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we will be

I N T E G R AT E D R E P O R T 2 0 2 3

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02Overview

About PMI
Philip Morris International (PMI) is a leadinginternational tobacco company, actively
delivering a smoke-free future and evolving its
portfolio for the long term to include products
outside of the tobacco and nicotine sector.
The company’s current product portfolio primarily consistsof cigarettes and smoke-free products. Since 2008, PMI
has invested USD 12.5 billion to develop, scientifically
substantiate and commercialize innovative smoke-free
products for adults who would otherwise continue
to smoke, with the goal of completely ending the saleof cigarettes. This includes the building of world-classscientific assessment capabilities, notably in the areasof pre-clinical systems toxicology, clinical and behavioral
research, as well as post-market studies. In 2022, PMI
acquired Swedish Match – a leader in oral nicotinedelivery – creating a global smoke-free champion led by
the companies’ IQOS and ZYN brands.

About this report at a glance
We are pleased to present PMI’s Integrated Report
2023, which aims to provide an objective descriptionof our business model, strategy, performance, andprospects in relation to our priority economic,
environmental, social, and governance topics. Contentsof this report are shaped by a formal sustainability
materiality assessment conducted in 2021 (read more
about it here).
Unless otherwise indicated, the data contained herein cover
our operations worldwide for the full calendar year 2023
or reflect the status as of December 31, 2023. Where notspecified, data comes from PMI financials, nonfinancials, or
estimates.
Unless explicitly stated, the data, information, and aspirationsin this report do not incorporate PMI’s wellness and healthcare
business, Vectura Fertin Pharma. Regarding the Swedish
Match acquisition, completed late 2022, unless otherwise
indicated, this report does not include information pertaining
to its sustainability performance. As we evolve, we will,
where material and feasible, include them in our sustainability
reporting in future reporting periods.

Strategy

Governance

Product impact

Operational impact

Fundamentals

Contents
The U.S. Food and Drug Administration (FDA) has
authorized versions of PMI’s IQOS Platform 1 devices
and consumables and Swedish Match’s General snus as
Modified Risk Tobacco Products (MRTPs). As of December
31, 2023, PMI’s smoke-free products were available forsale in 84 markets, and PMI estimates that approximately
20.8 million adults around the world had already switched
to IQOS and stopped smoking. Smoke-free products
accounted for approximately 37% of PMI’s total fullyear 2023 net revenues. With a strong foundation andsignificant expertise in life sciences, PMI announced in
February 2021 its ambition to expand into wellness andhealthcare areas and, through its Vectura Fertin Pharma
business, aims to enhance life through the delivery ofseamless health experiences.

a

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

This report is accompanied by a set of publications that will beavailable for download on PMI.com or will be issued shortly
after this report publication:• Reporting indices mapping content of this report against the
Universal Standards of the Global Reporting Initiative (GRI)
and the Sustainability Accounting Standards Board (SASB)• Performance data available in one place for download• Sustainability Strategy and 2023 Performance Highlights andTop 10 Takeaways summarizing the content of this report• Country-level case studies and market stories
shedding light on the work of our markets invarious sustainability areas around the world• Sustainability KPI Protocol 2023, providing details
on calculation methods, definitions, and thescope of key sustainability performance indicators
included in PMI’s Sustainability IndicesOverview

Fundamentals

2023 highlights

04

Nicotine science162

PMI’s Statement of Purpose

05

Conduct R&D responsibly and transparently

165

Message from our Chief Executive Officer

06

Sustain product reliability

167

Our global footprint

08

Uphold business ethics and integrity

169

Message from our Chief Financial Officer

10

Respect human rights

171

Operating context12Manage our supply chain sustainably

174

Strategy

Safeguard privacy and protect data

182

Apply fair fiscal practices

183

Value creation

18

Transforming for good

20

Reporting and performance

Message from our Chief Sustainability Officer

22

Performance in ESG ratings, rankings, and indices

Business Transformation Metrics

24

Performance metrics

189

Anchoring sustainability at the core of our strategy

26

Independent assurance report

203

Our 2025 Roadmap

28

Reconciliation of Non-GAAP Measures

206

188

Glossary of terms and acronyms

208

Governance and management

About this report

213

Board of Directors and Company Management

32

Forward-looking and cautionary statements

214

Sustainability Index

34

Notes

215

Operational management and program delivery

36

Risk management

38

P R O D U C T I M PAC T
Maximize the benefits of smoke-free products

44

Purposefully phase out cigarettes

64

Seek net positive impact in wellness
and healthcare

70

Reduce post-consumer waste

74• PMI’s Task Force on Climate-related Financial
Disclosures (TCFD) Report 2022
• PMI Sustainability Materiality Report 2021

O PE R ATI O N A L I M PAC T

The cover of this report compiles
designs submitted by our teams invarious markets around the world,whose passion and commitment are
essential drivers of progress in oursustainability strategy. The cover
showcases the word or concept of“sustainability” in their local language,reflecting the diverse realities andlocal communities where we operate.

© 2024 Philip Morris International, Inc. All rights reserved.

a©2024 Philip Morris International, Inc. All rights reserved.

