturing processes and in our tobacco supply chain. In 2020 we spent over $350k working with external agencies on product LCAs,(development and implementation of sustainable design program).

Operations Yes

Beyond its human repercussions, climate change threatens business continuity, especially where businesses involve agricultural supply chains. For PMI, raw material costs such as
tobacco leaf and cloves may rise, with consumers and our employees becoming increasingly sensitized to environmental impact of corporate actions. Upfront investments with longerterm returns are required as consequences of climate risk could expose investors to changes in corporate stock value. PMI’s efforts to reduce GHG, e.g., through increased energy
efficiency, could alleviate potential costs and create competitive advantage by meeting or exceeding consumers , employees, and other stakeholders expectations. In 2020, ourassessment results on current updated societal expectations, made us confirm our ambitious targets to guide on decarbonization: - Achievement of carbon neutrality of PMI’s direct
operations (scope 1+2) by 2030 with the ambition to anticipate it by 2025; - Achievement of carbon neutrality of PMI’s value chain (scope 1+2+3) by 2050 - a reduction in absolute CO2
emissions consistent with SBTi for a 1.5-degree submitted and validated in 2020. Our climate change strategy has a key role in the medium and long term to enable efficiencies in ouroperations, to keep us ahead of our competitors, increase our resilience and to fulfil our reduction targets for a better strategic position when customers/investors assess our
performance. Our business strategy focuses on physical adaptation and long-term emissions reduction including: - long-term sourcing strategies integrating CCROA considerations customer and supplier sustainability strategies aligned with ours to ensure support to our objectives. Our strategy and decisions are influenced by understanding and adapting topotential future climate change issues and by minimizing our environmental impact. We integrate climate related physical and transition risks and opportunities related to regulation,
reputation and market by implementing carbon emission reduction projects with longer payback period in our facilities, sourcing voluntary green electricity to decrease our dependence
from fossil fuels and reduce our carbon footprint, among others. One example is the decision to implement energy saving and CO2 reduction projects in our facilities delivering a 16.6%
reduction on scope 1 and 2 emissions between 2019 and 2020.

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(C3.4) Describe where and how climate-related risks and opportunities have influenced your financial planning.
Financialplanning
elements
that havebeen
influenced

Description of influence

Row Direct costs A clear international trend towards increasing and stricter climate-related regulations exists. Compliance which such policies and regulations are core to the way PMI operates. While in some1
Indirectcircumstances compliance with country-specific legislation increases operating costs, it also provides PMI with the opportunity to reduce energy consumption, CO2 emissions and operational
costs
costs. PMI has adapted its financial planning to address climate risks and seize opportunities related to direct and indirect costs, capital expenditure and allocation, and assets in the short (0-1
Capitalyear), medium (1-5 years) and long- time horizons (5-15 years). Some examples of how financial planning has been influenced by climate-related risks and opportunities include: - renewable
expenditures energy generation subsidies are factored into our cost-benefit analyses to improve return on investment, estimated to be over $1M throughout our global operations and is already implemented
Capitalin our sites like in Italy, Turkey, Lithuania, Ukraine, Serbia, Greece, Portugal, Indonesia and Mexico; - schemes such as the EU Emission Trading Scheme (EU ETS), which covers in 2020, 3 PMI
allocation
owned and operated factories in the Netherlands, Romania and Italy. The expansion of the EU ETS to include EU accession countries where PMI has facilities have influenced our investments
Assetswith energy saving initiatives and Drive for Zero; e.g., since 2019 in Romania we are working with an allocated budget of $1M to that. This provides us with the opportunity to apply ourexperience in these new countries or other regions considering introducing similar schemes; - energy taxes, such as in Germany, incentivized us to implement an Energy Management Program
according to ISO 50001, saving us an estimated $800k in energy tax reductions. For our global operations, such levies and taxes are estimated at around $2M. The transition risk of increased
production costs for farmers due to changing input prices, specifically diesel costs, has been evaluated as having a potential medium to low impact in the long term on tobacco procurement
expenditure o from third-party leaf suppliers and directly contracted farmers. Diesel is widely used in many farming practices. PMI’s supply chain and its purchases of tobacco leaf are influenced
by the cost of production for farmers, with mechanized activities at field level (i.e., dependent on diesel) for approximately 80% of our purchased volume. Energy is a significant cost in farming
practices in relation to the mechanical equipment used. If diesel prices increase the overall cost of producing raw tobacco at directly contracted farms, as well as the cost of sourcing tobacco
from third-party leaf suppliers, will increase as a result. This in turn would cause an associated indirect increase in procurement costs as the price of tobacco would respond to upward pressure
on the cost of production, based on surveyed data collected from farmers with diesel expenditure representing up to 10% of the overall cost of production. A key factor in diesel prices is global
oil prices, which are expected to have different developments depending on the transition pathway taken at a global level. Under transition pathways aligned to 2 degrees scenario or below, theoil demand will be lower than under scenarios associated with greater temperature increases. As such the expected increase in oil prices and indirectly tobacco prices paid by PMI is lower in a
2-degree scenario. Since 2002 we have been implementing the Good Agricultural Practices (GAP) program. GAP is a program with mandatory requirements for our tobacco suppliers and theircontracted farmers, which provides specific guidance on initiatives to mitigate tobacco growing risks and impacts related to climate change such as transition market risks related to fuel prices
increase. A set annual budget is allocated to initiatives to promote the adoption of improved and innovative practices by the farmers in our supply chain lowering fuel consumption, dependency
on fuel and overall production costs. Over the past years, the raising attention of PMI to mitigate climate change related risks influenced our financial planning and resulted in an increase of theyearly allocated budget to support farmers in its supply chain to improve their resiliency and seize opportunities in the low carbon economy. Strategic initiatives include improving efficiency andreducing mechanized activities at field stage, improving tobacco curing efficiency and switching to low-carbon energies, and thus making tobacco suppliers, their farmers and PMI more resilient
to price increments on diesel and diesel products, for instance. In 2020, based on our financial planning PMI allocated an annual budget accounting for approx. $5M in investments in climate risk
mitigation practices under the GAP program word wide. Similar yearly investment is expected over the next 10 years (long term). In 2020, the gradual switch to renewable sources and efficiency
led to: - 67% of flue-cured tobacco we purchased was cured using renewable and traceable fuels (mainly in PK, PH, IT, ES, MW, MZ, MX, BR and AR); - increased collaboration with PMI Leaf
suppliers on climate change related risks and shared value creation. In 2020, we defined an internal carbon price of $65/ton CO2eto identify where to act by comparing and ranking relevant
GHG reduction projects globally based on their cost-effectiveness in reducing emissions and drive the expenditures needed prioritizing our list of initiatives. e.g., in 2020 we installed pyrolysis
technology in our factory in Neuchâtel, which uses operational waste instead of fossil energies to produce steam and hot water. It will be operational in 2021. In addition, $10M/year in ourenergy management program and $200K/year to maintain our global energy metering system. Based on the investments made in previous years we evaluated an expected annual budget forcapital expenditures of $16-20M per year over a 6-7 years’ timeframe. We have an extensive risk control program whereby locations with values exceeding $30M are surveyed by engineers fromour property insurer including physical risks. We have several locations that do have natural catastrophe exposures including flood risk, however this is addressed through risk improvement
recommendations for physical mitigation solutions or implementation/reinforcement of management (administrative) controls such as protect openings, raise equipment, and implement Flood
Emergency Response Plans. In 2019 we had, worldwide, less than a dozen natural catastrophe related recommendations that exceeded a $10M loss expectancy. This information is reviewed
regularly with top management. It enables risk/opportunity identification and management at the company and asset level. From our Climate-Change Risks Assessment, we have identified
revenues, and access to capital as not yet impacted, and acquisitions & divestments and liabilities as not impacted at all.

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(C3.4a) Provide any additional information on how climate-related risks and opportunities have influenced your strategy and financial planning (optional).
Our approach to decarbonizing our operations and value chain is guided by several corporate policies. Reducing our energy consumption and carbon emissions is embedded
in our Environmental Commitment, our Guidebook for Success, our Responsible Sourcing Principles (RSP), and our Good Agricultural Practices (GAP) program; protecting
forests, as a fundamental climate-regulation mechanism, is directed by our Zero Deforestation Manifesto.
It is integrated into normal business activities, forms part of our annual Long-Range Planning process which reviews and sets business direction, and performance appraisal
process.
For PMI, sustainability means creating long‑term value while minimizing the negative externalities associated with our products, operations and value chain. We have an
important impact on our communities and environment that we are mindful of and committed to address.
In 2020 we continued to follow our sustainability materiality assessment outcomes to further embed sustainability across PMI’s strategies. Climate protection, littering
prevention and product eco-design and circularity, are tier 1 topics and are prioritized in our overall sustainability strategy.
We prepared our 2020 Integrated Report in accordance with the GRI Standards (Core option), aligned it with the principles and standards of the UN Global Compact and took
into account those of the Sustainability Accounting Standards Board (SASB). We are part of the World Business Council for Sustainable Development (WBCSD),
WeMeanBusiness coalition and with our participation to the UNFCCC COP21 in Paris and our support to the Paris Agreement, we have continued to engage anddemonstrate our commitments to climate change adaptation and mitigation.
We aim to reduce our carbon emissions across our value chain. We have several programs in place to meet corporate targets and achieve our ambition.
Following the 2018 report by the Intergovernmental Panel on Climate Change (IPCC), it became clear that we must step up our ambition and reduce carbon emissions toalign with the more prudent 1.5-degrees pathway.
We also conducted a deeper analysis of our climate change risk assessment in line with the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD). Based on these developments, we recently established new and more ambitious targets to guide our decarbonization journey:- Achievement of carbon neutrality of PMI’s direct operations (scope 1+2) by 2030 with the ambition to accelerate the target to 2025;- Achievement of carbon neutrality of PMI’s value chain (scope 1+2+3) by 2050;- a reduction in absolute CO2 emissions consistent with science-based targets for a 1.5-degree scenario. During 2020 we have submitted our revised absolute reduction
targets to the Science-Based Targets Initiative Committee and we obtained their validation.
Our climate change strategy has a key role in enabling our business efficiency which keeps us ahead of our competitors and believe that fulfilling our reduction targets puts
us in a better strategic position vs our competitors when customers/investors assess our performance.
In the short term our strategy focuses on effective risk management, emissions reduction and renewable energy strategy development including:- Direct materials supplier engagement program - Energy Management Program- 4-year green energy procurement roadmap- Central governance for on-site renewable investments- Lifecycle Assessments (LCAs) in cigarette/packaging components and new products- Annual GHG footprint- Action plans for mitigating risks and size opportunities
In the long-term our business strategy focuses on physical adaptation and long-term emissions reduction including:- Approved science-based targets to reduce our value chain absolute carbon footprint- Climate change risk and opportunities assessments (CCROA) to inform future management decisions (adaptation focus)- The application of an internal shadow carbon price and a virtual internal carbon levy to best support PMI’s investments in decarbonization projects- Long-term sourcing strategies integrating CCROA considerations- Customer and supplier sustainability strategies aligned with ours to ensure that our value chain progress supports our objectives

Our strategy and decisions are influenced by understanding and adapting to potential future climate change issues and by minimizing our environmental impact. We integrate
climate related physical and transition risks and opportunities related to regulation, reputation and market by:a) Implementing carbon emission reduction projects with longer payback period b) Sourcing voluntary green electricity to decrease our dependence from fossil fuels andreduce our carbon footprintc) Embedding environmental sustainability considerations in our GAP and RSP since 2002 and 2017 respectively.
PMI supported the call for a price on carbon in the Paris Climate Agreement. Our targets, recognized by the Science-Based Targets initiative in 2020, demonstrate how PMI
can contribute to keeping global warming below 1.5°C based on pre-industrial levels and remain financially competitive (IR2020 PDF link).

C4. Targets and performance

C4.1(C4.1) Did you have an emissions target that was active in the reporting year?
Both absolute and intensity targets

C4.1a
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(C4.1a) Provide details of your absolute emissions target(s) and progress made against those targets.
Target reference number
Abs 1Year target was set
2016
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 1+2 (market-based)
Base year
2010
Covered emissions in base year (metric tons CO2e)
914050Covered emissions in base year as % of total base year emissions in selected Scope(s) (or Scope 3 category)100
Target year
2030
Targeted reduction from base year (%)
40
Covered emissions in target year (metric tons CO2e) [auto-calculated]
548430Covered emissions in reporting year (metric tons CO2e)
412999% of target achieved [auto-calculated]
137.04146381489
Target status in reporting year
Achieved
Is this a science-based target?
Yes, and this target has been approved by the Science-Based Targets initiative
Target ambition
Well-below 2°C aligned
Please explain (including target coverage)
This target covers scope 1 and 2 emissions from owned and operated buildings, factories and fleet. In 2016 we submitted this target and it was approved by the Science
Based Target initiative (SBTi) in 2017. In 2020, we achieved 55% reduction versus our 2010 baseline exceeding by 15% the target set (i.e., 40% reduction by 2030) andthus resulting in 137% achieved (55%/40%*100=137%). This achievement has been possible thanks to increased energy efficiency in our factories, on-site renewableinvestments, sourcing power from renewable resources and a program to reduce emissions in our vehicles fleet. Since the beginning of the pandemic, the priority has been
to ensure the safety of our employees and their families. The company immediately activated the remote work policy and tools across our operations. With our people
staying at home, energy consumption consequently dropped in the offices that stayed completely closed and increased in the facilities that stayed operational, with reduced
capacity, due to the intensive operation of the ventilation systems; in total, our emissions from the offices dropped in 2020 by 31 percent versus 2019. In 2020, emissions
from our fleet saw a great decline as well, of around 26 percent versus 2019, as an impact of the home office but also as a result of the lockdown measures implemented allover the globe and the lower number of kilometers driven by our employees, as well as our efficiency efforts. We consider the Covid-19 related reductions to be atemporary event, driven by an extraordinary emergency, the great majority of our carbon emission reductions has been achieved by dedicated projects in energy efficiency
and switches to renewable energy between 2010-2020. This is what we consider to be a permanent result that we will continue to strive through implementation of ourcarbon reduction strategy.
Target reference number
Abs 2Year target was set
2016
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 1+2 (market-based)
Base year
2010
Covered emissions in base year (metric tons CO2e)
914050Covered emissions in base year as % of total base year emissions in selected Scope(s) (or Scope 3 category)100
Target year
2040
Targeted reduction from base year (%)
60
Covered emissions in target year (metric tons CO2e) [auto-calculated]
365620CDP

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Covered emissions in reporting year (metric tons CO2e)
412999% of target achieved [auto-calculated]
91.3609758765932
Target status in reporting year
Underway
Is this a science-based target?
Yes, and this target has been approved by the Science-Based Targets initiative
Target ambition
Well-below 2°C aligned
Please explain (including target coverage)
This target covers scope 1 and 2 emissions from owned and operated buildings, factories and fleet. In 2016 we submitted this target and it was approved by the Science
Based Target initiative (SBTi) in 2017. In 2020, we achieved a 55% reduction versus our 2010 baseline and thus 91% achieved (55%/60%*100=91%). This achievement
has been possible thanks to increased energy efficiency in our factories, on-site renewable investments, sourcing power from renewable resources and a program to
reduce emissions in our vehicles fleet.
Target reference number
Abs 3Year target was set
2016
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 1+2 (market-based) +3 (upstream & downstream)
Base year
2010
Covered emissions in base year (metric tons CO2e)
8062275
Covered emissions in base year as % of total base year emissions in selected Scope(s) (or Scope 3 category)100
Target year
2030
Targeted reduction from base year (%)
40
Covered emissions in target year (metric tons CO2e) [auto-calculated]
4837365
Covered emissions in reporting year (metric tons CO2e)
4002626% of target achieved [auto-calculated]
125.884102191999
Target status in reporting year
Achieved
Is this a science-based target?
Yes, and this target has been approved by the Science-Based Targets initiative
Target ambition
Well-below 2°C aligned
Please explain (including target coverage)
This target covers scope 1, 2 and 3 emissions from all operations and our entire value chain. In 2016 we submitted the target that was approved by the Science Based
Target initiative in 2017 (SBTi). In 2020, we achieved a 50% reduction versus our 2010 baseline and thus 126% achieved (50%/40%*100=126%). This achievement has
been possible thanks to progress in reducing our environmental impact across our value chain: in our factories and fleet where our carbon footprint is relatively small
compared to other industries, as well as beyond the factory gates. This achievement also includes looking at both our upstream supply chain activities (currently focusing on
tobacco farming and direct materials) and downstream, following our product and packaging environmental impacts to end-of- use. In the overall reduction we are listing, theimpact generated by the extraordinary conditions due to the Covid-19 pandemic that we consider temporary and not a part of our reduction strategy for which we are still
investing according to the original and pre-pandemic plan.
Target reference number
Abs 4Year target was set
2020
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 1+2 (market-based)
Base year
2019

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Covered emissions in base year (metric tons CO2e)555882
Covered emissions in base year as % of total base year emissions in selected Scope(s) (or Scope 3 category)100
Target year
2030
Targeted reduction from base year (%)
50
Covered emissions in target year (metric tons CO2e) [auto-calculated]
277941
Covered emissions in reporting year (metric tons CO2e)
412999% of target achieved [auto-calculated]
51.4076728514325
Target status in reporting year
New
Is this a science-based target?
Yes, and this target has been approved by the Science-Based Targets initiative
Target ambition
1.5°C aligned
Please explain (including target coverage)
As per SBTi Submission guidance , the target boundary also includes biogenic emissions and removals (reported separately from the scopes), and which accounted in thebase year for : Direct CO2 emissions from combustion of biofuels and/or biomass feedstocks : 1,057,115 tCO2 Estimated CO2 removals related to the use of biofuels
and/or biomass feedstocks -932,885 tCO2
Target reference number
Abs 5Year target was set
2020
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 3 (upstream & downstream)
Base year
2019
Covered emissions in base year (metric tons CO2e)4309443
Covered emissions in base year as % of total base year emissions in selected Scope(s) (or Scope 3 category)100
Target year
2030
Targeted reduction from base year (%)
50
Covered emissions in target year (metric tons CO2e) [auto-calculated]
2154721.5
Covered emissions in reporting year (metric tons CO2e)3589627% of target achieved [auto-calculated]
33.406451831478
Target status in reporting year
New
Is this a science-based target?
Yes, and this target has been approved by the Science-Based Targets initiative
Target ambition
1.5°C aligned
Please explain (including target coverage)
As per SBTi Submission guidance, the target boundary also includes biogenic emissions and removals (reported separately from the scopes), and which accounted in thebase year for : Direct CO2 emissions from combustion of biofuels and/or biomass feedstocks: 1,057,115 tCO2 Estimated CO2 removals related to the use of biofuels
and/or biomass feedstocks -932,885 tCO2

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(C4.1b) Provide details of your emissions intensity target(s) and progress made against those target(s).
Target reference number
Int 1Year target was set
2012
Target coverage
Company-wide
Scope(s) (or Scope 3 category)
Scope 1+2 (market-based) + 3 (upstream and downstream)
Intensity metric
Other, please specify (kg CO2e per million cigarette equivalent sold)Base year
2010
Intensity figure in base year (metric tons CO2e per unit of activity)8706% of total base year emissions in selected Scope(s) (or Scope 3 category) covered by this intensity figure
100
Target year
2020
Targeted reduction from base year (%)
30
Intensity figure in target year (metric tons CO2e per unit of activity) [auto-calculated]
6094.2% change anticipated in absolute Scope 1+2 emissions-55% change anticipated in absolute Scope 3 emissions-50
Intensity figure in reporting year (metric tons CO2e per unit of activity)5482% of target achieved [auto-calculated]
123.439773336396
Target status in reporting year
Achieved
Is this a science-based target?
No, but we are reporting another target that is science-based
Target ambition<Not Applicable>
Please explain (including target coverage)
This target covers scope 1, 2 and 3 emissions from all operations and our full value chain per million of cigarette equivalent sold. From 2018 onwards we are reporting
energy intensity based on sold units of equivalent cigarettes (versus produced units of cigarettes equivalent previously). In 2020 we achieved a 50% reduction versus our2010 baseline (8,706 kg CO2 per million of equivalent cigarettes sold) and thus 123% achieved (50%/30%*100=123%). This achievement has been possible due toprogress in reducing our environmental impact across our value chain: in our factories and fleet where our carbon footprint is relatively small compared to other industries,
as well as beyond the factory gates. That includes looking at both our upstream supply chain activities (currently focusing on tobacco farming and direct materials) anddownstream, following our product and packaging environmental impacts to end-of-use. % change anticipated in absolute scope 1+2 and scope 3 emissions are dependent
on 2021 production volumes and ratio between conventional cigarettes vs smoke-free products, that is rapidly changing due to the growth of our smoke-free products. The% anticipated change in emissions in scopes 1, 2 and 3 have been calculated based on achieved reductions in 2020, which exceeds the original 2020 intensity target, andwe expect to further improve this reduction by 2021.

