TASK FORCE ON CLIMATE-REL ATEDFINANCIAL DISCLOSURES (TCFD) REPORT 2022

we werewe are transforming for good
we will be

APRIL 2023

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Governance

About PMI
Philip Morris International (PMI) is a leadinginternational tobacco company working todeliver a smoke-free future and evolving its
portfolio for the long term to include products
outside of the tobacco and nicotine sector.
The company’s current product portfolio primarily
consists of cigarettes and smoke-free products. Since
2008, PMI has invested more than USD 10.5 billion todevelop, scientifically substantiate and commercialize
innovative smoke-free products for adults who would
otherwise continue to smoke, with the goal of completely
ending the sale of cigarettes. This includes the buildingof world-class scientific assessment capabilities, notably
in the areas of pre-clinical systems toxicology, clinicaland behavioral research, as well as post-market studies.
In November 2022, PMI acquired Swedish Match – aleader in oral nicotine delivery – creating a global
smoke-free champion led by the companies’ IQOS andZYN brands. The U.S. Food and Drug Administration(FDA) has authorized versions of PMI’s IQOS Platform 1
devices and consumables and Swedish Match’s Generalsnus as Modified Risk Tobacco Products (MRTPs). As of
December 31, 2022, PMI’s smoke-free products wereavailable for sale in 73 markets, and PMI estimates thatapproximately 17.8 million adults around the world had
already switched to IQOS and stopped smoking. Smokefree products accounted for approximately 32% of
PMI’s total full-year 2022 net revenues. With a strong
foundation and significant expertise in life sciences, PMI
announced in February 2021 its ambition to expand
into wellness and healthcare areas and, through its
Vectura Fertin Pharma subsidiary, aims to enhance life
through the delivery of seamless health experiences.

a

For more information, please visit www.pmi.com
and www.pmiscience.com

Strategy

Risk Management

Metrics & Targets

Appendix

About this report at a glance
We are pleased to present PMI’s 2022 TCFD Report.
We have aligned the structure of this report withthe recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD). Contents ofthis report are shaped by a formal Climate Change
Risk and Opportunity (CCRO) assessment conductedduring 2022. We intend to periodically update thisassessment and our TCFD report moving forward toseek further alignment with TCFD recommendations.
Unless otherwise indicated, the data contained hereincover our operations worldwide for the full calendar
year 2022 or reflect the status as of December
31, 2022. Where not specified, data comes from
PMI financials, nonfinancials, or estimates.
Climate-related figures presented in this report do notinclude GHG emissions from wellness and healthcareacquisitions made in 2021, which we have sinceconsolidated into Vectura Fertin Pharma. These emissions
represented 1.6 percent of PMI’s scope 1+2 emissions and2.1 percent of scope 3 emissions in 2022 and are calculated
in line with PMI’s methodology. They are currently excluded
from the inventory as they are below our materiality
threshold set at five percent for scope 1+2 and 10 percent
for scope 3, and are therefore not considered material. GHG
emissions from Vectura Fertin Pharma will continue to be
calculated on an annual basis, and will be integrated into theinventory if they become material. The data and informationin this report also do not incorporate PMI’s acquisition of
Swedish Match made at the end of 2022. We plan to fully
integrate climate-related data in the near future. For more
information on PMI’s approach to GHG calculations andmateriality thresholds, please refer to our ESG KPI Protocol
2022 here and carbon footprint methodology here.
Complementary materials
This report is complemented by a set of publications:• Our annual Integrated Report and related materials,
including reporting indices mapping contents againstinternationally recognized standards and frameworks,
annual ESG Highlights deck, and annual ESG KPI Protocol
providing details on calculation methods, definitions,and the scope of key sustainability performanceindicators are available for download on PMI.com.
• Performance data available for download,
updated annually• External verification statements for our EHS data andcarbon neutrality certifications for manufacturing facilities• Country-level case studies and market stories
highlighting our work in priority sustainability areas• PMI’s Low-Carbon Transition Plan (2021)• PMI’s Ambition on Biodiversity and Water (2022)• PMI’s Reduce Post-consumer Waste Strategy (2022)• PMI’s annual CDP Climate Change, Forest, and Water
Security questionnaires• PMI’s Sustainability Materiality Report (2021)• PMI’s annual Proxy Statement• PMI’s annual report on Form 10-K

Philip Morris International — TCFD Report 2022

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AppendixContents
GOVERNANCE

M E T R I C S & TA R G E T S

Describe the board’s oversight ofclimate-related risks and opportunities.

05

Describe management’s role in assessing
and managing climate-related risks andopportunities.

06

S T R AT E G Y

Describe the climate-related risks andopportunities PMI has identified over the
short, medium, and long term.

09

Describe the impact of climate-related risks
and opportunities on PMI’s businesses,
strategy, and financial planning.

16

Describe the resilience of PMI’s strategy,
taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario.

19

RISK MANAGEMENT

Describe PMI’s processes for identifying
and assessing climate-related risks.

22

Describe PMI’s processes for managing
climate-related risks.

24

Describe how processes for identifying,assessing, and managing climate-relatedrisks are integrated into PMI’s overallrisk management.

24

Philip Morris International — TCFD Report 2022

Disclose the metrics used by PMI toassess climate-related risks andopportunities in line with its strategy
and risk management process.

27

Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas(GHG) emissions, and the related risks.

31

Describe the targets used by PMI
to manage climate-related risks andopportunities and performanceagainst targets.

33

APPENDIX

Glossary of terms and acronyms

35

Forward-looking and cautionary statements

36

Notes

37

04

Governance

Strategy

Risk Management

Governance
PMI’s governance around climate-related risks and opportunities

Describe the board’s oversight of climate-related risks
and opportunities.

05

Describe management’s role in assessing andmanaging climate-related risks and opportunities.

06

Philip Morris International — TCFD Report 2022

Metrics & Targets

Appendix

05

Governance

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Appendix

Product Innovation and Regulatory Affairs Committee andConsumer Relationships and Regulation Committee haveoversight over product development and commercial
practices, including from an ESG perspective.

The primary responsibility of the Board of
Directors is to support the long-term successof our company.

PMI’s Chief Sustainability Officer (CSO), a member of
PMI’s management, updates each of the CLDC, the NCGC
and the full Board of Directors at least once per year on
sustainability-related matters, including progress in priority
areas and an overview of key initiatives.

The Board establishes broad corporate policies,
sets strategic direction, and oversees Company
Management—the individuals responsible for PMI’s
day-to-day operations—as defined here. Read
more in our annual Proxy Statement, available
on the investor relations page of PMI.com.

The role of the Board and its committees
Environmental, social, and governance (ESG) factors arepart of the responsibility of certain committees of theBoard, and considered in the evaluation of the annual
performance of the company and its management. As
part of their responsibilities, the Board and its committees
review and approve PMI’s annual budget based on thecompany’s performance and targets. This includes thoseresources required to deploy carbon emission reduction
initiatives to achieve our climate action targets.
While the Nominating and Corporate GovernanceCommittee (NCGC) oversees the company’s ESG andsustainability strategies and performance, and reports to
the Board on sustainability matters including climate-related
topics, several other committees are tasked with oversight
responsibility for specific sustainability topics. For instance,
the Audit Committee reviews with management, theinternal and independent auditors, any sustainability
information to be included in the Company’s financial
reporting framework and the internal controls andprocedures related to sustainability disclosures, while theCompensation and Leadership Development Committee(CLDC) is responsible for executive compensation matterswhich consists of, among others, evaluating the Company’s
performance in relation to the PMI Sustainability Index. The

PMI assigns ownership of each prioritized key risk
area to a member of our Company Management.
Furthermore, risk oversight is conducted by the full Boardof Directors, as well as by Board committees in theirrespective areas of responsibility. Throughout the year,
Company Management regularly updates the Board andits committees on the evolution of key risk areas. Our
Enterprise Risk Management practices are designed tosupport Company Management and the Board in theirrespective roles and ultimately to ensure the adequacyof PMI’s responses against each prioritized key risk area.
Climate-related risks and opportunities are consideredwithin these oversight practices (read more here).
Governance mechanisms into whichclimate-related issues are integrated• Reviewing and guiding strategy• Reviewing and guiding major plans of action• Reviewing and guiding risk management policies• Reviewing and guiding annual budgets• Reviewing and guiding business plans• Setting performance objectives• Monitoring implementation andperformance of objectives• Overseeing major capital expenditures,acquisitions and divestitures• Monitoring and overseeing progress against goals
and targets for addressing climate-related issues

Criteria used to assess the competence of Board member(s) on climate-related issues
PMI assesses the competence of the Board on sustainability-related issues, including climate change-related
issues, based on its members’ relevant professional experience, academic background, or other professional
training on climate science, environmental science or engineering, sustainability, or other related subjects. Several
members of PMI’s Board have expertise in sustainability and ESG matters, including climate change. One of our
Board Directors in particular brings a unique understanding of ESG strategy, as he has served as Chief Executive
Officer (CEO) of the Global Adaptation Institute (a foundation dedicated to the understanding of climate change)
and as Co-Chair of the World Economic Forum’s Global Agenda Council on Climate Change. Professional
biographies for each Board member are disclosed in our annual Proxy Statement available on PMI.com.
Philip Morris International — TCFD Report 2022

Governance . Describe the board’sAoversight of climate-related risks
and opportunities.

B

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Appendix

B. Describe management’s role in assessing andmanaging climate-related risks and opportunities.

Company Management
PMI’s Company Management primarily consists of ourChief Executive Officer, his direct reports leading ourdifferent business functions and regions, and other senior
management, such as the Vice President of Treasury andCorporate Finance, the Vice President and Controller, andthe Deputy Chief Financial Officer & Head of FinanceTransformation. Our Company Management, which
totals 25 employees as of March 11, 2023, of whomfour are women, includes the 11 employees who are
executive officers under Section 16 of the Securities
Exchange Act 1934. A biography of each member of
our Company Management can be found on PMI.com.
As part of our risk management practices, PMI has
established the Corporate Risk Governance Committee(CRGC), consisting of a subset of Company Management
and other key leaders from the organization. The
purpose of the CRGC is to identify and monitor
developments in key risk areas and oversee the company’s
Governance, Risk Management, and Compliance (GRC)
environment and strategy, including the establishment,
maintenance, and enhancement of effective risk
management and assurance capabilities within PMI.

The CRGC consists of senior executive officers, including
the Chief Financial Officer, Senior Vice President andGeneral Counsel, Chief Digital & Information Officer,
Vice President & PMI Controller, Vice President of Risk &Assurance, Chief Information Security Officer, and Vice
President and Chief Compliance Officer, among others. In
addition, the Chief Executive Officer and Vice President &Corporate Secretary are informed of any risk management
observations or insights shared with the CRGC andparticipate in these meetings. The CRGC receives
updates related to the Company’s risk management andinternal controls practices at least once per quarter.
Anchoring our sustainability priorities with executive
responsibilities and accountabilities helps embed ourstrategy into our daily operations. PMI’s sustainability
strategy is shaped by a formal sustainability
materiality assessment, which was updated in 2021
(read more here), re-prioritizing the most relevant
sustainability topics for PMI. Members of Company
Management are responsible for driving progress anddelivering on our sustainability targets within theirrespective functions (e.g., mitigate climate change anddecarbonizing our value chain to SVP Operations).
Composed of members of Company Management,
including our Chief Executive Officer, and chaired by
our Chief Financial Officer (CFO), PMI’s Sustainability
Committee meets at least four times per year. In 2022,
quarterly Sustainability Committee meetings focusedon assessing PMI’s performance on the Sustainability
Index, receiving updates on various sustainability
initiatives as well as external developments, reviewing
the company’s disclosures, and discussing efforts tofurther embed sustainability within PMI, effectively
manage ESG risks, and enhance ESG data reliability.
Sustainability performance plays a role in executive
remuneration (read more here).

