Philip Morris International - Forests 2018
F0. Introduction
F0.1(F0.1) Give a general description of and introduction to your organization.
Who we are:
Philip Morris International Inc. (PMI) is a leading international tobacco company with a diverse workforce of approximately
80,600 people across the globe.
In 2017, our products were sold in over 180 markets, and we operated 46 production facilities globally. Headquartered in
New-York, U.S.; PMI has its Operations Center in Lausanne, Switzerland.
What we do:
PMI manufactures and sells cigarettes and other nicotine-containing products in markets outside of the United States ofAmerica. Our portfolio comprises both international and local brands and is led by Marlboro, the world’s best -sellinginternational cigarette.
In 2017, PMI net revenues amounted to USD 78,098 million including excise taxes on products worth USD 49,350 million.
2017 net revenues less excise taxes amounted to 28,748 million USD. 2017 Operating Income was USD 11, 503 million.
PMI’s 2017 shipment volume for cigarettes and heated tobacco units was 798,152 million units (761,926 million cigarettes
and 36,226 million heated tobacco units).
Our vision:
We are building our future on smoke-free products that are a much better consumer choice than continuing to smoke
cigarettes. Our vision is that these products ultimately replace cigarettes to the benefit of adult smokers, society, ourcompany and our shareholders.
Our strategy:
To this end our core strategies are:
· Smoke-Free: Develop, market, and sell smoke-free alternatives, and switch our adult smokers to these alternatives, as
quickly as possible around the world· Transition: Transition our resources from cigarettes to smoke-free alternatives· Regulation: Propose regulatory policies that encourage the replacement of cigarettes by smoke-free alternatives· Sustainability: Drive world-class sustainability programs across our entire value chain· Talent: Be the employer of choice for our global workforce and work tirelessly to attract t he best talent

· Transparency: Share our progress, and invite dialogue and independent verification· Growth: Provide superior returns for our shareholders
Sustainability:
For PMI, sustainability means creating long-term value while minimizing the negative externalities associated with our
products, operations and value chain. From the more than 350,000 farmers from which we source tobacco right up to theapproximately 150 million consumers of PMI products, we have an important impact on the communities and the environment
around us, which we are committed to address. We cannot achieve this alone. The engagement beyond our own operations
is key, as this is where the most significant impacts take place. While operating in a highly regulated environment, we st rive
to go beyond mere compliance to achieve a sustainable smoke-free future. Our business has a significant, global supply
chain organized by five main categories. We have a large agricultural supply chain, ranging from tobacco growers to
producers of other agricultural products, such as clove, menthol and guar gum. Another part of the supply chain consists ofmanufacturers of direct materials used to produce cigarettes and other tobacco products, such as acetate tow (for cigarette
filters) and paper (both cigarette paper and packaging materials). Key to our business are also the manufacturers ofmachines for our cigarette and heated tobacco products factories, a highly specialized industry. A recently added part of our
supply chain consists of the manufacturers of electronic devices for heated tobacco products and e-cigarettes. Finally, we
work with thousands of suppliers of goods and services that are not specific to the tobacco business, but essential for any
business, such as office equipment etc. As a responsible business, we want to understand and continuously address
potential sustainability issues in our global supply chain. We are working with business partners to proactively identify,
manage, and reduce risks, and create shared value. PMI supported the call for a price on carbon in the Paris Climate
Agreement. Our targets, recognized by the Science-Based Targets initiative in 2017, demonstrate how PMI can contribute tokeeping global warming below 2°C based on pre-industrial levels. We have set our performance baseline as 2010. Againstthat baseline, we aim to reduce absolute CO2e emissions from our own operations by 30% by 2020, 40% by 2030 and 60%
by 2040. We are well on track in 2017, achieving an overall reduction of 31% for our GHG scopes 1 and 2 emissions, driven
by the use of greener electricity, exceeding our 2020 target. Across our value chain, we aim to reduce absolute CO2eemissions by 40% by 2030. In 2017, we achieved a 30% reduction across scopes 1, 2 and 3, driven by gains in curing
efficiency and use of greener fuels in tobacco agriculture. We also have a long-standing commitment to reduce theemissions intensity of our value chain (measured in CO2e per million cigarettes equivalent) by 30% by 2020. In 2017 weremained on track to meet this target, reaching a 24% reduction since 2010

F0.2
(F0.2) State the start and end date of the year for which you are reporting data.

Reporting year

Start Date

End Date

January 1 2017

December 31 2017

F0.3
(F0.3) Select the currency used for all financial information disclosed throughout your response.
USD

F0.4
(F0.4) Select the stage(s) of the value chain which best represents your organization’s area of operation pertaining toforest risk commodities.
Manufacturing

F0.5(F0.5) Do you produce, use, or sell materials or products that contain any of the forest risk commodities?
Produce/use/sell Disclosing Explanation if produce/use/sell but not disclosing
TimberYes

Yes<Field Hidden>

Palm OilYesNo

PMI sources PO derived vegetal glycerin, the deforestation assessment of PMI value chain developed in2017 concluded that palm oil does not represent a material risk of deforestation for PMI due to the small
amount of palm oil that goes into PMI products as in the form of vegetal glycerin. PMI sources roughly
4,000 metric tons. of vegetal glycerin derived from palm oil. The amount of palm oil needed to produce
this amount of vegetal glycerin is close to 0% of global palm oil production.

CattleProducts

No<FieldHidden><Field Hidden>

Soy

No

<FieldHidden><Field Hidden>

Other Rubber

No<FieldHidden><Field Hidden>

Other

No

<FieldHidden><Field Hidden>

F0.6

(F0.6) Are there any parts of your direct operations not included in your disclosure?
No

F0.7(F0.7) Are there any parts of your supply chain not included in your disclosure?
Yes

F0.7a
(F0.7a) Identify the parts of your supply chain not included in your disclosure.
Exclusion
Source/ country/ geographical area
Description of exclusion
Approximately 5% of the board and paper sourced by PMI is sourced regionally. This has been excluded from the disclosure.
Potential for forests-related risk
Potential for forests-related risk, evaluated, but not disclosing to CDPPlease explain
PMI sources the majority of board and paper globally; this means that the supply chain is centrally managed by the
Operations Center based in Switzerland. A small share of board and paper is sourced regionally; this means that materials
are purchased from regional suppliers and the supply chain is managed by the regional offices. Five regions are defined:
Latin America and Canada (LAC), Asia, Eastern Europe, Middle East and Africa (EEMA) South, and EEMA North. The
disclosure excludes board and paper sourced regionally. PMI disclosure includes five fo rms of timber: wood-based bioenergy,
board, paper, acetate tow, and fine papers. The results of the deforestation assessment of PMI’s value chain showed thatapproximately 5% of board and paper materials are sourced regionally. Additionally, a share of tho se are from recycledmaterials, therefore, regionally sourced pulp and paper are considered to pose a non -material deforestation risk for PMI andtheir exclusion does not give an inaccurate or misleading picture of the company's deforestation risk manageme nt. No
material exclusions have been made to the response and the information provided through this questionnaire gives anaccurate picture of the company's deforestation risk management.

F1. Current stateF1.1

(F1.1) How does your organization produce, use, or sell your disclosed commodity(ies)?
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Form of commodity
Wood-based bioenergy
SourceSmallholders
Multiple contracted producers
Country/Region of origin
Argentina
Brazil
India
Indonesia
MalawiMozambique
Pakistan
Philippines
PolandUnited Republic of Tanzania% of procurement spend<1%
Comment
The percentage is calculated based on the total procurement spend which includes direct and indirect materi als and services.
Forest risk commodity
TimberActivity
Distributing/packaging
Form of commodity

PaperPrimary packaging
Secondary packaging
Tertiary packaging
SourceContracted suppliers (manufacturers)
Country/Region of origin
Australia
Austria
BrazilCanadaChile
China
FinlandFranceGermany
Indonesia
New ZealandPortugal
Spain
SwedenUnited Kingdom of Great Britain and Northern Ireland
United States of America
Uruguay% of procurement spend
6-10%
Comment
The percentage is calculated based on the total procurement spend which includes direct and indirect materials and services.
The country of origin listed is the country of origin of the wood. Both board and paper together account for 9% of total
procurement spend which includes direct and indirect materials, and services.
Forest risk commodity

Timber
Activity
Using as input into product manufacturing
Form of commodity
Other, please specify (Fine Papers and Acetate tow)
SourceContracted suppliers (manufacturers)
Country/Region of origin
BrazilCanadaChina
Denmark
FranceJapan
NorwaySouth Africa
SwedenUnited States of America% of procurement spend
1-5%
Comment
Fine papers are specialty papers that are used exclusively for tobacco products. The disclosure is organized using the same
categories used by PMI to manage the supply chain of timber products. The same categories were used in the deforestation
risk assessment of PMI’s value chain, which has been the basis for setting priorities for further managing deforestation risk s.
Therefore, PMI has decided to use the same categories in its disclosure, separating fine papers. This share is based on the
total procurement spend which includes direct and indirect materials, and services.

F1.1a(F1.1a) Indicate from which State/region(s) and municipality(ies) your disclosed commodity(ies) originate.
Forest risk commodity
Timber

Activity
Using as input into manufacturing process for power generation
Country/Region of origin
BrazilState/Region
Specify state/region (Bahia)
Municipality
Specify municipality (1) (Cocos)
Please explain
PMI is currently implementing a harmonized and verifiable monitoring framework to allow monitoring of progress towards
PMI’s goals on sustainable leaf curing fuel. As part of this monitoring framework, tobacco leaf su ppliers are required to reporton the location of their contracted tobacco farmers and to collect information regarding the location of the tobacco farmers
and the source of firewood.
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
BrazilState/Region
Specify state/region (Santa Catarina)
Municipality
Specify municipality (1) (Chapecó)
Specify municipality (2) (Figueira)Specify municipality (3) (Marechal Bormann y Guatambú)
Please explain
PMI is currently implementing a harmonized and verifiable monitoring framework to allow monitoring of progress towards ourgoals on sustainable leaf curing fuel. As part of this monitoring framework, suppliers are required to report on the location of
their contracted tobacco farmers and to collect information regarding the location of the tobacco farmers and the source offirewood.

Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
BrazilState/Region
Specify state/region (Rio Grande do Sul)
Municipality
Specify municipality (1) (Barro Vermelho)
Specify municipality (2) (Bosque)Specify municipality (3) (Cachoeira do Sul)
Specify municipality (4) (Capane)
Specify municipality (5) (Cordilheira)Specify municipality (6) (Ferreira)Specify municipality (7) (Tres Vendas)
Specify municipality (8) (Botucarai)
Specify municipality (9) (Candelária)Specify municipality (10) (Novo Cabrais)
Specify municipality (11) (Restinga Seca y Jazidas)
Specify municipality (12) (, Paraíso do Sul)
Please explain
PMI is currently implementing a harmonized and verifiable monitoring framework to allow monitoring of progress towards ourgoals on sustainable leaf curing fuel. As part of this monitoring framework, suppliers are required to report on the location of
their contracted tobacco farmers and to collect information regarding the location of the tobacco farmers and the source offirewood
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin

Indonesia
State/Region
Specify state/region (Lombok)
Municipality
Specify municipality (1) (East Lombok)
Specify municipality (2) (West Lombok)
Specify municipality (3) (Central Lombok)
Please explain
PMI developed deforestation risk maps for countries where farmers use firewood for tobacco curing and where medium tohigh deforestation risks where identified in the initial high level global deforestation assessment. A deforestation risk map wasdeveloped for Indonesia in 2016 and and update will be done in 2018. As an input for the development of the forest risk map,
PMI requires tobacco leaf suppliers to provide the exact location of their contracted farmers. Additiona lly, PMI has also
identified the distance that tobacco farmers travel to source firewood. Therefore, PMI is able to identify the municipality w here
the wood-based bioenergy is sourced from.
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
Argentina
State/Region
Specify state/region (Salta)
Municipality
Specify municipality (1) (All Departments )Please explain
PMI developed deforestation risk maps for countries where farmers use firewood for tobacco curing and where medium tohigh deforestation risks where identified in the initial high level global deforestation assessment. A deforestation risk map wasdeveloped for Argentina. As an input for the development of the deforestation risk map, PMI requires tobacco leaf suppliers toprovide the exact location of their contracted farmers. Additionally, PMI has also identified the distance that tobacco farme rs
travel to source firewood. Therefore, PMI is able to identify the municip ality where the wood-based bioenergy is sourced from.

Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
Argentina
State/Region
Specify state/region (Jujuy)
Municipality
Specify municipality (1) (All departments)
Please explain
PMI has developed forest risk maps for countries using firewood to cure tobacco including Argentina. As an input for thedevelopment of the forest risk map, PMI requires tobacco leaf suppliers to provide th e exact location of their contracted
farmers. Additionally, PMI has also identified the distance that tobacco farmers travel to source firewood. Therefore, PMI isable to identify the municipality where the wood-based bioenergy is sourced from.
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
Argentina
State/Region
Specify state/region (Tucuman)
Municipality
Specify municipality (1) (All Departments)
Please explain
PMI has developed forest risk maps for countries using firewood to cure tobacco including Argentina. As an input for thedevelopment of the forest risk map, PMI requires tobacco leaf suppliers to provide the exact location of their contracted
farmers. Additionally, PMI has also identified the distance that tobacco farmers travel to source firewood. Therefore, PMI isable to identify the municipality where the wood-based bioenergy is sourced from.

Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
Argentina
State/Region
Specify state/region (Chaco)
Municipality
Specify municipality (1) (Almirante Brown)
Specify municipality (2) (General Guemes)
Please explain
PMI has developed forest risk maps for countries using firewood to cure tobacco including Argentina. As an input for thedevelopment of the forest risk map, PMI requires tobacco leaf suppliers to provide the exact location of their contracted
farmers. Additionally, PMI has also identified the distance that tobacco farmers travel to source firewood. Therefore, PMI isable to identify the municipality where the wood-based bioenergy is sourced from.
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
Argentina
State/Region
Specify state/region (Catarmarca)
Municipality
Specify municipality (1) (Antofagasta de la Sierra)Specify municipality (2) (Tinogasta)
Specify municipality (3) (Poman)Specify municipality (4) (Belen)Specify municipality (5) (Santa María)
Specify municipality (6) (Andalgala)Specify municipality (7) (Ambato)Specify municipality (8) (El Alto Viejo)
Specify municipality (9) (Santa Rosa )Please explain
PMI has developed forest risk maps for countries using firewood to cure tobacco including Argentina. As an input for thedevelopment of the forest risk map, PMI requires tobacco leaf suppliers to provide the exact location of their contracted
farmers. Additionally, PMI has also identified the distance that tobacco farmers travel to source firewood. Therefore, PMI isable to identify the municipality where the wood-based bioenergy is sourced from
Forest risk commodity
TimberActivity
Using as input into manufacturing process for power generation
Country/Region of origin
Argentina
State/Region
Specify state/region (Santiago del Estereo)
Municipality
Specify municipality (1) (Copo)
Specify municipality (2) (Alberdi)
Specify municipality (3) (Figueroa)
Specify municipality (4) (Banda)
Specify municipality (5) (Jimenez)
Specify municipality (6) (Pellegrin)
Specify municipality (7) (Rio Hondo)
Specify municipality (8) (Guasayan)
Specify municipality (9) (Capital)
Specify municipality (10) (Robles)Specify municipality (11) (Salpica)
Specify municipality (12) (San Martin )Please explain

PMI has developed forest risk maps for countries using firewood to cure tobacco including Argentina. As an input for thedevelopment of the forest risk map, PMI requires tobacco leaf suppliers to provide the e xact location of their contracted
farmers. Additionally, PMI has also identified the distance that tobacco farmers travel to source firewood. Therefore, PMI isable to identify the municipality where the wood-based bioenergy is sourced from.
Forest risk commodity
TimberActivity
Other, please specify (● Distributing/ packaging – Board )Country/Region of origin
BrazilState/Region
Don't know
Municipality
Don't know
Please explain
For pulp and paper products, PMI currently does not have visibility beyond the country level in Brazil. A deforestation risk
assessment of the value chain was developed in 2017, and currently PMI is planning the next steps to improve traceability
beyond the country level. Only one board supplier sources from Brazil, this supplier accounts for 12% of all board
Forest risk commodity
TimberActivity
Other, please specify (● Distributing/ packaging – Board )Country/Region of origin
Indonesia
State/Region
Don't know
Municipality
Don't know
Please explain

For pulp and paper products, PMI currently does not have visibility beyond the country level in Indonesia. A deforestation risk
assessment of the value chain was developed in 2017, and currently PMI is planning the next steps to improve traceability
beyond the country level. Only one board supplier sources from Indonesia, this supplier accounts for 9% of board sourced by
PMI, in addition to Indonesia the supplier sources from an additional country. So the estimated share of board from Indonesia
is less than 9%.
Forest risk commodity
TimberActivity
Other, please specify (● Distributing/ packaging – Paper)Country/Region of origin
BrazilState/Region
Don't know
Municipality
Don't know
Please explain
For pulp and paper products, PMI currently does not have visibility beyond the country level in Brazil. A deforestation risk
assessment of the value chain was developed in 2017, and currently PMI is planning the next steps to improve traceability
beyond the country level. Only one paper supplier sources from Brazil, this supplier accounts f or 2% of paper sourced by
PMI.
Forest risk commodity
TimberActivity
Other, please specify (● Distributing/ packaging – Paper )Country/Region of origin
Indonesia
State/Region
Don't know
Municipality
Don't knowPlease explain
For pulp and paper products, PMI currently does not have visibility beyond the country level in Indonesia. A deforestation risk
assessment of the value chain was developed in 2017, and currently PMI is planning the next steps to improve traceability
beyond the country level. Only one board supplier sources from Indonesia, this supplier accounts for 9% of board sourced by
PMI, in addition to Indonesia the supplier sources from an additional country. So the estimated share of board from Indonesia
is less than 9%.
Forest risk commodity
TimberActivity
Using as input into product manufacturing
Country/Region of origin
BrazilState/Region
Don't know
Municipality
Don't know
Please explain
For pulp and paper products including fine papers, PMI currently does not have visibility beyond the country level in Brazil. A
deforestation risk assessment of the value chain was developed in 2017, and currently PMI is planning the next steps toimprove traceability beyond the country level. All suppliers of fine papers source from Brazil and at least f our other countries.
Forest risk commodity
TimberActivity
Using as input into product manufacturing
Country/Region of origin
BrazilState/Region
Don't know
Municipality
Don't knowPlease explain
PMI requests information from suppliers regarding the source of the raw materials. For acetate tow, suppliers are able toidentify the location of the pulp mill. All four suppliers of acetate tow source from this area. Currently the share of pulp comingfrom this area is unknown, however, all suppliers also source from at least seven other mills in other countries.

F1.2(F1.2) Indicate the percentage of your organization’s revenue that was dependent on your disclosed forest risk
commodity(ies) in the reporting year.
% of revenue
dependent
oncommodity Comment
Timber

91-99%

100% of PMI heat sticks and cigarettes sales require timber derivative products. Additionally, PMI uses board and paper
for packaging of the majority of PMI’s products.

Palm Oil

<FieldHidden><Field Hidden>

Cattleproducts<FieldHidden><Field Hidden>

Soy<FieldHidden><Field Hidden>

Other Rubber<FieldHidden><Field Hidden>

Other<FieldHidden><Field Hidden>

F1.3(F1.3) Do you own or manage land used for the production of your disclosed commodity(ies)?
Forest risk commodity
TimberOwn and/or manage land?
Don't own or manage land

Type of control<Field Hidden>
Description of type of control<Field Hidden>
Country/Region<Field Hidden>
Land type<Field Hidden>
Size (Hectares)<Field Hidden>
Do you have a system in place to monitor forests-related risks?
<Field Hidden>
Type of monitoring system<Field Hidden>
Description of monitoring system<Field Hidden>
Recent infraction(s)<Field Hidden>
Explanation of infraction<Field Hidden>

F1.4(F1.4) For your disclosed commodity(ies), indicate if you collect data regarding your own compliance and/or thecompliance of your suppliers with the Brazilian Forest Code.
Timber
Do you collect data regarding compliance with the Brazilian Forest Code?
Yes, from suppliers
Please explain
PMI purchases tobacco from tobacco leaf suppliers which contract farmers who grow tobacco in their own land and who use
firewood to cured the Flue Cured Virginia (FCV) tobacco they produce. Tobacco leaf suppliers have field technicians who visit
tobacco farmers a few times every year and assess in the farm the firewood sources used to cure the FCV tobacco. Tobacco

Leaf suppliers in Brazil gather information regarding compliance with the Brazilian Forest Code. At the end of the year areport is compiled with the number of non compliant cases which can lead to contract termination. Additionally, the fieldtechnicians assess the presence of buffer zones implemented on farm as well as other APP (Permanent Protected Areas) inaccordance with the BR forest code. This information is available to PMI.
Palm OilDo you collect data regarding compliance with the Brazilian Forest Code?
<Field Hidden>
Please explain<Field Hidden>
Cattle products
Do you collect data regarding compliance with the Brazilian Forest Code?
<Field Hidden>
Please explain<Field Hidden>
Soy
Do you collect data regarding compliance with the Brazilian Forest Code?
<Field Hidden>
Please explain<Field Hidden>
Other - Rubber
Do you collect data regarding compliance with the Brazilian Forest Code?
<Field Hidden>
Please explain<Field Hidden>
Other
Do you collect data regarding compliance with the Brazilian Forest Code?
<Field Hidden>
Please explain<Field Hidden>

F1.4b

(F1.4b) For your disclosed commodity(ies), indicate which Key Performance Indicators (KPIs) you use to measure
the compliance of your suppliers with the Brazilian Forest Code and their performance against these indicator(s).
Forest risk commodity
TimberKPIs and performance% of suppliers on the Rural Environmental Registry (CAR) database% of suppliers with Legal Reserve (RL) and/or Permanent Protected Area (APP) deficit% of suppliers with signed Terms of Commitment of the Environmental Regularization Program (PRA)% of suppliers with no gross deforestation after July 2008
Other, please specify (●No use of native wood for as firewood )Number of suppliers
3
Please explain
PMI purchases tobacco from tobacco leaf suppliers which contract farmers who grow tobacco in their own land and who use
firewood to cured the Flue Cured Virginia (FCV) tobacco they produce. Tobacco leaf suppliers have field technicians who visit
tobacco farmers a few times every year and assess in the farm the firewood sources used to cure the FCV tobacco. The
information is recorded and reported. Tobacco leaf suppliers in Brazil gather information regarding compliance with theBrazilian Forest Code. At the end of the year a report is compiled with the number of non compliant cases which can lead tocontract termination. Additionally, the field technicians assess the presence of buffer zones implemented on farm as well asother APP (Permanent Protected Areas) in accordance with the BR forest code. This information is available to PMI.
Currently, on average, 71% of tier 2 suppliers (farmers) are listed in the CAR database, while 66% have a RL and/or APP.
Regarding the indicator on percentage of suppliers with no gross deforestation after July 2008, the PMI Monitoring
Framework for Sustainable Curing Fuel that tobacco leaf suppliers should comply with states 2006 as the cut-off year. Thismeans that plantations resulting from conversion of secondary/degraded/old growth forest are not considered sustainable
under the PMI Monitoring Framework. Therefore, when tobacco leaf suppliers comply with the PMI Monitoring Fra mework,
they also comply with the no gross deforestation after July 2008 indicator.
Forest risk commodity
TimberKPIs and performance
Other, please specify (Buffer zones on farms and permanent area)
Number of suppliers

3
Please explain
PMI purchases tobacco from tobacco leaf suppliers which contract farmers who grow tobacco in their own land and who use
firewood to cured the Flue Cured Virginia (FCV) tobacco they produce. Tobacco leaf suppliers have field technicians who visit
tobacco farmers a few times every year and assess in the farm the firewood sources used to cure the FCV tobacco. The
information is recorded and reported. Tobacco leaf suppliers in Brazil gather information regarding compliance with theBrazilian Forest Code. At the end of the year a report is compiled with the number of non compliant cases which can lead tocontract termination. Additionally, the field technicians assess the presence of buffer zones implemented on farm as well asother APP (Permanent Protected Areas) in accordance with the BR forest code. This information is available to PMI.
Currently, on average, 71% of tier 2 suppliers (farmers) are listed in the CAR database, while 66% have a RL and/or APP.
Regarding the indicator on percentage of suppliers with no gross deforestation after July 2008, the PMI Monitoring
Framework for Sustainable Curing Fuel that tobacco leaf suppliers should comply with states 2006 as the cut -off year. Thismeans that plantations resulting from conversion of secondary/degraded/old growth forest are not considered sustainable
under the PMI Monitoring Framework. Therefore, when tobacco leaf suppliers comply with the PMI Monitoring Framework,
they also comply with the no gross deforestation after July 2008 indicator.