C4.2(C4.2) Did you have any other climate-related targets that were active in the reporting year?
Target(s) to increase low-carbon energy consumption or production
Net-zero target(s)Other climate-related target(s)

C4.2a

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(C4.2a) Provide details of your target(s) to increase low-carbon energy consumption or production.
Target reference number
Low 1
Year target was set
2019
Target coverage
Business activity
Target type: absolute or intensity
Absolute
Target type: energy carrier
Electricity
Target type: activity
Consumption
Target type: energy source
Renewable energy source(s) only
Metric (target numerator if reporting an intensity target)
Percentage
Target denominator (intensity targets only)<Not Applicable>
Base year
2010
Figure or percentage in base year
0
Target year
2025
Figure or percentage in target year
100
Figure or percentage in reporting year78
% of target achieved [auto-calculated]
78
Target status in reporting year
Underway
Is this target part of an emissions target?
This target is directly linked with our scope 1 and 2 SBT absolute reduction target (Abs1 & Abs2 & Abs 4).
Is this target part of an overarching initiative?
Science-based targets initiative
Please explain (including target coverage)
This target covers the amount of electricity purchased and self-generated from renewable sources. Our initial target, set in 2016, aimed at 100% renewable by 2030. Thistarget was amended in 2019 for 100% by 2025 to reflect our increased ambition level. In 2020, 78% of our manufacturing facilities’ electricity consumption was sourced
from renewable sources versus our 2010 baseline where we were not sourcing/generating any. Thus 78% achieved (78%/100%*100=78%). This achievement has beenpossible mainly due to European factories sourcing or generating green electricity. In 2020, a second factory in Indonesia, our factories in Kazakhstan and in Malaysia
switched to renewable electricity. We will continue sourcing more renewable electricity as it becomes available in the countries where we operate. The 100% green
electricity target covers all our factories and is part of PMI strategy to first and foremost drive toward a low-carbon economy by promoting the renewable energy industry as
an alternative to fossil fuelled energy and subsequently reduce our scope 2 emissions. To achieve our ambitious Science Based Targets, PMI uses all the strategic tools
and mechanisms that have been identified as good practices by the recognized international standards, including RE100 and EP100 guidelines to manage our company’s
energy consumption.

C4.2b

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(C4.2b) Provide details of any other climate-related targets, including methane reduction targets.
Target reference number
Oth 1
Year target was set
2015
Target coverage
Business division
Target type: absolute or intensity
Absolute
Target type: category & Metric (target numerator if reporting an intensity target)
Engagement with suppliers

Other, please specify (Percentage of Virginia Flue Cured tobacco suppliers disclosing GHG emission related data)

Target denominator (intensity targets only)<Not Applicable>
Base year
2017
Figure or percentage in base year
0
Target year
2020
Figure or percentage in target year
100
Figure or percentage in reporting year100
% of target achieved [auto-calculated]
100
Target status in reporting year
Achieved
Is this target part of an emissions target?
Yes, Abs 3
Is this target part of an overarching initiative?
Science Based Targets initiative
Please explain (including target coverage)
As tobacco accounted for around 40% of PMI’s carbon footprint in our 2010 baseline, PMI set goals and developed strategic initiatives to reduce GHG emissions related totobacco growing including the emissions generated by the fuels used for the flue-cured Virginia (FCV) tobacco curing process. At the corporate level, PMI uses its GHG
emission inventory to track emission reductions and flag potential deviations to ensure swift responses. At the supplier level, PMI uses the Monitoring Framework (MF) for
Sustainable Leaf Curing Fuel, a mandatory requirement for all FCV suppliers (i.e., 100%), which requires them to report primary data (e.g., curing fuel type, fuelconsumption, barn type, etc.), allowing PMI to calculate the GHG emissions from the overall tobacco curing process. This figure is used within PMI’s year-on-year value
chain GHG footprint calculations, contributing to the Abs3 target highlighted in C4.1a. The 3 strategic initiatives within the MF are: ▪ Reduce fuel consumption rate via curing
efficiency improvement and curing barn optimization programs; ▪ Move from unsustainable to sustainable curing fuel sources; ▪ Encourage fuel switching to less polluting
fuels and the use of biomass as an alternative to unsustainable wood fuels or fossil fuels where appropriate. The global roadmap for sustainable firewood aimed at
supporting our tobacco suppliers to reach full implementation of the targets above by 2020 through engagement in capacity building activities with tobacco leaf suppliers
and farmers. Our 2020 assurance process on curing fuel use in tobacco led by a third party verification reported 100% compliance with the Monitoring Framework. We lookforward to maintaining the compliance while raising the requirements after 2020 in line with our renewed carbon neutrality ambitions.

C4.2c

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(C4.2c) Provide details of your net-zero target(s).
Target reference number
NZ1
Target coverage
Company-wide
Absolute/intensity emission target(s) linked to this net-zero target
Abs1
Target year for achieving net zero2030
Is this a science-based target?
No, but we are reporting another target that is science-based
Please explain (including target coverage)
In 2019 we set the target to achieve carbon neutrality of PMI’s direct operations (scope 1+2) by 2030 and we expect to achieve the Scope 1&2 neutrality five years earlier
than 2030 target. Business ambition is defined on the 1.5C scenario.
Target reference number
NZ2
Target coverage
Company-wide
Absolute/intensity emission target(s) linked to this net-zero target
Abs2
Target year for achieving net zero
2050
Is this a science-based target?
Yes, and we have committed to seek validation of this target by the Science Based Targets initiative in the next 2 years
Please explain (including target coverage)
In 2019 we set the target to achieve carbon neutrality of PMI’s value chain (scope 1+2+3) by 2050. For the validation of this target we are awaiting to have the SBTi Netzero guidelines issued to be able to follow the submission process and obtain SBTi approval. Early 2021 we have formally committed to Business ambition for 1.5 °C,
signing the pledge (https://sciencebasedtargets.org/companies-taking-action#table) and joining the visionary corporate leaders taking ambitious climate action,

C4.3(C4.3) Did you have emissions reduction initiatives that were active within the reporting year? Note that this can include those in the planning and/or
implementation phases.
Yes

C4.3a
(C4.3a) Identify the total number of initiatives at each stage of development, and for those in the implementation stages, the estimated CO2e savings.
Number of initiatives

Total estimated annual CO2e savings in metric tonnes CO2e (only for rows marked *)Under investigation

2585

To be implemented*

500

57000

Implementation commenced*

107

9784

Implemented*

70428259Not to be implemented

99

C4.3b
(C4.3b) Provide details on the initiatives implemented in the reporting year in the table below.
Initiative category & Initiative typeTransportation

Company fleet vehicle replacement

Estimated annual CO2e savings (metric tonnes CO2e)
1946
Scope(s)Scope 1
Voluntary/Mandatory
Voluntary

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Annual monetary savings (unit currency – as specified in C0.4)
1387331
Investment required (unit currency – as specified in C0.4)
0Payback period<1 year
Estimated lifetime of the initiative
3-5 years
Comment
This initiative reflects the CO2e saved through the replacement of greener vehicle (both benefit vehicle and working tools) within PMI fleet. The monetary savings arecalculated on the amount of fuel saved multiplied by an average worldwide price for fuel in 2020.
Initiative category & Initiative type
Energy efficiency in buildings

Building Energy Management Systems (BEMS)

Estimated annual CO2e savings (metric tonnes CO2e)267
Scope(s)Scope 2 (location-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
10400
Investment required (unit currency – as specified in C0.4)
26182
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
This concerns one initiative on the expansion of the BMS of our factory in Philippines to cover its wastewater treatment plant to reduce energy consumption and optimize
efficiency.
Initiative category & Initiative type
Energy efficiency in buildings

Heating, Ventilation and Air Conditioning (HVAC)

Estimated annual CO2e savings (metric tonnes CO2e)
18607
Scope(s)Scope 1
Scope 2 (location-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
1624738
Investment required (unit currency – as specified in C0.4)
1902943
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
40 initiatives in HVAC systems optimization and modernizations in existing units in our manufacturing centers.
Initiative category & Initiative type
Energy efficiency in buildings

Lighting

Estimated annual CO2e savings (metric tonnes CO2e)
185
Scope(s)Scope 2 (location-based)

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Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
17055
Investment required (unit currency – as specified in C0.4)
46900
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
These are initiatives mainly focused on installation of LED lighting in our factories. In total 2 initiatives in 2020.
Initiative category & Initiative type
Energy efficiency in production processes

Compressed air

Estimated annual CO2e savings (metric tonnes CO2e)1229
Scope(s)Scope 2 (location-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
242442
Investment required (unit currency – as specified in C0.4)
532332
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
11 initiatives implemented in our factories compressed air systems, mainly focusing on the decrease of pressure, equipment modernization, leakages prevention, to namesome.
Initiative category & Initiative type
Energy efficiency in production processes

Cooling technology

Estimated annual CO2e savings (metric tonnes CO2e)502
Scope(s)Scope 2 (location-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
72457
Investment required (unit currency – as specified in C0.4)
171295
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
Five initiatives in central cooling systems implemented in our factories in 2020.
Initiative category & Initiative type
Energy efficiency in production processes

Other, please specify (Steam system )Estimated annual CO2e savings (metric tonnes CO2e)324
Scope(s)Scope 1
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Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
50318
Investment required (unit currency – as specified in C0.4)
10011
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
In 2020 we implemented 3 initiatives in our factories in Argentina, Serbia and Russia to upgrade our steam system equipment by changing the air intake points and reduce
steam pressure.
Initiative category & Initiative type
Energy efficiency in production processes

Process optimization

Estimated annual CO2e savings (metric tonnes CO2e)67
Scope(s)Scope 2 (location-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
53386
Investment required (unit currency – as specified in C0.4)
0Payback period<1 year
Estimated lifetime of the initiative
6-10 years
Comment
In 2020 we improved the efficiency of the air treatment in our smoke free products production process in Russia, reducing its energy consumption.
Initiative category & Initiative type
Energy efficiency in production processes

Waste heat recovery

Estimated annual CO2e savings (metric tonnes CO2e)
246
Scope(s)Scope 1
Scope 2 (location-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
37324
Investment required (unit currency – as specified in C0.4)
111994
Payback period
1-3 years
Estimated lifetime of the initiative
6-10 years
Comment
In 2020 we implemented 2 initiatives in our manufacturing centers in Turkey and Switzerland to recover heat from our steam system.
Initiative category & Initiative typeLow-carbon energy consumption

Low-carbon electricity mix

Estimated annual CO2e savings (metric tonnes CO2e)
35209
Scope(s)CDPPage 37 of 89

Scope 2 (market-based)
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
0Investment required (unit currency – as specified in C0.4)
66250
Payback period
No payback
Estimated lifetime of the initiative
1-2 years
Comment
Renewable energy (certified green electricity) procurement for most of our EU facilities, Serbia, Mexico, Colombia and Turkey which commenced in 2014 and in 2020
expanded to new countries like factories in Indonesia, Kazakhstan and Malaysia . All certificates are available for 2020. Investment is the current additional amount paid forgreen electricity.
Initiative category & Initiative typeCompany policy or behavioral change

Resource efficiency

Estimated annual CO2e savings (metric tonnes CO2e)
28270
Scope(s)Scope 3
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
42400000
Investment required (unit currency – as specified in C0.4)
0Payback period
No payback
Estimated lifetime of the initiative
3-5 years
Comment
Productivity program co-lead by Procurement and Product Development teams focusing on Direct Materials (DIMs) to identify and implement opportunities for: specification
harmonization, specification optimization thru down gauging, material usage optimization and reduction, material substitution, waste optimization/reduction and reuse, andmaterial removal. No investment is required since the further deployed specifications are already existing and running on our production lines and do not require capex. The
Program was initiated beginning of 2019, with first deployment on our production lines of certain projects in 2019 following quality and machinability tests. Some otherinitiatives, requiring more extensive testing procedures and/or production capacity planning on supplier’s side, were commenced in 2020. Scope 3: category 1 purchased
goods
Initiative category & Initiative typeCompany policy or behavioral change

Other, please specify (Increase Supply Chain network visibility to improve demand forecasts and optimize production planning, reducing requirements of DIM)

Estimated annual CO2e savings (metric tonnes CO2e)
7263
Scope(s)Scope 3
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
15250000
Investment required (unit currency – as specified in C0.4)
0Payback period
No payback
Estimated lifetime of the initiative
6-10 years
Comment
Our Direct Materials expenditure has a strong link with our ability to forecast our production requirements to serve the demand. Also, the carbon footprint linked to DIM
usage is determined by the quantity of such materials that we are required to purchase each year to feed our production lines. While demand suffers short term notice major
fluctuations, the industrial processes behind the supply chains of DIM has not the required flexibility to adjust accordingly. Indeed, lot sizes are applied to purchase orders
with minimum order quantities requirements from suppliers. This creates left overs of DIM ordered, delivered and unused. These materials have many specificities[designs, languages, sizes, machine park specificities] that generates low interchangeability and/or re-usability levels in case of leftovers from production. This program
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aims at increasing our demand planning capability, by installing new processes and tools, reducing the amount of leftovers from production by better adjusting ourrequirements’ call offs to our production needs.
Initiative category & Initiative typeCompany policy or behavioral change

Resource efficiency

Estimated annual CO2e savings (metric tonnes CO2e)
334144
Scope(s)Scope 3
Voluntary/Mandatory
Voluntary
Annual monetary savings (unit currency – as specified in C0.4)
0Investment required (unit currency – as specified in C0.4)
5000000
Payback period
No payback
Estimated lifetime of the initiative
6-10 years
Comment
In our tobacco supply chain, we achieved an absolute reduction in 2020 of 334,144 tons of CO2e vs 2019 from improvements in tobacco curing process and fertilizer use,which are the main GHG emission contributors within tobacco scope 3 sub-categories. While most farmers own their curing barns, PMI and our suppliers provide guidanceand support to make them more fuel-efficient (e.g., combustion efficiency, ventilation, and heating control, insulation), monitoring the results in GHG reduction. The
improvement projects carried out in 2020 increased the efficiency of 2,146 barns in all markets where we source from, for a cumulative total of 82,519 barns upgradedsince 2014. In 2020, we delivered improvement projects around the world, including training farmers on fuel efficiency. We are seeing farmer profitability improve as aresult of cost savings on farms. While we encourage minimizing the use of fertilizers in our supply chain in line with our Good Agricultural Practices (GAP) program,technological developments in the manufacturing process for fertilizers have also contributed to reducing their GHG footprint. In 2019, PMI updated its calculation model for
fertilizers’ GHG emissions to more precisely assess their impact on the company’s carbon footprint in addition to further decrease in fertilizer use. The internal investment of
5M reflects the annual budget allocated in 2020 to environmental projects under the GAP across all regions. Scope 3: category 1 purchased goods.

C4.3c

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(C4.3c) What methods do you use to drive investment in emissions reduction activities?
MethodComment

Dedicated budget forenergy efficiency

Our Energy Management Program (over $100 million in investments from 2010-2020) aims to reduce our factories' energy consumption and help achieve greenhouse gas emissions
reduction targets. In 2020 we achieved a reduction of 26% of our scope 1 and 2 compared to our 2019 baseline and progressing towards our target to reduce 50% by 2030. Our Drive 4
Zero program, which aims to eliminate economic losses caused by inefficient energy use. Under the program, we look for industrial and manufacturing solutions such as heat recovery andmanufacturing-process optimization. We also promote behavioral change through our Zero Loss Mindset program. To support our Drive 4 Zero program, an Energy Saving Initiatives (ESIs)
program has been started in 2019, triggering more than 500 projects worldwide including among many others LED lighting, HVAC upgrade, chilled water optimization and heat recovery
projects.

Marginal abatement
cost curve

We consider a longer rate of return (4 years or more) for certain energy savings and renewable energy projects. A Marginal Abatement Cost Curve (MACC) methodology has beendeveloped and applied to evaluate carbon emission reduction related projects.

Dedicated budget forother emissions
reduction activities

We have developed a renewable energy strategy with an initial focus on low-carbon electricity uptake in the EU. We commenced the program in 2012 and continued to implement it inmore facilities in 2020. We continue to seek new opportunities to purchase greener energy. In order to drive the adoption of low-carbon electricity sources within our entire organization, we
set the more stringent target to have 100% of our affiliates switched to green electricity by 2025. We are well progressing as we have already reached 78% in 2019.

Compliance with
Compliance with policies and regulations are core to the way PMI operates. In some circumstances compliance with regulatory requirements and standards it also provides PMI with theregulatory
opportunity to achieve energy/emissions reductions and particularly when investing in new processes (e.g., requirements for renewable energy or energy efficiency) for new or upgraded
requirements/standards facilities in Greece and Italy, under EU ETS scheme. This has allowed us to delist sites in Germany and Portugal from the EU ETS scheme in previous years.
Employee engagement Employee engagement is implemented through our objective setting, Long-Range Planning process and via employee communications, sharing of tools, guidance and best practices. In
2020, the communication team in PMI Operations supported the engagement of all operations employees (more than 20,000 people are working in PMI’s operations worldwide) who
received senior management briefings on sustainability topics including Climate Change, carbon footprint, renewable energies, etc. Local market EHS managers and Sustainability
coordinators run specific focus days and campaigns in all markets where we operate.
Other (Dedicatedbudget to incentivize
other emissions
reduction initiative in
our agricultural supply
chain)GAP is a broad program with 4 sustainability-related pillars – governance, people, crop and environment – implemented by our leaf suppliers and contracted farmers. It promotes an
Integrated Production System which supports farmers in improving yield and farm efficiency on a variety of crops (particularly food crops) and not only tobacco. Through GAP ,environmental improvement programs are implemented in all the countries where we source tobacco around the world; these programs include among others: curing barn efficiency
improvements; curing fuel switching to low GHG emitting fuels; eliminating the use of coal; increasing the use of biomass; and helping farmers become wood self-sufficient and seeking
traceable sources of sustainable wood.

Internal price on
carbonIn line with our ambition to reduce carbon emissions aligning with the 1.5-degree target in 2020 we have introduced a shadow carbon price to help ensure that business decisions reflect
environmental costs by putting a price on carbon emissions. We have modelled what an adequate internal shadow carbon price should be for PMI following a robust methodology, bestinternational practices, and a worst-case scenario analysis of transition risks projected by 2030 and specific to our emission profile and the geographies where we operate. We haveconcluded that an adequate shadow carbon price for PMI is US$ 65 per ton of CO2e emitted. This will be used in all business cases preparation when they entail an impact (favorable orunfavorable) on our carbon emissions.