Philip Morris International — TCFD Report 2022

GovernanceIntegrating sustainability into our company relies
on a formal structure with clear accountabilities
at different levels of the organization.

B

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Governance

Reporting directly to the CEO, PMI’s SeniorVice President Operations (SVP Operations), a
member of Company Management, is strategically
positioned within the company’s structure to
be able to effectively engage the Board andspecific departments on climate issues. He
periodically holds discussions with separate Board
members on climate-related issues and risks.
PMI’s SVP Operations is delegated with
operational responsibility, including:• Assessing and managing climate-related risks andopportunities in relation to the activities deployedby PMI’s Operations function. The SVP Operations
also periodically consults with the CRGC tohighlight any significant climate-related risks.
• Addressing climate-related risks and opportunities—
both physical and transition—across thecompany’s activities that could impact PMI’s
ability to operate which are considered during the
CCRO assessment process (read more here).
• Maintaining robust business resiliency, risk
assessment processes aligned with corporatewide risk management practices, andstrategies to support business continuity.
• Ensuring that climate change risks and opportunities
are assessed, managed, monitored, and integrated
into long-range plan and budget review processes.
• Setting business direction, objectives andperformance appraisal processes.
The SVP Operations leads the Operations
Sustainability function headed by the VP Operations
Sustainability, which drives environmental strategies
and their full integration into the business, due
to the strategic importance of environmental
issues, including climate-related issues, within
our operations. The SVP Operations receives
updates on progress toward objectives andtheir achievement in monthly meetings with the
Operations Management Team reporting to him.

Philip Morris International — TCFD Report 2022

Risk Management

Metrics & Targets

Appendix

Operational management and program delivery
Integrating ESG drivers into business strategy cansignificantly enhance both sustainability agendas andfinancial performance. Accordingly, our Chief Sustainability
Officer (CSO) reports to PMI’s CFO, a member ofCompany Management who heads the Sustainability,
Finance, and Strategy functions—three essential
components that work hand in hand to drive strong andcoherent value creation and deliver long-term success.
Our CSO leads the integration of sustainability acrossour business. She updates the Sustainability Committee
on a quarterly basis and hosts the SustainabilityGroup—composed of functional leaders—quarterly.
The CSO heads PMI’s Sustainability Team, whichleads PMI’s sustainability materiality analysis, defines
strategy, manages reporting on performance, andcoordinates strategy implementation across thedifferent business functions and markets.
Program-specific working groups meet periodicallyto cross-functionally coordinate the strategy, targets,and performance of specific sustainability programs.
At the market level, dedicated sustainability
coordinators help ensure that sustainability priorities
are cascaded and programs are localized. Under
central guidance, market coordinators meet monthly toensure concerted effort and that progress is achieved
and tracked in a consistent manner, including via
KPIs derived from the PMI Sustainability Index.

Governance

Senior Vice President Operations

Strategy

B

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Strategy
The actual and potential impacts of climate-related risks andopportunities on PMI’s businesses, strategy, and financial planning

Describe the climate-related risks and opportunities
PMI has identified over the short, medium, and long term.

09

Describe the impact of climate-related risks andopportunities on PMI’s businesses, strategy, andfinancial planning.

16

Describe the resilience of PMI’s strategy, taking into
consideration different climate-related scenarios,
including a 2°C or lower scenario.

19

Philip Morris International — TCFD Report 2022

Metrics & Targets

Appendix

09

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Appendix

 escribe the climate-related risks and opportunitiesD
PMI has identified over the short, medium, and long term.

Through this process, we have identified andclassified a range of physical and transition risks
and opportunities across our value chain which wesummarize in this section. Read here to learn more about
their potential impacts and here to understand how
resilient PMI is to different future climate scenarios.

Time horizons
Short term (0–5 year)
Those risks and opportunities that may materialize
within the next five years. Short-term risks are
identified and assessed through a variety ofinternal processes including, among others:• We evaluate short-term profits and losses aspart of our quarterly financial reporting.
• Our annual long-range planning process is
updated annually and reviews and sets businessdirection over a 3–to–5 year horizon.
• Our manufacturing environmental risk assessment
is governed by our manufacturing facilities’ ISO
14001 certification. It forms part of our broader
environmental impact assessment and is updated
every three years on average. It assesses, among
other risks, climate change-related risks.
• Our insurable assets risk assessment is updated every
12–to–20 months according to factory size. It assesses
vulnerability to natural hazards and provides an estimateof potential flood-related losses for extreme eventswith historical 100 and 500 year return period.
• Our Leaf water risk assessment in our tobacco
supply chain is updated annually or according to theavailability of data from the water risk model provider
we use to inform it. It assesses current water-relatedrisks (e.g., flooding, water stress, and drought) in PMI
tobacco growing areas and projects them to 2030
under two diverse climate scenarios (RCP and SSP).

Philip Morris International — TCFD Report 2022

Medium term (5–10 years)
Those risks and opportunities that may materializeby the 2030 time horizon used for scenario analysis
in our CCRO assessment. This time period aligns
with PMI’s external commitment of carbon emission
reductions for scope 1+2+3 emissions as approvedby the Science Based Targets initiative. It is also areference date for most international policies andregulations (e.g., EU 2030 climate target plan).
Long term (>10 years)
Those risks and opportunities that may materialize
until the 2040 time horizon used for scenario analysis
in our CCRO assessment. This time period aligns with
PMI’s external commitment of net zero emissions as
approved by the Science Based Targets initiative. It
is also an intermediate step toward internationallyagreed policy commitments to 2050 (e.g., EU climate
law). Under this time-horizon, physical risks are
more likely to occur because climate extremes are
expected to intensify as climate change worsens.

Strategy

During 2022, PMI conducted its most recent
CCRO assessment (read more about theprocess here).

B
C

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Appendix

Key

Direct physical risks to assets

Projected cumulative damage and loss
(USD millions)*<100

100–200>200

MEDIUM

HIGH

MID-TERM

SHORT-TERM

Likelihood
LOW

Velocity

The CCRO assessment projected potential acute and chronic physical risks under 1.5°C, 2°C, and 3°C global
warming scenarios until 2030 and 2040 for our factories. Figures represent projected potential cumulative
losses and damages to 2030 and 2040 for physical risks absent additional mitigation actions. Read more about
our identification process here and our glossary for terminology definitions here.

LONG-TERM* Absent impact of additional mitigation actions.

Strategy

Physical risks for our assets

Manufacturing
Climate change may present chronic and acute physical risks with direct impacts on our factories. Cumulative potential
losses due to persistent drought ranges from USD 12 million to USD 252 million depending on the time horizon andclimate scenario absent additional mitigation actions. Cumulative potential losses due to extreme flood events ranges
from USD 24 million to USD 138 million depending on the time horizon and climate scenario absent additional
mitigation actions.

Risk

Description

Increased frequency andintensity of extreme droughts
in manufacturing sites

Drought could lead to factorybusiness interruption due towater scarcity

Increased frequency andintensity of extreme floods
in manufacturing sites

Floods, heavy rains and storms
could lead to losses and damages
in manufacturing sites

1 We assume that the factory value exposed is constant and have not projected future factory values.

Philip Morris International — TCFD Report 2022

2030

B

Type

ImpactIndicator

Geographies

Chronic

Downtime due to water scarcity
could result in high businessinterruption costs for factories
at high drought risk

Potential losses due
to business interruption
for factories at highdrought risk

Six factories across Africa,
Europe, Latin America,
and the Middle East

Direct impact (factory) –Floods could damage buildings,
equipment and inventory and leadbusiness interruption costs

Potential damage toproperty, inventory, andlosses due to businessinterruption for factories
at high flood risk

Five factories across Asia
Pacific, Latin America, andthe Middle East

Acute

2040

Likelihood

Velocity

Cumulative
damage and loss 1

Cumulative
damage and loss 1

1.5ºC

1.5ºC

3ºC

3ºC

C
Mitigation actions (current and potential)• Implementation of water efficiency and water
recycling programs (where feasible) in PMI factories
to reduce water demand in water stressed areas• Alliance for Water Stewardship (AWS) certification• Implementation of drainage systems andflood protection barriers could reduce
the risk of losses and damage• Alliance for Water Stewardship (AWS) certification

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AppendixKey

Indirect physical risks to assets

2030 relative value at stake*
LOW

MEDIUM

HIGH

2040 relative value at stake*
LOW

Increased frequency andintensity of extreme floods
in tobacco growing areas

Drought could lead to crop yield
losses in tobacco growing areas

Floods, heavy rains and storms
could lead to crop yield losses
in tobacco growing areas

HIGH

LONG-TERM

MID-TERM

SHORT-TERM* Absent impact of additional mitigation actions.

Climate change may present chronic and acute physical risks with indirect impacts in our tobacco sourcing activities. Cumulative potential losses
due to extreme flood events ranges from USD 68 million to USD 162 million depending on the time horizon and climate scenario absent additional
mitigation actions.1 Relative exposed value at risk depicted in the table is projected absent the impacts of additional mitigation actions.

Increased frequency andintensity of extreme droughts
in tobacco growing areas1

MEDIUM

Type

Chronic

Acute

ImpactIncreasing yield losses for PMI
tobacco suppliers could result inincreased tobacco price in local
markets or scarcity of alternative
volumes with the same quality of
tobacco, leading to increased
procurement costs for PMI

Increasing yield losses for PMI
tobacco suppliers could result inincreased tobacco price in local
markets or scarcity of alternative
volumes with the same quality of
tobacco, leading to increased
procurement costs for PMI

Indicator

Geographies

Likelihood

Velocity

2030

2040

Cumulative relativevalue at stake

Cumulative relativevalue at stake

1.5ºC

3ºC

1.5ºC

3ºC

Mitigation actions (current and potential)• Better spread purchases around the globe, thus
reducing over-dependency and minimizing impacts
potentially caused by extreme weather events• Re-assess the risks based on the new footprints

Value of tobacco supplied
to PMI by suppliers facing
high drought risk

• Produce a study about the effects of droughts on
aquifers in each of the the tobacco-growing regions
potentially subject to drought and plan an efficientirrigation strategy where possible and needed

16 sourcing areas across
Africa, Europe, andLatin America• In conjunction with irrigation strategies, farmers
must minimize tillage operations to conserve soil
structure and maintain ground cover by mulch to
reduce water runoff and increase soil infiltration

Value of tobacco supplied
to PMI by suppliers
facing high flood risk

• Leaf Resilience Strategy­—spread purchases overnorthern and southern hemispheres and aroundthe globe, avoiding over-dependencies

11 sourcing areas acrossLatin America and Asia Pacific• Where needed, minimize tillage to conserve
soil structure and/or mulching to reducewater runoff and increase soil infiltration

1 At the time of this assessment no data was available on losses within PMI’s tobacco supply due to extreme drought. Losses and damage are therefore not projected in this report.