F1.5(F1.5) Does your organization collect production and/or consumption data for your disclosed commodity(ies)?
Data availability/Disclosure
TimberConsumption data available, disclosing

Palm Oil

<Field Hidden>

Cattle products<Field Hidden>

Soy<Field Hidden>

Other - Rubber<Field Hidden>

Other<Field Hidden>

F1.5a(F1.5a) Disclose your production and/or consumption data.
Forest risk commodity
TimberData type
Consumption data
Volume1295000
MetricMetric tons
Data coverage
Full commodity production/consumption
Please explain
This is an estimated figure that considers all the different forms of timber-related products, which are not originally purchasedin the same units

F1.6(F1.6) Have you identified sufficient sources of sustainable materials to meet your current operational needs? If yes,
what are you doing to ensure the security/continuity of this supply?
TimberSustainable source identified
Yes
Primary action to ensure supply
Engaging in capacity building activities in the value chain
Please explain
PMI has adopted a Global Roadmap for sustainable firewood, which includes the following three global targets: 1. No Old
Growth Forest cut 2. Renewable sources/Self-sufficient firewood 3. Full traceability The global roadmap for sustainablefirewood provides a timeline for the achievement of the three above targets, the suggested timeline for its achievement is un til
2020. Biodiversity management and Social and economic development are aspirational sustainability targets to be achievedin the long term beyond 2020. PMI is currently implementing a harmonized and verifiable Monitoring Framework for
Sustainable Leaf Curing Fuel (referred to as Monitoring Framework) to monitor the progress towards PMI’s global targets.
The monitoring framework is composed of four principles, and Principle 2 “Be Sustainable” focuses on sustainability andtraceability of the fuel source. The purpose is to ensure that all origins switch to use fuels of a demonstrated sustainablesource such as biomass from waste agricultural residues or wood fuel from sources which are proven to be sustainably
managed (in accordance with the PMI defined criteria of sustainable wood fuel). Additionally, no coal should be used as a fue lto cure tobacco. PMI is supporting and engaging in capacity building activities with tobacco leaf suppliers to ensure they areable to comply with the Monitoring Framework by 2020 and beyond. We consider that the implementation of the Monitoring
Framework is proving effective and we estimate that above 65% of the curing fuel is sustainable and traceable.
Palm Oil
Sustainable source identified<Field Hidden>
Primary action to ensure supply<Field Hidden>
Please explain<Field Hidden>
Cattle products
Sustainable source identified<Field Hidden>
Primary action to ensure supply<Field Hidden>
Please explain<Field Hidden>
Soy
Sustainable source identified<Field Hidden>
Primary action to ensure supply<Field Hidden>
Please explain<Field Hidden>
Other - Rubber
Sustainable source identified<Field Hidden>
Primary action to ensure supply<Field Hidden>
Please explain<Field Hidden>
OtherSustainable source identified<Field Hidden>
Primary action to ensure supply<Field Hidden>
Please explain<Field Hidden>

F1.7(F1.7) Has your organization experienced any detrimental forests-related impacts?
Yes

F1.7a
(F1.7a) Describe the forests-related detrimental impacts experienced by your organization, your response, and thetotal financial impact.
Forest risk commodity
TimberImpact driver type
Reputational and markets
Primary impact driver
Uncertainty about product origin and/or legality
Primary impact
Brand damage
Description of impact
In 2017, there was increased attention from the public and international organizations to the environmental impacts of thetobacco industry. When the industry is associated with deforestation, PMI as a market leader has suffered reputational
damage. The uncertainty about the origin of all of PMI’s timber-based materials, has limited its ability to respond, which canaffect its entire business. The scale of the impact could cover PMI’s entire operations.
Primary response
Greater traceability of forest-risk commodities
Total financial impact
0
Description of response

The primary impact chosen uniquely affects the company as uncertainty about the product origin and legality limits PMI’s
ability to respond to brand damage associated with deforestation. Nonetheless, PMI has the target to source 100% traceable
and sustainable firewood that is also verified by a third party by 2020. To do so, PMI has developed a Monitoring Framework
for Sustainable Curing Fuels that all tobacco leaf suppliers should comply with. PMI is working with tobacco leaf suppliers t osupport them in complying with all the elements of the Monitoring Framework. Additionally, in 2017, PMI implemented a
deforestation risk assessment of its entire value chain to understand its impact on forests. The assessment was developedwith the involvement of all all relevant stakeholders including procurement teams, corporate affairs, health and safety, among
others. PMI is also exploring how to engage with pulp and paper products suppliers to increase traceability. The outcomes todate are: ● Over 65% of the curing fuel is sustainable and traceable ● The deforestation assessment of PMI’s value chain
highlighted the opportunities to improve traceability in pulp and paper products. To date, the financial impact has been thecosts associated to the design and implementation of the Monitoring Framework, which is equal to roughly 10% of the
spending on wood fuel by the farmers supplying FCV tobacco volume requirements.

F2. Procedures
F2.1(F2.1) Does your organization undertake a forests-related risk assessment?
Yes, forests-related risks are assessed

F2.1a(F2.1a) Select the options that best describe your procedures for identifying and assessing forests -related risks.
TimberValue chain stage
Direct operations
Supply chain
Coverage
Full
Risk assessment procedure
Assessed as part of other company-wide risk assessment system
Frequency of assessment
Annually

How far into the future are risks considered?
> 6 years
Tools and methods used to identify and assess risks
Internal company methods
External consultants
Other, please specify (Big Chain Tool)
Please explain
External consultants (South Pole) were hired to develop the first PMI deforestation risk assessment. The scope of theassessment was defined to include PMI’s entire value chain, specifically, all materials glo bally sourced by PMI for the
manufacturing of its products that, during the production process, have a link to the two main drivers of deforestation:
agriculture and mining. The consultants developed a materiality assessment to prioritize materials within the scope throughtwo indicators: global deforestation impact of the material, and PMI’s impact, approximated by PMI’s market share. From thisprioritization exercise, targeted risk assessments were implemented for tobacco leaf and priority pulp and paper products.
Additionally, PMI hired external consultants to assess the forests risks associated with the use of biomass for tobacco curin g
by farmers and in PMI’s factories. The consultants developed deforestation risk maps for countries where farmers use
firewood for tobacco curing and where medium to high deforestation risks where identified in the initial high level global
deforestation assessment. Internal company methods were used to assess the risks associated with the use of timber forbarn construction. To assess the deforestation impact of land use change, PMI used the BigChain Tool (BCT). The BCT wasdeveloped to execute a rapid screening of deforestation linked to commodity production, and be able to identify corporate
sustainability risks on a geographic basis. The BCT assessed the impact of land use change associated with the expansion of
tobacco farming for all countries where PMI sources tobacco. The assessment was developed at the regional level, theresults showed that only five countries had deforestation that could be associated with tobacco farming, in all cases, theimpact was less than 1 ha for the period 2001 to 2014, therefore, deforestation resulting from land use change associatedwith tobacco farming is considered a non-material risk for PMI. These methods were selected because PMI considered thatthe necessary expertise for this assessment was not available internally therefore a combination of internal company
methods and external consultants was used.
Palm Oil
Value chain stage<Field Hidden>
Coverage<Field Hidden>
Risk assessment procedure<Field Hidden>
Frequency of assessment<Field Hidden>
How far into the future are risks considered?
<Field Hidden>
Tools and methods used to identify and assess risks<Field Hidden>
Please explain<Field Hidden>
Cattle Products
Value chain stage<Field Hidden>
Coverage<Field Hidden>
Risk assessment procedure<Field Hidden>
Frequency of assessment<Field Hidden>
How far into the future are risks considered?
<Field Hidden>
Tools and methods used to identify and assess risks<Field Hidden>
Please explain<Field Hidden>
Soy
Value chain stage<Field Hidden>
Coverage<Field Hidden>
Risk assessment procedure<Field Hidden>
Frequency of assessment

<Field Hidden>
How far into the future are risks considered?
<Field Hidden>
Tools and methods used to identify and assess risks<Field Hidden>
Please explain<Field Hidden>
Other - Rubber
Value chain stage<Field Hidden>
Coverage<Field Hidden>
Risk assessment procedure<Field Hidden>
Frequency of assessment<Field Hidden>
How far into the future are risks considered?
<Field Hidden>
Tools and methods used to identify and assess risks<Field Hidden>
Please explain<Field Hidden>
Other
Value chain stage<Field Hidden>
Coverage<Field Hidden>
Risk assessment procedure<Field Hidden>
Frequency of assessment<Field Hidden>
How far into the future are risks considered?

<Field Hidden>
Tools and methods used to identify and assess risks<Field Hidden>
Please explain<Field Hidden>

F2.1b(F2.1b) Which of the following issues are considered in your organization's forests-related risk assessment(s)?
Availability of forest risk commodities
Relevance & inclusion
Relevant, always included
Please explain
This issue is important because the availability of different forms of timber to be used as fuel is key for tobacco curing, andthe availability of timber to produce products such as fine papers and acetate tow is also key to the manufacture of cigarett es.
Therefore, assessing the availability of timber is important to ensure PMI’s future ability to manufacture its main products.
Decreased availability of timber would impact the entire value chain. To assess this issue, as part of the Monitoring
Framework for Sustainable Leaf Curing Fuel, tobacco leaf suppliers must show that their contracted farmers have identified
fuel sources at least until 2020. They can do so by providing proof of long term contracts with fuel vendors or by presenting a
study. The assessment also considers existing mitigation actions implemented b y tobacco leaf suppliers, for example, bothtobacco leaf suppliers and farmers are managing their own woodlots to ensure availability of the resource in the future, insome areas in Africa, assisted natural regeneration practices are implemented . PMI then assess the share of tobacco leaf
suppliers and farmers that comply with this requirement. PMI supports tobacco leaf suppliers with technical assistance if
needed. This is an emerging issue and the results are used to inform the development of strategies t o collaborate withtobacco leaf suppliers.
Quality of forest risk commodities
Relevance & inclusion
Relevant, always included
Please explain
This issue is important to PMI because the type of wood and tree species used as fuel for tobacco curing can have e fficiency
implications such as affecting the amount of fuel needed to cure tobacco. As tobacco is the main ingredient in the
manufacture of PMI’s products, this issue can impact the entire value chain. This issue is assessed as part of the Monitoring
Framework for Sustainable Leaf Curing Fuels, where all tobacco leaf suppliers must identify the species used for firewood.

This is an emerging issue and the results are used to develop initiatives encouraging farmers to use more efficient types offuel, for example, the design and implementation of trainings to teach farmers how to optimize the performance of biomass
when used for curing tobacco, this might include drying the wood, or using specific species.
Impact of activity on the status of ecosystems and habitats
Relevance & inclusion
Relevant, always included
Please explain
This issue is important to PMI because it can potentially affect the availability of timber and because if PMI has negative
impact on ecosystems and habitats, this could lead to brand damage which could affect PMI’s revenue and thus affecting
PMI’s entire business. To assess this issue, PMI developed a deforestation risk assessment of its entire value chain in order
to identify the impact of PMI’s activities on the status of the ecosystems and habitats. It found that the use of firewood to curetobacco and the sourcing of pulp and paper products pose material deforestation risks. The risk assessment analyzed all thepulp and paper products suppliers and countries of origins, as well as all the countries where firewood is used for tobacco
curing. Additionally, PMI developed deforestation risk maps for countries where farmers use firewood for tobacco curing andwhere medium to high deforestation risks where identified in the initial high level global deforestation assessment. Updates ofthe forest risk maps for relevant countries were done in 2017 and 2018. The forest risk maps analyze the impact of tobacco
curing on forests surrounding tobacco farmers. This is a current issue and the results h ave informed strategies to mitigate theidentified risks, for example, the Monitoring Framework was developed as a result of the identification of global deforestati on
risks associated with tobacco curing. The results of the forest risk maps are used by to bacco leaf suppliers to develop forest
risk mitigation plans focusing on farmers who are in proximity to forest at risk of deforestation.
Regulation
Relevance & inclusion
Relevant, always included
Please explain
This issue is important to PMI because PMI operates in over 180 countries and in order to operate, it must ensure all local
regulations are followed. Additionally, as timber related products are key for the manufacture of PMI products, any change tothe regulatory framework of timber and the use of forest resources might impact PMI’s entire value chain. This issue isassessed as part of the deforestation risk assessment of PMI entire value chain. PMI considered the regulation in countries
where pulp and paper products are sourced. The assessment included the regulatory landscape of the pulp and paperindustry as one of the variables to assess the potential risk of a given country. This information was used to prioritize pul p
and paper suppliers who operate in higher risk countries. Additionally, the Monitoring Framework for Sustainable Curing