03

Reporting and performance

Foster an empowered and inclusive workplace
Read more about this report here

92

Improve the quality of life of peoplein our supply chain

110

Tackle climate change

126

Preserve nature

142

we werewe are transforming for good
we will be

I N T E G R AT E D R E P O R T 2 0 2 3

SustentabilidadZRÓWNOWAŻONY ROZWÓJ
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Sustainability

04

Overview

2023 highlights

SOCIAL

~33 m

36.4%

84

25

USD 12.5 bn

98%

ENVIRONMENT

Markets where smoke-free products
represented more than 50% of annual
net revenues (2022: 17)

320,000

Cumulative number of smoke-freeelectronic devices refreshed or repaired
since 2021 (2022: 157,000)6

Of adjusted net revenues derived fromsmoke-free products (2022: 32.1%)2

Cumulative investment behind smokefree products since 2008 (2022: USD
10.7 bn)576%

Of shipment volume covered bymarkets with anti-littering programsin place for combustible cigarettes(2022: 68%)6

Markets where PMI smoke-free
products are available for sale,3 ofwhich 47% in low- and middle-income
markets4 (2022: 73, 42%)

Of total shipment volume covered byyouth access prevention programs inindirect retail channels (2022: 91%)7

17.6%

Of shipment volume covered bymarkets with smoke-free consumables
take-back programs (2022: 8.5%)6

SOCIALENVIRONMENT

Of management positions held by
women, continuing to exceed ouraspiration of maintaining 40% (2022:
40.7%)

94%

Proportion of tobacco purchased at norisk of net deforestation of managed
natural forest and no conversion ofnatural ecosystems (2022: 55%)6

8

Human rights impact assessments
conducted since 2018 in highest-riskcountries (2022: 7)6

Triple A

Score from CDP for climate, forest,
and water security for the fourthconsecutive year

0.1%

Prevalence of child labor among
contracted farmers supplying
tobacco to PMI (2022: 0.1%)6

8.14

Million cubic meters of water
optimized in our tobacco-growing
areas, cumulative since 2019(2022: 4.94 million cubic meters)

1 Figures are based on IQOS user panels and PMI Market Research. Estimated user numbers for oral nicotine and e-vapor are approximate, with further methodology details to beprovided in future disclosures. See Glossary.
2 For definition of net revenues related to smoke-free products, see Glossary. Data excludes the impact related to termination of distribution arrangement in the Middle East in 2023.
3 For definition of available for sale, see Glossary.
4 Excluding PMI Duty Free. World Bank report issued in 2023 is used on a comparative basis for income level classification. For definition of low- and middle-income markets, see
Glossary.
5 Investments reflect research, product and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding. Figures do not include
Swedish Match and Vectura Fertin Pharma.
6 See PMI’s Sustainability KPI Protocol 2023 for further details.
7 Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free product consumables. See PMI’s Sustainability KPI Protocol 2023 for further details.
Data excludes Swedish Match and Vectura Fertin Pharma.

Philip Morris International Integrated Report 2023

Product impact

PMI aims to completely replace cigarettes as soon as possible
with smoke-free products that are scientifically substantiatedto be less harmful than smoking, while in the longer run laying
the foundation of a strong business in the areas of broader
lifestyle, consumer wellness, and healthcare.
Our company’s purpose is clearly articulated in PMI’s
Statement of Purpose, a declaration issued by our Boardof Directors. The Statement of Purpose also recognizes
those stakeholders most critical to long-term value creationand sustainability.

Operational impact

Fundamentals

Reporting and performance05

About PMI’s Statement of Purpose
On March 24, 2022, PMI published its 2022 Proxy
Statement, which contained a Letter from the Boardof Directors that corresponds to PMI’s Statement of
Purpose. The groundwork for the Statement of Purpose
was laid in the 2017 Proxy Statement in a letter toshareholders from the Board of Directors announcing
for the first time our company’s smoke-free vision.
It was reaffirmed in the 2020 Proxy Statement.

Excerpts from PMI’s Statement of Purpose:“In 2016, with the full support of the Board of Directors,
PMI announced its new purpose of delivering a smokefree future. Since then, PMI has fully aligned its
employees with this purpose and swiftly shifted its
organizational focus and resources to smoke-freealternatives. PMI is essentially disrupting its traditional
business from the inside out and is leading the industry
in this unprecedented transformation.”“PMI remains committed to accelerating the end of
smoking and laying the foundations of a strong businessin areas of wellness and healthcare as we strive todevelop commercially successful products that have a
net positive impact on society.”O P E R AT I O N A L I M P A C T

41.8%

Governance

PMI’s Statement of Purpose

P RO D U C T I M PAC T

Estimated number of users of PMI
smoke-free products, including 28.6 m
IQOS users (2022: 24.9 m IQOS users)1

Strategy

André Calantzopoulos
Executive Chairman“PMI’s key stakeholder constituencies, which are
fundamental to both the achieving of its purpose and to
the pace of its progress, will be affected in different waysby PMI’s transformation.”“To make its progress both measurable and verifiable,
PMI developed a set of bespoke key performanceindicators called Business Transformation Metrics. Thisset of metrics allow stakeholders to assess both the pace
and the scale of its transformation and showcase how it
is allocating resources away from its traditional cigarettebusiness, aiming to base success on a future where it nolonger makes or sells cigarettes.”aRead PMI’s full Statement of Purpose

Message from PMI’s Executive Chairman“PMI’s purpose is driven by its commitment to transform for good, which guides
its long-term strategy and resource allocation. By being clear and consistent
about our purpose, we have successfully adapted to the changing needs andpreferences of our consumers and stakeholders. Understanding sustainability
as an opportunity for innovation and growth has allowed us to create productsthat are actively accelerating the decline of cigarette smoking, beyond what
traditional tobacco control measures can achieve alone. But to phase out
cigarettes completely, this is not enough: policy and regulation can complete
this change or perpetuate the status quo. A smoke-free future is attainable,
and the benefits it can bring to the people who would otherwise continue tosmoke, and hence to global public health, are enormous. However, PMI will not
succeed on its own. We can maximize this opportunity by achieving a consensus
that smoke-free alternatives, when subject to proper government oversight andregulation, are part of a sound tobacco policy. We stand ready to engage withany country that wishes to regulate in the interest of public health, banningcigarettes and allowing adult smokers to access better, less harmful alternatives.”