2030

2040

Cumulative relativevalue at stake

Cumulative relativevalue at stake

Broader supply chain
Climate change may present chronic and acute physical risks with indirect impacts in our sourcing activities, namely in our electronics supply chain and pulp and paperbased supply chain, which includes acetate tow. Relative exposed value at risk depicted in the table is projected absent the impacts of additional mitigation actions.
Risk

Increased frequency andintensity of extreme droughts
in pulp and paper andelectronics supply regions

Increased frequency andintensity of extreme floods
in supply region

Description

Drought could undermine thecapacity of PMI suppliers toprovide materials/products

Floods, heavy rains andstorms could undermine thecapacity of PMI suppliers toprovide materials/products

Philip Morris International — TCFD Report 2022

Strategy

LOW

Velocity

Tobacco supply chain

Description

HIGH

Likelihood

The CCRO assessment projected potential acute and chronic physical risks under 1.5°C, 2°C, and 3°C global warming scenarios until 2030 and 2040 for assets in our supply chain
and logistics. Relative exposed value at risk is based on the total value of those assets exposed to the risks defined in each table absent additional mitigation actions, as opposed toprojections on potential damages and losses, for these indirect risks. We have classified risks as “Low,” “Mid,” and “High” relative to other prioritized indirect physical risks to assets.
Read more about our identification process here and our glossary for terminology definitions here.

Risk

MEDIUM

Type

ImpactChronic

Increased downtime and reduced
supplier productivity due to water
scarcity could result in increased
procurement costs and businessinterruption for PMI

Acute

Increased downtime and damage tosuppliers' sites due to extreme flood
events could result in increased
procurement costs and businessinterruption for PMI

Indicator

Value of assets at risk
with suppliers facing highdrought risks

Value of assets at risk
with suppliers facing
high flood risks

Geographies

Likelihood

1.5ºC

3ºC

1.5ºC

3ºC

Pulp
and
paper

Pulp
and
paper

Pulp
and
paper

Pulp
and
paper

Electronics:
Eight suppliers across Asia
Pacific and Europe

Electronics

Electronics

Electronics

Electronics

Pulp and paper:
Eight suppliers across Asia
Pacific, Europe, and Latin
America

Pulp
and
paper

Pulp
and
paper

Pulp
and
paper

Pulp
and
paper

Electronics

Electronics

Electronics

Electronics

Pulp and paper:
16 suppliers across theAmericas and Europe

Electronics:
12 suppliers across Asia Pacific

Velocity

Mitigation actions (current and potential)• Multiple sourcing strategy options• Engagement with suppliers to improve their resilience

Philip Morris International — TCFD Report 2022

B
C

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AppendixKey

Indirect physical risks to assets continued

2030 relative value at stake*
LOW

MEDIUM

HIGH

2040 relative value at stake*
LOW

MEDIUMHIGH

MEDIUM

HIGH

MID-TERM

SHORT-TERM

Likelihood

LONG-TERM* Absent impact of additional mitigation actions.

Logistics
Climate change may present chronic and acute physical risks with indirect impacts on third-party logistics. Relative exposedvalue at risk depicted in the table is projected absent the impacts of additional mitigation actions.

Risk

Increased frequency
and intensity of extreme
floods in ports

Sea level rise inport locations

Strategy

LOW

Velocity

Description

Floods, heavy rains and storms
could limit port operations

Sea level rise could limit port
operations

Philip Morris International — TCFD Report 2022

Indicator

Geographies

Likelihood

Velocity

2030

2040

Cumulative relativevalue at stake

Cumulative relativevalue at stake

Type

Impact

1.5ºC

3ºC

1.5ºC

3ºC

Mitigation actions (current and potential)

Acute

Increased downtime anddamages to port infrastructure
could undermine shipping/storage activities resulting inincreased logistics costs for PMI
and supply chain disruption

Value of PMI containers
in ports exposed tofuture high flood risks

Six ports across Asia, Latin
America, and the Middle East

• Multiple-logistics strategy options

Chronic

Increased downtime anddamages to port infrastructure
could undermine shipping/storage activities resulting inincreased logistics costs for PMI
and supply chain disruption

Value of PMI containers
in ports exposed tofastest sea level rise

Five ports across Asia Pacific• Multiple-logistics strategy options

B

Philip Morris International — TCFD Report 2022C

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AppendixKey

Physical risks for occupational health2030 relative impact on workforce*LOW

MEDIUM

HIGH

2040 relative impact on workforce*LOW

MEDIUMHIGH

MEDIUM

HIGH

MID-TERM

SHORT-TERM

Likelihood

LONG-TERM

Climate change may present chronic and acute physical risks for our workers and workers in our supply chain. This table includes direct and indirect impacts
as described in the “Impact” column. Relative impact on the workforce depicted in the table is projected absent the impacts of additional mitigation actions.

Value Chain
Segments

Description

Increased frequency
and intensity of extreme
heatwaves in tobacco
growing areas

Heat stress could impact thewell-being of workers,
especially those who spend
most of their activities
outdoors, leading to
occupational health-related
issues and putting at risk
compliance with minimum
working labor standards

Tobaccosupply chain

Increased frequency
and intensity of
extreme heatwaves
in factory locations

Heat stress could impact thewell-being of workers, leading
to occupational health-related
issues and putting at risk
compliance with minimum
working labor standards

Direct impact (factory) –extreme temperature could
affect the productivity of
Manufacturing
factories due to increasing
fatigue and illnesses of workers
exposed to high temperatures

Increased frequency
and intensity of extreme
heatwaves in supply
regions

Broader
supply chain

ImpactIndirect impact (supply chain)– extreme temperature could
affect the productivity andincomes of suppliers due toincreasing fatigue and illnesses
of workers exposed to hightemperatures

Indirect impact (supply chain)– extreme temperature could
affect the productivity ofsuppliers due to increasing
fatigue and illnesses of workers
exposed to high temperatures

Indicator

Geographies

Likelihood

Velocity

1.5ºC

2040

3ºC

1.5ºC

3ºC

Mitigation actions (current and potential)• Train farmers and farmworkers onheat related illnesses (HRI)
Exposed workers
to heat stress

Seven sourcing areas acrossAsia Pacific

Exposed workers toheat stress andpercentage of total
workforce

Six factories acrossAsia Pacific

Exposed workers toheat stress andpercentage of total
workforce• Update GAP requirements with heat protection clothing• Farmworkers to have easy access to waterfor proper hydration and take work breaks
in shaded areas to avoid heat stress• Implementation of building insulation andventilation systems where necessary to ensure
acceptable working conditions in factories

Pulp and paper:
Five suppliers across Asia
Pacific, Europe, and Latin
AmericaPulp
andpaper²

Electronics:
Nine suppliers across Asia
Pacific and Europe

Pulp
and
paper²Pulp
andpaper²Pulp
andpaper²• Engagement with suppliers to improve their resilience

Electronics

1 We assume a constant worker population based on 2021 data for forward-looking assessment.
2 Suppliers in our pulp and paper supply chain do not provide precise, facility-level figures, preventing us from properly assessing impacts tied to specific facilities.

Philip Morris International — TCFD Report 2022

* Absent impact of additional mitigation actions.

Cumulative relative Cumulative relative
impact on workforce1 impact on workforce1

Risk

Heat stress could impact thewell-being of workers, leading
to occupational health-related
issues and putting at risk
compliance with minimum
working labor standards

2030

Strategy

LOW

Velocity

Philip Morris International — TCFD Report 2022

Electronics

Electronics

Electronics

B
C

14

Strategy

GovernanceRisk Management

Metrics & Targets

Appendix

Key

Transition risks

2030 cumulative value at stake (USD millions)*<350

350-700>700

2040 cumulative value at stake (USD millions)*<100

100 – 1200

>1200

MEDIUM

HIGH

MID-TERM

SHORT-TERM

Likelihood
LOW

Velocity
LONG-TERM

Strategy

The CCRO assessment projected transition risks under 1.5°C, 2°C, and 3°C global warming scenarios until 2030 and 2040. Their cumulative financial impacts were reassessed
under two global warming scenarios. The 3°C global warming scenario appears more favorable from a transition risk perspective because it assumes no further policy instruments(i.e., carbon pricing, energy taxes) will be introduced, resulting in less potential financial risk related to growing energy and carbon prices. The value at stake (VaS) represents thedifference between the business as usual and the climate scenarios. Read more about our identification process here and our glossary for terminology definitions here.

* Absent impact of additional mitigation actions.

Manufacturing
Climate change may present transition risks with direct impacts on our factories. Exposed value atstake depicted in the table is projected absent the impacts of additional mitigation actions.
Risk

Description

Growing energy prices

Increased energy prices
could lead to increased energy
costs in manufacturing

Type

ImpactMarketIncreased prices of energy
sources in manufacturing sites
could result in increased energy
procurement costs for PMI

Indicator

Geographies

Likelihood

Energy costs for
manufacturing

Most PMI’s sites incountries across Asia Pacific,
Europe, Latin America,
and the Middle East

Velocity

2030

2040

Cumulative value
at stake 1

Cumulative value
at stake 1

1.5ºC

1.5ºC

3ºC

3ºC

Mitigation actions (current and potential)• Installation of technology to trigger in-houseproduction and storage of green energy

B• Implementation of energy saving andefficiency programsC• Implementation of low carbon transition plan’s programsto achieve decarbonization targets (scope 1+2)

Growing carbon prices
and taxation

Increased carbon prices
on manufacturing sites could
lead to increased costsof manufacturing emissions

Policyand legal

Increased carbon prices and carbon
taxation could result in higher costs
for manufacturing emissions

Carbon price and taxation
costs for manufacturing• Implement energy saving technology and efficiency
programs to bring our factories below the installedcapacity threshold of the emissions trading schemes(ETS) to be exempt from scheme requirements

Countries covering 90% of
PMI activities across Asia
Pacific, Europe, Latin America,
and the Middle East

• Implement mitigation actions to be
exempt from local carbon taxes
1 We assume that the factory value exposed is constant and have not projected future factory values.

Tobacco supply chain
Climate change may present transition risks with indirect supply chain impacts in our tobacco sourcing activities.
Exposed value at stake depicted in the table is projected absent the impacts of additional mitigation actions.
Risk

Description

Growing energy prices

Increased energy (fuel) prices
could lead to increased
procurement costs for tobacco

Growing energy prices

Carbon Border Adjustment
Mechanism (EU – CBAM)

Increased energy prices in
fertilizer production could leadto increased procurement costs(assuming that overheads are
passed to PMI)

Carbon Border Adjustment tax
applicable to imported fertilizer
into the EU could lead toincreased procurement costs

Philip Morris International — TCFD Report 2022

Type

ImpactMarketIncreased prices for fuels usedin curing barns could resultin increased costs for PMI's
suppliers and consequently higher
procurement costs for PMI

MarketPolicyand legal

Increased price of natural gas usedin fertilizer products could resultin increased production cost for
PMI's suppliers and consequently
higher procurement costs for PMI

CBAM tax on imported fertilizers
could result in increased
fertilizer procurement costs
for PMI in EU markets

Indicator

Geographies

Energy costs for curing

Africa, Asia Pacific, andLatin America wereconsidered (excluding
firewood self-collected)

Natural gas costs for
fertilizer suppliers

Likelihood

Velocity

2030

2040

Cumulative value
at stake

Cumulative value
at stake

1.5ºC

1.5ºC

3ºC

Mitigation actions (current and potential)• Continue curing barns efficiency program• Leverage PMI procurement strategy in energy
for farmers• Farmer self-sufficient energy production where
feasible

Nitrogen fertilizer: 20
countries across Africa,
the Americas, Asia Pacific,
Europe, and the Middle East
Potassium and phosphate
fertilizer: global approach

CBAM on purchased
fertilizers

3ºC

Countries considered for
CBAM rates as largest fertilizer
exporters to European tobacco
growing areas: countries across
Africa, the Americas, Asia
Pacific, and the Middle East

Philip Morris International — TCFD Report 2022

• Improve fertilization efficiency• Foster integrated nutrient management(e.g., crop residues, green manure)• Multiple sourcing strategy

15Strategy

GovernanceRisk Management

Metrics & Targets

AppendixKey2030 cumulative value at stake (USD millions)*<350

350-700>700

2040 cumulative value at stake (USD millions)*<100

Likelihood

Climate change may present chronic and acute risks with indirect impacts in our sourcing activities
in our broader supply chain, including pulp and paper materials and electronics. Exposed value atstake depicted in the table is projected absent the impacts of additional mitigation actions.