Internal financemechanisms

Carbon reduction and compensation projects are stimulated and promoted at PMI through the adoption of an internal financial mechanism that uses an internal virtual carbon levy tosupport adoption of new technology and invest in impactful projects in GHG reduction/avoidance/removal. PMI carbon levy enables us to internalize external costs by virtually charging ourbusiness functions or affiliates for their respective emissions. With the aim of using calculated virtual revenue to size and fund investments that contribute to the decarbonization of thebusiness and support behavioral change. The levy is collected in a climate fund (the PMI Portfolio of Climate Investments) to finance high quality carbon credits and removal projectsaligning with the demanding additional attributes PMI has set for them.

Dedicated budget for
low-carbon product
R&D

Our 2025 eco-design and circularity ambitions are to provide access to collection and recovery for the device and its consumables to all IQOS users and continue to reduce the carbon
footprint of our smoke-free products in line with our science-based targets. The way we work is guided by the foundation principles of eco-design and circularity, which account for impacts
related to materials sourcing, product function and design, manufacturing, use, and end-of-life. In our operations, eco-design principles inform how we use life-cycle analysis (LCA) toassess the comparative carbon footprint of our products, from tobacco sourcing to end-of-life impacts. Our long-term vision remains to recycle any waste that we collect while minimizing our
CO2 footprint. In 2020, we advanced our discussion with several waste management and recycling partners on potential second life that we could give to our recycled HTUs. Our
exploration is primarily focused on the recycling of the cellulose acetate, one of the materials our filters are made from. Our investigations to date show chemical properties of cellulose
acetate enable the material to be upcycled into a variety of applications: spinning of the fibers into fabrics, creation of pellets that can then be pressed/injection moulded into a variety ofhard goods. Though these results are promising, the recycling of cellulose acetate – unlike recycling for many metals or plastics – is not a widely available and developed waste stream
across the globe that we can leverage. When IQOS users return broken or end-of service devices, our reverse-logistics program CIRCLE helps to cycle materials back into the economy. In
2020, we continued the rollout of our CIRCLE program, achieving 48 percent market volume coverage (up from 39 percent in 2019, target is 100% in 2025), by adding two new markets tothe program. In addition to developing services to reduce the end-of-life impact of our products, our innovation and design teams are also exploring low carbon, recyclable, andbiodegradable options for filters and cartridges. We are committed to significant investment into continued research on the biodegradability of filters, and we are working toward a viable
solution that meets strict international standards, satisfies market requirements, and works with high volume manufacturing.

C4.5(C4.5) Do you classify any of your existing goods and/or services as low-carbon products or do they enable a third party to avoid GHG emissions?
No

C5. Emissions methodology

C5.1

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(C5.1) Provide your base year and base year emissions (Scopes 1 and 2).
Scope 1
Base year start
January 1 2019
Base year end
December 31 2019
Base year emissions (metric tons CO2e)
397210Comment
In 2020 we updated our baseline year, moving it from 2010 to 2019, to account for changes in our footprint and business model. The rapid expansion of smoke freeproducts in our portfolio has made it necessary to set a new baseline in 2019 to reflect the different emission profile created by the new product portfolio. We believe with amore recent and updated baseline PMI can be more incisive and transparent on the decarbonization journey in alignment with the recommendations from the Science Base
Target initiative and better incorporating inputs from the models published by Intergovernmental Panel on Climate Change.
Scope 2 (location-based)
Base year start
January 1 2019
Base year end
December 31 2019
Base year emissions (metric tons CO2e)
447322
Comment
In 2020 we updated our baseline year, moving it from 2010 to 2019, to account for changes in our footprint and business model. The rapid expansion of smoke freeproducts in our portfolio has made it necessary to set a new baseline in 2019 to reflect the different emission profile created by the new product portfolio. We believe with amore recent and updated baseline PMI can be more incisive and transparent on the decarbonization journey in alignment with the recommendations from the Science Base
Target initiative and better incorporating inputs from the models published by Intergovernmental Panel on Climate Change. Scope 2 (market-based)
Scope 2 (market-based)
Base year start
January 1 2019
Base year end
December 31 2019
Base year emissions (metric tons CO2e)
158672
Comment
In 2020 we updated our baseline year, moving it from 2010 to 2019, to account for changes in our footprint and business model. The rapid expansion of smoke freeproducts in our portfolio has made it necessary to set a new baseline in 2019 to reflect the different emission profile created by the new product portfolio. We believe with amore recent and updated baseline PMI can be more incisive and transparent on the decarbonization journey in alignment with the recommendations from the Science Base
Target initiative and better incorporating inputs from the models published by Intergovernmental Panel on Climate Change.

C5.2(C5.2) Select the name of the standard, protocol, or methodology you have used to collect activity data and calculate emissions.
European Union Emission Trading System (EU ETS): The Monitoring and Reporting Regulation (MMR) – General guidance for installations
IEA CO2 Emissions from Fuel Combustion
ISO 14064-1
The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition)
Other, please specify (Ecoinvent to estimate the CO2 embedded in products in certain products within our value chain; Defra Voluntary 2020 Reporting Guidelines)

C5.2a(C5.2a) Provide details of the standard, protocol, or methodology you have used to collect activity data and calculate emissions.

We aim at using the most relevant and/or updated conversion factor for each activity data and calculated emissions.
We ensure we remain as up to date with newly released coefficient by DEFRA when they release updated conversion factors. We started using IEA because the conversion
factors for electricity at country level are not provided by DEFRA or GHG Protocol anymore.
In some case, primary data are not possible to use, this is even more true within our value chain (scope 3) calculations. For example, for purchase goods considering the highvolume of goods purchased, we rely on Ecoinvent to apply the most accurate methodology
GHG protocol is used de facto for countries where there are no national conversion factors guidance (Latin America or Asia).

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C6. Emissions data

C6.1
(C6.1) What were your organization’s gross global Scope 1 emissions in metric tons CO2e?
Reporting year
Gross global Scope 1 emissions (metric tons CO2e)
322633
Start date
<Not Applicable>
End date<Not Applicable>
Comment
Our scope 1 emissions correspond to manufacturing, offices, warehouses and sales fleet.

C6.2(C6.2) Describe your organization’s approach to reporting Scope 2 emissions.
Row 1​Scope 2, location-based​
We are reporting a Scope 2, location-based figure
Scope 2, market-based
We are reporting a Scope 2, market-based figure
Comment
Our scope 2 emissions correspond to manufacturing, offices and warehouses emissions.

C6.3(C6.3) What were your organization’s gross global Scope 2 emissions in metric tons CO2e?
Reporting year
Scope 2, location-based
383895
Scope 2, market-based (if applicable)
90366
Start date
<Not Applicable>
End date<Not Applicable>
Comment
Our scope 2 emissions correspond to manufacturing, offices and warehouses emissions.

C6.4(C6.4) Are there any sources (e.g. facilities, specific GHGs, activities, geographies, etc.) of Scope 1 and Scope 2 emissions that are within your selected reporting
boundary which are not included in your disclosure?
Yes

C6.4a

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(C6.4a) Provide details of the sources of Scope 1 and Scope 2 emissions that are within your selected reporting boundary which are not included in yourdisclosure.
SourceEmissions from PMI operated IQOS stores
Relevance of Scope 1 emissions from this source
Emissions are not relevant
Relevance of location-based Scope 2 emissions from this source
Emissions are not relevant
Relevance of market-based Scope 2 emissions from this source (if applicable)
Emissions are not relevant
Explain why this source is excluded
As our IQOS stores activities are growing, we performed an analysis in order to estimate their emissions. These activities are performed by PMI entities (no Franchises).
We based our calculation on the 2020 IQOS stores footprint (m2) and BEIS ND-NEED and DEFRA emissions factors. Our calculations indicated that theses emissions are
standing for 0.7% of our 2020 Scope 1 and 2 emissions (<5% materiality level). Based on this, PMI understands that these business activities will remain in its watch list,
though excluded from our inventory for the time being.

C6.5(C6.5) Account for your organization’s gross global Scope 3 emissions, disclosing and explaining any exclusions.
Purchased goods and services
Evaluation status
Relevant, calculated
Metric tonnes CO2e
2636097
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
63
Please explain
Includes emissions that are product-related (i.e., the materials purchased to make each product) and those emissions non-product-related (i.e. everything else, officestationery, advertising etc.). Closed to half of this category has been calculated using data received from our suppliers. The rest has been calculated based on material
weights sourced or spending and specific emissions factors for each of the materials from international databases like BEIS (DEFRA) and Ecoinvent.
Capital goods
Evaluation status
Relevant, calculated
Metric tonnes CO2e
79990
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
0Please explain
Capital goods include emissions from goods that are used to manufacture/distribute PMI’s products, or other office buildings and includes for example machinery, buildings
or facilities.
Fuel-and-energy-related activities (not included in Scope 1 or 2)
Evaluation status
Relevant, calculated
Metric tonnes CO2e
87113
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
0Please explain
This category includes the emissions related to the production of fuels and electricity consumed by PMI. i.e. for all fuel-related emissions calculated as its scope 1&2
emissions, such as associated emissions to extract gas, coal and oil, transport and process prior to combustion, and losses in supplying electricity. All these emissions areaccounted for in this category.

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Upstream transportation and distribution
Evaluation status
Relevant, calculated
Metric tonnes CO2e521617
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
24
Please explain
This category includes emissions from all purchased (non-owned) transport and distribution services. This includes inbound logistics, outbound logistics (i.e., sold products,
if PMI has paid for/purchased the service) by land, sea and air freight, transport between PMI facilities and energy consumed in third party warehouses.
Waste generated in operations
Evaluation status
Relevant, calculated
Metric tonnes CO2e
4808
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the Corporate Value Chain (Scope 3) Accounting and Reporting Standard methodology from WRI. Our
waste flows were broken up into over 50 different waste types and treatment methods. The Technical Guidance for Calculating Scope 3 emissions (GHG Protocol) publish
emissions factors for the treatment of each type of waste. We calculated the GHG emissions of each type of waste flow by multiplying the tonnage of each waste flow by its
associated emissions factor.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
0Please explain
This category includes emissions from the third-party disposal and treatment of waste generated by PMI’s owned or controlled operations.
Business travel
Evaluation status
Relevant, calculated
Metric tonnes CO2e
17265
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
76
Please explain
This category includes estimates of emissions from the transportation of employees for business-related activities in vehicles owned or operated by third parties. This
includes emissions generated by employees travelling by air, road, rail and boat. It also includes the emissions due to stays in hotels.
Employee commuting
Evaluation status
Relevant, calculated
Metric tonnes CO2e
38437
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
0Please explain
This category includes emissions arising from the transportation of employees between their homes and their worksites. Typically, this may include emissions from:automobile travel, bus travel, rail travel, air travel and other modes including subway, cycling and walking.

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Upstream leased assets
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
This category includes emissions from the operation of assets that are owned by other entities and leased to the reporting company (acting as a lessee), and are notalready included in scope 1 and 2. PMI does lease some warehouse space from third parties with emissions that are not accounted for in scope 1 and 2. However, thiswarehouse space is included within category 4 – upstream transportation and distribution. The GHG Protocol refers to transportation and distribution, and for PMI thewarehouses are part of the distribution network, leading to its reporting combined with transportation. Therefore category 8 has been excluded to avoid double counting.
Downstream transportation and distribution
Evaluation status
Relevant, calculated
Metric tonnes CO2e
50935
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI
Percentage of emissions calculated using data obtained from suppliers or value chain partners
0Please explain
This category covers the transport of sold finished goods (FG) to the retailers and end-consumers. Transport relating to the end-consumer travelling to the retailer isgenerally not included under value chain or product footprinting standards. PMI fleet transportation is included in Scope 1&2 emissions, therefore, only non-PMI fleet
transport is included in this category. Any transport / storage of sold products paid for by PMI is included in category 4, and excluded from this category. Therefore, alltransport distances input for Category 9 calculations should exclude PMI-owned and operated transport (Scope 1 & 2) and any Third Party (TP) services procured by PMI(Category 4). Some transport legs will have a mixture of two or three of these types of transport services, but Category 9 emissions relate to transport of sold goods paid forby independent external parties only.
Processing of sold products
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
This category includes customer’s emissions relating to the processing of intermediate products sold by a reporting company, such as the conversion of aluminum ingots
into aluminum injection molded products. This category was reviewed in 2018 and it has been concluded that PMI sold only final products to end-users, and no intermediate
products which could be further processed, transformed or included into other products, therefore this category has been excluded.
Use of sold products
Evaluation status
Relevant, calculated
Metric tonnes CO2e
100263Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
16
Please explain
This category refers to emissions from the use of goods and services sold by PMI to end users, i.e. consumers that use these final products. Emissions from the P1 RRP
product are predominantly caused by the electrical charging of the product. This category also includes emissions arising from the use of lighters with conventional
cigarettes, cigars and other tobacco products (OTP).

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End of life treatment of sold products
Evaluation status
Relevant, calculated
Metric tonnes CO2e
53103
Emissions calculation methodology
Our Value Chain Model and Footprint is calculated to align with the accepted international standard for GHG value chain modelling "Corporate Value Chain (Scope 3)
Accounting and Reporting Standard" methodology from WRI.
Percentage of emissions calculated using data obtained from suppliers or value chain partners
0Please explain
This category refers to emissions from the waste disposal and treatment of products sold by PMI at the end of their life (EoL).
Downstream leased assets
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
PMI does lease some office floor-space in certain offices around the world, but this has been confirmed as extremely small, and regarded as de minimis, therefore thiscategory has been excluded.
Franchises
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
Whilst PMI pays other entities to manufacture finished goods (accounted for in category 1a) from materials purchased by PMI (also accounted for in category 1a), as
ownership of finished goods always returns back to PMI, there are no examples of franchise operations to account for, therefore this category has been excluded.
Investments
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
Emissions associated with investments were estimated based on each of the investee organisations (full value chain), allocating the emissions to PMI based on ownershipshare, and eliminating any double-counting if the emissions are already reported elsewhere. These emissions are currently excluded from the value chain inventory since
their contribution to the PMI’s Scope 3 emissions is below the materiality threshold.
Other (upstream)
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
There are currently no other (upstream) emissions at this time.

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Other (downstream)
Evaluation status
Not relevant, explanation provided
Metric tonnes CO2e
<Not Applicable>
Emissions calculation methodology<Not Applicable>
Percentage of emissions calculated using data obtained from suppliers or value chain partners<Not Applicable>
Please explain
There are currently no other (downstream) emissions at this time.

C-AC6.6/C-FB6.6/C-PF6.6(C-AC6.6/C-FB6.6/C-PF6.6) Can you break down your Scope 3 emissions by relevant business activity area?
Yes

C-AC6.6a/C-FB6.6a/C-PF6.6a

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(C-AC6.6a/C-FB6.6a/C-PF6.6a) Disclose your Scope 3 emissions for each of your relevant business activity areas.
Activity
Agriculture/Forestry
Scope 3 category
Purchased goods and services
Emissions (metric tons CO2e)
761226
Please explain
These emissions include those corresponding to agricultural practices and inputs such as seedling, fertilizers, curing fuels and crop protection agents. Our carbon footprint
is based on actual data (primary data) and average industry data (secondary data), including a number of estimates and assumptions, using impact databases. Elements ofour carbon footprint have been modelled using the Life Cycle Assessment (LCA) tool, Simapro. For our carbon footprint emissions, we undertook a 3rd party full scope 3
verification against ISO 14040 standards and the GHG Protocol Scope 3 Accounting and Reporting Standard. Due to the new baseline calculations, we have been able touse real data and in cases where no primary data was available extrapolated emissions from international databases such as Ecoinvent have been used.
Activity
Distribution
Scope 3 category
Upstream transportation and distribution
Emissions (metric tons CO2e)521617
Please explain
These emissions include those corresponding to upstream distribution due to ocean, air and overland transportation plus the warehouse emissions in distribution. Ourcarbon footprint is based on actual data (primary data) and average industry data (secondary data), including a number of estimates and assumptions, using impact
databases. Elements of our carbon footprint have been modelled using the Life Cycle Assessment (LCA) tool, Simapro. For our carbon footprint emissions, we undertook a
3rd party full scope 3 verification against ISO 14040 standards and the GHG Protocol Scope 3 Accounting and Reporting Standard. Due to the new baseline calculations,
we have been able to use real data and in cases where no primary data was available extrapolated emissions from international databases such as Ecoinvent have been
used.
Activity
Distribution
Scope 3 category
Downstream transportation and distribution
Emissions (metric tons CO2e)
50935
Please explain
These emissions include those corresponding to downstream distribution due to in market local distribution. Our carbon footprint is based on actual data (primary data) andaverage industry data (secondary data), including several estimates and assumptions, using impact databases. Elements of our carbon footprint have been modelled using
the Life Cycle Assessment (LCA) tool, Simapro. For our carbon footprint emissions, we undertook a 3rd party full scope 3 verification against ISO 14040 standards and the
GHG Protocol Scope 3 Accounting and Reporting Standard. Due to the new baseline calculations, we have been able to use real data and in cases where no primary data
was available extrapolated emissions from international databases such as Ecoinvent have been used.
Activity
Consumption
Scope 3 category
Use of sold products
Emissions (metric tons CO2e)
100263
Please explain
This activity considers the use of cigarette lighters. Our carbon footprint is based on actual data (primary data) and average industry data (secondary data), including
several estimates and assumptions, using impact databases. Elements of our carbon footprint have been modelled using the Life Cycle Assessment (LCA) tool, Simapro.
For our carbon footprint emissions, we undertook a 3rd party full scope 3 verification against ISO 14040 standards and the GHG Protocol Scope 3 Accounting andReporting Standard. Due to the new baseline calculations, we have been able to use real data and in cases where no primary data was available extrapolated emissions
from international databases such as Ecoinvent have been used.
Activity
Consumption
Scope 3 category
End of life treatment of sold products
Emissions (metric tons CO2e)
53103
Please explain
Downstream waste treatment and street cleaning related to cigarette butts and waste packaging. Our carbon footprint is based on actual data (primary data) and averageindustry data (secondary data), including several estimates and assumptions, using impact databases. Elements of our carbon footprint have been modelled using the Life
Cycle Assessment (LCA) tool, Simapro. For our carbon footprint emissions, we undertook a 3rd party full scope 3 verification against ISO 14040 standards and the GHG
Protocol Scope 3 Accounting and Reporting Standard. Due to the new baseline calculations, we have been able to use real data and in cases where no primary data wasavailable extrapolated emissions from international databases such as Ecoinvent have been used.

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C-AC6.8/C-FB6.8/C-PF6.8(C-AC6.8/C-FB6.8/C-PF6.8) Is biogenic carbon pertaining to your direct operations relevant to your current CDP climate change disclosure?
Yes

C-AC6.8a/C-FB6.8a/C-PF6.8a(C-AC6.8a/C-FB6.8a/C-PF6.8a) Account for biogenic carbon data pertaining to your direct operations and identify any exclusions.
CO2 emissions from biofuel combustion (processing/manufacturing machinery)Emissions (metric tons CO2)7285.2
Methodology
Default emissions factors
Please explain
These are biogenic emission for the consumption of biomass in our factories. The emission factor used come from DEFRA2020 database.
CO2 emissions from biofuel combustion (other)
Emissions (metric tons CO2)
1187.01
Methodology
Default emissions factors
Please explain
These are biogenic emission for the consumption of biodiesel and bioethanol in our fleet. The emission factor used come from DEFRA2020 database.