06

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

07

Message from our Chief Executive Officer
2023 allowed us to reflect on the strides we havemade. It was a year marked by unity, determination,
and a continued commitment to our vision of asmoke-free future—evident in every endeavor weundertook and each challenge we transformed into
an opportunity for growth.
Our persistent dedication to accelerating the end of smoking
resulted in a 27.9 percent cumulative decline in the shipment
volume of combustible tobacco products (versus 2015, before
we began our company’s transformation).
Through consistent strategic investment in our business
transformation—four consecutive years of 99 percent of
our R&D and approximately 74 percent of commercial
expenditure dedicated to smoke-free products—we haveseen smoke-free products grow to represent 36.4 percent
of our adjusted net revenues. Present in 84 markets, ofwhich 39 are low- and middle-income, and empowered byapproximately 33 million users of our smoke-free products,
including 20.8 million adults who have switched to IQOS
and successfully stopped smoking, our smoke-free products
continue to prove the most powerful opportunity to makecigarettes obsolete.
Importantly, we continued to deploy responsiblecommercialization practices guarding against the use of
our products by unintended audiences such as underage.
In particular, during 2023 we continued strengthening
governance for youth access prevention activities in our
indirect retail programs.
In preparation for the launch of IQOS in the U.S., in 2023
we submitted to the U.S. Food and Drug Administration(FDA) Premarket Tobacco Product Applications (PMTAs) and
Modified Risk Tobacco Product Applications (MRTPAs) for
IQOS ILUMA. In addition to strengthening our intellectual
capital, we also devoted the year to building robust social andhuman capital in the region. Our efforts emphasized nurturing
a workforce capable of delivering our innovative productswith the excellence our consumers expect of us. This reportmentions some of the challenges and opportunities ahead in
the section “Foster an empowered and inclusive workforce.”
The acquisition of Swedish Match positions us well to seize
the substantial smoke-free opportunity in the U.S., which
we approach with the rigor and innovative spirit that havebecome the hallmarks of our company. By joining forces with
Swedish Match, we expect to accelerate the achievement of
our joint smoke-free ambitions, switching more adults who
would otherwise continue to smoke to better alternatives
faster than either company could achieve separately. Ourjourney toward integrating Swedish Match into PMI includes,of course, integrating it into our sustainability strategy.
Philip Morris International Integrated Report 2023

I am pleased to see it has commenced with fervor. In 2023,
we completed a combined carbon footprint analysis, whichallows us to know and report accurately on PMI’s scope 1+2+3
emissions, inclusive of Swedish Match.

As we continue to lead an industry transformation and to
expand our electronics supply chain, building an ecosystem tomaximize the circularity of our devices remains a big challenge
to overcome.

While Swedish Match’s sustainability performance is not
yet fully integrated into the remainder of the report, ourtransparent approach maintains that we will diligently update
and incorporate relevant nonfinancial data as our integration
processes mature over the coming years, and will be ready torespond to regulatory reporting requirements.

Two years ago, eager to expand our company’s purposeand evolve into a broader lifestyle, consumer wellness, andhealthcare business, we announced the extension of ourvalue proposition and innovative capability to commercialize
products that go beyond tobacco and nicotine. While thereaction of some vocal individuals and organizations in theexternal environment has delayed our ability to fully harness
the potential of the assets and capabilities we have built over
our transformation journey, we remain convinced that thisbusiness can provide a very sizable, yet long-term, potential.

Our journey toward addressing the impacts of both our
products and operations continued to gain momentum
in 2023. We strengthened our product stewardship withcomprehensive retail safeguards and take-back initiatives—
crucial efforts improving circularity of our electronics byextending the life of approximately 320,000 smoke-freedevices. This success is a testament to our leadership inadvancing circular economy practices within the industry as
we pave the way toward our ambitious 2025 objective toembed eco-design and circularity principles in all our smokefree electronic devices. We also published our first Human
Rights Report and completed our eighth human rights impact
assessment since 2018, on track to achieving 10 by 2025. This
most recent assessment applied a gender lens to our humanrights impact, focusing on risks specific to women’s rights.
Despite this progress, we continue to face challenges—
driven mostly by our inability to fully control outcomes, andimportantly, impacts of our programs. For example, ensuring
a sustainable supply chain is not an easy task, especially whenit comes to environmental and social issues. As a result, manyof the challenges we face are not unique to our company, butrather pervasive in all multinational companies with complex
and diverse supply chains. Part of this is driven by the lack ofvisibility and transparency that currently exists on some of
our lower-tier suppliers, who operate in different countries
and regions with varying regulations and standards related
to greenhouse gas (GHG) emissions or human rights, forexample.
In addition to that, pursuing sustainability goals may
require trade-offs between economic, environmental, andsocial objectives, such as balancing efficiency, quality, andinnovation with environmental protection, human rights, andsocial justice. It also entails additional costs for monitoring,auditing, training, and improving supplier performance. Last
but not least, we continue to face challenges related tocoordination and collaboration: achieving a sustainable supply
chain requires us to work with various stakeholders, suchas suppliers, customers, competitors, industry associations,
governments, NGOs, and international organizations.