Velocity

Risk

Description

Growing carbon
prices and taxation

Increased carbon prices andtaxation on pulp and paper
suppliers could lead to higher
costs of suppliers’ emissions
and consequently increased
procurement costs for PMI(assuming that all costs are
passed through to PMI)

LOW

2030

LONG-TERM

2040

>1200

MEDIUM

HIGH

MID-TERM

SHORT-TERM* Absent impact of additional mitigation actions.

Type

ImpactIndicator

Geographies

Policyand legal

Increased carbon prices could
result in higher costs for suppliers’
emissions and consequently
increased procurement costs
for PMI

Carbon price andtaxation costs for pulp
and paper suppliers

Regions covering 90%
of PMI’s pulp andpaper suppliers acrossthe Americas, Asia
Pacific, and Europe

Likelihood

Velocity

Cumulativevalue at stake

Cumulativevalue at stake

1.5ºC

1.5ºC

3ºC

3ºC

Mitigation actions (current and potential)• Engaging with suppliers: guidance and support to
reduce supplier carbon footprint as part of scope
3 strategy for direct materials procurement• PMI’s Responsible Sourcing Principles (RSP)

Climate change may present chronic and acute risks with direct impacts on PMI’s own
logistics and indirect impacts on third-party logistics. Exposed value at stake depicted in
the table is projected absent the impacts of additional mitigation actions.

Description

Growing energy prices

Increased energy prices for PMI
owned and third-party logistics
could lead to increased logistics
costs (assuming that all costs
are passed through to PMI)

Growing carbon prices
and taxation

Increased carbon prices andtaxation for PMI owned andthird-party logistics emissions
could lead to increased logistics
costs (assuming that all costs
are passed through to PMI)

Philip Morris International — TCFD Report 2022

Type

MarketImpactIncreased price in energy sources
for transportation could resultin higher logistics costs for PMI

Indicator

Energy costs for logistics

Geographies

Likelihood

Velocity

2030

2040

Cumulativevalue at stake

Cumulativevalue at stake

1.5ºC

3ºC

1.5ºC

3ºC

PMI owned

PMI owned

PMI owned

PMI owned

PMI owned

Policyand legal

Carbon price and taxation
costs for logistics

Mitigation actions (current and potential)• Electrification of PMI fleet vehicles(hybrid and electric cars)• Engagement with third-party logistics
suppliers to improve efficiency of fleet

Global approach

Third party

Increased carbon prices could
result in higher costs forlogistics emissions for PMI

B
C

Logistics

Risk

Strategy

Broader supply chain

100 – 1200

Third party

PMI owned

Third party

PMI owned

Third party

PMI owned

Global approach• Regional sourcing strategy (source close to factory)
to optimize material/product transportation distance• Electrification of PMI fleet vehicles(hybrid and electric cars)• Selection of lower-carbon transportation
carriers and transport routes• Regional sourcing strategy (source close to factory)
to optimize material/product transportation distanceThird party

Philip Morris International — TCFD Report 2022

Third party

Third party

Third party• Engagement with third-party logistics
suppliers to reduce carbon footprint

16

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

B. Describe the impact of climate-related risks and opportunities
on PMI’s businesses, strategy, and financial planning.

Strategy
Climate-related risks and opportunities have influenced
our strategy in a number of categories including products
and services, supply chain, R&D allocation, and operations.
Supply chain and logistics
Physical climate change risks could affect our own
operations and those of our suppliers globally. Changes inprecipitation patterns and extreme variability in weather
patterns could affect the yield, quality, and availability of
key crops, such as tobacco leaves and cloves, changing
our purchasing patterns and increasing operationalcosts. Increased drought or flooding could disturb thetobacco crop life cycle stages in several of our sourcing
countries, 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 dependingon the impacted asset. For example, different tobacco
growing areas have different levels of exposure topotential supply chain disruptions, with varying financial
impacts based on geographies and related crop volumes.
To prevent these impacts from materializing, PMI has
adapted its management strategy at the short-to-medium
term. We consider risks in the strategic decision andannual planning of our tobacco leaf inventories which
can help mitigate short-to-medium term impacts.

Philip Morris International — TCFD Report 2022

To support addressing these risks, we have embedded
environmental sustainability considerations in our Good
Agricultural Practices (GAP) and Responsible Sourcing
Principles (RSP) since 2002 and 2017, respectively, andrequire our suppliers to comply with them. We actively
engage with our suppliers, and we plan to embed theelements of our carbon neutrality strategy in the programswith our suppliers as we move to the achievementsof our targets for 2030. In the strategic decision andannual planning of our tobacco leaf inventories weinclude consideration on the impact that GAP-related
initiatives have had since the program’s implementation
to mitigate those risks and its increasing influence overtime in the short to medium term. For example, wehave invested in previous years to support farmers in
Brazil, the Philippines, and Indonesia with more efficienttechnologies (e.g., drip irrigation) contributing to climatechange mitigation efforts. In the long term, our businessstrategy focuses on physical adaptation and long-termemissions reduction in accordance with our approved
Science-Based Targets, based on 1.5°C pathway, toreduce our value chain absolute carbon footprint.
Manufacturing
Climate change can threaten business continuity,
particularly where businesses involve agricultural supply
chains. For PMI, raw material costs such as tobacco leaf
and cloves may rise, and consumers and our employees
are becoming increasingly sensitized to the environmental
impact of corporate actions. Upfront investments withlonger-term returns are required as consequences ofclimate risk could expose investors to changes in corporate
stock value. PMI’s efforts to reduce GHG emissions, suchas through increasing energy efficiency, could alleviate
potential costs and create competitive advantage bymeeting or exceeding stakeholder expectations.
Our most recent sustainability materiality assessment
conducted in 2021 confirmed that our ambitious
decarbonization targets are aligned with societal
expectations (learn more about our climate-related
targets here).

StrategyThis section provides a concise overview ofsome of the potential impacts of climate-relatedrisks identified as part of our CCRO assessment
on PMI’s strategic and financial planning. Learn
more about our most recent updates and specificexamples of actions and initiatives we havetaken to mitigate climate-related risks in the“Tackle climate change” section of our annual
Integrated Report available on PMI.com.

B
C

17

GovernanceOur business strategy focuses on physicaladaptation and long-term emissions reduction
including long-term sourcing strategies integrating
CCRO assessment considerations and customer
and supplier sustainability strategies aligned withours to ensure progress against our objectives.
Our strategy and decisions are influenced by our ability
to understand and adapt to potential future climatechange issues and to minimize our environmental
impact. We integrate climate-related physical andtransition risks and opportunities related to regulatory,
reputational, and market risks by implementing carbon
emission reduction projects with longer payback
period in our facilities, voluntarily sourcing green
electricity to decrease our dependence on fossil fuels
and reduce our carbon footprint, among others.
Products and services
For PMI, sustainability means creating long-term value
while minimizing the negative externalities associatedwith our products. For example, we utilize life cycle
assessments (LCAs) and develop new product andpackaging design using circularity principles.
Periodically applying updated CCRO assessments enables
us to account for our company’s progress in responsiblytransitioning from a cigarette to a world-leading smokefree business, and the evolving environmental impact of
our expanding portfolio (along with the necessary tradeoffs stemming from this transition). We seek to designand deploy tailored programs based on the specificitiesof each product category and disclose our approach in
our annual Integrated Report available on PMI.com.
By applying a more in-depth CCRO assessment alignedwith the TCFD recommendations, we were better able toevaluate climate-related risks and opportunities in relation
to our products and services, such as shifts in supply anddemand and downstream market risks associated withshifting consumer demands for lower-carbon products.

Philip Morris International — TCFD Report 2022

Risk Management

Metrics & Targets

Appendix

We also periodically conduct surveys with our productadult users to gather insights into their perspectives onsustainability-related matters. In 2021, we conductedsurveys with our product users in four key smoke-free
product markets. Results provided valuable insights on
consumer views, with over 90% expressing positive
perceptions of PMI’s efforts in sustainability as aprogressive and innovative brand and their appreciationfor our end-of-life take-back programs and otherpost-consumer waste initiatives and programs. This
feedback enabled PMI to integrate these programs
into the design of our smoke-free product roadmap.
Climate change influences the setting of short- andmedium-term sustainability targets for our products andservices. To control environmental and social impacts
across the life cycle of our smoke-free products, wehave set 2025 eco-design and circularity ambitions,which extend to electronic devices, accessories,
consumables, and packaging (read more in the “Reduce
post-consumer waste” section of our annual Integrated
Report available on PMI.com). Potential benefits include
energy savings, reduced use of natural resources,
waste reduction, and a longer product lifespan.
Investment in R&D
Product eco-design and circularity is now an 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, our 2025 ecodesign and circularity ambitions 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 recycledcontent in our product packaging. In our operations,eco-design principles inform how we use LCA to assess
the comparative carbon footprint of our products, fromtobacco sourcing to end-of-life impacts. We have analyzed
IQOS devices, heated tobacco units, and packaging. We
are working to close the carbon emissions intensity gap
between combustible tobacco products and smokefree products through intensive R&D in improved
manufacturing processes, extending the usable life of
our electronic devices, and decreasing the total carbon
footprint through innovative material selection guided
by the application of LCAs and eco-design principles.

Strategy

Our climate change strategy plays a key role over the
medium and long term to enable efficiencies in ouroperations, increase our resilience, and deliver against
our reduction targets, thereby better positioning us
when our stakeholders—including consumers andinvestors—assess our performance versus competitors.

Strategy

BC18

Governance

Financial planning
Climate-related regulations are expanding and becoming
more stringent. Compliance with such regulations arecore to the way PMI operates. While new legislation
may trigger additional costs when implementing new
programs and initiatives, it can also provide us with theopportunity to reduce energy consumption, carbon
emissions, and operational costs. We have adapted
our financial planning to address climate risks andseize opportunities related to direct and indirect costs,
capital expenditure and allocation, and assets overthe short-, medium-, and long-term time horizons.
Some examples of how financial planning has been
influenced by climate-related risks and opportunities include:• Renewable energy generation subsidies
are factored into our cost-benefit analyses
to improve return on investment• The expansion of schemes such as the EU Emission
Trading Scheme (EU ETS) to include EU accession
countries where PMI has facilities has influenced
our investments with energy saving initiatives,
our Drive4Zero Program, and our portfolio ofzero-carbon technologies (learn more about these
initiatives in the “Tackle climate change” section of
our annual Integrated Report available on PMI.com)• Energy taxes have incentivized us to implement an
Energy Management Program according to ISO 50001,
contributing to savings from energy tax reductions
PMI’s supply chain and its purchases of tobacco leaf
are influenced by the cost of production for farmers.
If the overall cost of producing raw tobacco at directly
contracted farms and third-party leaf suppliers
increases, it would lead to an indirect increase inprocurement costs as the price of tobacco would
respond to upward pressure on the cost of production.