C-AC6.9/C-FB6.9/C-PF6.9(C-AC6.9/C-FB6.9/C-PF6.9) Do you collect or calculate greenhouse gas emissions for each commodity reported as significant to your business in CAC0.7/FB0.7/PF0.7?
Agricultural commodities
TobaccoDo you collect or calculate GHG emissions for this commodity?
Yes
Please explain
These emissions include those corresponding to agricultural practices and inputs such as seeding, fertilizing, curing fuels and crop protection agents and the logistics
required to source tobacco from farms to our buying stations and from there to the stemmeries.
Agricultural commodities
Timber
Do you collect or calculate GHG emissions for this commodity?
Yes
Please explain
We collect and calculate emissions from curing fuels used for tobacco and other direct materials used in our manufacturing process like packaging, cigarette papers,
acetate tow for filters, etc.

C-AC6.9a/C-FB6.9a/C-PF6.9a

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(C-AC6.9a/C-FB6.9a/C-PF6.9a) Report your greenhouse gas emissions figure(s) for your disclosing commodity(ies), explain your methodology, and include any
exclusions.
TimberReporting emissions by
Total
Emissions (metric tons CO2e)
797517
Denominator: unit of production<Not Applicable>
Change from last reporting year
Lower
Please explain
In 2020, we accounted for 797,517 tCO2e of emissions coming from the timber that is part of our supply chain, in detail 78% of the emissions came from our timber-basedmaterials supply chain and the remainder from the timber based curing fuels for our tobacco leaf supply chain. Our total emissions in the previous year were 1,247,823
tCO2e resulting in 36% decrease overall. We achieved this by engaging with other direct materials suppliers using timber as raw material and inviting them to participate in
our CDP supply chain; we collect primary data (e.g., emissions allocated) and collaborate with them to reduce carbon footprint. In the tobacco leaf supply chain we could
reduce the curing emissions related to timber materials by more than 50% proving that the firewood used by our farmers is sustainable and therefore does not cause land
use change of forest degradation consequently lowering significantly the emissions for the whole process.
TobaccoReporting emissions by
Total
Emissions (metric tons CO2e)
911160Denominator: unit of production<Not Applicable>
Change from last reporting year
Lower
Please explain
In 2020, we reduced our emissions by 334,144 tCO2e in our tobacco supply chain. Our total emissions in the previous year were 1,245,304 tCO2e, resulting in a 27%
decrease. Total emissions for tobacco include all activities performed and inputs used by farmers and related to tobacco seedling production, fertilizers, pesticides,
transport, mechanization and curing. Our Good Agricultural Practices (GAP) program promotes environmentally sustainable practices, including the elimination of highly
hazardous pesticides, the promotion of bio-pesticides and the overall reduction of pesticide use, biodiversity management and reforestation, as well as water, soil, andwaste management. A significant percentage of the total GHG emissions attributed to our tobacco purchases result from the curing process of Virginia flue-cured tobaccoand emissions are related greatly to the unsustainable use of firewood for curing causing deforestation and being linked to land use change. With our Renewable Curing
Fuel program we have focused on minimizing the risk by supporting a sustainable firewood sourcing system validated by the application of an internal protocol (ourMonitoring Framework) that is audited on a yearly basis by a third party. For 2020 all our Virginia flue cured tobacco suppliers were audited and assessed as fully compliant
and the relative emissions that we calculated via our proprietary reporting system resulted in a further decrease from the previous years. Compared to our 2010 baseline in2020 we have reached a 77% reduction in the emissions generated by tobacco curing and 67% of our global flue cured tobacco purchase was cured with timber-based
biomass. The efforts on the ground with our suppliers and the strong assurance process we carry out on a yearly basis allowed to validate that 100% of our flue cured
tobacco in 2020 was purchased at no risk of deforestation of primary forests bringing the risk for land use change related to tobacco curing to the minimum.

C6.10(C6.10) Describe your gross global combined Scope 1 and 2 emissions for the reporting year in metric tons CO2e per unit currency total revenue and provide any
additional intensity metrics that are appropriate to your business operations.
Intensity figure
0.00001439
Metric numerator (Gross global combined Scope 1 and 2 emissions, metric tons CO2e)
412999Metric denominator
unit total revenue
Metric denominator: Unit total
28694000000
Scope 2 figure used
Market-based% change from previous year
22.83
Direction of change
Decreased
Reason for change
The reasons for change are: i) the decrease in absolute CO2e emissions by 25.70%% from 555,882 tons in 2019 to 412,999 tons in 2020, driven by 66 carbon reduction
activities in our manufacturing facilities such as on-site renewable projects, energy efficiency projects, like for example the 40 projects in HVAC systems optimization that
can yield more than 18.000 tonnes of CO2 reduction per year and increased green electricity sourcing and a 3.7% decrease in net revenues (from $29.8 billion in 2019 to$28.7 billion in 2020). COVID 19 pandemic and volumes decline impact have been important drivers for 2020 CO2 reduction performances; and therefore 2020 landing
figures can not be taken as benchmark for future target (i.e., similar levels of reduction are not replicable in 2021). Since the beginning of the pandemic, the priority has
been to ensure the safety of our employees and their families. The company immediately activated the remote work policy and tools across our operations. Energy
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consumption consequently dropped in the offices that stayed completely closed and increased in the facilities that stayed operational, with reduced capacity, due to theintensive operation of the ventilation systems; in total, our emissions from the offices dropped by 31 percent versus 2019. Emissions from our fleet saw a great decline aswell, of around 26 percent versus 2019, either as an impact of the home office but also as a result of the lockdown measures implemented all over the globe and the lower
number of kilometers driven by our employees, as well as our efficiency efforts. The intensity number is derived from our 2020 CO2e emissions of 412,999 tons divided by
net revenues of $28.7 billion. The term “net revenues” refers to operating revenues from the sale of our products, excluding excise taxes, and net of sales and promotion
incentives. We believe that the most appropriate basis of disclosure is net revenue (as defined) and in line with CDP guidance.
Intensity figure
5.83
Metric numerator (Gross global combined Scope 1 and 2 emissions, metric tons CO2e)
412999Metric denominator
full time equivalent (FTE) employee
Metric denominator: Unit total
70849
Scope 2 figure used
Market-based% change from previous year
22.92
Direction of change
Decreased
Reason for change
The main reason for change is the decrease in absolute CO2e emissions by 25.70%from 555,882 tons in 2019 to 412,999 tons in 2020, mainly driven by carbon reduction
activities in our manufacturing facilities (such as on-site renewable projects, energy efficiency projects and increased green electricity sourcing) and a 4% decrease of total
number of employees to 70,849which have a minimal impact in the calculation. COVID 19 pandemic have been an important driver for 2020 CO2 reduction performances;and therefore 2020 landing figures can not be taken as benchmark for future target (i.e., similar levels of reduction are not replicable in 2021). Since the beginning of thepandemic, the priority has been to ensure the safety of our employees and their families. The company immediately activated the remote work policy and tools across ouroperations. Energy consumption consequently dropped in the offices that stayed completely closed and increased in the facilities that stayed operational, with reduced
capacity, due to the intensive operation of the ventilation systems; in total, our emissions from the offices dropped by 31 percent versus 2019. Emissions from our fleet saw
a great decline as well, of around 26 percent versus 2019, as an impact of the home office but also as a result of the lockdown measures implemented all over the globe
and the lower number of kilometers driven by our employees, as well as our efficiency efforts. The intensity number is worked out from our 2020 CO2e emissions of
412,999 tons divided by 70,849 FTE employees. In 2019 we had 555,882 tons of CO2e emissions and 73500 FTE employees
Intensity figure418.24
Metric numerator (Gross global combined Scope 1 and 2 emissions, metric tons CO2e)
305381
Metric denominator
Other, please specify (Combustible and smoke free-products shipment volume (in billion units))
Metric denominator: Unit total
730.16
Scope 2 figure used
Market-based% change from previous year
16
Direction of change
Decreased
Reason for changeThis covers Scope 1 and 2 emissions from our manufacturing facilities only. We decreased our CO2 intensity from 498kg CO2 per million cigarettes equivalent sold in 2019
to 418 kg CO2 per million cigarettes equivalent sold in 2020. This was driven by our Energy Management Program activities, and renewable energy projects and slightly
declining production volumes. Moreover, our Drive 4 Zero program, which aims to eliminate economic losses caused by inefficient energy use. Under the program, we lookfor industrial and manufacturing solutions such as heat recovery and manufacturing-process optimization. We also promote behavioral change through our Zero Loss
Mindset program. To support our Drive 4 Zero program, an Energy Saving Initiatives (ESIs) program started in 2019, triggering more than 500 projects worldwide including
among many others LED lighting, HVAC upgrade, chilled water optimization and heat recovery projects. The intensity number is worked out from our 2020 305,381 tCO2eemissions (for manufacturing) divided by 730 billion cigarettes equivalent sold volume. In 2019 we had 394,447 tons of CO2e emissions and 792 billion cigarettes
equivalent sold. The reduction of 16% is due to the Energy Saving Initiatives listed in section 4.3b, the increase in the purchased renewable electricity and the impact of
COVID 19 pandemic that has been an important driver for 2020 CO2 reduction performances; and therefore 2020 landing figures can not be taken as benchmark for futuretarget (i.e., similar levels of reduction are not replicable in 2021).

C7. Emissions breakdowns

C7.1(C7.1) Does your organization break down its Scope 1 emissions by greenhouse gas type?
Yes

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C7.1a(C7.1a) Break down your total gross global Scope 1 emissions by greenhouse gas type and provide the source of each used greenhouse warming potential(GWP).
Greenhouse gas

Scope 1 emissions (metric tons of CO2e)

GWP Reference

CO2321464IPCC Fifth Assessment Report (AR5 – 100 year)

CH4

395

IPCC Fifth Assessment Report (AR5 – 100 year)

N2O

774

IPCC Fifth Assessment Report (AR5 – 100 year)

C7.2(C7.2) Break down your total gross global Scope 1 emissions by country/region.

CDP

Country/Region

Scope 1 emissions (metric tons CO2e)

Albania

73.86

Algeria252.51

Argentina

7537.74

Armenia

117.49Australia

533.99Bangladesh

9.08

Bosnia & Herzegovina

87.62

Brazil7718.85

Bulgaria

207.03

Canada2543.8

Chile

32.58

China

49.58

China, Hong Kong Special Administrative Region

47.27

China, Macao Special Administrative Region

0.16

Colombia368.33

Costa Rica

558.8

Croatia281.15

Czechia

4239.41

Denmark

162.79Dominican Republic

834.08Ecuador686.86

Egypt

851.6

El Salvador

98.92

Finland

44.53

France1008.66

Georgia

141.82Germany

15697.13

Greece7732.99

Guatemala128.4

Hungary

831.19

India

52.21

Indonesia

40977.89

Italy25907.04

Jamaica

64.13

Japan

3461.46

Jordan443.79

Kazakhstan

3908.8

Kuwait40.41

Lebanon

66.7

Malaysia

10231.06

Mexico4961.45

Morocco207.4

Netherlands

31389.62

Lithuania

1796.24

New Zealand

199.23

Nicaragua

85.21

Norway19.87

Pakistan4263.3

Panama22.28

Paraguay

18.11

Peru

41.54

Philippines

21962.18

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Country/Region

Scope 1 emissions (metric tons CO2e)

Poland14192.67

Republic of Korea

8212.66

Republic of Moldova

84.44

Réunion85.91

Romania

12794.02

Russian Federation

30601.41

Senegal667.25

Serbia5084.89

Singapore

431

Slovakia

376.06

Slovenia

77.56

South Africa

1037

Spain

906.25

Sweden240.93

Switzerland

4472.33

Taiwan, Greater China

305.07

North Macedonia

81.03

Thailand1067.26

Tunisia137.59Turkey21850.79

Ukraine8235.41

United Arab Emirates

420.19

United Kingdom of Great Britain and Northern Ireland297.21

Uruguay

17.83

Venezuela (Bolivarian Republic of)

8.11

Viet Nam

303.21Other, please specify (Rest of the world (where we do business))

981.7

Israel843.11

Portugal

5819.73

Nigeria

2.69

C7.3(C7.3) Indicate which gross global Scope 1 emissions breakdowns you are able to provide.
By activity

C7.3c(C7.3c) Break down your total gross global Scope 1 emissions by business activity.
Activity

Scope 1 emissions (metric tons CO2e)

Manufacturing

240092.25

Offices and Warehouses

3083.73

Vehicle Fleet

78475.8

Private Aircraft

981.69C-AC7.4/C-FB7.4/C-PF7.4(C-AC7.4/C-FB7.4/C-PF7.4) Do you include emissions pertaining to your business activity(ies) in your direct operations as part of your global gross Scope 1
figure?
Yes

C-AC7.4b/C-FB7.4b/C-PF7.4b

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(C-AC7.4b/C-FB7.4b/C-PF7.4b) Report the Scope 1 emissions pertaining to your business activity(ies) and explain any exclusions. If applicable, disaggregate youragricultural/forestry by GHG emissions category.
Activity
Processing/Manufacturing
Emissions category<Not Applicable>
Emissions (metric tons CO2e)
240092.25
Methodology
Default emissions factor
Please explain
This category regroups all activities related to manufacturing The emission factor used come from DEFRA2020 database.
Activity
Distribution
Emissions category<Not Applicable>
Emissions (metric tons CO2e)82541.22
Methodology
Default emissions factor
Please explain
This category regroups all activities related to distribution (including offices, warehouses and aircraft) The emission factor used come from DEFRA2020 database.

C7.5(C7.5) Break down your total gross global Scope 2 emissions by country/region.

CDP

Country/Region

Scope 2, location-based(metric tons CO2e)

Scope 2, market-based(metric tons CO2e)

Purchased and consumed electricity,heat, steam or cooling (MWh)Purchased and consumed low-carbon electricity, heat, steam or coolingaccounted for in Scope 2 market-based approach (MWh)Albania22.88122.881

57.99

0Algeria

20.44920.44940.53

0Argentina

9319.513356.4528942.57

18518.8

Armenia

8.69

8.69

45.61

0

Aruba

20.72

20.72

32.05

0

Australia

279.41

279.41392.440Austria

3.02

3.02

48.53

0

Lithuania

2210.39354.5629069.31

26935.2

Bangladesh

10.43

10.43

21.13

0

Netherlands

16014.5

67.1938330.53

38169.72

Bosnia & Herzegovina

63.63

63.63

139.990Brazil1676.711676.7116800.69

0Bulgaria

74.3

74.3

165.880Canada1984.94

417.6815048.84

11882.19

Chile

12.17

12.17

30.3

0

China

44.85

44.85

72.73

0

Colombia

107.45107.45669.460

Costa Rica

3.26

3.26

350.690

Croatia29.62

0203.57144.28Curaçao

21.71

21.71

38.18

0

Czechia

12505.2

77.29

25232.45

25076.49

Denmark

1.93

1.93

18.97

0

Dominican Republic

397.71397.71708.040

Ecuador332.34332.341675.08

0

Egypt

45.29

45.29

93.26

0

El Salvador

26.08

26.08

152.4

0

Finland

2.44

2.44

20.69

0

France7.87

7.87

142.770

Georgia

6.57

6.57

78.98

0

Germany10748.37

418.6428955.26

25734.26

Greece13825.75

025353.11

25353.11

Guatemala

38.18

38.18

100.050China, Hong Kong Special
Administrative Region

404.64404.64548.070Hungary

76.5

76.5

301.32

0

India

97.27

97.27

129.360Indonesia

70533.49

8660.2193468.69

81938.6

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Country/Region

Scope 2, location-based(metric tons CO2e)

Scope 2, market-based(metric tons CO2e)

Purchased and consumed electricity,heat, steam or cooling (MWh)Purchased and consumed low-carbon electricity, heat, steam or coolingaccounted for in Scope 2 market-based approach (MWh)Israel361.84361.84731.140

Italy18702.97

340.6267150.88

66044.98

Jamaica

16.29

16.29

28.09

0

Japan

397.07397.07790.670

Jordan2064.222064.224680.780

Kazakhstan

6693.28805.6711154.17

9215.24

Republic of Korea

14286.98

14286.98

26709.62

0

Kuwait

16.84

16.84

26.92

0

Lebanon

44.22

44.22

61

0

China, Macao Special
Administrative Region

2.1

2.1

4.66

0

Malaysia

5016.41

176.9810873.2

10605.81

Mexico11651.83

423.8425535.45

24606.59

Republic of Moldova

17.49

17.49

35.94

0

Morocco

35.33

35.33

55.62

0

New Zealand

7.78

0

71.71

71.71

Nicaragua

17.11

17.11

57.41

0

Nigeria

12.98

12.98

31.28

0

Norway

0.23

0.23

26.22

0

Pakistan

2621.97

2621.977308.37635

Panama

3.02

3.02

17.33

0

Paraguay

2.06

2.06

2.29

0

Peru

7.55

7.55

37.81

0

Philippines

38589.83

2314.95

54932.14

51007.32

Poland50026.93615.1178274.14

65396.36

Portugal

7179.47024181.42

24181.42

Romania

11002.28

63.5

32852.42

32662.8

Senegal3438.743438.74

3993.890

Serbia14733.15

77.03

20116.47

19999.45

Singapore

1369.87

1369.873520.60

Slovakia

15.03

15.03

94.32

0

Slovenia

59.15

59.15

305.490South Africa

2304.222304.222572.25

0

Spain

75.1

75.1

289.390

Sweden

21.97

21.23

179.5956.59

Switzerland

943.4124.08

35559.45

35405.36

Thailand

86.93

86.93

179.360Tunisia

22.21

22.21

51.84

0

Turkey13362.71

358.9828866

28095.83

Ukraine8964.978964.9723577.64

0United Arab Emirates

87.72

87.72

168.640

United Kingdom of GreatBritain and Northern Ireland

208.12

208.12907.230Uruguay

0.55

0.55

24.22

0

United States of America

232.04232.04562.110Viet Nam

39.37

39.37

86.56

0

Russian Federation

27600.9927600.9981328.65

0Taiwan, Greater China

200.98200.98325.9

0Venezuela (Bolivarian
Republic of)273.19273.19868.36

0

North Macedonia

42.08

42.08

67.65

0

Réunion

56.55

56.55

80.21

0

C7.6
(C7.6) Indicate which gross global Scope 2 emissions breakdowns you are able to provide.
By activity

C7.6c(C7.6c) Break down your total gross global Scope 2 emissions by business activity.

CDP

Activity

Scope 2, location-based (metric tons CO2e)

Scope 2, market-based (metric tons CO2e)

Manufacturing

35767065289

Offices and Warehouses

26225

25077

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C7.9(C7.9) How do your gross global emissions (Scope 1 and 2 combined) for the reporting year compare to those of the previous reporting year?
Decreased

C7.9a(C7.9a) Identify the reasons for any change in your gross global emissions (Scope 1 and 2 combined), and for each of them specify how your emissions compare
to the previous year.
Change in Direction Emissions
Please explain calculation
emissions of change value(metric(percentage)
tons
CO2e)
Change in35647
renewableenergyconsumption

Decreased 6.41

The change in renewable energy consumption comes from the purchased renewable electricity in our manufacturing plant + the generation of renewableenergy generated. Our total Scope 1 and 2 emissions in the 2019 was 555,882 tCO2e, therefore a 6.41% reduction (35,647/555,882)*100 = 6.41%

Otheremissions
reduction
activities

92278

Decreased 16.6

The 92,278 tCO2e reduction comes from the relentless drive of our energy saving and efficiency team implementing processes through our Drive for Zero
program. Compared to our scope 1 and 2 in 2019, this represents a 16.6% taking in consideration the increased energy demand from our Smoke-FreeProducts (the process to manufacture heated tobacco units is more energy intensive than for conventional cigarettes, due to the production of the cast leaf
tobacco in the magnitude of three times more energy than conventional products). Our total Scope 1 and 2 emissions in the 2019 was 555,882 tCO2e,
therefore a 16.60% reduction (92,278/555,882)*100 = 16.60%

Divestment0

No change 0

PMI did not have any changes due to change in divestment in 2020.