We remain eager and fully committed to making cigarettes
obsolete. Our progress could be even bolder if we were notconfronted in some geographies with some governments
refusing to develop policy and regulate in the interest of
public health, rejecting harm reduction principles and thereby
depriving millions of smokers from access to smoke-free
products and information about their benefits comparedwith continued smoking. These policies can result in severely
slowing down the decline of smoking prevalence: there isoverwhelming evidence that regulatory acceptance andthe creation of an environment in which adult smokers canlearn about smoke-free products can lead to significant
acceleration of the decline in smoking. Moreover, therigorous implementation of responsible practices acrossour value chain–from product design, development, andcommercialization–limits to a great extent any access and useof tobacco- and nicotine-containing products by unintended
audiences.
Our business imperative is clear: We are dedicated tomaximizing the benefits and capitalizing on our smoke-free
product growth and are proactive seeking opportunities
that can drive positive change.
As we encounter new challenges, our people’s enduringresilience and their exceptional talent and depth of purpose
ensure we are well-equipped to emerge stronger and more
adaptive. I ask that you consider this Integrated Report
2023 an open invitation for you to observe our ongoingtransformation and partake in the dialogue that will shape thecourse of our future. Together, let us continue this journey—
pursuing progress, embracing innovation, and fostering
sustainability—as we transform for good and advance evercloser to a smoke-free future.

Jacek Olczak
Chief Executive Officer

08

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

Our global footprint

73,704
Employees worldwide

1

~33 m

84

Estimated number of usersof PMI smoke-free products,
including 28.6 m IQOS users2

Contracted farmers supplying
us with tobacco, locatedin 23 countries5

50

Markets where PMI smoke-free
products are available for sale3

306,000 32

Our product portfolio

PMI-owned
manufacturing facilities 4

Smoke-free products

38

Third-party
manufacturers

Smoke-free products

36.4%

Third-party operators(in Indonesia)

1 Incorporating Vectura Fertin Pharma, as well as the 2022 acquisition of Swedish Match, PMI employed approximately 82,700 people worldwide at year-end 2023.
2 Figures are based on IQOS user panels and PMI Market Research. Estimated user numbers for oral nicotine and e-vapor are approximate, with further methodology
details to be provided in future disclosures. See Glossary.
3 For definition of available for sale, see Glossary.
4 Data reflects the number of factories operated and owned by PMI at the end of the respective year.
5 Figure pertains to tobacco farmers whose tobacco is included in PMI packed products.

2023 overview by PMI segment

Proportion of PMI’s total adjusted net
revenues generated by each segment
Proportion of adjusted net revenues derived
from smoke-free products in each segment
Proportion of global workforce by segment
Number of PMI-owned manufacturing
facilities in each segment

Europe

SSEA, CIS,
and MEA

EA,
Australia,
and PMI
DF

38%

30%

18%

6%

1%

7%

41%

12%

57%

4%

100%

83%

30%

44%

5%

10%

2%

9%

13

13

2

7

1

14

AmericasWellness &Healthcare

SwedishMatchNotes:
Figures in the above table are rounded.
For definition of net revenues derived from smoke-free products, see Glossary.
As of December 31, 2023, we managed our business in four geographical segments, a Swedish Match segment, and a Wellness and Healthcare segment (which includes the operating resultsof our new Wellness and Healthcare business, Vectura Fertin Pharma). See Glossary. Following the combination and the progress made in 2023 toward the integration of the Swedish Matchbusiness into the existing PMI regional segment structure, we changed our segment reporting by including Swedish Match results in the four existing geographical segments on February 27,
2024. For more information, please access the corresponding 8-K as filed with the SEC on February 27, 2024 here.

Consistent with our vision to make PMI a truly global leader in the smoke-free category, on October 20, 2022, PMI
announced that it had reached an agreement with Altria Group, Inc., to end the companies’ commercial relationship covering
IQOS in the U.S.—the world’s largest smoke-free market—as of April 30, 2024. Under this agreement, effective May 1, 2024,
PMI will hold the full rights to commercialize IQOS in the U.S. The acquisition, completed in December 2022, and the related
ongoing integration of Swedish Match, is laying the foundation for our smoke-free deployment into the U.S. Our intent is toprovide better alternatives to the estimated over 28 million Americans who currently smoke cigarettes.1 We do not have any
intention of selling cigarettes in the U.S.
1 Source: Centers for Disease Control and Prevention, Data and Statistics, Smoking and Cigarettes.

Philip Morris International Integrated Report 2023

PMI’s adjusted
net revenues in20231

Our smoke-free product portfolio is composed of multiple
categories that do not require combustion to be consumed,
including heat-not-burn, e-vapor, and oral products (suchas snus and nicotine pouches).2 Our two leading smokefree products are commercialized under the IQOS andZYN brands. IQOS is a heat-not-burn product that uses
electronics to heat tobacco or a non-tobacco substrate
in a controlled manner to generate an aerosol. ZYN isan oral nicotine pouch product that does not contain
tobacco. Our e-vapor products, VEEV ONE and VEEVNOW, generate an aerosol by heating a nicotine-containing
e-liquid formulation. We are also present in other oral
tobacco product categories, including snus and moist
snuff categories.