Fuels also considers compliance with local regulations such as the need for permits, registrations etc. The results are used toplan strategies of action with the suppliers. This is a current issue.
Climate change
Relevance & inclusion
Relevant, always included
Please explain
This issue is important to PMI because of its commitment to decrease its carbon footprint by 30% across our entire value
chain by 2020. Based on the 2010 baseline, agriculture accounts for 38% of PMI’s carbon footprint, thus the PMI Leaf
department in charge of sourcing tobacco, set goals and developed strategic initiatives to reduce GHG emissions. To assess
this issue, the Monitoring Framework for Sustainable Leaf Curing Fuel was developed as part of the efforts to contribute to
PMI’s GHG emission reduction target. Additionally, the deforestation risk assessment was also developed considering theeffect of deforestation in climate change. The results of the assessment along with the overall co mpany risk assessment
inform the strategies to advance towards PMI’s carbon emission reduction goal. This is a current issue.
Tariffs or price increases
Relevance & inclusion
Relevant, always included
Please explain
This issue is important for PMI because any tariff or price increase can have a negative impact on the profitability of thebusiness, thus affecting the entire value chain. This issue is assessed as part of the company wide risk assessment and it ispart of procurement and supplier management. PMI maintains warehouses for all direct materials to be able to mitigate thispotential impact, additionally, PMI has a diversified strategy where sourcing is spread across different areas. PMI also aims todevelop long term relationships with suppliers and to have a strong and stable supplier base. The results of assessing thisissue could inform procurement strategies. This is a current issue.
Loss of markets
Relevance & inclusion
Relevant, always included
Please explain
This is an important issue for PMI because the loss of markets might have a negative impact on profits, therefore affecting
PMI’s entire value chain. This issue is assessed as part of the company wide risk assessment and it is part of procurement
and supplier management. PMI maintains warehouses for all direct materials to be able to mitigate this potential impact,
additionally, PMI has a diversified strategy where sourcing is spread across different areas. PMI also aims to develop long

term relationships with suppliers and to have a strong and stable supplier base. The results of assessing this issue could
inform procurement strategies. This is a current issue.
Brand damage related to forest risk commodities
Relevance & inclusion
Relevant, always included
Please explain
This is an important issue for PMI because the risk of brand damaged due to PMI sourcing of materials associated with
deforestation can affect sales and hence affect revenue and profits, impacting the entire value chain. This issue is assessedindirectly through assessing PMI’s deforestation risks. The Monitoring Framework for Sustainable Curing Fuels is a response
to deforestation risks. PMI plans to continue engaging with tobacco leaf suppliers to manage the potential risk of branddamage as this is a current issue. As a result of the deforestation assessment, PMI is exploring actions to be taken to
mitigate risks. Additionally, to address the potential impacts from brand damage and other risks, in 2017 PMI published its
Responsible Sourcing Principles. These principles provide process and performance requirements applicable to all suppliers
doing business with its. Through their application, PMI’s goal is to achieve measurable, tangible improvements in our supply
chain.
Corruption
Relevance & inclusion
Relevant, always included
Please explain
This issue is important to PMI because it can affect the operations of PMI in certain countries where corruption is an issue.
This issue is assessed as part of the first deforestation risk assessment of PMI entire value chain develo ped in 2017, PMI
considered corruption in countries where pulp and paper products are sourced. The assessment included Transparency
International Corruption Index as one of the variables to assess the potential risk of a given country. As a result of theassessment, pulp and paper suppliers who operate in higher risk countries where prioritized. PMI is exploring how to further
engage and collaborate with pulp and paper suppliers sourcing from countries that were ranked as high risk. This is an
emerging issue. Additionally, to address the potential impacts from brand damage and other risks, in 2017 PMI published its
Responsible Sourcing Principles. These principles provide process and performance requirements applicable to all suppliers
doing business with PMI. Through their application, PMI’s goal is to achieve measurable, tangible improvements in its supply
chain.
Social impacts
Relevance & inclusion
Relevant, always included

Please explain
This issue is important to PMI because Continuously improving PMI’s social impact within its operations and beyond isessential to PMI’s long-term success. This issue was assessed as part of the first deforestation risk assessment of PMI entire
value chain, developed in 2017. PMI considered social impacts such as the presence of mechanisms within the forestry
sector to guarantee indigenous populations’ rights, in countries where pulp and paper products are sourced. It is expectedthat this will continue to be part of future deforestation risk assessments. The result of the country assessment was used toprioritize countries and pulp and paper suppliers for further engagement. PMI is exploring how to further engage andcollaborate with pulp and paper suppliers sourcing from countries that were ranked as high risk. This is an emerging issue.
Additionally, to address the potential social impacts and other risks, in 2017 PMI published its Responsible Sourcing
Principles. These principles provide process and performance requirements applicable to all suppliers doing business with
PMI. Through their application, PMI’s goal is to achieve measurable, tangible improvements in its supply chain.
Other, please specify
Relevance & inclusion
Please selectPlease explain

F2.1c(F2.1c) Which of the following stakeholders are considered in your organization’s forests-related risk assessments?
Customers
Relevance & inclusion
Relevant, always included
Please explain
Customers are included because they are increasingly expecting brands to manage their environmental impacts, speciallyrelated to deforestation and climate change, failure to respond to PMI’s customers’ concerns can negatively impact its
business. Failure to do so can result in brand damage, which in turn can result in a decrease in sales. Therefore, customers
are considered because they are one of the drivers for PMI to assess its deforestation risks across the entire value chain. To
include customers, PMI follows the results of consumer surveys regarding sustainability.
Employees
Relevance & inclusion
Relevant, always included
Please explainEmployees are included because they are the ones driving the implementation of PMI’s goals and targets, they are also theones managing suppliers. In the development of the deforestation risk assessment of PMI’s entire value chain, all relev ant
employees were directly engaged throughout the development of the assessment. Engagement was done through meetings,
electronic communication to receive information from relevant employees, and they provided feedback to the results of theassessment. Employees included members of a variety of teams such as procurement, health and safety, corporate affairs,
agricultural programs among others. For example, employees of corporate affairs focus on risks related to reputation andbrand damage, whereas employees from the procurement team focus on ensuring supply of materials and on maintaining
strong supplier relationships.
Investors
Relevance & inclusion
Relevant, always included
Please explain
Investors are included because as one of the most important stakeholders they have to be informed on the performance ofthe company in all aspects. The results of the risk assessment are included in PMI’s annual sustainability report which iscommunicated to investors. Additionally, we engage with stakeholders on an ongoing basis in a number of ways. In doing so,
we will be guided by AccountAbility’s Stakeholder Engagement Standard: AA1000.
Local communities
Relevance & inclusion
Relevant, always included
Please explain
Local communities of the places we operate are included because they are crucial to PMI’s long term success. They are
engaged directly and through PMI’s tobacco leaf suppliers, for example, for the development of the forest risk maps, local
farmers and other stakeholders are interviewed. In 2017 forest risk maps were developed for Pakistan, Philippines, Malawi,
Mozambique and Argentina. In 2016, maps were developed for Indonesia and Tanzania. For the development of theArgentina map, for example, a local NGO and farmers where interviewed. Additionally, as part of the Monitoring Framework
for Sustainable Curing Fuels, all of PMI’s tobacco leaf suppliers must have a stakeholder engagement plan where local
communities are included when relevant.
NGOs
Relevance & inclusion
Relevant, always included
Please explain

NGO’s are included because they can often provide support and technical expertise to manage PMI’s deforestation risks. The
deforestation risk assessment used information developed by NGO’s to inform the assessment of both pulp and paper
suppliers and countries from where PMI sources pulp and paper products. This included reports of unsustainable practices,transparency rankings among others. Additionally, as part of the Monitoring Framework for Sustainable Curing Fuels, in somecases, NGOs work directly with PMI tobacco leaf suppliers to help them implement initiatives to reach the targets onsustainability and traceability. Additionally, they are engaged directly, for example, for the development of the forest risk
maps, experts and local NGO’s are sometimes interviewed. In 2017 maps were developed for Pakistan, Philippines, Malawi,
Mozambique and Argentina. In 2016, maps were developed for Indonesia and Tanzania For the development of the Argentina
map, for example, a local NGO and farmers where interviewed.
Other forest risk commodity users/producers at a local level
Relevance & inclusion
Relevant, always included
Please explain
Other users are included because deforestation impacts at the regional or local level are not isolated, deforestation has
several drivers and is important for PMI to understand other users in order to define PMI’s own impact. Not including otherusers might affect the estimation of PMI’s own impact. As part of the deforestation risk assessment of PMI’s entire value
chain, all countries from which PMI sources pulp and paper products where evaluated through a qualitative assessment. The
country assessment included the status of the entire pulp and paper industry, therefore, other users/producers are
considered. Additionally, when analyzing the impact of tobacco farming in land use change, the analysis included the impact
on deforestation from land use of other agricultural commodities.
Regulators
Relevance & inclusion
Relevant, always included
Please explain
Regulators are included because they define the rules under which PMI operates, there is a risk that regulations mightchange affecting PMI’s operations. They were included as part of the Monitoring Framework for Sustainable Leaf Curing
Fuels, all of PMI’s tobacco leaf suppliers must have a stakeholder engagement plan where relevant regulators are included.
Suppliers
Relevance & inclusion
Relevant, always included
Please explainTobacco leaf suppliers are included because they are the ones who directly contract tobacco fa rmers, they are the ones who
ensure PMI targets and standards are met, if tobacco leaf suppliers are not considered, there is a risk that PMI cannot
achieve its targets. PMI works closely with tobacco leaf suppliers in the development of supplier -specific forest risk maps.
Tobacco leaf suppliers provide relevant information related to their operations, and once the forest risk map is developed,
tobacco leaf suppliers provide their input so the final forest risk map is a collaborative effort and has been app roved by the
tobacco leaf suppliers. Additionally PMI is working to strengthen the engagement of suppliers of pulp and paper products tovalidate the findings of the deforestation risk assessment related to such products.
Other stakeholders, please specify
Relevance & inclusion
Please selectPlease explain

F3. Risks and opportunities
F3.1(F3.1) Have you identified any inherent forests-related risks with the potential to have a substantive financial or
strategic impact on your business?
Risk
TimberYes, both in direct operations and the rest of our value chain

Palm Oil

<Field Hidden>

Cattle Products<Field Hidden>

Soy<Field Hidden>

Other - Rubber<Field Hidden>

Other<Field Hidden>

F3.1a(F3.1a) How does your organization define substantive impact on your business?
In relation to substantive change, we refer to materiality - material issues are identified in a multidisciplinary way and include
those which:● have the highest potential impact and a realistic probability of occurrence;● are most relevant to our enterprises and geographic locations;● are most important to our stakeholders.
In 2020+ risk forecasting terms, higher level risks are defined as those with a potential impact in excess of US$5M or a raw
material impact in excess of 1000 metric tonnes of tobacco leaves. These apply to both our direct operations and our
tobacco supply chain.
Over the last couple of years, we have been expanding our forest programs by first assessing current and future forest related risks more broadly across our value chain. These risks include availability of forest resources, and impact on
deforestation.

F3.1b(F3.1b) For your disclosed forest risk commodity(ies), provide details of risks identified with the potential to have asubstantive financial or strategic impact on your business, and your response to those risks.
Forest risk commodity
TimberType of risk
PhysicalGeographical scale
GlobalWhere in your value chain does the risk driver occur?
Supply chain
Primary risk driver
Increased ecosystem vulnerability
Primary potential impact
Reduction or disruption in production capacity
Company-specific description
Timber products are key materials for the production of PMI products. For example, firewood is used for tobacco curing, while
paper is used for the production of cigarettes and is also used in all packaging. Increased ecosystem vulnerability in the formof increased deforestation rates in some parts of the world might decrease the availability of timber products in the future.
This can impact PMI’s ability to manufacture its products if PMI firewood becomes more expensive, or pulp and paper
products such as fine papers or acetate tow needed for the manufacture of cigarettes become more expensive. Suchincrease in our production costs might affect our revenue.

Timeframe>6 years
Magnitude of potential impact
Medium-highLikelihood
More likely than not
Potential financial impact
Explanation of financial impact
In 2020+ risk forecasting terms, higher level risks are defined as those with a potential impact in excess of US$5M or a raw
material impact in excess of 1000 metric tons of tobacco leaves. These apply to both our direct operations and our tobacco
supply chain. Over the last couple of years, we have been expanding our forest programs by first assessing current andfuture forest-related risks more broadly across our value chain. These risks include availability of forest resources, and impact
on deforestation. If we assume that the risk of increased ecosystem vulnerability will have an impact on an increase of
production costs as defined by our definition of substantive impact of US$5M, for example, for the case of firewood, an impac tof this size would represent a 16% increase in production cost.
Primary response to risk
Engagement with suppliers
Description of response
In 2016 PMI started developing a Monitoring Framework for Sustainable Leaf Curing Fuels that tobacco leaf suppliers should
comply with and that should be audited by a third party by 2020. The Monitoring Framework require s tobacco leaf suppliers toensure that 100% of the biomass (for example, firewood or wood pellets) used for tobacco curing is sustainable andtraceable. The Monitoring Framework is an ongoing process and it is being implemented in all countries where PMI sources
Flue Cured Virginia tobacco. PMI actively engages with tobacco leaf suppliers to support them in the implementation ofactivities to comply with the Monitoring Framework. The implementation of the Monitoring Framework and the associatedsupplier engagement is expected to address the risk of increased ecosystem vulnerability by providing an understanding of
the deforestation risk associated with tobacco curing through the development of forest risks maps. Tobacco leaf suppliers
then have to develop a forest risk mitigation plan to manage the identified deforestation risks. PMI considers that the
response has been effective and that tobacco leaf suppliers who have developed forest risks maps are equipped to develop
risk mitigation plans. Currently, above 65% of the curing fuel including biomass, is sustainable and traceable, which has
decreased the risk and is expected to prevent future impacts.
Cost of response
3000000