Acquisitions 0

No change 0

PMI did not have any changes due to change in acquisitions in 2020.

Mergers0

No change 0

PMI did not have any changes due to change in mergers in 2020.

Change in
output14958

Decreased 2.69

The main driver for this decrease was the impact of COVID 19 pandemic in our fleet emissions which saw a great decline versus 2019,as an impact of thehome office but also as a result of the lockdown measures implemented all over the globe and the lower number of kilometres driven by our employees and adecrease in production of our conventional products in volume. This effect outset the ramp up in the production of smoke free products - (the process to
manufacture heated tobacco units is more energy intensive than for conventional cigarettes, due to the production of the cast leaf tobacco (magnitude of threetimes more energy than conventional products)., In 2020, 14,958tCO2e decreased in our scope 1 and 2 , compared to a total of 555,882, therefore a14,958/555,882*100 = 2.69% decrease.

Change in0methodology

No change 0

PMI did not have any changes due to change in methodology in 2020.

Change inboundary0

No change 0

PMI did not have any changes due to change in boundary in 2020.

Change inphysicaloperatingconditions

0

No change 0

PMI did not have any changes due to change in physical operating in 2020.

Unidentified 0

No change 0

PMI did not have any changes due to change in unidentified in 2020.

Other

Decreased 1.63

Since the beginning of the COVID 19 pandemic, the priority has been to ensure the safety of our employees and their families. The company immediately
activated the remote work policy and tools across our operations. With our people staying at home, energy consumption consequently dropped in the officesthat stayed completely closed and increased in the facilities that stayed operational, with reduced capacity, due to the intensive operation of the ventilation
systems; in total, our emissions from the offices dropped by 31 percent versus 2019. In 2020, 9,071 tCO2e decreased in our scope 1 and 2 , compared to a
total of 555,882, therefore a 9,071 /555,882*100 = 1.63% decrease.

9071

C7.9b
(C7.9b) Are your emissions performance calculations in C7.9 and C7.9a based on a location-based Scope 2 emissions figure or a market-based Scope 2
emissions figure?
Market-based

C8. Energy

C8.1(C8.1) What percentage of your total operational spend in the reporting year was on energy?
More than 0% but less than or equal to 5%

C8.2

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(C8.2) Select which energy-related activities your organization has undertaken.
Indicate whether your organization undertook this energy-related activity in the reporting year
Consumption of fuel (excluding feedstocks)

Yes

Consumption of purchased or acquired electricity

Yes

Consumption of purchased or acquired heat

Yes

Consumption of purchased or acquired steamNo

Consumption of purchased or acquired cooling

No

Generation of electricity, heat, steam, or cooling

Yes

C8.2a
(C8.2a) Report your organization’s energy consumption totals (excluding feedstocks) in MWh.
MWh from non-renewable sources

Total (renewable and non-renewable) MWh

Consumption of fuel (excluding feedstock)

Heating value

LHV (lower heating value) 25466.53

MWh from renewable sources

1314775.79

1340242.32

Consumption of purchased or acquired electricity<Not Applicable>

612693.56

210671.63823365.19

Consumption of purchased or acquired heat

<Not Applicable>

024427.27

24427.27

Consumption of purchased or acquired steam<Not Applicable><Not Applicable><Not Applicable><Not Applicable>

Consumption of purchased or acquired cooling<Not Applicable><Not Applicable><Not Applicable><Not Applicable>

Consumption of self-generated non-fuel renewable energy<Not Applicable>

9027.92<Not Applicable>

9027.92

Total energy consumption<Not Applicable>

647188.01

1549874.69

2197062.7

C8.2b(C8.2b) Select the applications of your organization’s consumption of fuel.
Indicate whether your organization undertakes this fuel application
Consumption of fuel for the generation of electricity

Yes

Consumption of fuel for the generation of heat

Yes

Consumption of fuel for the generation of steam

Yes

Consumption of fuel for the generation of coolingNo

Consumption of fuel for co-generation or tri-generation

Yes

C8.2c
(C8.2c) State how much fuel in MWh your organization has consumed (excluding feedstocks) by fuel type.
Fuels (excluding feedstocks)
Jet Kerosene
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
3763
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat0
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
2.29
Unit
kg CO2e per liter
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment

CDP

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Fuels (excluding feedstocks)
Bioethanol
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
4184
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat0
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
0.0084Unit
kg CO2e per liter
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
Biodiesel
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
433
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat0
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
0.1658Unit
kg CO2e per liter
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
Fuel Oil Number 4
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
24756
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat0
MWh fuel consumed for self-generation of steam
24756
MWh fuel consumed for self-generation of cooling<Not Applicable>
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MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
79.1219Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
PetrolHeating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
166654
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat263
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
67.1226
Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
Natural Gas
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
943692
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat
198243
MWh fuel consumed for self-generation of steam
568056
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
176935Emission factor
56.5944Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
Coal
Heating value
LHV (lower heating value)

CDP

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Total fuel MWh consumed by the organization
251
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat251
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
93.6827Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
Liquefied Petroleum Gas (LPG)
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
25239
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat25239
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
63.9736Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
Wood Chips
Heating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
20850
MWh fuel consumed for self-generation of electricity0
MWh fuel consumed for self-generation of heat61
MWh fuel consumed for self-generation of steam
20788
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
4.2917

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Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment
Fuels (excluding feedstocks)
DieselHeating value
LHV (lower heating value)
Total fuel MWh consumed by the organization
150421
MWh fuel consumed for self-generation of electricity
17149
MWh fuel consumed for self-generation of heat1334
MWh fuel consumed for self-generation of steam0
MWh fuel consumed for self-generation of cooling<Not Applicable>
MWh fuel consumed for self-cogeneration or self-trigeneration
0
Emission factor
74.6978Unit
kg CO2e per GJ
Emissions factor source
Emission factor provided by UK Government (DEFRA)
Comment

C8.2d(C8.2d) Provide details on the electricity, heat, steam, and cooling your organization has generated and consumed in the reporting year.
Total Gross generation(MWh)

Generation that is consumed by theorganization (MWh)Gross generation from renewable sources Generation from renewable sources that is consumed by the(MWh)organization (MWh)Electricity 81055.61

81039.98

8985.278969.64

Heat

191702.67

191702.67

171.6

171.6

Steam

507603.41

507603.41

17670.14

17670.14

Cooling582634.38

582634.38

435164.24

435164.24

C8.2e(C8.2e) Provide details on the electricity, heat, steam, and/or cooling amounts that were accounted for at a zero emission factor in the market-based Scope 2
figure reported in C6.3.
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Czechia
MWh consumed accounted for at a zero emission factor
25207
Comment
Refers to our factory in Czechia
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
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Lithuania
MWh consumed accounted for at a zero emission factor
24893
Comment
Refers to our factory in Lithuania
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, supported by energy attribute certificates
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Germany
MWh consumed accounted for at a zero emission factor
16785
Comment
Refers to the factory in Berlin
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, supported by energy attribute certificates
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Germany
MWh consumed accounted for at a zero emission factor
8935
Comment
Refers to the factory in Dresden
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, supported by energy attribute certificates
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Germany
MWh consumed accounted for at a zero emission factor
412
Comment
Refers to the offices in Munich.
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeLow-carbon energy mix
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Greece
MWh consumed accounted for at a zero emission factor
24944
Comment
Refers to our factory in Greece
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeLow-carbon energy mix
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Greece
MWh consumed accounted for at a zero emission factor
344
Comment
Refers to our tobacco warehouses in Greece
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology type

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WindCountry/area of consumption of low-carbon electricity, heat, steam or cooling
PolandMWh consumed accounted for at a zero emission factor
67729
Comment
Refers to our factory in Poland.
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, supported by energy attribute certificates
Low-carbon technology typeWind
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Portugal
MWh consumed accounted for at a zero emission factor
24177
Comment
Refers to our factory, offices and warehouses in Portugal.
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeWind
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Romania
MWh consumed accounted for at a zero emission factor
32663
Comment
Refers to our factory in Romania.
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeWind
Country/area of consumption of low-carbon electricity, heat, steam or cooling
SerbiaMWh consumed accounted for at a zero emission factor
19950
Comment
Refers to our factory in Serbia.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or coolingIndonesia
MWh consumed accounted for at a zero emission factor
82000
Comment
This refers to factories in Indonesia.
Sourcing method
Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Netherlands
MWh consumed accounted for at a zero emission factor
38170
Comment
Refers to our factory in the Netherlands.
Sourcing method

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Unbundled energy attribute certificates, Guarantees of Origin
Low-carbon technology type
Other, please specify (Wind, marine, solar )Country/area of consumption of low-carbon electricity, heat, steam or cooling
Italy
MWh consumed accounted for at a zero emission factor
60635
Comment
This refers to our 2 factories in Italy.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
TurkeyMWh consumed accounted for at a zero emission factor
27900
Comment
This refers to our factory in Turkey.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology typeWind
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Argentina
MWh consumed accounted for at a zero emission factor
18450
Comment
This refers to our factory in Argentina. Note that i-RECs are not available in Argentina. The above certificate have been redeemed from Brazilian registry.
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, not supported by energy attribute certificates
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
CanadaMWh consumed accounted for at a zero emission factor
11882
Comment
This refers to our factory in Canada.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology typeSolar
Country/area of consumption of low-carbon electricity, heat, steam or cooling
MexicoMWh consumed accounted for at a zero emission factor
25109
Comment
This refers to our factory in Mexico.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology type
GeothermalCountry/area of consumption of low-carbon electricity, heat, steam or cooling
Philippines
MWh consumed accounted for at a zero emission factor
49521
Comment
This refers to our two factories in the Philippines.
CDP

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Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, not supported by energy attribute certificates
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Switzerland
MWh consumed accounted for at a zero emission factor
35074
Comment
This refers to our factory, offices and warehouses in Switzerland.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology typeWind
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Kazakhstan
MWh consumed accounted for at a zero emission factor
9957
Comment
This refers to our factory in Kazakhstan.
Sourcing method
Unbundled energy attribute certificates, International REC Standard (I-RECs)
Low-carbon technology typeHydropower
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Malaysia
MWh consumed accounted for at a zero emission factor
10606
Comment
This refers to our factory in Malaysia.
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, not supported by energy attribute certificates
Low-carbon technology typeLow-carbon energy mix
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Sweden
MWh consumed accounted for at a zero emission factor
55
Comment
This refers to our offices in Sweden.
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, not supported by energy attribute certificates
Low-carbon technology typeLow-carbon energy mix
Country/area of consumption of low-carbon electricity, heat, steam or cooling
Croatia
MWh consumed accounted for at a zero emission factor
144
Comment
This refers to our offices in Croatia.
Sourcing method
Green electricity products (e.g. green tariffs) from an energy supplier, not supported by energy attribute certificates
Low-carbon technology typeLow-carbon energy mix
Country/area of consumption of low-carbon electricity, heat, steam or cooling
New Zealand
MWh consumed accounted for at a zero emission factor
72

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Comment
This refers to our offices in New Zealand.

C9. Additional metrics

C9.1(C9.1) Provide any additional climate-related metrics relevant to your business.
Description
Waste
Metric value
3.09
Metric numerator
Waste landfilled or incineration w/o heat recovery
Metric denominator (intensity metric only)
Total waste generated% change from previous year
1
Direction of change
Decreased
Please explain
The start-up of our new RRP facilities in Italy, impacted our disposal ratio in 2017. Since 2018 we solved this issue and we are back on track, including in 2020, to maintainour long-term target to reduce and keep our disposal to landfill ratio below 5%.

C10. Verification

C10.1(C10.1) Indicate the verification/assurance status that applies to your reported emissions.
Verification/assurance status
Scope 1

Third-party verification or assurance process in place

Scope 2 (location-based or market-based)

Third-party verification or assurance process in place

Scope 3

Third-party verification or assurance process in place

C10.1a(C10.1a) Provide further details of the verification/assurance undertaken for your Scope 1 emissions, and attach the relevant statements.
Verification or assurance cycle in place
Annual process
Status in the current reporting year
Complete
Type of verification or assurance
Reasonable assurance
Attach the statement
PMI GHG Verification Statement 2020 external - v3.pdf
Page/ section reference
Page 3: total Scope 1 Page 2 and 3: method and scope
Relevant standard
ISO14064-3
Proportion of reported emissions verified (%)
100

C10.1b
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(C10.1b) Provide further details of the verification/assurance undertaken for your Scope 2 emissions and attach the relevant statements.
Scope 2 approach
Scope 2 market-based
Verification or assurance cycle in place
Annual process
Status in the current reporting year
Complete
Type of verification or assurance
Reasonable assurance
Attach the statement
PMI GHG Verification Statement 2020 external - v3.pdf
Page/ section reference
Page 3: total Scope 2 market-based and location based Page 2 and 3: method and scope
Relevant standard
ISO14064-3
Proportion of reported emissions verified (%)
100
Scope 2 approach
Scope 2 location-based
Verification or assurance cycle in place
Annual process
Status in the current reporting year
Complete
Type of verification or assurance
Reasonable assurance
Attach the statement
PMI GHG Verification Statement 2020 external - v3.pdf
Page/ section reference
Page 3: total Scope 2 market-based and location based Page 2 and 3: method and scope
Relevant standard
ISO14064-3
Proportion of reported emissions verified (%)
100

C10.1c(C10.1c) Provide further details of the verification/assurance undertaken for your Scope 3 emissions and attach the relevant statements.
Scope 3 category
Scope 3 (upstream & downstream)
Verification or assurance cycle in place
Annual process
Status in the current reporting year
Complete
Type of verification or assurance
Reasonable assurance
Attach the statement
PMI Scope 3 GHG Verification Statement 2020 - v1.0 .pdf
Page/section reference
Page 1: total Scope 3 Page 2 and 3: method and scope.
Relevant standard
ISO14064-3
Proportion of reported emissions verified (%)
100

C10.2
(C10.2) Do you verify any climate-related information reported in your CDP disclosure other than the emissions figures reported in C6.1, C6.3, and C6.5?
Yes

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C10.2a(C10.2a) Which data points within your CDP disclosure have been verified, and which verification standards were used?
Disclosure module
verification relates toData verified

Verification
standard

Please explain

C6. Emissions data

Year on year change in emissions(Scope 1 and 2)

ISO14064-3

PMI has chosen to verify this data in order to certify our year on year progress on carbon emission reductions in all ouroperations (factories, offices, warehouses and fleet).
PMI GHG Verification Statement 2020 external - v3.pdf

C6. Emissions data

Year on year change in emissions(Scope 3)

ISO14064-3

PMI has chosen to verify this data from our carbon footprint model in order to certify our year on year progress on carbon
emission across outvalue chain.
PMI Scope 3 GHG Verification Statement 2020 - v1.0 .pdf

C11. Carbon pricing

C11.1(C11.1) Are any of your operations or activities regulated by a carbon pricing system (i.e. ETS, Cap & Trade or Carbon Tax)?
Yes

C11.1a(C11.1a) Select the carbon pricing regulation(s) which impacts your operations.
EU ETSSwitzerland carbon tax
Ukraine carbon tax

C11.1b
(C11.1b) Complete the following table for each of the emissions trading schemes you are regulated by.
EU ETS% of Scope 1 emissions covered by the ETS
20% of Scope 2 emissions covered by the ETS
0Period start date
January 1 2020
Period end date
December 31 2020
Allowances allocated26157
Allowances purchased
44153
Verified Scope 1 emissions in metric tons CO2e
46710
Verified Scope 2 emissions in metric tons CO2e0
Details of ownership
Facilities we own and operate
Comment
The “% scope 1 emissions covered”, covers emissions from our manufacturing sites in Italy, the Netherlands and Romania. Additional information: 1. PMI other European
manufacturing sites, in 2020 Czech Republic, Greece, and Poland were below combustion capacity threshold to be included in the scheme. Lithuania, Germany andPortugal sites have been delisted from the EU ETS scheme due to the energy reduction programs conducted. 2. Scope 2 not included, only scope 1.

C11.1c

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(C11.1c) Complete the following table for each of the tax systems you are regulated by.
Switzerland carbon tax
Period start date
January 1 2020
Period end date
December 31 2020
% of total Scope 1 emissions covered by tax
0.51
Total cost of tax paid
576754
Comment
Ukraine carbon tax
Period start date
January 1 2020
Period end date
December 31 2020
% of total Scope 1 emissions covered by tax
1.81
Total cost of tax paid
2300
Comment

C11.1d(C11.1d) What is your strategy for complying with the systems you are regulated by or anticipate being regulated by?
European Union Allowances (EUA)’s prices have shown a strong up-moving trend in 2020. The main reason behind this uptrend is an expectation of an unbalanced market
on the demand side mainly due to the activity of the EU ETS system to reduce the oversupply number of credits in the market and thus low prices in the past and a highdemand of credits on the voluntary market. In order to mitigate this impact reducing energy consumption thorough increasing energy efficiency in our factories is a priority. At
PMI, we started in 2012 our Global Energy Management Program paired with local reduction initiatives, targeting energy and CO2 savings to minimize the need forpurchasing EUAs. This program represents PMI’s main component of its strategy to comply with the relevant ETS. We balance our allowances purchased over a 3-year
timeframe. As a result of the efforts, energy reductions have enabled our factories in Portugal, Germany and Lithuania to be removed from the EU ETS scheme in the last 4
years (moving below total combustion capacity thresholds). Regarding emerging regulations, we are monitoring closely and anticipating the strategic position of ourmanufacturing plant vs. the potential impact of such cap and trade mechanism or carbon tax. For example, with Korea ETS , it is our understanding that a company will be
included in the scheme if the average CO2 emission of the last three years is over 125,000 tons/yr. South Korea is a strategic market where we launched our smoke-free
products and we may increase production capacity in the future. Considering that currently our activities resume to an average 25,000tons/yr CO2 emissions, we could
increase the capacity without immediate threats from such carbon tax. Moreover, through the implementation of our global program “Drive for Zero”, we aim to improve
efficiency in our manufacturing facilities and eliminate losses, reducing emissions intensity to further mitigate the impact of emerging regulations in South Korea.