Combustible tobacco products

Combustible tobacco products

63.6%

We seek to maintain our competitive position in thecigarette market while we transition away from combustible
tobacco products.3 This provides us with better accessto trade partners and adult smokers, which enhances ourability to switch adults who would otherwise continue
smoking to smoke-free alternatives. Remaining competitivein the cigarette market also helps us finance the necessary
R&D, manufacturing, and commercialization investments forour smoke-free portfolio. Moreover, it paves the way for the
rest of the industry to follow our lead. Our cigarette brands
are sold in approximately 175 markets, in many of which
they hold the number one or number two market shareposition. Our portfolio includes a wide range of premium,mid-price, and lower-price brands, including Marlboro, L&M,
Chesterfield, Philip Morris, and Parliament.

1 For definition of net revenues related to smoke-free products, see Glossary. 2023 figure includes Swedish Match.
2 Smoke-free products is the term we primarily use to refer to all our products that are not combustible tobacco products. See Glossary for details.
3 Following the acquisition of Swedish Match, we now also have a presence in the cigar category.

09

10

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

11

Message from our Chief Financial Officer
As the CFO of our company, I am compelled toshare not just a financial narrative, but one thatweaves together the myriad nonfinancial factorsthat are also important to our enduring success.
Strategic foresight unites our nonfinancial aspirations withfinancial outcomes. This is consistent with our purpose, which
increasingly resonates with our stakeholders and we believe
powerfully demonstrates the interplay between societal
impact and the generation of long-term shareholder returns.
Nearly eight years into our commitment to deliver a smokefree future, our company finds itself bridging two worlds:
remaining competitive in the legacy cigarette market whileleading the way in the development and commercialization ofsmoke-free products that promise a less harmful future for
adults who would otherwise continue to smoke.
Our goal is to make cigarettes obsolete by effecting systemlevel change. Significant advances in our sustainability
agenda have fortified this resolve. At PMI, sustainability is
not just a part of our corporate strategy; it is at the core ofour business transformation. Notably, our efforts contributeto mitigating climate change, protecting nature, andfostering inclusive growth that benefits our workforce andour supply chain. These endeavors are parallel to our smokefree objectives—both demand transformative solutions thattranscend individual actions.
Transformation is an arduous, continual process. In 2023, we
continued to navigate the complexities of global markets andregulation. We operate in a resilient legacy cigarette businesswhile simultaneously building an entirely novel and improved
category of products. Having invested approximately USD
12.5 billion in scientifically researching, developing, andcommercializing smoke-free products since 2008—which
accounted for nearly 40 percent of our total net revenues
in the last quarter of 2023—we are living the future weenvisioned nearly a decade ago when we set out our smokefree vision.

Philip Morris International Integrated Report 2023

Our commitment to transformation is unwavering, but wehave been clear from the start that we cannot accomplish
it alone. Collaboration and a multistakeholder approachare vital to realizing the change we seek. In a world thatdemands change, it is imperative that governments stay
on top of technological and scientific developments,
while ensuring that innovative products are appropriately
regulated.
Pressing environmental and social concerns, including thoserelated to human rights, climate change, product healthimpacts, youth access prevention, and circularity, also steered
our course in 2023. Addressing these issues well is not merely
a corporate ethos but a business imperative that directly
correlates with risk mitigation and long-term value creationfor our stakeholders and society. This path aligns with investor
interests that are increasingly geared toward companies that
demonstrate environmental and social stewardship. Further,it directly contributes to our competitive advantage andmarket positioning. Our shift in executive remuneration,with the PMI Sustainability Index now dictating 30 percent
of executive Performance Share Unit (PSU) long-termcompensation, marked a groundbreaking step in further
integrating nonfinancial and financial performance. In 2023,
we introduced our second iteration of the Sustainability Index,
which will serve the 2023–25 PSU cycle.
Our financial returns are supported by our sustainability
performance, acknowledged by key ESG ratings, which aim
to attract investments that can fuel our business. In 2023,
our leadership in this area was recognized by our inclusion in
the Dow Jones Sustainability World Index and top ranking
in the tobacco sector for the first time. Furthermore, we
maintained our position in the Dow Jones Sustainability North
America Composite Index for the fourth consecutive year.
Inclusion in these indices validates our long-term economic,
environmental, and social sustainability efforts and positions
PMI among the top 10 percent of the largest 2,500 companies
in the S&P Global Broad Market Index.

Moreover, we are proud to have attained “Prime” statusaccording to the ISS ESG rating methodology. PMI is the
only company in the tobacco industry to have received thisprestigious qualification. We also obtained a Triple A scorefrom CDP for the fourth consecutive year, underscoring ourcommitment to environmental performance and transparency.
Our transparent and robust reporting practices wereacknowledged by the annual WBCSD Reporting Matterspublication, which has recognized PMI as a top performer for
three consecutive years.
While we celebrate these achievements, it is importantto acknowledge the long road ahead and that addressing
our most material issue—phasing out the world ofcigarettes—remains our top priority and the core of ourstrategy. Success requires us to be dynamic in our corebusiness while seeking out new territories for innovationand growth. Each step we take is aimed at nurturing thetrust and confidence of those we serve, fully aware of themagnitude of our undertaking.
We will continue to report on our progress transparently
and pursue milestones that reflect our ambitions. As we
present this 2023 Integrated Report, let this commitment
be clear: delivering a smoke-free future and excelling in oursustainability aspirations are not just ethically sound decisions;they are the bedrock of our strategy and the key to our sharedsuccess. We invite you to explore this report to gain further
insights into our aspirations, challenges, achievements, andongoing efforts to transform our business, for good.