Explanation of cost of response
The cost of the response is the investment PMI has made in the design and implementation of the Monitoring Framework andassociated activities. Based on our internal records, we estimate that the cost of the implementation of the Monitoring
Framework amounts to roughly 3 million USD annually, equivalent to 10% of the spending on wood fuel by the farmers
supplying FCV tobacco volume requirements. It is expected that the same level of associated costs will continue after 2020.
Forest risk commodity
TimberType of risk
Regulatory
Geographical scale
GlobalWhere in your value chain does the risk driver occur?
Supply chain
Primary risk driver
Poor enforcement of regulation
Primary potential impact
Increased production costs
Company-specific description
PMI sources materials from countries known for their limited enforcement of regulation. PMI might be associated withunsustainable materials due to the poor enforcement of regulation in such countries. For example, if protected areas or timbe rharvest regulations are not enforced and if PMI does not have certainty that regulation designed to ensure sustainability ofmaterials is enforced, PMI has to invest in additional measures when looking for assurance that a material is sustainable inthose countries as even if regulation exists, it does not mean that is being enforced. For example, PMI sources tobacco
leaves from Indonesia, Philippines, Malawi, among other countries. Based on the development of country -specific forest risk
maps, we have identified possible deforestation risks in some of those countries. E ven though forests are protected by law,
this is not always enforced, therefore, PMI’s production costs increase due to the additional measures PMI is implementing toensure all biomass used for fuel is sustainable.
Timeframe
Current - up to 1 year
Magnitude of potential impact
Medium-highLikelihood
Very likely
Potential financial impact
Explanation of financial impact
In 2020+ risk forecasting terms, higher level risks are defined as those with a potential impact in excess of US$5M or a raw
material impact in excess of 1000 metric tons of tobacco leaves. These apply to both our direct operations and our tobacco
supply chain. Over the last couple of years, we have been expanding our forest programs by first assessing current andfuture forest-related risks more broadly across our value chain. These risks include availability of forest resources, and impact
on deforestation. If we assume that the the risk of poor enforcement of regulation will have an impact on an increase of
production costs as defined by our definition of substantive impact of US$5M, for example, for the case of firewood, an impactof this size would represent a 16% increase in production cost.
Primary response to risk
Engagement with suppliers
Description of response
In 2016 PMI started developing a Monitoring Framework for Sustainable Leaf Curing Fuels that tobacco leaf suppliers should
comply with and that should be audited by a third party by 2020. The Monitoring Framework requires tobacco leaf suppliers toensure that 100% of the biomass used for tobacco curing is sustainable and traceable. The Monitoring Framework is an
ongoing process and it is being implemented in all countries where PMI sources Flue Cured Virginia tobacco (FCV). PMI
actively engages with tobacco leaf suppliers to support them in the implementation of activities to comply with the Monitoring
Framework. The implementation of the Monitoring Framework and the associated supplier engagement is expected toaddress the risk of poor enforcement of regulation by requiring tobacco leaf suppliers to ensure that all biomass (for example,
firewood, wood pellets, etc.) used as fuel is sustainable. This will then be audited by a third party. PMI considers that the
response has been effective and that tobacco leaf suppliers implementing the Monitoring Framework are addressing this risk.
Currently, above 65% of the curing fuel including biomass, is sustainable and traceable, which has decreased the risk and is
expected to prevent future impacts. Additionally, to address poor enforcement of regulation and other risks, in 2017 PMI
published its Responsible Sourcing Principles. These principles provide process and performance requirements applicable toall suppliers.
Cost of response
3000000
Explanation of cost of response
The cost of the response is the investment PMI has made in the design and implementation of the Monitoring Framework andassociated activities. Based on our internal records, we estimate that the cost of the implementation of the MonitoringFramework amounts to roughly 3 million USD annually, equivalent to 10% of the spending on wood fuel by the farmers
supplying FCV tobacco volume requirements. It is expected that the same level of associated costs will continue after 2020.
Forest risk commodity
TimberType of risk
Reputational and markets
Geographical scale
GlobalWhere in your value chain does the risk driver occur?
Supply chain
Primary risk driver
Availability of certified sustainable material
Primary potential impact
Increased production costs
Company-specific description
The industry of specialty papers for cigarette production has a very limited offer of certified materials. Additionally, ther e is nomature market for certified firewood. These facts, present challenges for PMI to source certified sustainable m aterials. If PMI
is not able to find certified materials such as fine papers or acetate tow that are crucial for the manufacture of cigarettes , PMI
will have to strengthen the requirements for suppliers. For the case of firewood, for example, PMI is alread y requiring tobacco
leaf suppliers to ensure firewood is sustainable and traceable, which has increased production costs because PMI has
engaged in various activities with the tobacco leaf suppliers.
Timeframe
1-3 years
Magnitude of potential impact
MediumLikelihood
More likely than not
Potential financial impact
Explanation of financial impact
In 2020+ risk forecasting terms, higher level risks are defined as those with a potential impact in excess of US$5M or a raw
material impact in excess of 1000 metric tons of tobacco leaves. These apply to both our direct operations and our tobaccosupply chain. Over the last couple of years, we have been expanding our forest programs by first assessing current andfuture forest-related risks more broadly across our value chain. These risks include availability of forest resources, and impact
on deforestation. If we assume that the risk limited availability of certified materials will have an impact on an increase o f
production costs as defined by our definition of substantive impact of US$5M, for example, for the case of firewood, an impactof this size would represent a 16% increase in production cost.
Primary response to risk
Engagement with suppliers
Description of response
Sourcing certified materials provide assurance that the materials are sustainable. Fore some of the materials sourced by PMI
the supply of certified materials is limited. PMI response has been since 2016, to develop a Monitoring Framework for
Sustainable Leaf Curing Fuels that tobacco leaf suppliers should comply and that should be audited by a third party by 2020.
The Framework requires tobacco leaf suppliers to ensure that 100% of the biomass used for tobacco curing is sustainable
and traceable. Then by having a third party auditor, the Monitoring Framework will fill the gap and achieve the same
objectives as certified materials. This is an ongoing process and it is being implemented in all countries where PMI sources
Flue Cured Virginia tobacco. PMI actively engages with tobacco leaf suppliers to support them in the implementation ofactivities to comply with the Framework. The implementation of the Framework and the supplier engagement is expected toaddress the risk of limited availability of certified materials. PMI considers that the response has been effective and that
tobacco leaf suppliers implementing the Monitoring Framework are addressing this risk. Currently, above 65% of the curing
fuel including biomass, is sustainable and traceable, which has decreased the risk and is expected to prevent future impacts.
Audits are expected to begin in 2019. Additionally, in 2017 PMI published its Responsible Sourcing Principles.
Cost of response
3000000
Explanation of cost of response
The cost of the response is the investment PMI has made in the design and implementation of the Monitoring Framework andassociated activities. Based on our internal records, we estimate that the cost of the implementation of the Monitoring
Framework amounts to roughly 3 million USD annually, equivalent to 10% of the spending on wood fuel by the farmers
supplying FCV tobacco volume requirements. It is expected that the same level of associated costs will continue after 2020.

F3.2(F3.2) Have you identified any forests-related opportunities with the potential to have a substantive financial or
strategic impact on your business?

Have you identified opportunities?
TimberYes

Palm Oil

<Field Hidden>

Cattle products<Field Hidden>

Soy<Field Hidden>

Other - Rubber<Field Hidden>

Other<Field Hidden>

F3.2a(F3.2a) For your selected forest risk commodity(ies), provide details of the identified opportunities with the potential
to have a substantive financial or strategic impact on your business.
Forest risk commodity
TimberType of opportunity
Resilience
Where in your value chain does the opportunity occur?
Supply chain
Primary forests-related opportunity
Improved supply chain engagement
Financial incentives<Field Hidden>
Company-specific description & strategy to realize opportunity
To manage our forest risks related to the sourcing of tobacco leaves, in 2016 PMI started developing the Monitoring
Framework for Sustainable Leaf Curing Fuels that tobacco leaf suppliers should comply with and that should be audited by athird party by 2020. The implementation of the Monitoring Framework has increased PMI’s engagement with tobacco leaf
suppliers and has allowed us to closely collaborate with them. This close collaboration is an opportunity to strengthen our
working relationship, and foster additional collaboration not only managing forest related risks, but also in other areas thatmight have a positive impact on our business and share value with society. Because the Monitoring Framework is being
implemented with all our tobacco leaf suppliers, who in turn, work with farmers who are the ones curing the tobacco, the scaleof this opportunity covers our entire tobacco value chain. PMI’s definition of substantial opportunity, mirrors the definitio n of
substantial impact. In 2020+ risk forecasting terms, higher level risks are defined as those with a potential impact in excess ofUS$5M or a raw material impact in excess of 1000 metric tons of tobacco leaves. These apply to both our direct operations
and our tobacco supply chain. Therefore, improved supply chain engagement will be a substantial opportunity if it aligns withthe stated definition. To realize the opportunity, PMI is working closely with tobacco leaf suppliers by supporting them withtechnical assistance when they face challenges related to sustainability and traceability. PMI through its regional offices holds
in-person meetings with tobacco leaf suppliers to discuss sustainability matters including their progress on sustainability andtraceability. PMI also organizes conference calls and meetings as needed to provide technical assistance. For example, PMI
is working closely with tobacco leaf suppliers in the Philippines to support them in efforts to increase clarity and sharedunderstanding of current regulations among all tobacco leaf suppliers in the country.
Estimated timeframe for realization
Current - up to 1 year
Magnitude of potential impact
Medium-highLikelihood
Virtually certain
Potential financial impact
0
Explanation of financial impact
Currently, no direct financial benefit is anticipated for the company in relation to the opportunity selected. Instead of afinancial impact, the final outcome of this opportunity is that PMI will be able to build a stronger and more resilient value chain
and that it will be capable of positioning itself as a leading company collaborating with its suppliers to implement actions that
contribute to a more sustainable future. This might change in the future and PMI might foresee a financial benefit aligned wi th
the definition of substantive opportunity.
Forest risk commodity
TimberType of opportunity
Markets
Where in your value chain does the opportunity occur?
Supply chain
Primary forests-related opportunity
Driving demand for sustainable materials
Financial incentives

<Field Hidden>
Company-specific description & strategy to realize opportunity
One of the findings of the deforestation risk assessment of PMI’s value chain was that the industry of pulp and paper product s
specializing in materials for the production of cigarettes is lagging behind in terms of sustainability, compared to other pulp
and paper industries such as packaging. PMI as one of the market leaders of the tobacco industry, has an opportunity todrive demand for verified sustainable materials in areas such as acetate tow and fine papers. PMI has not acted in this area
yet and is currently analyzing options to realize this opportunity. Options include engagement with suppliers to understandtheir barriers to produce verified sustainable materials for the tobacco industry. PMI’s definition of substantial opportunity,
mirrors the definition of substantial impact. In 2020+ risk forecasting terms, higher level risks are defined as those with apotential impact in excess of US$5M or a raw material impact in excess of 1000 metric tons of tobacco leaves. These apply toboth our direct operations and our tobacco supply chain. Therefore, improved supply chain engagement will be a substantial
opportunity if it aligns with the stated definition. Additionally, to drive d emand for verified sustainable materials, in 2017 PMI
published its Responsible Sourcing Principles. These principles provide process and performance requirements applicable toall suppliers doing business with PMI. Through their application, our goal is t o achieve measurable, tangible improvements inour supply chain.
Estimated timeframe for realization
4-6 years
Magnitude of potential impact
Medium-highLikelihood
LikelyPotential financial impact
0
Explanation of financial impact
No direct financial benefit is anticipated for the company in relation to the opportunity selected. Instead of a financial impact,
the final outcome of this opportunity is that PMI will be able to build a stronger and more resilient value chain and that it will
be capable of positioning itself as a leading company in actions that contribute to a more sustainable future.