C11.2(C11.2) Has your organization originated or purchased any project-based carbon credits within the reporting period?
Yes

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(C11.2a) Provide details of the project-based carbon credits originated or purchased by your organization in the reporting period.
Credit origination or credit purchase
Credit purchase
Project type
Forests
Project identification
myclimate awarded the PMI factory in Klaipeda, Lithuania, PMPSA factory in Neuchatel Switzerland with the claim “climate-neutral factory 2020” and PMI Operations
Center offices in Lausanne Switzerland. The climate-neutrality encompasses all scope 1 and scope 2 emissions. The corresponding GHG emissions have been validated
and all remaining emissions (i.e., 3297 metric tons CO2e) have been offset with high-quality carbon offset certificates from myclimate. Carbon offset project - Project: SmallScale Farmers Re-forest Forests in Alimu-gonza & Ongo Forest - Project type: Forest - Project location: Uganda - Project standard: Gold Standard CER - myclimate project
number: 7181
Verified to which standard
Gold Standard
Number of credits (metric tonnes CO2e)
3298
Number of credits (metric tonnes CO2e): Risk adjusted volume3298
Credits cancelled
Yes
Purpose, e.g. compliance
Voluntary Offsetting

C11.3(C11.3) Does your organization use an internal price on carbon?
Yes

C11.3a(C11.3a) Provide details of how your organization uses an internal price on carbon.
Objective for implementing an internal carbon price
Drive low-carbon investment
Identify and seize low-carbon opportunities
GHG Scope
Scope 1
Scope 2
Application
The underlying concept PMI applies on internal carbon price is to have a visible and fair quantification of the financial impact of emissions to incentivize and increase theviability of actions and investments focusing on their reduction. Integrating carbon pricing in our business decisions will help to: i) Mitigate hidden future risks due to climatechange (such as regulations and taxations) by embedding their true impact in the business case of a project or investment, and helping drive and prioritize investments thatorganically reduce mid and long term CO2 emissions; ii) Allocate sufficient funds to activities aimed at decarbonizing the business and/or offsetting/insetting its emissions;iii) Attract ESG investors positioning PMI as a leading company in environmental sustainability. We have modelled what an adequate Shadow Carbon Price should be for
PMI following a robust methodology, concluding that an adequate Shadow Carbon Price for PMI is US$ 65 per ton of CO2e emitted.
Actual price(s) used (Currency /metric ton)
65
Variance of price(s) used
To define PMI’s internal carbon price, the Stiglitz and Stern price corridor has been identified as the “perfect theoretical” solution to set shadow carbon price. On practicalimplementation to better integrate it to PMI’s multi-disciplinary processes and culture, a single shadow carbon price methodology has been designed for easier adoption
through internal consultation. The objective of the single price methodology was to keep the robustness and internationally recognized practices, modelling the Stiglitz andStern references and applying them in a worst case scenario analysis of transition risks projected by 2030, specific to our emission profile and the geographies where weare operating. To do so, the Stiglitz and Stern price corridor assumptions were merged in a single price through the following steps: 1. Each country in which PMI has amanufacturing facility (offices and warehouses were not taking in account) was weighted in ratio to its total carbon weigh taking into account 2019 direct emissions profiles,
Scope 1 and Scope 2 location based (i.e.: to not be biased by green electricity purchasing strategies). 2. Each country emission was then divided by the total sum of all
countries carbon emission profiles to allocate a carbon intensity to each country. 3. Countries were then split in the (4) categories associated to their risk level in relation tocarbon tax or carbon regulations already in vigour or planned to be in a near horizon. PMI integrates in today’s shadow carbon price evaluation, the transition risks 10
years in advance for a forward-looking approach. 4. The carbon intensity of each country was then multiplied by the country risk carbon price (value from above table)
allocating the respective carbon weighted contribution. 5. The single shadow price was finally obtained by the sum of all the countries carbon weighted contribution andadjusted at the most meaningful close integer. In 2020 exercise, for example, the weighted single shadow carbon price was modelled at $65.86 per ton of CO2e andtherefore the PMI’s shadow carbon price was set at $65 per ton of CO2e The PMI’s shadow carbon price will be revised on an annual basis to track changes in the
countries’ risk profile and to be adjusted to annual PMI’s direct GHG emissions and country specific GHG emission footprint profiles.
Type of internal carbon priceShadow priceImpact & implication
As an example of internal shadow carbon price usage, in 2020 through our Drive 4 Zero and Energy Saving Initiatives an additional 13 carbon emission reduction projects
were approved for a total of 140 projects and a budget of around $22 million was allocated to support the execution of the projects in our manufacturing sites. Due to theimpact of Covid-19 pandemic the finalization of the execution of some projects has been postponed to 2021. Overall, our efficiency initiatives helped drive around 10
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percent reduction in carbon emissions across our manufacturing facilities in 2020 versus 2019. The application of the shadow carbon price increases the IRR and reduces
the impact of the payback period thus making possible efficiency and emission reduction projects that would not qualify otherwise according to our internal investment
policy. Examples of projects that have been approved thanks to the valorisation of the cost of carbon include a project to increase energy efficiency in the Philippines where
drastically increased compressed air generation reduces energy consumption, while in Kazakhstan, Pakistan, Argentina and Portugal we reduced the baseload of ourplants with a set of selected and impactful interventions. In 2020, in our factory in Neuchâtel we installed pyrolysis technology, which uses operational waste instead ofenergy generated with fossil fuel to produce steam and hot water, it will be fully operational in 2021. The shadow carbon price made PMI to internalize the costs ofexternalities in the financial evaluation of the projects, allowed to improve the financial parameters of those projects and served as enabler of the carbon neutrality strategy
favoring investments that will organically accelerate the reduction path and support the achievement of our neutrality targets. The internal shadow carbon price has been
instrumental to prioritize projects delivering higher impact in carbon reduction emissions. Embedding an internal shadow carbon price in the financial decision, contributes
to raising awareness to invest in environmentally conscious and low carbon technologies.
Objective for implementing an internal carbon price
Change internal behavior
Drive low-carbon investment
Identify and seize low-carbon opportunities
Supplier engagement
GHG Scope
Scope 1
Scope 2
Scope 3
Application
Carbon Levy is recognized as one of the main instruments used by corporates to account for the cost of the negative externalities of carbon emissions in business andinternal expenditure decisions. A carbon levy enables us to internalize external costs by virtually charging our business functions or affiliates for their respective emissions.
With the aim of supporting behavioral change, the levy is collected in a climate fund (PMI Portfolio of Climate Investments), which will finance high-quality carbon insetting
and/or offsetting projects. The Carbon Levy mechanism has been approved by Company Management in the course of 2020 and consequently implemented in our
expenditure process to reduce carbon emissions and increase energy efficiency.
Actual price(s) used (Currency /metric ton)
8
Variance of price(s) used
We do not forecast to apply a variance in price. A fix price will be implemented throughout our business overtime, on direct and indirect emission beginning with selectedbusiness units (i.e., Scope 1 and 2 emissions and emissions from business travel). The price will be recalibrated every year to reflect PMI emission profile and reduction
forecast in 2030.
Type of internal carbon priceInternal fee
Impact & implication
A carbon levy enables us to internalize external costs by virtually charging our business functions or affiliates for their respective emissions. With the aim of supporting
behavioral change, the levy is collected in a dedicated climate fund (PMI Portfolio of Climate Investments), which will finance high-quality carbon insetting and/or offsetting
projects. PMI’s carbon levy helps size the investments required today to abate our emissions through offsetting (e.g., acquisition of green certificates) or in-setting initiatives(e.g., agroforestry projects, and carbon sequestration programs). We have modelled what the carbon levy should be for PMI basing our calculation on data on theforecasted voluntary carbon market prices, our CO2 compensation profile (i.e., the number of tons of CO2 to be compensated through offsetting/in-setting investments), ourcarbon neutrality time horizon, and the compensation strategy we want to adopt. We started implementing our carbon levy in 2020 within the business functions accounting
for the bulk of our direct emissions, such as our manufacturing sites, offices, and fleet, to form a budget that will be conducive to set up a PMI portfolio of climate
investments to compensate remaining unavoidable CO2 emissions and achieve carbon neutrality. The Carbon Levy mechanism has been approved by Company
Management in the course of 2020 and consequently implemented in our expenditure process to reduce carbon emissions and increase energy efficiency.

C12. Engagement

C12.1(C12.1) Do you engage with your value chain on climate-related issues?
Yes, our suppliers
Yes, our customers
Yes, other partners in the value chain

C12.1a(C12.1a) Provide details of your climate-related supplier engagement strategy.
Type of engagement
Information collection (understanding supplier behavior)
Details of engagement
Collect climate change and carbon information at least annually from suppliers% of suppliers by number91% total procurement spend (direct and indirect)
43

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% of supplier-related Scope 3 emissions as reported in C6.5
89
Rationale for the coverage of your engagement
Suppliers’ engagement covers all tobacco supply chain including 285,900 tobacco farmers and leaf suppliers, direct material suppliers (around 75% of total spend withmaterial suppliers), and the majority of our main electronics and logistics services providers. We have used our carbon footprint model to identify the main contributors interms of emissions within our purchased material categories. For direct materials (non-tobacco), we have identified acetate tow and consumer board and paper, fine papers
used for cigarettes and heated tobacco products, flexible packaging as well as chemicals and ingredients as significant contributors to our carbon footprint and we havetherefore prioritized engagement with relevant suppliers. Since 2014 we have engaged with our suppliers through direct discussions and through CDP Supply Chain
program, focusing, among others, on information collection. We have invited suppliers of tobacco, paper/board, acetate tow, fine papers used for cigarettes and heated
tobacco products, flexible packaging as well as chemicals and ingredients distribution/logistics, electronics and some others to share primary data with us to improve theaccuracy of our carbon footprint model in 2020 and beyond. In the medium to long term, we will use this forum to drive improvements towards our carbon neutralitycommitments across our value chain (scope 1+2+3) by 2050. Main engagement areas: • Tobacco leaf suppliers – through Good Agricultural Practices (GAP) program
which includes mandatory requirements for managing energy and climate change (mitigation and adaptation), and reporting against the indicators defined in GAP. • All othernon-leaf suppliers – in 2017, we released our Responsible Sourcing Principles (RSP) and Implementation Guidelines, that are applicable to all suppliers doing businesswith PMI and which encourages our suppliers to minimize their energy use and GHG emissions. We aim to influence their behavior through procurement and productdevelopment activities. One of the outcomes of the information collection, beyond understanding our supplier’s behavior and measurable progress, is the definition ofparameters of environmental performance for different raw material components to allow the improvement of our engagement and reporting in the future.
Impact of engagement, including measures of success
Our measure of success is to achieve at least 80% response rate in CDP supply chain program. In 2020 the outcome of this engagement was 100% response rate, allowing
PMI to be listed in CDP Supplier Engagement Leaderboard. The information received from CDP supply chain program was used to fine tune our carbon footprint model in
2020. We engaged suppliers to collect primary data, CO2 emissions reduction strategy, and projects’ glidepath pertaining to our direct materials, with 14% increase of
suppliers engaged (vs. previous year in number of suppliers). The CO2 emission reductions in our direct materials supply chain contributed to 21% of our 2020 reduction
across our value chain. PMI recently established new and more ambitious carbon neutrality targets. To support the achievement of these targets, we will further expand this
supplier engagement to other supply chain material categories. Our tobacco suppliers are contractually required to implement our Good Agricultural Practices (GAP)
program. To assess suppliers’ conformity against GAP, the Sustainable Tobacco Program (STP) is used, incl. an annual supplier’s self-assessment and on-site reviews.
Suppliers report on metrics and performance related to water and GHG emissions reductions, among other environmental indicators. Access to this data allows for internalbenchmark, as well as selection and deployment of strategic initiatives with suppliers. We expect our suppliers to demonstrate yearly continuous improvements, which arereflected in suppliers’ scorecards, together with STP assessments results, and used to make future decisions such as tobacco purchase volume allocation through our
supplier base. GAP is also the foundation to increase resilience of tobacco crops to climate change. Our measure of success was to reduce the GHG emission intensity
related to tobacco curing by 70% by 2020 vs. 2010 baseline. We have reached 77% reduction in 2020 and we have set a new target to reduce 75% intensity emissions due
to tobacco curing by 2025 vs. 2019 baseline. A monitoring and verification framework was launched in 2016 across our tobacco supply chain to monitor and verify the
impact of the initiatives being implemented. These initiatives support the achievement of our target by eliminating the use of coal and non-sustainable firewood, promoting
the use of alternative wood fuels and improving curing efficiency.
Comment
Type of engagement
Compliance & onboarding
Details of engagement
Included climate change in supplier selection / management mechanism% of suppliers by number93% total procurement spend (direct and indirect)
87% of supplier-related Scope 3 emissions as reported in C6.5
89
Rationale for the coverage of your engagement
PMI’s approach to sustainable supply chain includes a range of compliance programs that are expected to be fully met by our suppliers, allowing us to engage with them at
different levels and stages of the value chain. Our Responsible Sourcing Principles (RSP) and Implementation Guidelines establish the foundation for a morecomprehensive and systematic approach to addressing supply chain sustainability beyond our agricultural supply chain. The RSP is available in 26 languages and covers
environmental, social, and governance topics, encouraging suppliers to review, identify and minimize their environmental impacts, especially regarding land use, waste,emissions, energy and water consumption. The RSP applies to all suppliers and service providers, including our tobacco suppliers. The prioritization for direct engagement
is based on spend and suppliers having the biggest potential environmental impacts through their business activities; e.g., engaging with them to decrease their emission will
have a major impact on our indirect emissions reduction. Through our Good Agricultural Practices (GAP) program, specific requirements are implemented in our agricultural
supply chain, fostering collaboration not only to address climate change related risks, but also in other areas that may have a positive impact on our business and create
value to society. This is an opportunity for PMI to build a stronger and more resilient value chain and to be positioned as a leading company in sustainability by collaboratingwith its tobacco suppliers to implement actions for a more sustainable future. To monitor the adherence of our suppliers to the RSP and GAP requirements, we have set up
several processes and systems. STEP (Sustainable Transformation Enables Performance), the supplier due diligence and performance program to achieve suppliercompliance with our RSP, is implemented since 2019. It serves as the backbone for sustainably managing our first-tier suppliers; in some cases, second-tier suppliers arealso included with a target to source sustainably from all our critical suppliers by 2025 to ensure their social, business and environmental integrity alignment to RSP. In
addition to STEP, we engage with suppliers on more specific sustainability issues, train and empower suppliers, and conduct assessments and audits through third parties.
Impact of engagement, including measures of success
PMI has two functions responsible to procure goods and services; the Procurement function, sourcing all material and services for the company excluding tobacco andclove which fall under the sourcing responsibility of the Leaf function. We engaged with suppliers of all Procurement Categories accounting for a procurement spend of
85%. Leaf function engaged with all its suppliers covering the 100% of the Leaf spend. Therefore the total coverage is 87% of the spend [Procurement 85%+ Leaf 100% =87%]. In 2020, PMI engaged with a base of suppliers focusing on criticality (above $0.5 million in spend and providers of essential components/non substitutable) as part ofits STEP program; allowing us to cover 95% of our critical Direct Materials Spend and 15% of our Indirect Materials and Services Spend. During the year, we embarked ona reassessment of our STEP platform to address our evolving needs and reflect market developments. Further, we considered how to optimize efforts for both our company
and our suppliers, through a collaboration-promoting tool that enables us to share assessments across companies and industries, and we plan to start the implementation ofa new solution in 2021. Our analysis also focused on enhancing the management of online evaluations and on-site audits. With regard to on-site audits, we also plan toselect and partner with several specialized providers. Within our tobacco supply chain with the implementation of GAP and strategic initiatives to reduce carbon footprint,
PMI aims to further reduce its carbon footprint by focusing on most emitting processes, such as tobacco curing, where upgrading tobacco barns to increase curing
efficiency and replacing fossil fuels with biomass as curing fuel sources has led to significant emission reductions in the past years (in 2020 77% reduction vs. 2010
baseline). Through such strategic initiatives engagement with our suppliers remains a priority and a key contributor to reach PMI’s more ambitious targets in ourdecarbonization journey with further reductions in absolute CO2 emissions to be set in linewith our science-based targets for a 1.5-degree scenario, which were approved
by SBTi in 2020.
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Comment
Type of engagement
Innovation & collaboration (changing markets)
Details of engagement
Other, please specify (Collaborating with tobacco leaf suppliers to reduce climate impacts from agricultural supply chain. )% of suppliers by number90% total procurement spend (direct and indirect)
12% of supplier-related Scope 3 emissions as reported in C6.5
25
Rationale for the coverage of your engagement
PMI’s suppliers’ engagement through the collaboration with leaf suppliers to reduce climate impacts from agricultural supply chain covers all tobacco supply chain including
285,900 tobacco farmers and tobacco leaf suppliers. We have used our carbon footprint model to identify the main contributing processes in terms of GHG emissions
within our tobacco supply chain, which inform company’s decision towards internal investment and focus areas for joint project development and implementation with ourleaf suppliers. Through PMI’s Good Agricultural Practices (GAP) program, a set of mandatory requirements are implemented by all leaf suppliers, encompassing several
actions areas (from environmental practices to human rights). Furthermore, GAP sets out best practices, for example, towards more resource efficient technologies (e.g.,
improved tobacco curing practices) and innovative solutions (e.g. irrigation methods). One of the outcomes of the strong collaboration with our leaf suppliers is thesignificant reduction in GHG emissions from the tobacco curing process in recent years.
Impact of engagement, including measures of success
Our measure of success is the continuous CO2 emission reductions within our leaf supply chain, which drive a positive trend in decreasing our Scope 3 indirect emission.
This is the successful result and direct impact of the collaboration with our suppliers worldwide in different action areas, from tobacco curing to fertilizer application andmechanized activities. To assess suppliers’ conformity against GAP, the Sustainable Tobacco Program (STP) is used, including an annual supplier’s self-assessment andon-site reviews performed by an independent company. Suppliers report on metrics and performance related to water and GHG emissions reductions, among otherenvironmental indicators. Access to this data allows for internal benchmark, as well as selection and deployment of strategic initiatives in collaboration with suppliers. We
expect our suppliers to demonstrate yearly continuous improvements, which are reflected in the suppliers’ scorecards, together with the STP assessments results, and used
to make future decisions such as tobacco purchase volume allocation through our supplier base. GAP is also the foundation to increase resilience of tobacco crops toclimate change. We have a measure of success to reduce the GHG emission intensity related to tobacco curing by 70% by 2020 vs. 2010 baseline, and we were able toachieve 77% reduction, exceeding our target. To continue focusing on improvements we have set a new target to reduce 75% tobacco curing carbon emissions per ton offlue cured tobacco by 2025 vs. 2019 baseline. A monitoring and verification framework was launched in 2016 across our leaf supply chain to monitor and verify the impactof the initiatives being implemented. These initiatives have supported the achievement of our target by aiming at eliminating the use of coal and non-sustainable firewood,
promoting the use of alternative wood fuels and improving curing efficiency.
Comment

C12.1b

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(C12.1b) Give details of your climate-related engagement strategy with your customers.
Type of engagement
Education/information sharing
Details of engagement
Run an engagement campaign to educate customers about the climate change impacts of (using) your products, goods, and/or services% of customers by number
100% of customer - related Scope 3 emissions as reported in C6.5
75
Portfolio coverage (total or outstanding)<Not Applicable>
Please explain the rationale for selecting this group of customers and scope of engagement
We engage 100% of our consumers (i.e., please read same as customers) on climate-related issues as we recognize that increased climate action expectations andshifting consumer preferences are important for us. Consumer related emissions are 75% of total downstream emissions (Use and End of Life of product categories).
Failing to develop an effective GHG emission reduction strategy that addresses impacts from direct operations and supply chains, as well as developing products that areenvironmentally friendly, can have significant impacts on our operations. Additionally, our consumers insights on our climate targets, performance and products can help us
understanding our market potential and further opportunities. For these reasons, we engage 100% of our consumers through several direct and indirect initiatives, incl.
raising awareness on environmental issues through education campaigns, as well as sourcing agri-commodities and developing innovative and environmentally friendly
products. Our strategic business transformation towards a smoke-free future, replacing cigarettes with RRPs, has changed our operating model, organizational structure
and culture and accelerated our evolution to a consumer-centric, technology and science-driven company. Beyond offering smokers less harmful alternatives to cigarettes,
we also aim to reduce our products’ environmental footprint by integrating circularity considerations at the design stage and strengthening our used devices collection andrecovery programs. LCA is integrated in our R&D processes, and we develop LCAs for RRPs to assess the impact of these new products may have on our carbon footprint.
The increasing relevance of RRPs within our product portfolio, will enhance focus on these product’s eco-design and their potential environmental impacts, with additional
steps to our product development process to mitigate them. As part of our business transformation we strive to continuously share our efforts on sustainability and climatechange related issues, engaging with all our stakeholders, including consumers, by means of publicly disclosing our annual Integrated Report, communication campaigns
and our CDP disclosures, demonstrating our achievements related, for instance, to our Science Based emission reduction Targets. A specific sustainability branding
campaign regarding our RRPs was developed in 2020.
Impact of engagement, including measures of success
PMI measures success of its engagement activities in multiple ways. When it comes to educating our consumers (i.e., please read same as customers) on the climate
related impacts from PMI’s products, the company relies on the usage of online platforms and other materials as the main method of engagement. In this context, ourmeasure of success is based on two components: 1) PMI’s ability to provide clear and transparent information regarding the direct and indirect climate impacts from its
global operations; 2) having an increasing share of customers accessing climate-related resources and/or participating in related surveys. In 2020, our second Integrated
Report explains PMI’s dependency on the environment, as well as how the company creates social, environmental and economic value. By transparently disclosing ourdirect and indirect climate impacts, explaining how we integrate Life Cycle Analysis (LCA) in the development of our products as well as our climate ambitions andprogress, we provide our consumers with a clear understanding of the impacts from our products and our strategy to reduce them. To better understand how consumers’
access to these resources’ changes over time, PMI monitors visits to its sustainability pages at pmi.com. After launching our Integrated Report 2020 as a full online version,
traffic to the sustainability section increased by 83.8% compared to the previous year. Downloads increased by 55.9% compared to 2019, with the Integrated Report 2020
making up 78.4% of the total downloads. Another example of PMI’s engagement is the use of surveys. PMI carried out 4 large scale surveys during 2020 with 13575 users
in 4 key RRP markets. Results from these surveys provided valuable insights on our consumers’ perception and evaluation of PMI Sustainability efforts, with over 95% ofthem having improved or unchanged brand perceptions after learning about PMI sustainability initiatives; results also indicated that environmental and social initiatives werehighly appreciated (including device repair, eco-certified devices made out of sustainable materials, used consumables proper disposal, packaging minimisation as well ascarbon neutral manufacturing and effective waste management). This feedback enabled PMI to quantify potential market benefits from these products and integrate themin the design of our RRP roadmap and branding campaign.