Emmanuel Babeau
Chief Financial Officer

12

Overview

Operating context
Market trends
Overview of the global nicotine business
Products within the global tobacco and nicotine business fall
into three main categories: combustible tobacco products,
smoke-free products, and therapeutic cigarette replacements(often known as nicotine replacement therapies or NRTs).
Combustible tobacco products (e.g., cigarettes, fine-cut
tobacco, pipe tobacco, cigars, and cigarillos) burn tobacco todeliver nicotine.

Smoke-free products deliver nicotine without combustion.
The category includes inhalable products (including
heat-not-burn and e-vapor products) and oral products(such as snus or nicotine pouches). By eliminating
combustion, these products present, are likely to present,or have the potential to present less risk of harm toadults who switch to them versus continued smoking.
Therapeutic cigarette replacements, which include
nicotine gum and patches, among other forms, aim
to help smokers quit smoking. These products deliver
nicotine and require a pharmaceutical approval
process to be followed; in some countries, their use
requires prescriptions from medical professionals.

Oral products

TOBACCOCONTAINING

Heat-not-burnproducts

NON-TOBACCOCONTAINING

Heat-not-burnproducts

E-vaporproducts

Governance

Product impact

TOBACCOCONTAINING

NON-TOBACCOCONTAINING

Snus andmoist snuff

Nicotinepouches

E-vapor products
are battery-powered
devices, commonly
known as e-cigarettes,
that vaporize a liquid
solution containing
nicotine and flavors
to create an inhalable
aerosol. While
traditional e-vapor
products come withrechargeable batteries
and replaceable orrefillable cartridges,
disposable e-vapor
products are singleuse devices that comeprefilled with e-liquid.

Snuff consists offinely ground tobacco.
Snus contains moist
powdered tobaccothat is wrapped in acellulose pouch.
Moist snuff and snus
products are placed
between the gum andthe cheek or upper
lip, with nicotine
absorbed into thebloodstream mainly via
the mucous membranes
in the mouth.

Nicotine pouches
contain nicotine,
together with water,
flavorings, and plantbased fibers. The
nicotine in the pouches
is extracted into thesaliva and is absorbed
mainly via the mucous
membranes in themouth before entering
the bloodstream.

Note: The visual above depicts the main smoke-free products available on the market. It is not representative of PMI specific products, nor aimed at providing an extensive
illustration of all smoke-free products available on the market. For an overview of PMI smoke-free product characteristics, please visit PMIscience.com.

Philip Morris International Integrated Report 2023

Fundamentals

13

Reporting and performance

Competition

Combustible tobacco products currently represent thelargest share of the global tobacco and nicotine business, withcigarettes remaining the dominant tobacco product used by
nicotine consumers worldwide.

As in other consumer goods sectors, manufacturers in
the tobacco and nicotine industry compete primarily on
product quality, brand recognition, brand loyalty, taste,
R&D, innovation, packaging, customer service, marketing,advertising, retail price, and, increasingly, adult smoker
willingness to convert to their brands of smoke-free products.

Even with the decline in smoking prevalence, efforts to curb
the habit of smoking have been outstripped by population
growth.1 Reports show that in 2022 an estimated 1 billion
people worldwide continued to smoke.2
While the World Health Organization’s (WHO) reports nolonger offer projections related to smoking prevalence, itestimates that the total number of tobacco users by 2030 will
be approximately 1.2 billion.2

Global shares of market 2023, including cigarettes
and heated tobacco units
2023

China National Tobacco Corporation~33.1%

Philip Morris International

14.1%

British American Tobacco~11.1%

Japan Tobacco~10.3%

Imperial Brands~3.8%

Emergence of smoke-free alternatives

Altria Group~1.5%

In recent years, the development, commercialization, andsubsequent adoption of various smoke-free products have led
to rapid category growth. Within the nicotine industry, smokefree products have begun to replace combustible tobacco
products.

Other~26.1%We believe that, with the right policies and regulation, by
2030 less harmful alternatives can represent a larger shareof the 1.2 billion—and thus contribute to further decreasesmoking prevalence.

In particular, the heat-not-burn segment volume grew in theinternational market (which excludes China and the U.S.) at
a compound annual growth rate (CAGR) of 20 percent overthe past three years, driven both by increased adoption in theinitial launch markets and geographic expansion. This is thelargest smoke-free category by both retail value and volume in
the international market.
Overall, we expect the smoke-free segment volume to growby 10 to 15 percent between 2024 and 2026.

Heat-not-burn products, also known as heated
tobacco products, electrically heat tobacco ora nicotine substrate, using either inductive or
resistive heating, just enough to release a nicotinecontaining aerosol without burning. They areused with heated tobacco units designed forheating that contain a tobacco plug (made fromtobacco leaves that are ground and reconstituted
into tobacco sheets that are then crimped) or a
non-tobacco substrate infused with nicotine.

Operational impact

Prevalence of tobacco smoking worldwide

1 The Lancet, The Global Burden of Tobacco, 27 May 2021.
2 WHO Global Report on Trends in Prevalence of Tobacco Use 2000-2030, 16 January 2024.

Overview of main smoke-free products available on the market

Inhaled products

Strategy

Note: Global market includes China and the U.S.
Source: PMI financials or estimates.