F4. GovernanceF4.1

(F4.1) Does your organization have a policy that includes forests-related issues?
Yes, we have a documented forests policy, but it is not publicly available

F4.1a(F4.1a) Select the options to describe the scope and content of your policy.
Scope

SelectedRow products
1
onlyContent

Please explain

PMI does not have a stand-alone forest policy, the principles and goals regarding forest-related issues
are included in different documents. Our forest policy covers all timber used for curing tobacco in all
countries where PMI sources FCV tobacco. Pulp and paper materials are excluded from this policy,
however, pulp and paper are covered by our wider sustainability principles. In 2016, started developinga harmonized and verifiable Monitoring Framework for Sustainable Leaf Curing Fuel (referred to as
Monitoring Framework) that states four principles to be followed by all tobacco leaf suppliers: Principle
1. Know your fuel source; Principle 2. Be sustainable; Principle 3. Be transparent and replicable;
Principle 4. Engage stakeholders. The first version of the Monitoring Framework was finalized in early
2017, and it is expected that an updated version will be rolled out in late 2018 or early 2019. Afterwards,
Commitments beyond
the document will be revised and updated as needed. The Monitoring Framework has requirements that
regulatory compliance
go beyond regulatory compliance, because PMI took a global approach. For example, in Brazil, theCommitment toregulatory cut-off date to prove that a plantation was not forest and still be considered sustainable istransparency
2008, while the cut-off date for PMI is 2006. The commitment to transparency is reflected in Principle 3.
Commitment toBe transparent and replicable. All tobacco suppliers are required to develop clear Standard Operating
stakeholder awareness Procedures regarding the management of timber used for curing tobacco. Principle 4. Engage
and education
stakeholders requires the development of a stakeholder map and a stakeholder engagement plan. In
Commitment to align with order to ensure the long term availability of the resource, PMI needs to monitor how dependent tobacco
public policy initiatives,
curing is on timber fuel. That is why Principle 1. Know your fuel source monitors the different types of
e.g. SDGs
fuel and the quantities used by each farmer. Therefore PMI can track and describe our dependency on
Description of business forests to manufacture our products. Each principle of the Monitoring Framework is organized in criteria,
dependency on forests
indicators, and underlying requirements, which is expected to serve as our standard for procurement.
Description of forestsThis will allow us to achieve our targets and monitor our progress in a systematic way globally. In
related standards for
addition to this policy focusing on timber used for tobacco curing, PMI addresses forest issues in a
procurement
variety of documents that are applied company wide.

F4.1b
(F4.1b) Do you have commodity specific sustainability policy(ies)? If yes, select the options that best describe theirscope and content.

Do you havea commodity
specificsustainability
policy?
ScopeContent

Please explain

Commitments beyond
regulatory compliance
Commitment totransparency
Commitment tostakeholder
awareness andeducation
Commitment to alignwith public policy
initiatives, e.g. SDGs
Description ofbusiness dependency
on forests
Description of forestsrelated standards for
procurement

PMI does not have a stand-alone forest policy, the principles and goals regarding
forest-related issues are included in different documents. Our forest policy covers all
timber used for curing tobacco in all countries where PMI sources FCV tobacco. Pulp
and paper materials are excluded from this policy, however, pulp and paper arecovered by our wider sustainability principles. In 2016, started developing aharmonized and verifiable Monitoring Framework for Sustainable Leaf Curing Fuel(referred to as Monitoring Framework) that states four principles to be followed by all
tobacco leaf suppliers: Principle 1. Know your fuel source; Principle 2. Be sustainable;
Principle 3. Be transparent and replicable; Principle 4. Engage stakeholders. First
Monitoring Framework was finalized in 2017 and an updated version may be rolled
out in 2018 or 2019. The Monitoring Framework has requirements that go beyond
regulatory compliance, because PMI took a global approach. For example, in Brazil,
the regulatory cut-off date to prove that a plantation was not forest and still beconsidered sustainable is 2008, while the cut-off date for PMI is 2006. The
commitment to transparency is reflected in Principle 3. Be transparent and replicable.
All tobacco suppliers are required to develop clear Standard Operating Procedures
regarding the management of timber used for curing tobacco. Principle 4. Engage
stakeholders requires the development of a stakeholder map and a stakeholder
engagement plan. In order to ensure the long term availability of the resource, PMI
needs to monitor how dependent tobacco curing is on timber fuel. That is why
Principle 1. Know your fuel source monitors the different types of fuel and thequantities used by each farmer. Therefore PMI can track and describe ourdependency on forests to manufacture our products. Each principle of the Monitoring
Framework is organized in criteria, indicators, and underlying requirements, which is
expected to serve as our standard for procurement. This will allow us to achieve ourtargets and monitor our progress in a systematic way globally. In addition to thispolicy focusing on timber used for tobacco curing, PMI addresses forest issues in avariety of documents that are applied company wide. We have more formallycommitted to water stewardship through our environmental commitment to be
published in Q3 2018

TimberYes

Selected
products
onlyPalm Oil

<FieldHidden><FieldHidden><Field Hidden><Field Hidden>

CattleProducts<FieldHidden><FieldHidden><Field Hidden><Field Hidden>

Do you havea commodity
specificsustainability
policy?
ScopeContent

Please explain

Soy<FieldHidden><FieldHidden><Field Hidden><Field Hidden>

Other Rubber<FieldHidden><FieldHidden><Field Hidden><Field Hidden>

Other<FieldHidden><FieldHidden><Field Hidden><Field Hidden>

F4.2(F4.2) Is there board-level oversight of forests-related issues within your organization?
Yes

F4.2a
(F4.2a) Identify the position(s) of the individual(s) on the board with responsibility for forests -related issues.
Position ofindividual

Please explain

Board/Executive
board

In 2017, the highest level of direct oversight for forest-related issues within PMI lied with the Product Innovation and Regulatory
Affairs Committee of the Board of Directors. The Committee comprised 9 out of the 13 Directors and was chaired by Harold Brown(Counselor, Center for Strategic and Int. Studies). The other members of the Committee were at March 29, 2018: - Massimo
Ferragamo, Chairman, Ferragamo - Werner Geissler, Operating Partner, Advent Int - Jun Makihara, Retired Businessman Sergio Marchionne, CEO, Fiat Chrysler Automobiles - Kalpana Morparia, CEO, J.P. Morgan Chase - Frederik Paulsen, Chairman,
Ferring Group - Robert B. Polet, Chairman, Rituals Cosmetics EBV - Stephen M. Wolf, Managing Partner, Alpilles In 2018, as partof our continued focus on sustainability, the Board has added oversight of our sustainability strategies and performance to thecharter of the Board’s Nominating and Corporate Governance Committee that advises the Board on sustainability matters.

F4.2b(F4.2b) Provide further details on the board’s oversight of forests-related issues.

Frequency
that forestsrelated issues Governanceare amechanisms intoscheduledwhich forests-related
agenda item issues are integrated
Monitoring
implementation andperformance
Overseeing acquisitions
and divestiture
Overseeing major
capital expenditures
Providing employee
incentives
Reviewing and guiding
annual budgets
Reviewing and guiding
business plans
Reviewing and guiding
corporate responsibility
strategy
Reviewing and guiding
major plans of action
Reviewing and guiding
risk management
policies
Reviewing and guiding
strategy
Reviewing innovation /R&D priorities
Row Scheduled Setting performance1some meetings objectives

Please explain

The Board established Committees to assist with the performance of its responsibilities and isregularly informed of the company’s performance, future plans, and significant issues affecting thebusiness. The Board meets several times per year with additional meetings held as necessary. The
Board of Directors believes that environmental, social, and governance (ESG) factors relevant to thecompany’s business are important to PMI’s long-term success, and in 2017, the Product Innovation
and Regulatory Affairs Committee was responsible for reviewing and monitoring PMI’s programs onsocietal alignment issues, including forest related issues with PMI’s CEO and the VP Operations.
Since 2018, the Board’s Nominating and Corporate Governance Committee is responsible tooversee our sustainability strategies and performance, and advises the Board on sustainability
matters. The four other committees (Audit, Compensation and Leadership Development, Finance,
Product Innovation and Regulatory Affairs) assist the board with a full range of activities that also
include sustainability related matters.

F4.3(F4.3) Below board level, provide the highest-level management position(s) or committee(s) with responsibility forforests-related issues.

Name of theposition(s) and/or
committee(s)Other C-Suite Officer,
please specify (SeniorVice President,
Operations)Sustainably committee

F4.4

Responsibility

Frequency ofreporting to
the board on
forestsrelated
issuesPlease explain

Both assessing andmanaging forestsrelated risks andopportunities

Forest-related issues are embedded within our overall business strategy, ourGuidebook for Success (Code of Conduct) and our Responsible Sourcing
Principles. It's integrated into normal business activities and forms part of ourannual Long Range Planning process which reviews and sets business direction.
In 2017, the strategy was developed/reviewed based on prior year performance,sustainability commitments and objectives, regulatory/external developments,
risk/opportunity assessments, stakeholder interest and business changes, throughfunctional management teams up to our Senior Management Team (Management
Board). Our Senior VP of Operations is a member of PMI’s Senior Management
Team (Management Board); in 2017 he reported to PMI’s Chief Executive Officer
and was delegated with operational responsibility. In 2017, the SVP Operations
was responsible for reviewing and monitoring PMI’s objectives, strategies andaction plans related to forest issues with the CEO and reported to the Prod.
Innovation and Regulatory Affairs Committee of the Board of Directors. Currently,
our Senior Management Team is responsible for reviewing sustainability matters,
including water-related issues – strategy, key programs, and budget ― through aMorecross-functional representation, coordinated by the Sustainability Team led by thefrequently
Vice President Social & Economic Affairs, who reports to the President Externalthan quarterly Affairs & General Counsel, a member of PMI’s Senior Management Team.

Both assessing andmanaging forestsrelated risks andopportunities

Currently, our Senior Management Team is responsible for reviewing sustainability
matters, including forest-related issues – strategy, key programs, and budget ―through a cross-functional representation, coordinated by the Sustainability Team
led by the Vice President Social & Economic Affairs, who reports to the President
External Affairs & General Counsel, a member of PMI’s Senior Management
Team. The Sustainability Team strives to equip our Company with the relevant
know-how and expertise in view of the changing nature of our business. From an
operational perspective, the Sustainability Team manages and coordinates oursustainability work across PMI functions and regions seeking to ensure it isMoreembedded at all levels of the organization. Finally, three cross-functional working
frequently
groups have been created to manage environmental, social and reporting matters
than quarterly that are overseen by committees composed of senior function heads.

(F4.4) Do you provide incentives to C-suite employees or board members for the management of forests-related
issues?
Yes

F4.4a(F4.4a) What incentives are provided to C-Suite employees or board members for the management of forests-related
issues?
Who is entitled tobenefit from theseincentives?

Monetary
rewardIndicator for
incentivized
performance

Corporate executive
team
Chief Executive
Officer (CEO)Other, please specify (Sustainability
Managers,
Employees)
Achievement ofManagement Group, commitments andSustainability Manager targets

Please explain
The Compensation and Leadership Development Committee consists entirely of nonmanagement directors, all of whom our Board has determined are independent within
the meaning of the listing standards of the New York Stock Exchange. The Committee
determined the 2017 cash incentive award performance rating based on 2017 results
versus performance metrics pre-established by the Committee. Metrics included
performance on key strategic initiatives, one being “rapid progress towards establishingcredibility and trust to accelerate the realization of our vision of a smoke-free world andour progress towards achieving our sustainability objectives and commitments”. Ourcarbon footprint reduction targets are part of our sustainability objectives andcommitments. The executive compensation awards are in accordance with the PMI
Performance Incentive Plan approved by PMI shareholders. Monetary reward 1) Chief
Executive Officer (CEO) Our CEO specifically covers EHS results in the assessment of
our annual company-wide performance that is reviewed by the Compensation andLeadership Development Committee of the Board of Directors. Accordingly, these results
are included in our overall performance rating which determines the cash bonuses forthe management group and other eligible employees. Executive management covering
EHS topics are specifically appraised each year for performance against targets. 2)
Management group Executive management covering EHS topics are specificallyappraised each year for performance against targets. The assessment of Environmentand Health and Safety (EHS) results directly influences the annual performance rating of
our SVP Operations and certain members of our Management Team. This covers theannual cash incentive compensation and long term restricted stock incentive
compensation elements for those roles. 3) All employees Specific company awards suchas the CEO Award and Recognition for Excellence Awards, which are either cash orstock, are available for Energy Managers, EHS Managers, project teams and other
employees who are responsible for forest related initiatives.

Who is entitled tobenefit from theseincentives?

Indicator for
incentivized
performance

Please explain
Behavior change related indicator: annually many affiliates continued to performvoluntary awareness and promotion campaigns/ programs in order to increase
employees’ active participation in EHS programs and to make carbon footprint reduction
part of the company's culture. Awards and recognition for best practices form a coreelement of such campaigns.

Recognition(nonmonetary)

Other, please specify(All employees)

Achievement ofcommitments andtargets

Other nonmonetary
rewardNo one is entitled tothese incentives

Please selectF5. Business strategy
F5.1(F5.1) Are forests-related issues integrated into any aspects of your long-term strategic business plan, and if sohow?
Are forestsrelated issues
integrated?

Long-termbusiness
objectives

Yes, forestsrelated issues areintegrated

Longtermtimehorizon(years) Please explain

11-15

In 2016, we worked with Business for Social Responsibility (BSR) to identify the areas that are mostsignificant to both our business sustainability and to our stakeholders and prioritized them. That
analysis also highlighted areas of opportunity and risk, emerging themes, and gaps for management
action. The analysis consisted of a structured review and engagement process, carried out by BSR and
involving PMI’s functional leaders and internal subject matter experts as well as external stakeholders.
It considered both our current business and changes driven by our vision of a smoke-free future. The
analysis helped us to focus on where we need to prioritize and allocate resources to mitigate negative
impacts and create opportunities for wider societal value, with product harm reduction the fundamental
premise of our strategy. In the 2016 materiality matrix, “Commodity-driven deforestation andbiodiversity” was considered as an important element for our business and we are working with our
suppliers to monitor, comply, and manage this issue. We plan to update this analysis in 2018 and share
the results in our 2018 Sustainability Report. We identified additional areas from a risk management
perspective, including good agricultural and labor practices in tobacco farming and the need for climatechange mitigation and related action throughout the value chain. We also need to anticipate andAre forestsrelated issues
integrated?