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(C12.1d) Give details of your climate-related engagement strategy with other partners in the value chain.
In our value chain we engage with our employees and global partners through a two-folded strategy that focuses on training initiatives and continuously renewing our fleet tomore eco-friendly vehicles. In some countries where we operate, eco-driving training is conducted to promote more environmental-friendly practices by our drivers, resulting
for example in fuel savings, and consequently reduction in carbon emissions and air pollutions at local level.
Driving efficiency in reducing carbon emissions is key in all business areas of PMI that contribute to the carbon footprint of the company.
Our fleet carbon emissions are really important to address because they constitute a daily and constant impact to the environment and because showing leadership in
tackling fleet carbon emissions is a tangible action and demonstration of sustainability leadership, as well as it is an important driver of behavioural change since cars arepart of the daily routine of the employees in the majority of the markets where PMI operates. Transformation strategies start from behavioural changes and PMI wants to be acatalyst in each area of improvement.
Since 2020, in Israel, Brazil, Indonesia and Turkey e-learning programs are being conducted with 800 drivers, and the long term plan is to cover the entire PMI fleet driversby 2024. We are also implementing telematics in our working tool fleet with the plan to have 18,000 vehicles covered by the end of 2023 and drivers trained on the best
approach to driving.
Our new Principle and Practice for Global Fleet Vehicles defines maximum emissions caps for all new PMI’s vehicles (excluding trucks and motorcycles) used by PMI’s
employees. In 2020 we have defined that all new vehicle purchases as of the beginning of 2021, in the EU region must be hybrid, plug in hybrid or electric. By 2024 a
minimum of 24% of PMI’s total fleet will be converted to hybrid. We also developed the “Moving first towards a safer, smoke free fleet” campaign to engage our employees
worldwide including the benefit of switching to more eco-friendly vehicles and best approach to driving.
These initiatives will contribute to the overall reduction in our fleet emissions from the 2019 baseline which we assess as measure of success of the engagement and theoverall strategy.
PMI has a eet of around 23,000 vehicles used for delivery, sales, and other services, out of which approximately 700 are “green” vehicles, either electric, hybrid or emitting
less than 80 g/km of CO2 for cars or vans and less than 600 g/km of CO2 for trucks.
Our eet emissions account for about 27% of our direct (scope 1) GHG emissions. In 2020, we decreased the absolute CO2e emissions from our eet by 26% versus 2019.
This reduction is a combination of good vehicle maintenance, ongoing switch to hybrid more fuel-efcient vehicles, eco-driving behaviours and the impact of reduced
kilometres due to COVID 19 pandemic.

C-AC12.2/C-FB12.2/C-PF12.2(C-AC12.2/C-FB12.2/C-PF12.2) Do you encourage your suppliers to undertake any agricultural or forest management practices with climate change mitigation
and/or adaptation benefits?
Yes

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(C-AC12.2a/C-FB12.2a/C-PF12.2a) Specify which agricultural or forest management practices with climate change mitigation and/or adaptation benefits you
encourage your suppliers to undertake and describe your role in the implementation of each practice.
Management practice reference number
MP1
Management practice
Other, please specify (Responsible Sourcing Principles)
Description of management practiceIn 2017, we launched our Responsible Sourcing Principles (RSP) and Implementation Guidelines, which established the foundation for a more comprehensive andsystematic approach to addressing supply chain sustainability beyond our agricultural supply chain. The RSP provides our suppliers with PMI’s expectations in the areas ofhuman rights, environment, and business integrity. The environment section covers environmental compliance and management, and resource consumption and waste
minimization. In the area of climate change, our RSP encourages suppliers to review, identify and minimize their environmental impacts, especially regarding land use,
waste, emissions, energy and water consumption. Our RSP also encourages supplier set targets for improvement, measure performance and report on them.
Your role in the implementation
Operational
Explanation of how you encourage implementation
The RSP applies to all suppliers doing business with PMI but tobacco farmers. In addition tobacco suppliers and their farmers follow our Good Agricultural Practices (GAP)
program and Agricultural Labor Practices Code. In 2017 we rolled out the RSP to global partners covering 99% of our total spend on global vendors by December 2017. To
monitor the adherence of our suppliers to the RSP, in 2020 we continued the roll out of STEP (Sustainable Transformation Enables Performance), the supplier due
diligence and performance program , with the aim to regularly evaluate suppliers’ status in social, environmental, and business integrity compliance and to address gaps
within our RSP or other commitments. STEP is based on the risk management approach that guides our supply chain due diligence management framework. It is the
backbone for sustainably managing our first-tier suppliers; in some cases, second-tier suppliers are also included. Through STEP, suppliers are requested to answer a setof questions related to environmental compliance including if they have in place a procedure to regularly update their register of applicable environmental legislation andregulations, through which the compliance with regulations and/or mandatory standards are addressed. In addition, high-risk suppliers undergo a desktop audit. According
to the questionnaire results and, as applicable, desktop audit, the supplier risk profile may be re-evaluated and require further due diligence. E.g., a medium-risk supplierthat did not achieve the minimum acceptable RSP compliance will be required to undergo a desktop and/or an on-site audit. Following both types of audits, corrective actionplans are defined and implemented. PMI considers these programs and tools to be sufficient to ensure legal compliance within operations and supply chain, as these arealigned with all local regulation as well as PMI's policies, often more stringent. Our final objective is to support suppliers to continuously improve their practices to meet ourrequirements and improve the overall working and living conditions within our supply chain. Tracking and reporting on our suppliers’ performance, both internally andexternally, will drive transparency. In addition, we will continue to look for further opportunities to collaborate with our suppliers in specific projects to improve theirsustainability performance.
Climate change related benefit
Emissions reductions (mitigation)
Increasing resilience to climate change (adaptation)
Comment
Management practice reference number
MP2
Management practice
Other, please specify (Good Agricultural Practices Program)
Description of management practice
Tobacco growing, harvesting and curing account for around 23 percent of our carbon footprint. We are working with farming communities to reduce the environmental
footprint of tobacco curing and growing. We do that through our Good Agricultural Practices (GAP) program and strategic initiatives such as curing barn improvements andreforestation. GAP lays out extensive agricultural environmental practices for farmers to adopt; these practices cover effective farming techniques, the safe storage,
handling and use of chemicals (crop protection agents), water and waste management, energy and raw material efficiency. GAP also covers soil
management/conservation, biodiversity and the sustainable use of wood. GAP implementation helped us deliver on our 2020 target for CO2 reduction in our value chain.
Your role in the implementation
Financial
Knowledge sharing
Explanation of how you encourage implementation
We mandate GAP implementation for all PMI tobacco suppliers. Our Leaf department supports our suppliers in implementing GAP and, where we directly contract farmers,
our field technicians provide direct support and recommendations. We allocate an annual budget to initiatives to catalyze the adoption of improved and innovative practices
by the farmers in our supply chain (i.e.: in 2020 $5 million for initiatives specific to environmental related topics such as climate change, water security and combat
deforestation). Similar yearly expenditure is expected over the next 10 years.
Climate change related benefit
Emissions reductions (mitigation)
Increasing resilience to climate change (adaptation)
Comment

C-AC12.2b/C-FB12.2b/C-PF12.2b(C-AC12.2b/C-FB12.2b/C-PF12.2b) Do you collect information from your suppliers about the outcomes of any implemented agricultural/forest management
practices you have encouraged?
Yes

C12.3

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(C12.3) Do you engage in activities that could either directly or indirectly influence public policy on climate-related issues through any of the following?
Trade associations
Other

C12.3b
(C12.3b) Are you on the board of any trade associations or do you provide funding beyond membership?
Yes

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(C12.3c) Enter the details of those trade associations that are likely to take a position on climate change legislation.
Trade association
U.S. Council for International Business (USCIB)
Is your position on climate change consistent with theirs?
Consistent
Please explain the trade association’s position
One of the main areas of focus of the USCIB is sustainable development. They state that the “economic growth and energy of the U.S. depends on international regulations
that promote strong private-sector role in wise management and use of resources, effective environmental stewardship and greener growth and needs: (1) Sustainable
Cost-effective, science and risk-based cooperative environmental and energy policies to address the challenges of climate change while protecting energy security,
promoting innovation and efficiency and advancing resilience to climate impacts; and provide multilateral solutions to trans-boundary environment, energy and climate
challenges, and reject unilateral, arbitrary measures that disqualify technology or energy options; and (2) Pro-growth, market oriented policies that promote sustainable
development to develop multilateral and national partnership frameworks to incentivize private sector involvement in sustainable development planning, implementation
and risk allocation minimization; and maintain technology neutral policies and other enabling frameworks to encourage trade and investment in cleaner technologies andenergy sources.
How have you influenced, or are you attempting to influence their position?
Our trade association memberships relate to specific business priorities which do not currently include climate change. We are not currently involved in, nor do we
influence, trade association positions on climate change.
Trade association
National Center for Asia-Pacific Economic Cooperation
Is your position on climate change consistent with theirs?
Consistent
Please explain the trade association’s position
APEC have supported the development of an energy strategy study which includes: "Expand and Diversify Supply of Energy Resources; Promote Conservation and
Improve Efficiency; Promote Open and Efficient Energy Markets; Clean Energy Use and Technology Innovation."
How have you influenced, or are you attempting to influence their position?
Our trade association memberships relate to specific business priorities which do not currently include climate change. We are not currently involved in, nor do we
influence, trade association positions on climate change.
Trade association
US ASEAN Business Council
Is your position on climate change consistent with theirs?
Consistent
Please explain the trade association’s position
Their Energy Committee covers broad energy improvement topics including energy efficiency and renewables.
How have you influenced, or are you attempting to influence their position?
Our trade association memberships relate to specific business priorities which do not currently include climate change. We are not currently involved in, nor do we
influence, trade association positions on climate change.
Trade association
EconomieSuisse
Is your position on climate change consistent with theirs?
Consistent
Please explain the trade association’s position
Energy and Environment section: "Climate protection concerns us all and Swiss business is pointing the way. Based on voluntary measures it has successfully charted apath of CO2 reduction and continues to stay the course. Innovation in this sector is doubly advantageous: resource-friendly processes help cut costs and may evolve intobusiness ideas. Regardless of any decision for or against certain technologies we promote a reliable, affordable, and environmentally friendly energy supply."
How have you influenced, or are you attempting to influence their position?
Our trade association memberships relate to specific business priorities which do not currently include climate change. We are not currently involved in, nor do we
influence, trade association positions on climate change.
Trade association
U.S. Chamber of Commerce
Is your position on climate change consistent with theirs?
Consistent
Please explain the trade association’s position
The U.S. Chamber of Commerce supports U.S. participation in the Paris Agreement. The Chamber is an official observer to the United Nations Framework Convention on
Climate Change (UNFCCC) and continues to work with its overseas partners to pursue international collaboration between governments and businesses. As part of theongoing efforts, the U.S. Chamber has launched a Member Task Force on Climate Action to help better understand the range of mechanisms, innovations, and internal
processes that businesses are engaging to confront climate change. The Chamber believes that effective climate policy should require strategic government support,
including robust federal programs that help companies develop and adopt commercially viable clean energy technologies, embrace innovation and improve energy
efficiency on both supply and demand; and promote climate-resilient infrastructures.
How have you influenced, or are you attempting to influence their position?
Our trade association memberships relate to specific business priorities which do not currently include climate change. We are not currently involved in, nor do we
influence, trade association positions on climate change.

C12.3e
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(C12.3e) Provide details of the other engagement activities that you undertake.
We work with environmental organizations and governments to support communities on environmental sustainability topics including sustainable forestry, reforestation,
controlled use of pesticides in agriculture, sustainable rural living conditions and education; all of these can have an influence on climate change mitigation and adaptation. In
2020, PMI supported projects to protect and enhance natural resources, implemented conservation agriculture, provided clean water, catered for food security, and improved
the livelihoods of people living in rural communities. Our efforts to replace cigarettes with smoke-free products will require less tobacco and reduce the associated carbon
emissions to tobacco curing. Where farming is the only alternative for former tobacco farmers we are proactively supporting crop diversification to prepare farmers to a market
shift. We work with our tobacco suppliers and their farmers to introduce complementary crops for food and for additional sources of income. Complementary crops identified
are now expanded to commercial levels, while trials remain to identify better high-yielding, disease-resistant, and drought-tolerant varieties of groundnuts and soybeansamongst others. Water is key to the success of these initiatives as it gives the smallholder farmer the ability to grow crops outside the rainy season. We promote and test
solutions collaborating with companies specialized in precision irrigation promoting technological solutions with the characteristics of being feasible at low capital cost such as
gravity drip irrigation, solar powered water pumps, rainwater harvesting and different irrigation technologies. Climate change will increase the frequency and severity of
extreme weather events and as first measure of support community investments help manage social and environmental impacts associated with our value chain. In 2020, we
continued supporting multi-stakeholder initiatives on environmental topics by, for example, further participating in the Brazilian Business Commitment to Water Security, acoalition of companies led by the Brazilian branch of the World Business Council for Sustainable Development. Our commitment includes the implementation of the Alliancefor Water Stewardship (AWS) Standard in our Brazilian factory and a partnership with tobacco growers to restore degraded river banks and protecting water streams (Water
Guardian Project).
We know that partnership is critical to successfully addressing climate change and achieving UN SDG 13 (“take urgent action to combat climate change and its impacts”). PMI
partners, supports, participates, and is a member of sustainability-related initiatives and organizations such as the World Business Council for Sustainable Development(WBCSD), Business for Social Responsibility (BSR), CSR Europe, and the We Mean Business coalition, which harness the power of collaboration to implement solutions at
scale. In 2020, our CEO joined CEOs from over 170 businesses, investors, and business and investor networks, in an open letter to call on EU policymakers to support an EU
2030 GHG emissions reduction target of at least 55 percent. Moreover, following the establishment of our new science-based emissions reduction targets consistent withkeeping global warming to 1.5 degrees Celsius above pre-industrial levels, we signed the Business Ambition for 1.5°C commitment—responding to the call-to-actions forcompanies to step up their ambition for the best chance of tackling the climate crisis. Our affiliates also belong to national business associations that are engaging withgovernments to advance progress on climate protection at the local level.

C12.3f(C12.3f) What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climatechange strategy?
PMI operates within an overarching Code of Conduct to a set of internal policies, which we call our Guidebook for Success, complemented by a broader number of internal
policies. These policies cover our mandatory requirements and processes in relation to environment, health and safety (EHS) and sustainability, which includes our climatechange strategy; corporate contributions; and interaction with government officials, among others. Our engagement activities take place across all relevant business functions
and geographies where we operate and are consistent with our climate change strategy. In line with our intention to advance progress in achieving SDG 13 (take urgent
action to combat climate change and its impacts), as business leads the transition to a low-carbon economy, PMI supports and is member of sustainability relatedorganizations who help harness the power of collaboration to implement solutions at scale. We believe that partnerships and collaborative efforts can help changes happen
faster and go further. Our affiliates are also members of national business associations which are engaging with governments to advance progress on SDG 13. We conduct
due diligence to ensure consistency with our Code of Conduct and Responsible Sourcing Principles (RSP), and to check potential compliance and reputation issues when
joining trade associations. We belong to many carefully selected business and trade associations around the world. We work with these groups because they represent our
industry and the larger business community in policy discussions on issues where we have a common interest or objective. Our support to these organizations and groups isdesigned to comply with applicable laws and our own principles and practices. We routinely evaluate our participation to ensure that the groups’ objectives align with the longterm interests of PMI and its stakeholders, and that their activities continue to reflect PMI’s values and high standards of conduct. There are times when we may not agreewith certain positions adopted by the organizations we support. In these instances, we may choose to withdraw our participation or support. Other external facing activities
related to climate change are also reviewed by our External Affairs and Sustainability Team to ensure consistency with our climate change strategy. In early 2019 the Chief
Sustainability Officer (CSO) role was formally established in the company. PMI’s CSO reports to our CFO and leads the strategy of integration of the most relevant
sustainability topics, as prioritized based on PMI sustainability materiality assessment and including climate-related issues, across our business. PMI’s CSO heads andmanages PMI’s Corporate Sustainability Team, reports on progress to the Sustainability Committee on a quarterly basis and updates on progress the Board of Directors atleast once a year.
From an operational perspective, our Operations Sustainability and Corporate Sustainability functions coordinate the company’s climate change mitigation actions. Most of
the coordination takes place in the context of sustainability working groups and with local market coordinators. This helps ensure that any policy, engagement activities fromany business division or geography remain consistent with global strategies, including our company’s strategy on climate change; and that programs can be implemented at
the market level and local realities are reflected in our global efforts. We have embedded Climate protection within our overall business strategy, our Guidebook for Success(Code of Conduct), our PMI’s Environmental Commitment, our Responsible Sourcing Principles (RSP) and Good Agricultural Practices (GAP). We have integrated climaterelated issues into normal business activities, it forms part of our annual Long-Range Planning process which reviews and sets business direction, objectives andperformance appraisal process. In 2020, the strategy was developed/reviewed based on prior year performance, sustainability commitments and objectives,
regulatory/external developments, risk/opportunity assessments, stakeholder interest and business changes, through functional management teams across business divisions
and geographies up to our Company Management.