Smoke-free products
There is increasing competition in smoke-free products. withmore tobacco manufacturers shifting their resources toward
developing, acquiring, and commercializing these products.
Despite advances in science and technology that present
the opportunity to phase out combustible tobacco products,
the business strategy of most international cigarettemanufacturers appears to be focused on continuing to growcigarette sales while expanding their portfolios to also include
smoke-free alternatives.
In 2016, we were the first company to announce its smokefree vision and committment to phasing out cigarettes,
encouraging adults who would otherwise continue to smoke
to switch completely to better alternatives. Importantly,
we established Business Transformation Metrics to reportprogress on our transformation in a transparent manner.
We remain optimistic that the growing interest in thesmoke-free category can allow us to continue advancing ourtransformation and also lead the industry to adopt a similar
strategy, thereby accelerating the end of smoking.

14

Overview

Combustible cigarettes
The global combustible cigarette sector includes four large
international manufacturers—British American Tobacco,
Imperial Brands, Japan Tobacco, and PMI—along with two
major manufacturers focused primarily on their respective
domestic markets: China National Tobacco Corporation in
China and Altria Group, Inc. in the U.S. (Altria is the parent
company of Philip Morris USA, which operates exclusively in
the U.S. and is not affiliated with Philip Morris International).

Our perspective
At PMI, we base our success on a future in which we nolonger make or sell cigarettes, the most harmful form of
nicotine consumption. In stark contrast to those of ourcompetitors, PMI’s value proposition is not to expand its
portfolio of both combustible and smoke-free products tooffer more choice to consumers. Rather, our goal is to leadan industry-wide transformation wherein cigarettes arephased out completely.
Our strategy is centered on researching and developing
better products than cigarettes, promoting broad accessto them among adults who would otherwise continue
to smoke, and working to ensure these products replacecigarettes and make smoking obsolete as soon as possible.
To achieve this, we are actively shifting and reallocating
resources, setting ambitious goals connected to thisstrategy, and transparently reporting on our progress.
We are aspiring for less than one-third of our total net
revenues to derive from combustible tobacco productsales by 2030. As of year-end 2023, PMI smoke-free
products represented 36.4 percent of our annual adjusted
net revenues and 18.6 percent of our total shipment
volume.

PMI total international share of market (in %)
2023

2022

2021

Cigarettes

23.7%

23.6%

23.7%

Heated tobacco units

4.7%

4.1%

3.5%

Total

28.3%

27.7%

27.2%

Source: PMI financials or estimates.
Note: International market excludes China and the U.S., reflects cigarettes and HTUs, andincludes cigarillos in Japan. Sum of share of market by product categories might not foot tototal due to rounding.

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

15

Regulation and taxation

Illicit trade prevention

Stakeholder engagement

The harms associated with smoking have led policymakers,
legislators, and regulators to impose rigorous restrictions on
the manufacturing, marketing, and consumption of cigarettes,
including high excise taxes, minimum age requirements,
and designated smoking areas. Additional restrictions andmandates apply to packaging design and health warnings,
ingredients and flavors, marketing, advertising, promotion, andother forms of sponsorship.

The increasingly interconnected and digitalized global
economy provides more opportunities to criminal networks
engaged in illicit activities such as the sale of counterfeit
products, wildlife smuggling, narcotics, human trafficking, andexcise fraud.

PMI regards stakeholder engagement as fundamental to thecreation of shared and sustainable value. Actively seeking
open dialogue with our stakeholders allows us to understandtheir expectations and respond appropriately. Continuous
engagement also enables us to build a shared understandingof contingency issues, proactively respond to concerns,
identify potential areas of compromise, stay abreast of global
trends and market expectations, address misinformation, andfind solutions that are good for our stakeholders and business.

Much of the regulation that shapes the tobacco industry’s
operating environment is influenced by the WHO’s
Framework Convention on Tobacco Control (FCTC).
The FCTC has established a global agenda to reduce theprevalence of tobacco use and nonsmokers’ exposure totobacco smoke.
While there is currently no global consensus on how best to
regulate or tax smoke-free products, a growing number ofauthorities recognize that the risk profile of these products
differs from cigarettes and should be regulated differently topromote their adoption as a better alternative for those adults
who would otherwise continue to smoke.
Our perspective
PMI supports a comprehensive approach to the regulationof all tobacco- and nicotine-containing products. In
addition to discouraging initiation and promoting cessation,commonsense regulation should encourage adults who
smoke and would not otherwise quit to switch completely
to scientifically substantiated smoke-free alternatives, which
can be a better choice than continued smoking.
We advocate for a comprehensive and risk-proportionate
regulatory and fiscal framework that recognizes that not all
tobacco- and nicotine-containing products are the same.
Regulation and taxation should subject the most harmful
products to the most restrictive measures while encouraging
those adults who would otherwise continue to smoke toswitch to the less harmful alternatives now available.
At the same time, increasing the acceptability of smokefree products for adult smokers must be balanced against
the objective of minimizing use by unintended audiences,in particular youth. Any regulation needs to account forthis. Therefore, we support putting in place safeguards
against unintended use and robust post-market
monitoring of real-world data to assess the actual impact
of policy interventions, and to allow targeted and timely
policy adjustments. Such an approach would significantly
accelerate the phasing out of combustible tobacco
products and promote public health.
As innovation in this space is ever increasing, the risk fornoncompliant products entering the market also increases,
so additional focus should be placed by authorities toensure enforcement of laws and regulations.