Philip Morris International — TCFD Report 2022

Risk Management

Metrics & Targets

Appendix

Since 2002, we have been implementing the Good
Agricultural Practices (GAP) program. GAP is a programwith mandatory requirements for our tobacco suppliers
and their contracted farmers, which provides specificguidance on initiatives to mitigate tobacco growing
risks and impacts related to climate change such astransition market risks related to fuel price increases. A
set annual budget is allocated to initiatives to promote
the adoption of improved and innovative practices by thefarmers in our supply chain lowering fuel consumption,
dependency on fuel and overall production costs.
Based on our financial planning PMI allocates anannual budget to investments in climate risk mitigation
practices under the GAP program worldwide, whichis expected to continue over the next decade. We
have increased the annual budget to support farmers
in our supply chain to improve their resiliency andseize opportunities in the low carbon economy overthe past several years. Strategic initiatives include
improving efficiency and reducing mechanized activities
at field stage, improving tobacco curing efficiency, andswitching to low-carbon energies, thus making tobacco
suppliers, their farmers, and PMI more resilient to priceincrements on diesel and diesel products, for instance.
We also use carbon pricing mechanisms and revise ourinternal carbon prices annually. Carbon pricing helps us to
identify where to act by comparing and ranking relevant
GHG reduction projects globally based on their costeffectiveness in reducing emissions and drive the expendituresneeded for prioritizing our list of initiatives (read morehere).
We have an extensive risk control program whereby
locations with values exceeding USD 30 million are
surveyed by engineers from our property insurer
including physical risks. We have several locations
that do have natural catastrophe exposures including
flood risk. This is addressed through risk improvement
recommendations for physical mitigation solutions or
the implementation and reinforcement of management
controls such as protecting openings, raising equipment,
and implementing Flood Emergency Response Plans.
Information on our exposure and responses is reviewed
regularly. It enables risk and opportunity identificationand management at the company and asset level.
Based on the results of our most recent CCRO
assessment, revenues and access to capital are currently
not impacted by climate change, and acquisitions anddivestments are not expected to materially impact PMI.

StrategyOver the past several years, we have reduced the overall
carbon impact of our smoke-free products throughimprovements in manufacturing processes and in our
tobacco supply chain.

Strategy

BC19

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

C. Describe the resilience of PMI’s strategy, taking into considerationdifferent climate-related scenarios, including a 2°C or lower scenario.

Scenario analysis is based on the most frequently
used Representative Concentration Pathways (RCP),
ranging from RCP2.6 to RCP8.5. Starting from the RCP
scenarios, climate data are assessed to analyze theimpact on the PMI areas of interest at specific global
warming levels with scenarios in line with the successfulachievement of the Paris Agreement’s goal (1.5°C and
2.0°C warming compared to preindustrial level), andanother scenario shaped on its failure (3°C warming).
The database used is based on the analysis of multiple
outputs from seven Regional Circulation Models (sitespecific climate variables) and 23 General Circulation
Models (regional climate variables) participating in
the Climate Model Intercomparison Project (CMIP).
Read more about the identification process here.
Manufacturing
We are continuing our efforts to certify all our priority
factories to the Alliance for Water Stewardship(AWS) standard by 2025. This certification supports
local stakeholder engagement activities in water
catchment areas that in turn can help mitigate water
scarcity risks. Several factories are implementing
water saving and recycling programs as part ofour Drive4Zero initiative and are also piloting
projects to reduce their water consumption rates(read more in the “Preserve nature” section of ourannual Integrated Report available on PMI.com).
PMI aims to ensure that its manufacturing sites areadequately designed, built, and protected in an effective
way. Programs include an external risk assessment of PMI
insurable manufacturing sites performed on average once
per year to evaluate the potential exposure of factories
to floods and their preparedness, estimating the risk ofpotential losses and damage and business interruption.
All PMI factories are equipped with air conditioning
systems to limit heat-stress due to long heatwave
periods and allow for good working conditions.

Philip Morris International — TCFD Report 2022

Tobacco supply chain
PMI farmers and suppliers in tobacco growing areas
already adopt several adaptation measures to reduce
exposure to longer and more frequent droughts that are
forecasted by climate models. All our tobacco supplierscommit to PMI’s Good Agriculture Practice (GAP)
program that includes farming practices to conserve soil
moisture and nutrients. Moreover, the implementationof irrigation systems in drought-prone areas such as theBrazilian Northeast region halves the exposed value ofyield losses at risk due to extreme events. Periodic local
water risk assessments help determine critical hotspots in
our tobacco supply chain calling for adaptation measuresand helping to validate conditions when potential
alternative supply regions are identified, supporting thelong-term stability of our sourcing strategy. Tobacco
suppliers are reporting soaring crop losses due to heavy
rains and floods; vulnerable tobacco sourcing areas are
implementing GAP practices to enhance their resilience
to such events, including subsoiling and cover crops toreduce soil compaction and improve water infiltration.
In some key supply regions, such as Brazil for instance,
tobacco farmers have access to insurance schemesthat protect them against hailstorms and floods.
Broader supply chain
PMI actively engages with its suppliers to support
their transition toward a more resilient and sustainablebusiness model, as covered in PMI’s Responsible Sourcing
Principles (RSP). PMI’s Sourcing Risk Management
framework facilitates the identification of mid- and longterm business disruption risks–including climate-related
ones–and supports the supplier selection process. PMI
adopts a multiple-sourcing strategy to diversify risk acrossdifferent suppliers and geographies to guarantee thestability of its supply chain, thus reducing the likelihood ofbusiness interruption and increased procurement costs.

Strategy

Physical risks

B
C

20

GovernanceTransition risks
Transition risks have been assessed under two
mitigation pathways consistent with the 1.5°C Paris
Agreement target and beyond (+3°C). The resultsof the climate scenarios have been compared witha business-as-usual scenario (BAU, representing afuture in which no extra international efforts are madeto adapt to or mitigate climate-related impacts) toestimate the value at stake. Two Network of Central
Banks and Supervisors for Greening the Financial
System (NGFS) climate scenarios have been used torepresent the potential impacts of global warming
1.5°C and 3°C pathways. NGFS climate scenarios
provide a common reference point for understanding
how climate change and climate policy and technology
trends could evolve in different future scenarios:• The Net Zero 2050 scenario, aligned to SSP2-1.9 (1.5°C),
is an ambitious scenario that limits global warming to
1.5°C through stringent climate policies and innovation,
reaching net zero CO₂ emissions around 2050
• The Current Policies scenario, aligned to SSP2-4.5(3°C), assumes that only currently implemented
policies are preserved but they are not sufficientto achieve official climate commitments,
emissions grow until 2080 leading to about 3°C
of warming by 2100 and severe physical risks
These scenarios are built on the Integrated Assessment
Models which form the basis of the Intergovernmental
Panel on Climate Change (IPCC) reports and areconsidered best practice globally. The benefits ofthe scenarios are that they are annually updated toincorporate countries’ commitments to reach net zero
emissions and have been enriched with an expanded setof macroeconomic variables, and country-level granularity.
Read more about the identification process here.

Philip Morris International — TCFD Report 2022

Risk Management

Metrics & Targets

Appendix

Manufacturing
In direct operations, PMI is reducing its exposure
to energy and carbon price increases throughthe implementation of two programs to increase
efficiency and cut emissions: Drive4Zero and Zero
Carbon Technology. PMI will further increase theshare of renewables in its energy matrix through the
deployment of technologies to self-produce and store
renewable energy. Read more about these initiatives
and progress in the “Tackle climate change” section of
our annual Integrated Report available on PMI.com.
Tobacco supply chain
PMI actively supports farmers in its supply chain to
improve resiliency and seize opportunities in the lowcarbon economy. Strategic initiatives include improving
tobacco curing barn efficiency and switching to lowcarbon energy sources, such as wood and biomasspellets produced from agricultural residues, making
tobacco suppliers more resilient to price increments on
fossil fuel which are energy sources used in the curing
process (read more in the “Preserve nature” sectionof our annual Integrated Report available on PMI.
com). As a part of its GAP program, PMI fosters theimplementation of sustainable agricultural practices tooptimize the use of chemical fertilizers in its tobacco
sourcing areas, thus reducing the exposure to fertilizer
price volatility and increased procurement costs.
Broader supply chain
PMI launched a new car fleet policy in 2021 to foster
the electrification of its own fleet, progressively phaseout fossil fuel vehicles, and reduce fleet emissions. PMI
logistics prioritizes lower-carbon transportation carriers
and routes, reducing air shipments as much as possible.
Moreover, PMI’s regional sourcing strategy contributes
to minimizing raw material and product transportation
distances between suppliers and factories, reducing
fuel consumption. Since our largest share of emissions
tied to logistics comes from third-party logistics, PMI
is actively engaging with suppliers to support theirtransition to more efficient and lower-carbon fleets.
All of this will result in a lower exposure to the direct
and indirect risks due to growing energy and carbon
prices in PMI owned and third-party logistics.

Strategy

Logistics
Seaports are essential for PMI’s global trade.
PMI periodically updates the business continuity
plans (BCP) and recovery strategies of the criticalnodes in its transport networks to minimize therisks of supply chain disruption and increased
procurement costs. Risk identification andassessment include flood and sea level rise risks.

Strategy

BC21

Governance

Strategy

Risk Management

Risk Management
The processes used by PMI to identify, assess,and manage climate-related risks
Describe PMI’s processes for identifying and assessing
climate-related risks.

22

Describe PMI’s processes for managing
climate-related risks.

24

Describe how processes for identifying, assessing,and managing climate-related risks are integrated into
PMI’s overall risk management.

24

Philip Morris International — TCFD Report 2022

Metrics & Targets

Appendix

22

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

A. Describe PMI’s processes for identifying
and assessing climate-related risks.

• Integration into our corporate-wide Enterprise Risk
Management (ERM) practices (read more here);• Consideration as part of a Climate Change
Risk and Opportunity (CCRO) assessment(read more in this section); and• Consideration as part of an Environmental Risk Analysis(ERA) (read more in this section’s feature box).

CCRO assessment
We periodically carry out a CCRO assessment tounderstand our company’s exposure to climaterelated physical and transition risks over time under
different climate scenarios and time horizons, following
the recommendations of the TCFD. In 2022, PMI
conducted a CCRO assessment to identify and assess
physical and transition risks across multiple climate
scenarios and time horizons. The assessment covered
specific areas within PMI’s Operations function,
namely Leaf (i.e., tobacco and clove growing areas),
PMI Manufacturing (i.e., factories and warehouses),
Procurement (i.e., paper and pulp-based supply chain,
which includes acetate tow, and electronics supply chain)and Logistics (i.e., ports and key distribution centers).

Identification and assessment ofphysical risks and opportunities
The CCRO assessment projected acute and chronic
physical risks under 1.5°C, 2°C and 3°C global warming
scenarios until 2030 and 2040. These scenarios arecompatible with the targets set by the Paris Agreement.
The assessment covered around 600 assets (such as
tobacco crops, factories, warehouses) and geographiesof interest around the world with a spatially explicit
approach (30 km2 resolution). The risk assessment
was based on the Intergovernmental Panel on Climate
Change (IPCC) definition of climate risk that brings
together climate hazards, exposure (i.e., assets that
could be impacted) and vulnerability (i.e., likelihood ofassets being negatively affected by the hazards).
Climate variables and extremes were simulated byusing multiple outputs from 30 different climate models
participating in the Climate Model Intercomparison Project(CMIP5) for the time window 2010–2040. These variables
were used to assess the exposure of each site to climate
hazards including drought, heatwave, and flooding. By
comparing against baseline conditions (1980–2010),
we estimated the change in frequency and intensity(moderate, severe, extreme) of climate-related physicalhazards for each location and their projected trends overtime until 2040. A final hazard risk index was calculated toscore risk exposure for each asset and identify hotspots.
We considered that acute risks arise from site-specificextreme events (e.g., increased occurrence of floods
and heatwaves), while chronic risks are linked to theincremental shift in temperature and rainfall leading toincreased droughts. This reflects the characteristics ofclimate variables used to calculate drought, heatwave,
and flood indicators of the CMIP5 models. We also
assessed the exposure of ports to sea level rise,
which was considered as a long-term, chronic risk.