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(C12.4) Have you published information about your organization’s response to climate change and GHG emissions performance for this reporting year in places
other than in your CDP response? If so, please attach the publication(s).
Publication
In mainstream reports
StatusComplete
Attach the document
pmi_2020_annualreport_10k.pdf
2021-proxy-statement.pdf
pmi-integrated-report-2020.pdf
Page/Section reference
Integrated report: summary of financial, environmental incl. climate change, social and governance performance p4-5, commentary from the Executive Chairman and CEO
p6-7, details on environmental performance p98-126. Annual Report on Form 10-K: response to environmental regulation incl. climate change; p4-5, climate-related risks
and their potential impact on the supply chain p10. Proxy statement, filed with the U.S. Security and Exchange Commission: summary on sustainability performance p12-13.
Content elements
Governance
Strategy
Risks & opportunities
Emissions figures
Emission targets
Other metrics
Comment
PMI has an Integrated Report in place which describes how the company creates value over the short, medium and long terms. Additionally, PMI integrates climate-related
elements regarding the company’s climate related risks and response as part of its Annual Report on Form 10-K and Proxy Statement, filled with the U.S. Security andExchange Commission. In its journey towards integrated reporting, PMI published its Integrated Report in 2020 in accordance with the GRI Standards: core option, which
includes an integrated overview of PMI’s performance, covering, among others, also financial information. Its contents are shaped by a formal materiality assessment,
which takes into account stakeholder perspectives as well as our impacts on sustainable development. Climate protection is assessed as tier 1 topic for PMI, for which an
extensive program is in place. We periodically conduct a climate change risks and opportunities assessment to fully understand PMI’s impact across our entire value chain.
This work aligns with international expectations such as the Paris Agreement to mitigate and adapt to climate impacts. Scenario analysis formed part of the climate changerisks and opportunities assessment we conducted in 2015 on physical risks and opportunities. Throughout 2018 and 2019, we updated that earlier risk assessment, andconfirmed the outcomes in 2020, accounting for changes in PMI’s footprint and business model that led to define 2019 as our new baseline year to for our decarbonization
targets, including the validation of our revised Science Based targets based on the 1.5 °C trajectory. Our objective is also to further align our work and reporting with therecommendations of the TCFD, which aims to foster voluntary climate-related disclosures that provide clear, reliable, and useful information to the financial community. The
updated assessment identified climate change risks and opportunities (CCRO) that align with the TCFD transition and physical risk categorizations. Throughout thisprocess, we mapped 149 CCROs across materiality and certainty and then divided them according to PMI’s risk categories: proactive, reactive, nonmaterial, watch, andpotential quick wins, so we could better integrate them into the business. After further analysis, it was decided to prioritize the proactive CCROs, as they have the highest
certainty and materiality levels.

C13. Other land management impacts

C-AC13.2/C-FB13.2/C-PF13.2(C-AC13.2/C-FB13.2/C-PF13.2) Do you know if any of the management practices mentioned in C-AC12.2a/C-FB12.2a/C-PF12.2a that were implemented by yoursuppliers have other impacts besides climate change mitigation/adaptation?
Yes

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(C-AC13.2a/C-FB13.2a/C-PF13.2a) Provide details of those management practices implemented by your suppliers that have other impacts besides climate change
mitigation/adaptation.
Management practice reference number
MP1
Overall effectPositive
Which of the following has been impacted?
Other, please specify (Environmental Management)
Description of impacts
In addition to greenhouse gas emissions, environmental impacts of our suppliers can include impacts to: • Air, such as through sulfur dioxide emissions from burning fuel oil
in boilers which can lead to acid rain; • Water, such as wastewater discharge from plating operations, which can lead to poisoning of fish and metal contamination of plants;• Soil, such as through leakages from storage tanks which could lead to soil contamination
Have any response to these impacts been implemented?
Yes
Description of the response(s)The environment section of our Responsible Sourcing Principles (RSP) and Implementation Guidelines covers environmental compliance and management, and resource
consumption and waste minimization. Our RSP encourages suppliers to review, identify and minimize their environmental impacts.
Management practice reference number
MP2
Overall effectPositive
Which of the following has been impacted?
Biodiversity
Soil
Other, please specify (Human Health & Labor Practices)
Description of impacts
The environmental impact of tobacco farming can be significant, and the GAP program is therefore crucial for managing and reducing our overall environmental footprint. In
addition to greenhouse gas emissions, traditional tobacco farming uses hazardous Crop Protection Agents (CPA) that have adverse impacts on biodiversity, soil, water andhuman health.
Have any response to these impacts been implemented?
Yes
Description of the response(s)Due to the nature of PMI’s business, there are no significant impacts on biodiversity or deforestation from our own operations. Where we do have a larger role to play on
biodiversity is in our agricultural supply chain. Impacts linked to tobacco farming are addressed through our Good Agricultural Practices program for tobacco suppliers,
where we describe our requirements for good environmental practices, including integrated pest management and soil conservation practices, as well as biodiversity
management. GAP provides guidance on biodiversity management practices and requires our tobacco suppliers to develop and implement a biodiversity management planthat incorporates, and goes beyond compliance with the applicable laws, and regulations for tobacco- and forest‑growing areas. Tobacco production areas must not belocated in places that could cause negative effects on national parks, wildlife refuges, biological corridors, forestry reserves, buffer zones, or other public or private
biological conservation areas.

C15. Signoff

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

C15.1(C15.1) Provide details for the person that has signed off (approved) your CDP climate change response.

Row 1

Job title

Corresponding job category

Chief Executive Officer (CEO)

Chief Executive Officer (CEO)SC. Supply chain module

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(SC0.0) If you would like to do so, please provide a separate introduction to this module.
Philip Morris International Inc. (PMI) is a leading international tobacco company. PMI has its executive headquarters in New York, US, its primary listing on the New York
Stock Exchange (NYSE: PM), and its Operations Center in Lausanne, Switzerland. PMI manufactures and sells cigarettes, smoke-free products and associated electronic
devices and accessories, and other nicotine-containing products in markets outside of the U.S. We have a wide range of cigarette brands, including the world’s best-sellinginternational cigarette Marlboro. Our smoke-free product portfolio includes heat-not-burn and nicotine-containing vapor products. In 2020, PMI net revenues amounted to USD
28.7 billion excluding excise taxes on products worth USD 47.4 billion, on a like-for-like basis; 23.8% of PMI’s net revenues in 2020 related to the sale of smoke-free products.
PMI’s 2020 total shipment volume for combustible products and smoke-free products was 730 billion (654 billion combustible products and 76 billion smoke-free products).
We are building our future on smoke-free products that are a much better consumer choice than continuing to smoke cigarettes. Our vision is that these products ultimately
replace cigarettes to the benefit of adult smokers, society, our company and our shareholders. This ambition is at the very core of our corporate strategy and sits atop oursustainability priorities. For PMI, sustainability is an opportunity for innovation, growth, and long-term value creation, and a means to minimize the negative externalities
associated with our products, operations, and value chain while maximizing operational efficiency and resource allocation. We have a global footprint: as of December 31,
2020, PMI had a workforce of close to 71,000 people worldwide and operated 39 production facilities globally. In 2020, our tobacco was sourced from over 285,900
contracted farmers across 23 countries, and our products were sold in over 175 markets.
Our sustainability materiality analysis helps us prioritize our focus where we can have the greatest impact. Climate protection, littering prevention and product eco-design andcircularity are tier 1 environmental topics that are prioritized in our sustainability strategy.
Engagement beyond our own operations is key, as this is where the most significant sustainability impacts occur, especially when it comes to climate change and carbon
emissions.
Our business has a significant, global supply chain organized by five main categories:
1. Agricultural products, including tobacco and other agricultural products, such as clove, menthol and guar gum.
2. Direct materials used to produce cigarettes and other tobacco products, such as acetate tow (for cigarette filters) and paper (both cigarette paper and for packaging
materials).
3. Machines for our cigarette and heated tobacco products factories.
4. Electronic devices for heated tobacco and vapor products.
5. Goods and services that are not specific to the tobacco business, but essential for any business, such as office equipment etc.
As a responsible business, we want to understand and continuously address potential sustainability issues in our global supply chain. We are working with business partners
to proactively identify, manage, and reduce risks, and create shared value. The description above is a summary and is qualified in its entirety by reference to the full text of
PMI’s Annual Report on Form 10-K for the year ended 2020 and 2021 Proxy Statement dated March 25, 2021, filed with the U.S. Securities and Exchange Commission, andthe full text of PMI’s Integrated Report 2020.
Remarks for this disclosure, in this submission:-“PMI,” “we,” “us” and “our” refer to Philip Morris International Inc. and its subsidiaries;-Trademarks and service marks in this submission are the registered property of, or licensed by, the subsidiaries of PMI Inc. and are italicized;-Expectations, aspirational targets and goals set forth in this submission do not constitute financial projections;-Smoke-Free Products or Reduced-Risk Products (RRPs) - the terms PMI uses to refer to products that present, are likely to present, or have the potential to present less riskof harm to smokers who switch to these products versus continued smoking. PMI has a range of RRPs in various stages of development, scientific assessment andcommercialization;-Materiality: In this submission and in related communications, the terms “materiality,” “material” and similar terms, when used in the context of economic, environmental, andsocial topics, are defined in the referenced sustainability standards, and are not meant to correspond to the concept of materiality under the U.S. securities laws and/or
disclosures required by the US Securities and Exchange Commission.
-Unless otherwise indicated, the scope of the data in this report covers our operations worldwide for the full calendar year 2020 or reflects the status as of December 31, 2020.
Where not specified, data come from PMI estimates.

SC0.1(SC0.1) What is your company’s annual revenue for the stated reporting period?
Annual Revenue
Row 128694000000

SC0.2(SC0.2) Do you have an ISIN for your company that you would be willing to share with CDP?
Yes

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(SC0.2a) Please use the table below to share your ISIN.

Row 1

ISIN country code (2 letters)

ISIN numeric identifier and single check digit (10 numbers overall)

US7181721090

SC1.1(SC1.1) Allocate your emissions to your customers listed below according to the goods or services you have sold them in this reporting period.
Requesting member
S Group
Scope of emissions
Scope 1
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e391
Uncertainty (±%)
5
Major sources of emissions
Emissions from scope 1 include fuel used in factories, fleet, warehouses and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 1 emissions 322,633 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 884 million equivalent cigarette units purchased by the customer in 2020.
Requesting member
S Group
Scope of emissions
Scope 2
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
109
Uncertainty (±%)
5
Major sources of emissions
Electricity and district heating used in our factories and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 2 emissions 90,366 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 884 million equivalent cigarette units purchased by the customer in 2020.
Requesting member
S Group
Scope of emissions
Scope 3
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
4348
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Uncertainty (±%)
5
Major sources of emissions
Our scope 3 emissions are mainly due to tobacco agriculture and curing, sourcing raw materials like tobacco, paper and cardboard, due to services like marketing or
consulting, due to upstream and downstream logistics and other minor impacts like business travel, use phase and end of life of our products.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 3 emissions 3,589,627 tCO2e and the total annual volume sold 730,000 (654,000 combustible and76,000 smoke-free products) million equivalent cigarettes sold and 884 million equivalent cigarette units purchased by the customer in 2020.
Requesting member
Kesko Corporation
Scope of emissions
Scope 1
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
441
Uncertainty (±%)
5
Major sources of emissions
Emissions from scope 1 include fuel used in factories, fleet, warehouses and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 1 emissions 322,633 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 997 million equivalent cigarette units purchased by the customer in 2020.
Requesting member
Kesko Corporation
Scope of emissions
Scope 2
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
123
Uncertainty (±%)
5
Major sources of emissions
Electricity and district heating used in our factories and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 2 emissions 90,366 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 997 million equivalent cigarette units purchased by the customer in 2020.
Requesting member
Kesko Corporation
Scope of emissions
Scope 3
Allocation level
Company wide
Allocation level detail

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<Not Applicable>
Emissions in metric tonnes of CO2e
4905
Uncertainty (±%)
5
Major sources of emissions
Our scope 3 emissions are mainly due to tobacco agriculture and curing, sourcing raw materials like tobacco, paper and cardboard, due to services like marketing or
consulting, due to upstream and downstream logistics and other minor impacts like business travel, use phase and end of life of our products.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 3 emissions 3,589,627 tCO2e and the total annual volume sold 730,000 (654,000 combustible and76,000 smoke-free products) million equivalent cigarettes sold and 997 million equivalent cigarette units purchased by the customer in 2020.
Requesting member
Coop Danmark A/S
Scope of emissions
Scope 1
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e75
Uncertainty (±%)
5
Major sources of emissions
Emissions from scope 1 include fuel used in factories, fleet, warehouses and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 1 emissions 322,633 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 170 million equivalent cigarette units and 10 million equivalent Heets units purchased by the customer in 2020.
Requesting member
Coop Danmark A/S
Scope of emissions
Scope 2
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e20
Uncertainty (±%)
5
Major sources of emissions
Electricity and district heating used in our factories and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 2 emissions 90,366 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 170 million equivalent cigarette units and 10 million equivalent Heets units purchased by the customer in 2020.
Requesting member
Coop Danmark A/S
Scope of emissions
Scope 3

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Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
841
Uncertainty (±%)
5
Major sources of emissions
Our scope 3 emissions are mainly due to tobacco agriculture and curing, sourcing raw materials like tobacco, paper and cardboard, due to services like marketing or
consulting, due to upstream and downstream logistics and other minor impacts like business travel, use phase and end of life of our products.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 3 emissions 3,589,627 tCO2e and the total annual volume sold 730,000 (654,000 combustible and76,000 smoke-free products) million equivalent cigarettes sold and 170 million equivalent cigarette units and 10 million equivalent Heets units purchased by the customer in2020.
Requesting member
J Sainsbury Plc
Scope of emissions
Scope 1
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
185
Uncertainty (±%)
5
Major sources of emissions
Emissions from scope 1 include fuel used in factories, fleet, warehouses and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 1 emissions 322,633 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 253.8 million equivalent cigarette units and 76.5 million equivalent Heets units purchased by the customer in2020.
Requesting member
J Sainsbury Plc
Scope of emissions
Scope 2
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
56
Uncertainty (±%)
5
Major sources of emissions
Electricity and district heating used in our factories and offices.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 2 emissions 90,366 tCO2e and the total annual volume sold 730,000 (654,000 combustible and 76,000
smoke-free products) million equivalent cigarettes sold and 253.8 million equivalent cigarette units and 76.5 million equivalent Heets units purchased by the customer in
2020.
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Requesting member
J Sainsbury Plc
Scope of emissions
Scope 3
Allocation level
Company wide
Allocation level detail<Not Applicable>
Emissions in metric tonnes of CO2e
2030
Uncertainty (±%)
5
Major sources of emissions
Our scope 3 emissions are mainly due to tobacco agriculture and curing, sourcing raw materials like tobacco, paper and cardboard, due to services like marketing or
consulting, due to upstream and downstream logistics and other minor impacts like business travel, use phase and end of life of our products.
VerifiedNo
Allocation method
Allocation based on the number of units purchased
Please explain how you have identified the GHG source, including major limitations to this process and assumptions madeThe emissions were calculated by extrapolation of PMI wide scope 3 emissions 3,589,627 tCO2e and the total annual volume sold 730,000 (654,000 combustible and76,000 smoke-free products) million equivalent cigarettes sold and 253.8 million equivalent cigarette units and 76.5 million equivalent Heets units purchased by thecustomer in 2020.

SC1.2(SC1.2) Where published information has been used in completing SC1.1, please provide a reference(s).
The best source of all our environmental information is our CDP climate response or in PMI 2019's Integrated Report that can be downloaded from our website: PMIs 2020
Integrated Report shows progress toward accelerating the end of smoking | PMI (www.pmi.com/media-center/news/pmi-s-2020-integrated-report-shows-progress-towardaccelerating-the-end-ofsmoking#:~:text=Our%20Integrated%20Report%202020%20demonstrates%20how%20our%20company’s,Tier%201%20topics%20from%20PMI’s%20sustainability%20mate
riality%20assessment.)

SC1.3(SC1.3) What are the challenges in allocating emissions to different customers, and what would help you to overcome these challenges?
Allocation challenges

Please explain what would help you overcome these challenges

Diversity of product lines makes accurately accounting foreach product/product line cost ineffective

We would need detailed bill of materials and emissions per SKU and volumes purchased by each customer

We face no challenges

Extrapolating customer allocation on volume based is not an exercise that require too many complicated information and has proved efficient toprovide the right level of information to clients that were requesting inputs for their indirect emissions.

SC1.4(SC1.4) Do you plan to develop your capabilities to allocate emissions to your customers in the future?
Yes

SC1.4a(SC1.4a) Describe how you plan to develop your capabilities.
We have internal capabilities to allocate emissions to customers. If more customers request more information, we will develop dedicated tools to answer to them managing
the complexity of our product lines and accounting for the different input values that define the carbon footprint of our conventional products versus our reduced risk products
such as heat not burn products.

SC2.1(SC2.1) Please propose any mutually beneficial climate-related projects you could collaborate on with specific CDP Supply Chain members.
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Requesting member
S Group
Group type of project
Other, please specify (We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics,
packaging designs or operational opportunities that would improve both of our environmental footprints.)
Type of project
Other, please specify (Partnering to achieve environmental footprint reduction)
Emissions targeted
Other, please specify (Partnering to achieve environmental footprint reduction)
Estimated timeframe for carbon reductions to be realized
Other, please specify (ongoing)
Estimated lifetime CO2e savings
0
Estimated payback
Cost/saving neutral
Details of proposal
We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics, packaging designs oroperational opportunities that would improve both of our environmental footprints: carbon emissions, water scarcity, waste and littering and deforestation.
Requesting member
Kesko Corporation
Group type of project
Other, please specify (We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics,
packaging designs or operational opportunities that would improve both of our environmental footprints)
Type of project
Other, please specify (Partnering to achieve environmental footprint reduction)
Emissions targeted
Other, please specify (Partnering to achieve environmental footprint reduction)
Estimated timeframe for carbon reductions to be realized
Other, please specify (ongoing)
Estimated lifetime CO2e savings
0
Estimated payback
Cost/saving neutral
Details of proposal
We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics, packaging designs oroperational opportunities that would improve both of our environmental footprints: carbon emissions, water scarcity, waste and littering and deforestation.
Requesting member
Coop Danmark A/SGroup type of project
Other, please specify (We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics,
packaging designs or operational opportunities that would improve both of our environmental footprints)
Type of project
Other, please specify (Partnering to achieve environmental footprint reduction)
Emissions targeted
Other, please specify (Partnering to achieve environmental footprint reduction)
Estimated timeframe for carbon reductions to be realized
Other, please specify (ongoing)
Estimated lifetime CO2e savings
0
Estimated payback
Cost/saving neutral
Details of proposal
We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics, packaging designs oroperational opportunities that would improve both of our environmental footprints: carbon emissions, water scarcity, waste and littering and deforestation.
Requesting member
J Sainsbury Plc
Group type of project
Other, please specify (We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics,
packaging designs or operational opportunities that would improve both of our environmental footprints)
Type of project
Other, please specify (Partnering to achieve environmental footprint reduction)

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Emissions targeted
Other, please specify (Partnering to achieve environmental footprint reduction)
Estimated timeframe for carbon reductions to be realized
Other, please specify (ongoing)
Estimated lifetime CO2e savings
0
Estimated payback
Cost/saving neutral
Details of proposal
We seek to partner with our customers and study potential collaborative opportunities. We invite our customers to provide ideas on logistics, packaging designs oroperational opportunities that would improve both of our environmental footprints: carbon emissions, water scarcity, waste and littering and deforestation.

SC2.2(SC2.2) Have requests or initiatives by CDP Supply Chain members prompted your organization to take organizational-level emissions reduction initiatives?
No

SC4.1
(SC4.1) Are you providing product level data for your organization’s goods or services?
No, I am not providing data

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

I am submitting my response

I am submitting to

Public or Non-Public Submission

Are you ready to submit the additional Supply Chain questions?

Investors
Customers

PublicYes, I will submit the Supply Chain questions now

Please confirm below
I have read and accept the applicable Terms

CDP

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