Longtermtimehorizon(years) Please explain
manage the supply chain risks related to our non-tobacco materials, especially as our product portfolio
now increasingly includes electronic devices. Our ambition is to turn these strategic risks into
opportunities to add value. The time horizon was chosen because PMI business strategy considers thetransition to a smoke free world. Additionally, we developed Science Based Targets to beaccomplished by 2030 and 2040.

Strategy forlong-term
objectives

Financialplanning

Yes, forestsrelated issues areintegrated

Yes, forestsrelated issues areintegrated

11-15

Sustainable tobacco production is key for PMI and the company has set goals and developed strategicplans to reduce greenhouse gas emissions from tobacco curing as well as to tackle the risk of
deforestation. All of which has been integrated in our strategy for long-term objectives through thefollowing three strategic initiatives: ♣ Reduce the fuel consumption rate via curing efficiency
improvement and curing barn optimization programs; ♣ Move from unsustainable to sustainable curing
fuel sources; ♣ Encourage fuel switching to less polluting fuels and the use of biomass as analternative to unsustainable wood or fossil fuels, where appropriate. For example, to implement thestrategic initiative to move from unsustainable to sustainable curing fuel sources, PMI has adopted a
Global Roadmap for sustainable firewood, which includes the following three global targets: 1. No Old
Growth Forest cut 2. Renewable sources/Self-sufficient firewood 3. Full traceability The global roadmap
for sustainable firewood provides a timeline for the achievement of the three above targets, the set
timeline for its achievement is until 2020. The time horizon was chosen because PMI business strategy
considers the transition to a smoke free world. Additionally, we developed Science Based Targets to beaccomplished by 2030 and 2040. Furthermore, in 2016 PMI started developing a harmonized andverifiable Monitoring Framework for Sustainable Leaf Curing Fuel to monitor the progress towards ourglobal targets. The framework is composed of four principles. Tobacco leaf suppliers are implementing
the Monitoring Framework and they will be audited by a third party by 2020. The Monitoring Framework
in ongoing process and it is being implemented in all countries where PMI sources Flue Cured Virginia
tobacco. Additionally, in 2017 PMI published its Responsible Sourcing Principles. These principles
provide process and performance requirements applicable to all suppliers doing business with PMI.
Through their application, our goal is to achieve measurable, tangible improvements in our supply
chain.

11-15

Sustainable tobacco production is key for PMI and the company has set goals and developed strategicplans to reduce greenhouse gas emissions from tobacco curing as well as to tackle the risk of
deforestation. As PMI is working towards achieving these goals, human and financial resources areallocated into long-term financial planning for forest related issues. For example, since 2016 PMI
developed a Monitoring Framework for Sustainable Leaf Curing Fuels that tobacco leaf suppliers
should comply with and that should be audited by a third party by 2020. The Monitoring Framework
requires tobacco leaf suppliers to ensure that 100% of the biomass used for tobacco curing is

Are forestsrelated issues
integrated?

Longtermtimehorizon(years) Please explainsustainable and traceable. The Monitoring Framework is an ongoing process and it is being
implemented in all countries where PMI sources Flue Cured Virginia tobacco. Since its design, carefulfinancial planning including actions, and resources have been allocated to facilitate the achievement of
PMI’s forest-related objectives. In very challenging markets such as Brazil, PMI is working with tobacco
leaf suppliers to explore options to ensure long-term sustainable supply of firewood. This includes
efforts in researching and forecasting potential costs of transforming the entire supply chain of
firewood. Therefore, PMI is including forest related issues in the current financial planning and is also
exploring how forest related issues could impact financial planning in the long term in different markets.

F6. Implementation
F6.1(F6.1) Has your organization made a public commitment to reduce or remove deforestation and/or forest degradationfrom its direct operations and/or supply chain?
Yes

F6.1a
(F6.1a) Has your organization endorsed any of the following initiatives as part of its public commitment to reduce orremove deforestation and/or forest degradation?
Please selectF6.1b
(F6.1b) Provide details on your public commitment(s), including the description of specific criteria, coverage, andactions.
Commodity coverage
TimberCriteria
Other, please specify (No old growth forest cut)Operational coverage
Supply chain% of total production/ consumption covered by commitment
61-70%
Commitment timeframe
2020
Please explain
Sustainable tobacco production is key for PMI and the company has set goals and developed strategic plans to reducegreenhouse gas emissions from tobacco curing as well as to tackle the risk of deforestation. All of which has been integrated
in our strategy for long-term objectives through the following three strategic initiatives: ♣ Reduce the fuel consumption rate
via curing efficiency improvement and curing barn optimization programs; ♣ Move from unsustainable to sustainable curing
fuel sources; ♣ Encourage fuel switching to less polluting fuels and the use of biomass as a n alternative to unsustainable
wood or fossil fuels, where appropriate. For example, to implement the strategic initiative to move from unsustainable tosustainable curing fuel sources, PMI has adopted a Global Roadmap for sustainable firewood, which inclu des the following
three global targets: 1. No Old Growth Forest cut 2. Renewable sources/Self -sufficient firewood 3. Full traceability The global
roadmap for sustainable firewood provides a timeline for the achievement of the three above targets, the set t imeline for its
achievement is until 2020. The time horizon was chosen because PMI business strategy considers the transition to a smoke
free world. Additionally, we developed Science Based Targets to be accomplished by 2030 and 2040. Furthermore, in 2016
PMI started developing a harmonized and verifiable Monitoring Framework for Sustainable Leaf Curing Fuel to monitor the
progress towards our global targets. The framework is composed of four principles. Tobacco leaf suppliers are implementing
the Monitoring Framework and they will be audited by a third party by 2020. The Monitoring Framework in ongoing process
and it is being implemented in all countries where PMI sources Flue Cured Virginia tobacco. PMI’s cut -off date for non
conversion is 2006.

F6.2(F6.2) Did you have any quantified targets for increasing sustainable production and/or consumption of yourdisclosed commodity(ies) that were active during the reporting year?
Yes

F6.2a

(F6.2a) Provide details of your target(s) for increasing sustainable production and/or consumption of the disclosed
commodity(ies), and progress made.
Target reference number
Target 1
Forest risk commodity
TimberForm of commodity covered
Wood-based bioenergy
Type of target
Traceability
Coverage
Direct operations and supply chain
Traceability point
Plantation
Third-party certification scheme<Field Hidden>
Start year
2014
Start figure0%
Target year
2020
Target100%% achieved
31-40%
Please explain
PMI has adopted a Global Roadmap for sustainable firewood, which includes the following three global targets: 1. No Old
Growth Forest cut 2. Renewable sources/Self-sufficient firewood 3. Full traceability The global roadmap for sustainablefirewood provides a timeline for the achievement of the three above targets, the set timeline for its achievement is until 2020.
PMI is currently implementing a harmonized and verifiable Monitoring Framework for Sustainable Leaf Curing Fuel to monitor
the progress towards our global targets. The monitoring framework is composed of four principles, and Principle 2 “BeSustainable” focuses on sustainability and traceability of the fuel source. The purpose is to ensure that all origins switch touse fuels of a demonstrated sustainable source which are proven to be sustainably managed (in accordance with the PMI
defined criteria of sustainable wood fuel). One of the indicators addresses traceability directly stating that all the wood -fuelused for tobacco curing activities should be traceable to the source with supported documentation. This means that
information should be provided for all Farmers/curing centers. Documentation should be available annually. Documentation isrequired for auditing purposes and includes purchase receipts, or a verification report including evidence of the fuel source(for example, firewood, wood pellets, etc.) and amounts consumed. PMI plans to achieve this target by implementing thetraceability indicator as stated in the Monitoring Framework (Indic ator 2.1 Curing fuel is fully traceable to the source
supported by documentation) and subjecting the compliance of tobacco leaf suppliers to a third party audit. Additionally, PMI
is working closely with tobacco leaf suppliers to help them achieve the 100% traceability target. For example, in Pakistan,
PMI is planning to manage a plantation that will provide firewood to its farmers. This will ensure 100% traceability to theplantation; similar approaches are being explored in other countries.
Target reference number
Target 2
Forest risk commodity
TimberForm of commodity covered
Wood-based bioenergy
Type of target
Sustainable procurement standard
Coverage
Direct operations and supply chain
Traceability point<Field Hidden>
Third-party certification scheme<Field Hidden>
Start year
2014
Start figure21-30%
Target year

2020
Target100%% achieved
61-70%
Please explain
Sustainable tobacco production is key for PMI and the company has set goals and developed strategic plans to reducegreenhouse gas emissions from tobacco curing as well as to tackle the risk of deforestation. The 3 strategic initiatives are: ▪
Reduce the fuel consumption rate via curing efficiency improvement and curing barn optimization programs; ▪ Move fromunsustainable to sustainable curing fuel sources; ▪ Encourage fuel switching to less polluting fuels and the use of biomass as
an alternative to unsustainable wood or fossil fuels where appropriate. PMI has adopted a Global Roadmap for sustainablefirewood, which includes the following three global targets: 1. No Old Growth Forest cut 2. Renewable sources/Self -sufficient
firewood 3. Full traceability The global roadmap for sustainable firewood provides a timeline for the achievement of the thre e
above targets, the set timeline for its achievement is until 2020. Biodiversity management and Social and economic
development are aspirational sustainability targets to be achieved in the long term beyond 2020. PMI is currently
implementing a harmonized and verifiable Monitoring Framework for Sustainable Leaf Curing Fuel (referred to as Monitoring
Framework) to monitor the progress towards our global targets. The monitoring framework is composed of four principles, andPrinciple 2 “Be Sustainable” focuses on sustainability and traceability o f the fuel source. The purpose is to ensure that all
origins switch to use fuels of a demonstrated sustainable source such as biomass from waste agricultural residues or wood
fuel from sources which are proven to be sustainably managed (in accordance with the PMI defined criteria of sustainable
wood fuel). Additionally, no coal should be used as a fuel to cure tobacco. PMI is supporting and engaging in capacity
building activities with tobacco leaf suppliers to ensure they are able to comply with the Monito ring Framework by 2020 andbeyond. PMI considers that the implementation of the Monitoring Framework is proving effective and it estimates that above
65% of the curing fuel is sustainable and traceable.

F6.3(F6.3) Do you have traceability system(s) in place to track and monitor the origin of your disclosed commodity(ies)?
Do you have system(s) in place?
TimberYes

Palm Oil

<Field Hidden>

Do you have system(s) in place?
Cattle products<Field Hidden>

Soy<Field Hidden>

Other - Rubber<Field Hidden>

Other<Field Hidden>

F6.3a(F6.3a) Provide details on the level of traceability your organization has for your disclosed commodity(ies).
Point to% of total
which
production/consumption commodity
volume traceable
is traceable Description of traceability system

Timber31-40%

Plantation

Exclusions

Description of
exclusion

PMI is currently implementing a harmonized and verifiable
monitoring framework to allow monitoring of progress
towards our goals of the sustainable leaf curing fuelroadmap. The monitoring framework is composed of four
principles, and Principle 2 focuses on sustainability andtraceability of the source. One of the indicators addresses
traceability directly stating that all the fuel used for tobacco
curing activities should be traceable to the source withsupported documentation. This means that information
should be provided for all Farmers/curing centers.
Documentation should be available annually. This will help
PMI to identify and report unsustainable sources of fuel thatwould not be compliant with PMI’s sustainability objectives.
Documentation is required for auditing purposes. Required
documentation includes: a. Purchased fuel: documentationconsist of the receipts of the fuel purchased by all the
farmers (or centers). The receipts should have the name of
the biomass vendor and the amount of fuel purchased. For
biomass (wood fuel and agro fuel), a verification of thesource of the fuel is needed. The verification should be areport that contains evidence of the fuel source (e.g. Pictures
No traceabilityof the place where the biomass is obtained). For supplies
Other, please system is in placeusing intermediaries, a research should provide thespecify (form of for pulp and paper
information. The methodology for the research should becommodity)
products.