Philip Morris International — TCFD Report 2022

Risk Management

As part of PMI’s various risk management practices,
the identification and assessment of climaterelated risks is primarily achieved through:

B
C

23

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

Identification and assessment oftransition risks and opportunities
Risks and opportunities were determined by desktop
research, internal stakeholder consultations, and a reviewof the main findings from past CCRO assessments. Risks
and opportunities across PMI’s Operations function werecategorized into the TCFD sub-categories as follow:

Cumulative increment in losses and damages due tosoaring drought and flood instances have been projected
to 2030 and 2040 for PMI manufacturing sites (resulting
in damages to property, inventory, and businessinterruption) and tobacco growing areas (resulting inlosses in crop yield). This analysis has been driven by
the availability of data on observed losses and damages
for those asset categories. Worker population exposedto heat stress has also been estimated for each site.

• 14 policy and legal risks• One technology risk
• Eight market risks• Two market opportunities• Two resource efficiency opportunities• Two energy source opportunities
Risks and opportunities were prioritizedaccording to materiality, velocity, and likelihood
criteria in order to define a final ranking.
The top 10 risks and opportunities were validated
internally. Their financial impacts were reassessed under
two climate scenarios aligned to the SSP2-1.9 and
SSP2-4.5: the NGFS net zero 2050 scenario (1.5°C) andthe Current Policy scenario (3°C). Mitigation actions
are considered as cost avoidance opportunities. The
value at stake (VaS) represents the difference between
the business as usual and the climate scenarios.

Environmental Risk Analysis (ERA)
While the CCRO assessment is a stand-alone project
conducted on a periodical basis to identify climaterelated risks, the ERA is PMI’s main process to identify
and manage substantial, short-term environmental
risks and opportunities at the operational level on amore frequent basis. The ERA builds on the CCRO
assessment to further analyze operational implications
from the identified risks and opportunities.

Philip Morris International — TCFD Report 2022

Risk Management

The exposed financial value for each asset was calculatedwith a focus on the main hotspots subject to the highest
risks. The total value at stake was reduced wheneveradaptation measures were in place (e.g., irrigation systems
in tobacco growing area that would mitigate the risk ofcrop yield failure due to droughts). Adaptation measures
were considered as an opportunity to avoid costs (losses).

B
C

24

Governance Describe PMI’s processes forB.
managing climate-related risks.

• Integrating climate-related risk observations into
our corporate-wide Enterprise Risk Management(ERM) practices (read more to the right);• Following up on identified and assessed climate-relatedrisks as part of a Climate Change Risk and Opportunity(CCRO) assessment (read more in this section); and• Following up on identified and assessed climaterelated risks as part of an Environmental Risk Analysis(ERA) (read more in this section’s feature box).

CCRO assessment
As a result of the CCRO assessment, we identify andassess climate-related transition risks and opportunities
relevant to our business operations, prioritizing themaccording to their velocity, likelihood, and materiality. In
depth-assessments are carried out for the most relevantrisks across the different PMI business functions in orderto provide a detailed quantification of the potential
value at stake and inform risk mitigation actions.
We developed a risk control program as a response to
the identified and assessed physical risks resulting fromclimate change. Locations exceeding USD 30 million in
asset value are surveyed by engineers from our property
insurer, who provide risk management recommendations.
Vulnerable hotspots to climate hazards are mapped andassessed in-depth to understand existing weakness andproactively define adaptation measures—or strengthen
existing ones—to enhance their resilience in the long term.

Environmental Risk Analysis (ERA)
Results from the ERA (described here) are usedby PMI’s business functions to develop programs,
roadmaps, action plans, targets, and budgets to either
prevent substantial risks from materializing, or to
seize opportunities. Results are monitored by each of
PMI’s relevant departments and communicated to therelevant stakeholders to trigger follow-up actions.

Philip Morris International — TCFD Report 2022

Risk Management

Metrics & Targets

Appendix Describe how processes forC.
identifying, assessing, and managing
climate-related risks are integrated
into PMI’s overall risk management.
As highlighted in our description of specificclimate-related risk management activities, climaterelated risks are integrated into PMI’s overall
Enterprise Risk Management (ERM) practices.
We designed our risk management and internal control
practices to address significant or emerging strategic,
external, inherent process, and project deployment risks
that could undermine our ability to achieve our strategic
business objectives and create value over time. Within
this context, ESG-related risks and opportunities are
considered as part of our risk management practices.
Our enterprise risk management approach utilizes aninterconnected three-step assessment process to identify,
assess, manage, and respond to risks that can have asubstantive impact on our strategic priorities and businessobjectives. Management has identified and prioritized
key enterprise risks based on four risk dimensions: (1) the
impact a risk could have on the organization if it occurs;(2) the likelihood a risk will occur; (3) the velocity withwhich a risk would affect the organization if it occurs;and (4) the interconnectivity of a risk with other risks.
Furthermore, management distinguishes its risks intoeither strategic or operational (critical) risks. Strategicrisks have a direct influence and bearing over theCompany’s strategic priorities, business objectives
and the long-term direction the Company is pursuing.
Management’s operational (critical) risks are significant interms of their immediate, short- or medium-term businessdisruptive effect. Strategic risks and critical operationalrisks that are deemed significant are communicated bymanagement to the Board or respective Board committee
exercising subject matter oversight as appropriate.

Risk Management

As part of PMI’s various risk management
practices, the overall management of climaterelated risks is primarily achieved through:Strategy

B
C25

Governance

ESG-related risks and opportunities are consideredwithin our enterprise-wide risk assessment, which
also leverages the company’s sustainability materiality
assessment process. More specifically, the priority
ESG topics identified by the latest sustainability
materiality assessment determine which ESG risks
and opportunities are considered in the enterprisewide risk assessment. Moreover, we also progressively
consider, among others, risks and opportunities that
could have an impact on PMI’s sustainability strategy
and the achievement of performance targets linked
to KPIs defined as part of the Sustainability Index.
In this context, our enterprise risk landscape addresses
climate-related risks in two key risk areas, namely“Environmental, Social, and Governance (ESG)” risk and“Business Disruption” risk. The key risk area “ESG” informs
about the risk of being unable to implement an effective
sustainability strategy prioritizing relevant ESG-relatedrisks, progress against set aspirations, and report results.
The key risk area “Business Disruption” refers to the riskof potential disruption of our supply chains and logistics
as well as the inability to operate due to, among others,
an inadequate climate-proofing strategy along the value
chain. The key risk area “Business Disruption” is owned
by our Senior Vice President Operations, whereas the keyrisk area “ESG” is owned by our Chief Financial Officer.

Philip Morris International — TCFD Report 2022

Risk Management

Metrics & Targets

Appendix

To complement our continuous enterprise-wide risk
assessment efforts and regular sustainability materiality
analyses, we have various risk evaluation mechanisms inplace to support the development of tailored strategies
and responses for our priority ESG issues along ourvalue chain. The specialized risk management processes,
as outlined here and here, are deployed to identify,
assess, and manage climate-related risks in PMI.
We are working to further integrate these processes
and their outcomes into our wider enterprise-wide risk
management practices by incorporating specific climaterelated risk observations into the enterprise risk landscapefor aggregation into relevant key risk areas. Moreover,
we are working to build synergies between both our
specialized climate-related and our enterprise-wide risk
management practices by aligning their terminology,
processes, methodologies, and building capabilities
within functions to strengthen the level of integration.
Finally, we disclose PMI’s material risk factors
in our 10-K and 10-Q submissions to the U.S.
Securities and Exchange Commission. Our latest
submissions are available on PMI.com.

Risk Management

Enterprise risk management is facilitated by PMI’s
corporate risk management function “Risk & Controls”
through periodic alignment with “first line” business,other “second line” risk management and assurance, and“third line” internal audit (Corporate Audit) functions. We
assign ownership of each prioritized key risk area to amember of our Company’s Management. In parallel, risk
oversight is conducted by the full Board of Directors,
as well as by the Committees of the Board with respect
to their areas of responsibility. Read more about
Board oversight here and management’s role here.

Strategy

B
C26

Governance

Strategy

Risk Management

Metrics & Targets
The metrics and targets used by PMI to assess and manage
relevant climate-related risks and opportunities
Disclose the metrics used by PMI to assessclimate-related risks and opportunities in line with
its strategy and risk management process.

27

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks.

31

Describe the targets used by PMI to manage
climate-related risks and opportunities and performanceagainst targets.

33

Philip Morris International — TCFD Report 2022

Metrics & Targets

Appendix

27

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

A. Disclose the metrics used by PMI to assess climate-related risks andopportunities in line with its strategy and risk management process.
Metrics & Targets

Performance indicators allow us to measure progress and evaluate our efforts. We trackprogress against a range of climate-related environmental metrics, price carbon, andincorporate forward-looking targets into our executive compensation program.
Tracking progress against environmental metrics
Beyond our carbon footprint data, we consider energy consumption in our direct operations aswell as metrics related to forestry, water, biodiversity, waste, and environmental management
due to the interdependent nature between these capitals and climate-related risk.
A selection of our indicators related to environmental health and safety (EHS) of our operations are
externally assured each year. You can find our most recent verification statements on PMI.com.
You can find updated progress against KPIs in the “Performance metrics” page available on
PMI.com and progress against our aspirations in our annual Integrated Report.

B
C

Energy Consumption in PMI direct operations

Tackle climate change

12

Total energy consumption in PMI factories,
offices and fleet (gigajoules)
Proportion of total energy consumed
that is from renewable sources
Energy intensity (gigajoules per million
cigarettes equivalent)¹
Fuel consumption from non-renewable sources (gigajoules)
Fuel consumption from renewable sources (gigajoules)
Total electricity consumed (MWh)²
Total electricity consumed that is fromrenewable sources (MWh)Intensity is measured per million cigarette equivalent sold.
Excludes electricity consumption from fleet.

Philip Morris International — TCFD Report 2022

2019

2020

2021

2022

9,456,576

7,909,157

7,721,166

7,657,899

27%

29%

33%

35%

11.95
5,819,072
128,967
959,723

10.83
4,733,193
91,680832,292

10.37
4,541,721
123,033
865,166

10.14
4,487,522
95,236
861,434

623,940

621,620674,903727,283

Goals

28

Governance

Strategy

Metrics & Targets

Risk Management

AppendixPreserve nature

Forest

PMI tobacco
supply chain

PMI value
chain

Proportion of paper, board, and pulp-basedpurchased at no risk of gross deforestationof primary and protected forests¹

Biodiversity

Water

Cubic meters of water optimized in our tobaccogrowing areas (cumulative since 2019) (million m3)²
Proportion of tobacco-growing areas
which are covered by Local Water Risk
Assessments (cumulative, since 2018)
Quantity of blue water used per
ton of tobacco produced³
Total amount of water used (’000 m3)
Total amount of water consumed (withdrawn
minus discharged) (’000 m3)
Total amount of water withdrawn (’000 m3)
Total amount of freshwater withdrawn (’000 m3)⁴
Water ratio (water withdrawn in m3 per
million units of cigarettes sold)⁵
Proportion of PMI factories
certified to AWS standard⁶
CDP Water rating
Proportion of tobacco purchased without
detection of residues attributable to the use ofhighly hazardous pesticides (HHPs), as definedby FAO and WHO guidelines in 2016
Proportion of tobacco purchased without
detection of residues attributable to the use of
WHO TOX1 group of crop protection agents

SI Indicators included in PMI Sustainability Index

Philip Morris International — TCFD Report 2022

PMI tobacco
supply chain

PMI factories

PMI valuechain

PMI tobacco
supply chain

2020

2021

2022

Goals

100%

100%

100%

maintain
100%

n/a
n/a
n/a
n/a

37%
355
165
190

55%
389
199
190

67%

75%

74%

82,51993,700102,806

A

A

A

n/a

n/a

64%

0.01

0.44

≥10 million
cubic metersby 2030
4.94

57%

66%

81%

307
115,009339
133,674263
107,720

1,619
3,375
2,215

1,481
3,120
2,088

1,547
3,089
2,137

3.5

2.6

2.5

30%

43%

51%

A

A

A

97%

100%

100%

maintain
100%

100%

100%

100%

maintain
100%

100% by2025

SI

Metrics & Targets

Scope

Proportion of tobacco purchased at no risk of grossdeforestation of primary and protected forests¹
Proportion of tobacco purchased at no risk of
net deforestation of managed natural forest
and no conversion of natural ecosystems¹
Total hectares of forest grown• Due to restoration of at-risk forest• Contribution to forest positive
Proportion of flue-cured tobacco purchasedthat is cured with renewable fuel sources (selfsufficient firewood and biomass adoption)
Approximate total number of curing barns
upgraded since 2014 (cumulative)
CDP Forest rating

maintain> 70%

B100% by2025

100% by2025

maintain<3.1
100% by
2025

C

29

Governance

Strategy

Metrics & Targets

Risk Management

AppendixPreserve nature continued

Waste
Environmental
management
1
2
3
4
5
6
7
8
9

• Incinerated with energy recovery• Incinerated without energy recovery• Disposed to landfill⁷
Amount of hazardous waste
generated (in metric tons)• Incinerated with energy recovery• Recycled• Incinerated without energy recovery• Disposed to landfill

PMI
operations

Proportion of manufacturing facilities
certified to ISO 14001⁸
Number of environmental fines(and approximate amount in USD)⁹PMI
factories

2020

2021

2022

Goals

69%

79%

97%

100% by
2022

119,750
85.5%

114,043
87.3%

119,192
86.9%

11.4%
0.3%
2.8%
1,266

11.4%
0.3%
1.1%
1,057

12.0%
0.3%
0.8%
1,698

42.6%
37.6%
12.7%
7.1%

57.3%
20.9%
13.5%
8.2%

67.4%
16.7%
13.4%
2.5%

100%

100%

100%

1
(32,000)

2(48,000)

0

maintain
85%

<1%

B
maintain100%

For definitions, please see PMI’s Zero Deforestation Manifesto and PMI’s ESG KPI Protocol 2022.
Indicator is based on the World Resources Institute’s volumetric benefit accounting methodology and is verified by an external third party.
Blue water refers to water used for irrigation, excluding rainfall.
Refers to amount of freshwater withdrawn from municipal sources.				
Water intensity is measured in cubic meters per million cigarettes produced equivalent. In 2021, we updated our methodology to account for the conversion factor of heated tobacco
units to conventional cigarettes of 5:1 and have restated historical data accordingly.
Aspiration pertains to priority manufacturing facilities identified based on site overall risk in relation to the watershed, water withdrawal, water consumption, product portfolio, andother strategic considerations.
Disposal to landfill includes sanitary waste, canteen waste, and waste mandated by authorities to be disposed of in landfill.
Scope: Manufacturing facilities producing more than three billion cigarette equivalents annually.
Fines above USD 10,000 (or equivalent in converted currency).

Pricing carbon
Assigning a price—and hence a theoretical cost—tocarbon emissions makes the intangible tangible andfurther incentivizes action to reduce the emissions
that contribute to global warming. PMI has used twocomplementary internal carbon pricing instruments
since 2020: a shadow price and a carbon levy.

We integrate our shadow carbon price into the
preparation and financial evaluation of businessproposals aimed at structurally reducing our carbon
emissions, supporting the approval of carbon emission
reduction projects, including projects under our
Zero Carbon Technology (ZCT) program.

We revise our shadow price and carbon levy annually
to reflect changes in our risks and emission profile.
In 2022, we also conducted a carbon pricing benchmark
assessment, and evaluated external factors, suchas inflation rates and developments in emissions
trading schemes.

We also used our carbon levy to help determine
investments required to compensate our emissions
through offsetting or insetting initiatives. The levy isdesigned to internalize costs and support behavioral
change by setting a virtual internal tax on selectedbusiness units for their GHG emissions. This helps
us determine a budget for the Portfolio of Climate
Investments.

Most recently, we adjusted our shadow price from
USD 65 to USD 105 per ton of CO2e and increased ourcarbon levy from USD 8 to USD 11 per ton of CO2ein the last quarter of 2022.

Philip Morris International — TCFD Report 2022

You can read more about carbon pricing and
our Portfolio of Climate Investments (PCI) in the“Tackle climate change” section of our annual
Integrated Report available on PMI.com.

Metrics & Targets

Scope

Proportion of PMI factories with
virtually zero waste to landfill
Total amount of waste generated (in metric tons)• RecycledC30

GovernanceOur executive compensation and benefits programsupports our business, financial, and strategic objectives
and is explained in detail in PMI’s 2023 Proxy Statement.
The three components of our executive officers’ total
direct compensation are base salary, annual performancebased incentive compensation awards, and long-term
variable equity awards. Our long-term executive
compensation program reflects our commitment toputting sustainability at the core of our corporate strategy.
In 2022, annual incentive awards were assessed on six
growth measures, including a 20 percent weight for ourheat-not-burn shipment volume and a 15 percent weighton strategic initiatives. Those measures are heavily
focused on our transformation to smoke-free products
and include the drive for material and measurable progressin priority sustainability areas, alongside transparent
and clear sustainability reporting and disclosure.
For 2023, we continued the practice of incorporating
measures focused on our smoke-free product transformationand sustainability priorities into our annual incentive andlong-term equity performance goals for executives.
For more information, please refer to PMI’s
2023 Proxy Statement.

Risk Management

Metrics & Targets

Appendix

PMI’s Sustainability Index
In 2021, we developed PMI’s Sustainability Index
to measure and communicate progress rigorously
and quantitatively against our aspirations, using
a set of clearly defined and verifiable metrics. To
better align with shareholder and other stakeholderinterests, the Compensation and Leadership
Development Committee of PMI’s Board of Directors
has used the index to enhance the company’s
practices, explicitly linking compensation tosustainability and strengthening the link between
long-term compensation and ESG performance.
PMI’s Sustainability Index comprises 19 KPIs
directly linked to our 11 Roadmap goals. As with
our Roadmap, each KPI is aligned with one oftwo drivers: “Product Sustainability” (11 KPIs)
or “Operational Sustainability” (8 KPIs).
Using predefined target ranges, we assess andaward a score to each KPI annually. Thereafter,
using a weight assigned to each KPI (informedby the results of our sustainability materiality
assessment), we calculate the total Sustainability
Index score. Performance results from the fiscal
year 2022 are summarized on the following page.
You can read more about the weights of the
Sustainability Index metrics, including climate changerelated indicators, in our ESG KPI Protocol and annual
Integrated Report, both available on PMI.com.

Philip Morris International — TCFD Report 2022

Metrics & Targets

Incorporating climate-related performance
metrics into executive remuneration

Strategy

BC31

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

B. Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and the related risks.
Metrics & Targets

To deliver on our climate ambition, we rely on robust carbon footprint accounting,analysis of climate change-related risks and opportunities, ambitious mitigation
targets, implementation of adaptation measures, clear management and governancestructures, and key enablers such as our internal carbon pricing.
Our value chain GHG inventory and a selection of our GHG emissions data are externally assured each year.
You can find our most recent verification statements on PMI.com.
Read more about our progress and approach in the “Tackle climate change” section of our annual Integrated Reportavailable on PMI.com and a description of transition risk and opportunities associated with our carbon emissions here.
You can find updated progress against our KPIs in the “Performance metrics” page available on PMI.com.

B

Total GHG emissions
Scope 1 + 2

Tackle climate change

2019

2020

2021

2022

Absolute CO2e scope 1 (metric tons)¹
Absolute CO2e scope 2 (metric tons)¹
Absolute CO2e scope 1+2 (metric tons)¹• Absolute reduction versus 2019 baseline

397,210
158,672
555,882n/a

322,633
90,366412,99926%

308,822
64,217373,040
33%

297,60242,482340,084
39%

Carbon offsetting certificates (metric tons)²
Net CO2e scope 1+2 (metric tons)¹

1,242
554,6403,297
409,703

16,128356,91142,848297,236

702

556

501

450

Absolute CO2e scope 1+2 (metrictons) from manufacturing
Proportion of electricity used and purchasedthat is from renewable sources
Proportion of carbon-neutral factories

394,447

305,381

267,783

242,392

72%

78%

81%

87%

3%

5%

13%

35%

Absolute CO2e scope 1 from fleet (metric tons)• Absolute reduction versus 2019 baseline
CO2e emissions from fleet (kg CO2e per km driven)
Proportion of hybrid or electrical vehicles in our fleet

111,400
n/a
222—%

79,45729%
216
5%78,01830%200
10%79,54329%
191
19%

Scope 1 & 2
Manufacturing

CO2e scope 1+2 intensity (kg per
million cigarettes equivalent)³

Scope 1 & 2
PMI FleetC

SI Indicators included in PMI Sustainability Index

Philip Morris International — TCFD Report 2022

Goals

50% by2030 (SBT)
Carbonneutrality
by 2025

100% by2025
100% by
2025

SI

32

Governance

Strategy

Metrics & Targets

Risk Management

Appendix

Tackle climate change continued

2021

2022

4,621
n/a

3,854
17%

3,749
19%

4,257
8%

Scope 3
Total

2020

2,312

2,386

2,331

909

804

888

n/a

28%

36%

30%

n/a

44%

64%

57%

16%

11%

3%

6%

Absolute CO2e scope 1+2+3 (’000 metric tons)

5,177

4,267

4,122

4,597

• Absolute reduction versus 2019 baseline
CO2e scope 1+2+3 intensity (kg per
million cigarettes equivalent)¹• Reduction versus 2019 baseline
CDP Climate Change rating

n/a
6,542

18%
5,844

20%
5,535

11%
6,085

n/a
A

11%
A

15%
A

7%
A

Total
PMI Value Chain

Scope 3
Tobacco Supply Chain

CO2e scope 3 biogenic emissions (’000 metric tons)
Absolute CO2e scope 3 (’000 metric tons)
from tobacco supply chain• Absolute reduction versus 2019 baseline
CO2e intensity reduction in tobacco
curing versus 2019 baseline
Proportion of Virginia tobaccopurchased cured with coal

2,598

Goals

25% by2025, 50%
by 2030(SBT)

SI

35 % by2025, 50
% by 2030
75 % by
2025
0% by
2023
Net zeroby 2040

Note: Our inventory of GHG emissions (scope 1, 2, and 3) in 2022 is subject to external verification by SGS (see the External Verification Statement for scope 1+2 here, for scope 3 here,
and a list of the individual metrics verified here).
12
34Emissions from PMI-operated IQOS stores are partially excluded from scope 1+2 emissions, as de minimis. In 2022, a portion of PMI’s retail stores (representing approx. 10% of total
retail surface area) have been included in the scope 1+2 emissions.
2022 figure includes carbon offsetting certificates purchased in our factories in Czech Republic, Lithuania, Mexico, Portugal, Switzerland, and our 2022 figure includes carbon credit
certificates retired in the name of our factories in Argentina, Brazil, Czech Republic, Greece, Indonesia (three sites, differentiated between six reporting entities for certification
purposes), Lithuania, Mexico, Pakistan, Portugal, Senegal, and Switzerland—in total 13 manufacturing sites—as well as our Operations Center in Switzerland and the Mexico market.
Intensity is measured per million cigarette equivalent sold.
For further details on scope 3 calculation please refer to the PMI Value Chain Methodology. In 2022, we further improved our carbon footprint model and data accuracy;
improvements relate to, for example, increased coverage of primary data collected from direct materials suppliers and integration of emissions related to fleet purchase. This led toprevious years being restated accordingly.