Point to% of total
which
production/consumption commodity
volume traceable
is traceable Description of traceability system

Exclusions

Description of
exclusionclearly defined and reported as well. If the source of
information is from existing literature, it should be fromreliable sources such as universities, internationalorganizations (e.g. FAO) and research institutes. b. Farmer
and community woodlot, commercial plantations fromtobacco leaf suppliers and self-collected biomass:
documentation should prove the source of the fuel and theamount of the fuel from a specific source. For example,
tobacco leaf suppliers in the Philippines that use woodpellets to cure tobacco are able to show the contract, andreceipts of the wood pellets supplier, additionally they canshow the correspondent government permits that certifies
the plantation from where the timber comes from. PMI did averification visit in 2017, in 2018 pre audits will take place
covering 40% of the volume of purchased tobacco, audits willtake place in 2019 and 2020. It is expected that thetraceability system will continue beyond 2020.
Palm Oil <Field Hidden><FieldHidden><Field Hidden><Field Hidden> <Field Hidden>

Cattleproducts <Field Hidden><FieldHidden><Field Hidden><Field Hidden> <Field Hidden>

Soy<Field Hidden><FieldHidden><Field Hidden><Field Hidden> <Field Hidden>

Other Rubber<Field Hidden><FieldHidden><Field Hidden><Field Hidden> <Field Hidden>

Other<Field Hidden><FieldHidden><Field Hidden><Field Hidden> <Field Hidden>

F6.4(F6.4) Do you specify any third-party certification schemes for your disclosed commodity(ies)? Indicate the volume
and percentage of your production and/or consumption covered.
Forest risk commodity

Timber
Do you specify any certification scheme?
No
Third-party certification scheme<Field Hidden>% of total production/consumption volume certified<Field Hidden>
Form of commodity<Field Hidden>
Volume of production/ consumption certified<Field Hidden>
Metric<Field Hidden>
Please explain

F6.5(F6.5) Do you specify any sustainable production/procurement standards for your disclosed commodity(ies), otherthan third-party certification? Indicate the percentage of production/consumption covered and if you monitor
supplier compliance with these standards.
Forest risk commodity
Timber
Do you specify any sustainability standards?
Yes
Type of standard
Procurement
Description of standard
As part of the monitoring framework, PMI developed a set of credible monitoring principles and underlying indicators,
requirements and guidance, which should be applied within countries where PMI sources Flue Cured Virginia tobacco inorder to develop consistent and simple monitoring measures with regard to sustainable curing fuel. The principles are: 1.
Know your fuel source: quantify fuel usage and source of all fuels used for tobacco curing. 2. Be sustainable: ensure that al lorigins switch to use fuels of a demonstrated sustainable source such as biomass from waste agricultural residues or woodfuel from sources which are proven to be sustainably managed (in accordance with the PMI defined criteria of sustainable
wood fuel). No coal should be used as a fuel to cure tobacco. 3. Be transparent and replicable: have a clear and accessible
process and communication that facilitate coordination of actions among different stakeholder. Replicability will ensure thatdata collection and reporting is consistent to allow for comparisons and compilation of data locally and globally. Moreover itwill allow the upscaling of processes that have been demonstrated to be successful. 4. Include stakeholders: to include
various stakeholders involved in the FCV tobacco curing process, in order to understand their specific characteristics andsituation given the country they are operating. This will allow to adjust monitoring activities according to local situation toensure proper implementation of activities and data collection. It is expected that in 2018, six countries will undergo a preaudit and in 2019 audits will be rolled out. Additionally, in 2017 PMI published its Responsible Sourcing Principles. These
principles provide process and performance requirements applicable to all suppliers doing business with PMI. Through theirapplication, our goal is to achieve measurable, tangible improvements in our supply chain.
% of total commodity volume covered by standard
61-70%
Do you have a system in place to monitor compliance with this standard?
Yes
Type(s) of monitoring system
Third-party auditing% of suppliers in compliance with standards<10%
Please explain
The Monitoring Framework is structured in four principles. Each principle is organized in criteria, indicators, and underlying
requirements. Principles: What to achieve The principles are the fundamental set of monitoring rules that represent PMI’s
global roadmap for sustainable curing fuel and its objectives. They govern and help stakeholders in determining the concret e
implementation measures of monitoring actions to achieve sustainability. The principles relate to both the goals of the Leaf
CO2 reduction strategy and to PMI’s GAP (Good Agricultural Practices), and are meant to link them in an overall structured
manner. Criteria: How to achieve The criteria are the factors selected to measure the principles. Indicators: How to measure
The indicators provide the specific information that is used to measure the criteria for each monitoring principle: the indic atorsshow how to measure the criteria. Many of the criteria have more than one indicator. The indicators may be measured using
either quantitative or qualitative methods. Extensive guidance on the indicators and how to measure them is provided.
Underlying requirements: What to do The underlying requirements are the measures that need to be implemented to achieve
full conformity with the monitoring principles. They are a guide to users of the protocol, to measure progress towards
achieving the monitoring principles and to highlight gaps.

F6.7(F6.7) Are you working with your direct suppliers to support and improve their capacity to supply sustainable raw
materials?
Are you
working withdirectsuppliers?

Supplier engagement
approach

Please explain

Supplier questionnaires
on environmental andsocial indicators
Workshops and training
Supplier audits
Joint projects
Financial support
Technical support

PMI is working with 100% of our direct tobacco leaf suppliers from which we source Flue
Cured Virginia tobacco In the implementation of the monitoring framework. PMI regional
coordinators engage directly with tobacco leaf suppliers in each country to communicate andensure tobacco leaf suppliers understand the monitoring framework. PMI also provides
technical and financial support when tobacco leaf suppliers need support to comply with theprinciples stated in the monitoring framework. For example, PMI financed the development ofcountry specific forest risk maps. A map has been developed for each country in which
farmers use firewood: Philippines, Malawi, Mozambique, Argentina, Indonesia, Pakistan andTanzania. In 2017 maps were developed for the first time for Argentina, Malawi and the Punjab
region in Pakistan, while updates to the maps developed in 2015 were developed forPhilippines, Mozambique, Pakistan, Indonesia and Tanzania. The objective was to identify therisk of deforestation of old growth forest or equivalent so the tobacco leaf suppliers candevelop a forest risk mitigation plan. The results of the maps has shown the different risks
levels and tobacco leaf suppliers are working on the development of forest risk mitigationplans. In 2018 we will update the map from Indonesia.

TimberYes, working
with direct
suppliers

Palm Oil

<Field Hidden> <Field Hidden><Field Hidden>

Cattleproducts<Field Hidden> <Field Hidden><Field Hidden>

Soy<Field Hidden> <Field Hidden><Field Hidden>

Other Rubber<Field Hidden> <Field Hidden><Field Hidden>

Other<Field Hidden> <Field Hidden><Field Hidden>

F6.8(F6.8) Are you working beyond your first-tier supplier(s) to manage and mitigate forests-related risks?

Are youworkingbeyond first
tier?

Please explain

TimberYes, working
beyond firsttier

PMI is working with its direct tobacco leaf suppliers in the implementation of the Monitoring Framework for Sustainable
Leaf Curing Fuel. Compliance with the framework is only possible with the active engagement of tobacco leaf supplierswith farmers, who are our suppliers beyond first tier. The Monitoring Framework has been rolled-out in every relevantmarket, and 90% of our tobacco purchases are through direct contract by our leaf operations or our tobacco leaf suppliers.
Therefore, in 2017 PMI has engaged with 90% of our tobacco leaf suppliers’ contracted farmer base For example, farmers
in Indonesia, Philippines, Argentina, Malawi, Mozambique, Brazil, Mexico, Pakistan, to name a few, have received training
specific to the Monitoring Framework. In some countries such as the Philippines, after the training focusing on sustainable
and traceable firewood, farmers undertake a questionnaire that measures their understanding of the topics covered on the
training. Allowing PMI and its first tier tobacco leaf suppliers to plan for the following trainings or for additional support if
needed. Additionally, Farmers are visited by Field Technicians several times a year.

Palm Oil

<FieldHidden><Field Hidden>

Cattleproducts<FieldHidden><Field Hidden>

Soy<FieldHidden><Field Hidden>

Other Rubber<FieldHidden><Field Hidden>

Other<FieldHidden><Field Hidden>

F6.9(F6.9) Do you participate in external initiatives or activities to further the implementation of your policies concerning
the sustainability of your disclosed commodity(ies)?
Forest risk commodity
Timber
Do you participate in activities/initiatives?
Yes
Activities
Involved in industry platforms

Initiatives<Field Hidden>
Please explaino achieve the targets of 100% sustainable and traceable firewood, PMI is currently engaged in Industry efforts to collaborate
with NGO’s and other stakeholders in areas such as reforestation, availability of sustainable firewood, among others. Thisapproach is currently being implemented in Brazil and Philippines where all PMI tobacco leaf suppliers come together andplan an industry strategy and collaborate with other stakeholders to achieve sustainability and traceability of fuel sources. For
example, in Brazil, the implementation of the Monitoring Framework has triggered all three main tobacco leaf suppliers toform an industry approach to manage sustainability and traceability of firewood. PMI and tobacco leaf suppliers in Brazil arecoordinating to develop sustainability study every 4 years from 2019 onwards . Taking an industry approach will help
strengthen the efforts to achieve 100% sustainability and traceability of firewood.

F7. Linkages and trade-offs
F7.1(F7.1) Has your organization identified any linkages or trade-offs between forests and other environmental issues in
its direct operations and/or other parts of its value chain?
Yes

F7.1a
(F7.1a) Describe the linkages or trade-offs and the related management policy or action.
Linkage/tradeoff
LinkageType of linkage/tradeoff
Decreased GHGs emissions
Description of linkage/tradeoff
PMI committed to decrease its carbon footprint by 30% across its value chain by 2020 compared to 2010 baseline.
Agriculture accounts for around 38% of PMI’s carbon footprint, thus PMI Leaf, the department in charge of s ourcing tobacco,
set goals and developed strategic initiatives to reduce GHG emissions. PMI found that by managing forest related -risk, it isalso contributing to its GHG emission reduction goal.
Policy or action

Given the link between carbon emissions and deforestation, PMI decided to strengthen the management of deforestation
risks by developing the deforestation risk assessment of the entire value chain and by implementing the Monitoring
Framework for Sustainable Leaf Curing Fuel. The results of the assessment contribute to strategic decision making on which
regions or suppliers are prioritized.
Linkage/tradeoff
LinkageType of linkage/tradeoff
Decreased GHGs emissions
Description of linkage/tradeoff
By improving curing barn efficiency, we can decrease the amount of fuel needed. The plan is to improve combustion
efficiency, ventilation or controls of 60,000 flue-cured barns by 2020, resulting in 10% GHG emissions reduction. The
improvement has been done in Brazil, Indonesia, Spain, Italy, Colombia, Malawi, Mozambique, Pakistan, Philippines andTanzania.
Policy or action
Good Agricultural Practices: Actions: to ensure tobacco farmers have access to the information, systems and tools needed tobe successful business owners who minimize the environmental impacts of their activities and provide good working
conditions on their farms

F8. Verification
F8.1(F8.1) Do you verify any forests information reported in your CDP disclosure?
In progress

F9. Barriers and challenges
F9.1(F9.1) Describe the key barriers or challenges to avoiding forests-related risks in your direct operations or in otherparts of your value chain.

Forest risk commodity
TimberCoverage
Supply chain
Primary barrier/challenge type
Supply chain complexity
Comment
Our use of pulp and paper products and the use of firewood as fuel for tobacco curing are the areas of our supply chain with
forest-related risks. In some countries, the supply chain for firewood as fuel for tobacco curing can be very informal, with tier2, tier 3 or tier 4 suppliers. For example, some farmers collect firewood themselves, or purchase it from firewood vendors,
who may obtain it from various producers or intermediaries. Given our low level of control over these practices, achieving
traceability and ensuring sustainability present several challenges.
Forest risk commodity
TimberCoverage
Supply chain
Primary barrier/challenge type
Limited availability of certified materials
Comment
A share of the pulp and paper products used by PMI are specialty products specifi c to the tobacco industry such as acetate
tow and fine papers. These materials seem to be lagging behind in terms of sustainability. Only a limited amount of theseproducts have some type of certification.

F9.2(F9.2) Describe the main measures that would improve your organization’s ability to manage forests-related risks.
Forest risk commodity
TimberCoverage
Supply chain
Main measureReduced cost of certified materials
Comment
Even if forest certification is a voluntary process, the costs for small forest holders can be prohibitive. Expanding collaborative
group certificates, according to credible standards such as FSC, will be essential to expand certification and increase theavailability of certified materials.
Forest risk commodity
TimberCoverage
Supply chain
Main measure
Investment in monitoring tools and traceability systems
Comment
One of our main challenges to manage our forest-related risks is the limited traceability from some of our suppliers. In thecases where we are advancing in traceability, monitoring costs can be high which can hinder our efforts. The availability ofmore cost-effective monitoring tools will facilitate our and our suppliers’ ability to manage forest -related risks.

F10. Signoff
F-FI(F-FI) Use this field to provide any additional information or context that you feel is relevant to your organization's
response. Please note that this field is optional and is not scored.

F10.1(F10.1) Provide the following information for the person that has signed off (approved) your CDP forests response.
Row 1

Job Title

Corresponding job category

Andre Calantzopoulos, Chief Executive Officer (CEO)

Chief Executive Officer (CEO)