SI Indicators included in PMI Sustainability Index

Philip Morris International — TCFD Report 2022

Metrics & Targets

Absolute CO2e scope 3 (’000 metric tons)4• Absolute reduction versus 2019 baseline

2019

B
C

33

Governance

Strategy

Risk Management

Metrics & Targets

Appendix

C. Describe the targets used by PMI to manage climate-relatedrisks and opportunities and performance against targets.
Metrics & Targets

Performance indicators that allow us to measure progress and evaluate our efforts are oftentimes
attached to targets and aspirations to drive improvement and provide clarity on desired outcomes.
Our most recent climate-related targets are included below and include metrics directly related toenergy and emissions as well as metrics related to our work to preserve nature that demonstrate
mitigation and adaptation to climate change.
You can find updated progress against our aspirations in the “Performance metrics” page available on PMI.com.

Tackle climate change
2023

Zero coal used as curing fuel for the tobacco we source

2025

Carbon neutrality in our direct
operations (scope 1+2) SI

100% of our manufacturing
facilities certified carbon neutral

25% reduction in absolute scope 3
GHG emissions versus 2019 baseline SI

35% reduction in absolute greenhousegas (GHG) emissions in our tobacco
supply chain versus 2019 baseline

100% of electricity used andpurchased in our factories derived
from renewable sources

15% of suppliers by spend (coveringpurchased goods and services) will
have science-based targets (SBT)

50% reduction in absolute scope
1+2 GHG emissions versus 2019baseline (SBT)

50% reduction in absolute scope 3
GHG emissions versus 2019baseline (SBT)

50% reduction in absolute GHG
emissions in our tobacco supply
chain versus 2019 baseline

2030

2040

Net zero GHG emissions in our value chain (scope 1+2+3) (SBT)

Preserve nature
Maintain

2025

1

Zero grossdeforestationof primary andprotected forests
associated with ourtobacco supply chain>70% of flue-cured
tobacco purchased
cured with renewable
fuel sources (selfsufficient firewood
or biomass)

Zero net deforestation of managed
natural forest and no conversion of natural
ecosystems in our tobacco supply chain SI

100% of tobaccopurchased without
detection of residues
attributable tothe use of highly
hazardous pesticides≤3.1 Water ratio in
our manufacturing
facilities (water
withdrawn in cubic
meters per million
cigarettes equivalent)

Net positive impact onforests associated with ourtobacco supply chain

Virtually zerowaste to landfill in
manufacturing sites

Zero gross deforestation of primaryand protected forest associated with our
supply of paper and pulp-based materials

100% of our tobacco-growing areas covered by local
water risk assessments (cumulative since 2018)

100% of our manufacturing facilities certified to the
Alliance for Water Stewardship (AWS) standard1

2030≥10 million cubic meters of water optimized in our
tobacco-growing areas (cumulative since 2019)

Net zero deforestation of managed natural forest
and no conversion of natural ecosystems in thepaper and pulp-based products supply chain2033

No net loss on ecosystems
connected to PMI’s value chain

2050

Contribute toward a net positive impact on nature

Scale solutions toward a positive impact on water resources,
measured as volume of water optimized and restored
Contribute toward a positive impact on water resources

Aspiration pertains to priority manufacturing facilities identified based on-site overall risk in relation to the watershed, water withdrawal, water consumption, product portfolio, andother strategic considerations.

SI Indicators included in PMI Sustainability Index

Philip Morris International — TCFD Report 2022

B
C

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Appendix
Glossary of terms and acronyms

35

Forward-looking and cautionary statements

36

Notes

37

Philip Morris International — TCFD Report 2022

Metrics & Targets

Appendix

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Appendix

Glossary of terms and acronyms
3TGs – Tin, tantalum, tungsten, and gold
AWS – Alliance for Water Stewardship
CCRO assessment – Climate Change Risk
and Opportunity assessment
Company Management – The term we use to refer tothe senior management of the company, as presented
on our www.PMI.com site (also referred to as “ourleadership team” or “senior management team”)
Downstream supply chain – Those stages in the supply chain
in which materials (mostly in the form of finished products)
flow away from the organization to the customers/consumers
EHS – Environmental, Health, and Safety
ERM – Enterprise Risk Management

Offsetting – The act of purchasing a carbon credit
generated outside the corporate’s sphere of influence
and retiring the unit on behalf of 1 ton of carbon
that has been emitted by the corporate (source:International Carbon Reduction and Offset Alliance)
PCI – Portfolio of Climate Investments
Physical risk – Physical risks are those associatedwith the impacts from climate change. Source: U.S.
Environmental Protection Agency (EPA)• Acute physical risk – Acute physical risks refer tothose that are event-driven, including increased
severity of extreme weather events, such as cyclones,
hurricanes, heat or cold waves, or floods.

GAP – Good Agricultural Practices• Chronic physical risk – Chronic physical risks refer tolonger-term shifts in climate patterns (e.g., sustained higher
temperatures, sea level rise, changing precipitation patterns)
that may cause sea level rise or chronic heatwaves.

GHG – Greenhouse gas

R&D – Research and development

Insetting – The act of generating a carbon credit within thecorporate’s sphere of influence and retiring the unit on behalfof 1 ton of carbon that has been emitted by the corporate(source: International Carbon Reduction and Offset Alliance)

RSP – Responsible Sourcing Principles

IQOS heat-not-burn devices – Precisely controlled heating
devices into which specially designed and proprietary tobacco
units are inserted and heated to generate an aerosol

TCFD – Task Force on Climate-related Financial Disclosures

ESG – Environmental, Social, and Governance

KPIs – Key performance indicators
LCA – Life-cycle analysis
LCTP – Low-Carbon Transition Plan
NCGC – Nominating and Corporate GovernanceCommittee of PMI’s Board of Directors
NGOs – Non-governmental organizations
No Net Loss – The point at which business-related
impacts on biodiversity are balanced by measuresfrom the mitigation hierarchy, to leave no degradation
on natural ecosystems at end balance

Philip Morris International — TCFD Report 2022

SBT – Science-based target
SBTi – Science Based Targets initiative

TGA – Tobacco-growing area
Transition risk – Transition risks are those associated withthe pace and extent at which an organization manages
and adapts to the internal and external pace of change
to reduce greenhouse gas emissions and transition to
renewable energy. Transitioning requires policy and legal,
technology, and market changes to address mitigation
and adaptation requirements related to climate change.
Source: U.S. Environmental Protection Agency (EPA)
Upstream supply chain – Those operations in which thematerials flow into the organization (i.e., it mainly refers
to procurement activities and inbound logistics)
ZDM – Zero Deforestation Manifesto

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Appendix

Forward-looking and cautionary statements
This report and related materials contain projectionsof future results and goals and other forward-looking
statements, including statements regarding businessplans and strategies. Achievement of future results is
subject to risks, uncertainties and inaccurate assumptions.
In the event that risks or uncertainties materialize, or
underlying assumptions prove inaccurate, actual results
could vary materially from those contained in suchforward-looking statements. Pursuant to the “safe harbor”
provisions of the Private Securities Litigation ReformAct of 1995, PMI is identifying important factors that,
individually or in the aggregate, could cause actual results
and outcomes to differ materially from those containedin any forward-looking statements made by PMI.
PMI’s business risks include: excise tax increases anddiscriminatory tax structures; increasing marketing
and regulatory restrictions that could reduce ourcompetitiveness, eliminate our ability to communicate
with adult consumers, or ban certain of our products incertain markets or countries; health concerns relating to
the use of tobacco and other nicotine-containing products
and exposure to environmental tobacco smoke; litigation
related to tobacco use and intellectual property; intensecompetition; the effects of global and individual country
economic, regulatory and political developments, natural
disasters and conflicts; the impact and consequencesof Russia’s invasion of Ukraine; changes in adult smoker
behavior; the impact of COVID-19 on PMI’s business;
lost revenues as a result of counterfeiting, contraband
and cross-border purchases; governmental investigations;unfavorable currency exchange rates and currency
devaluations, and limitations on the ability to repatriate
funds; adverse changes in applicable corporate tax laws;
adverse changes in the cost, availability, and qualityof tobacco and other agricultural products and raw
materials, as well as components and materials for ourelectronic devices; and the integrity of its information
systems and effectiveness of its data privacy policies.

Philip Morris International — TCFD Report 2022

PMI’s future profitability may also be adversely affectedshould it be unsuccessful in its attempts to produce andcommercialize reduced-risk products or if regulation or
taxation do not differentiate between such products
and cigarettes; if it is unable to successfully introduce
new products, promote brand equity, enter new markets
or improve its margins through increased prices andproductivity gains; if it is unable to expand its brandportfolio internally or through acquisitions and thedevelopment of strategic business relationships; if it
is unable to attract and retain the best global talent,
including women or diverse candidates; or if it is unable
to successfully integrate and realize the expected
benefits from recent transactions and acquisitions.
Future results are also subject to the lower predictabilityof our reduced-risk product category’s performance.
PMI is further subject to other risks detailed from time
to time in its publicly filed documents, including PMI’s
Annual Report on Form 10-K for the fourth quarterand year ended December 31, 2022. PMI cautions thatthe foregoing list of important factors is not a complete
discussion of all potential risks and uncertainties. PMI
does not undertake to update any forward-looking
statement that it may make from time to time, except in
the normal course of its public disclosure obligations.

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Notes
In this report, “PMI,” “we,” “us,” and “our” refer toPhilip Morris International Inc. and its subsidiaries.
In this report and in related communications, the term“materiality,” “material,” and similar terms, when usedin the context of economic, environmental, and social
topics, are defined in the referenced sustainability
standards, and are not meant to correspond to theconcept of materiality under the U.S. securities laws
and/or disclosures required by the U.S. Securities andExchange Commission. Additionally, in this report and in
related communications, “climate-related risks,” “risks,” andsimilar terms, when used in the context of the Climate
Change Risk and Opportunity assessment (“CCRO
assessment”) are aligned with the recommendations of
the Task Force on Climate-related Financial Disclosures,
represent forward-looking projections based on uncertain
future climate scenarios, and are not meant to correspondto the concept of material risk factors contemplated
by U.S. securities laws and/or disclosures requiredby the U.S. Securities and Exchange Commission.

Philip Morris International — TCFD Report 2022

This report contains references and links to websites
operated by third parties. These references areprovided as a convenience to you and as an additional
avenue of access to the information contained inthose sources; they should not be viewed as anendorsement by us of the content of these references
and linked sites or opinions of their authors.
Unless otherwise stated, all references to IQOS are to
our IQOS heat-not-burn devices and consumables.
Trademarks and service marks in this report are
the registered property of, or licensed by, thesubsidiaries of Philip Morris International Inc., andare italicized or shown in their logo form.
Estimates for total industry volume and market
share in certain geographies reflect limitations
on the availability and accuracy of industry
data during pandemic-related restrictions.
Aspirational targets and goals do not constitutefinancial projections, and achievement of future
results is subject to risks, uncertainties, and inaccurate
assumptions, as outlined in our forward-looking andcautionary statements on page 36 of this report.

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www.pmi.com

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