Philip Morris International Integrated Report 2023

Strategy

The illicit tobacco trade provides a cheap and unregulated
supply of tobacco products. It undermines public healthpolicies across the world, hampers efforts to reducesmoking prevalence, damages legitimate businesses,
stimulates organized crime, increases corruption, andreduces government tax revenue. We generally estimate
that, excluding China and the U.S., illicit trade may accountfor as much as approximately 15 percent of global cigarette
consumption; this includes counterfeit, contraband, and thepersistent problem of “illicit whites,” which are cigarettes
legally purchased in one jurisdiction for the sole purpose ofbeing exported and illegally sold in another jurisdiction where
they have no legitimate market.1
Many countries have initiated or are considering actions toprevent the illicit trade of tobacco products. In 2012, the
FCTC adopted the Protocol to Eliminate Illicit Trade in Tobacco
Products, which includes supply chain control measures, suchas the implementation of tracking and tracing technologies andeffective controls on manufacturing and transactions in tobaccoand tobacco products in Free Zones (i.e., special economic areasthat benefit from tax and duty exemptions). The protocol cameinto force in September 2018, and parties to it have started
implementing its measures via national legislation.
Our perspective
To prevent the smuggling and counterfeiting of our
products, we focus on securing our supply chain
with advanced track and tracing technologies and onleveraging state-of-the-art security feature technology
and innovation to protect our products. These
internal efforts are coupled with strong cross-sectoralcollaboration. Illicit trade is a high-profit, low-risk crimethat needs to be tackled by public–private coalitions able
and willing to drive change.
At PMI, we collaborate with law enforcement and othergovernment authorities worldwide to counter illicit trade.
To this end, we invest in global programs and promote theimplementation and enforcement of effective regulations,such as the WHO’s FCTC Protocol to Eliminate Illicit Tradein Tobacco Products. Public–private partnerships andimpactful regulatory frameworks are fundamental
to progress.
Read more about our approachand actions on PMI.com

1 U.S. Department of State, The Global Illicit Trade in Tobacco: A
Threat to National Security, 2015.

Our stakeholder engagement incorporates both structured
and ad hoc interactions. Above all, it is guided by transparency,
integrity, and respect, and governed by our Code of Conduct
and its accompanying Policies, summarized in this overview ofour engagement principles.
Read more about our approach and engagement with key
stakeholder groups, as well as our sustainability-related
memberships and alliances, on PMI.com.

Megatrends
We operate on a global scale in a fast-paced world. Our longterm success requires that we monitor, anticipate, and respondto the challenges and opportunities shaping our reality today
and in the future.
Global trends intersect with our strategies and initiatives
and inform how we interact with the external environment.
Several trends existed before COVID-19, including
political conflict and war (and their far-reaching impacts),
but have been amplified and accelerated by the global
pandemic, which disrupted supply chains and business
operations and heightened the impact of certain trends.
Read more about our identified megatrends on PMI.com.

16

Overview

Strategy
Value creation

p18

Transforming for good

p20

Message from our Chief Sustainability Officer

p22

Business Transformation Metrics

p24

Anchoring sustainability at the core of our strategy

p26

Our 2025 Roadmap

p28

Philip Morris International Integrated Report 2023

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

17

18

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

19

Value creation
Resources and relationships

Human
Our success depends on developing the skills, knowledge, and experience of our
73,704 employees worldwide, of whom 43 percent are women.1 Our employees
represent 139 nationalities.

Intellectual
Innovation underpins our business transformation. In 2023, we invested USD
709 million in R&D, of which 99 percent continues to be dedicated to smokefree products. Innovation also guides process improvements, from sourcing to
manufacturing, logistics, and sales. Our acquisition of leading innovative companies
to advance our nascent wellness and healthcare business has enriched our R&D withaccess to valuable patents and expertise.

Natural
In 2023, we sourced around 308,000 tons of packed tobacco, a material integral to
our products. Other raw materials and natural resources used in our business include
paper and pulp-based products, metals, water, and energy. We seek to source thesematerials sustainably and use them efficiently.

Key activities

Our mission
Accelerate the end of cigarettes byoffering adults who would otherwise
continue to smoke scientifically
substantiated better alternatives
and evolve in the longer term
into a broader lifestyle, consumer
wellness and healthcare company.

Our value chaintransformation
To achieve this mission, all segmentsof our value chain—including sourcing,
operations, commercialization, andconsumers and revenues—are undergoing
rapid transformation. Learn more byviewing our expanded value chaintransformation infographic on PMI.com.

Manufactured
Our facilities—such as our R&D centers, 50 factories,2 38 consumer call centers, and
286 IQOS stores3—and nearly 21,500 vehicles allow us to develop, manufacture,deliver, and commercialize a multi-category smoke-free product portfolio to meet thedemands of our consumers.

SOURCING

SocialBuilding stakeholder trust is essential. In addition to our shareholders, we develop andsustain relationships with a network of over 26,000 suppliers,4 306,000 contracted
farmers from whom we source tobacco, around 130 million consumers of ourcigarette brands, and approximately 33 million users of our smoke-free products(including approximately 28.6 million IQOS users),5 our leading smoke-free product.
Our relationships also extend to the retailers of our products, the communities inwhich we operate, regulators and other government officials, nongovernmentalorganizations (NGOs), and the multistakeholder initiatives in which we participate.

OPERATIONSCOMMERCIALIZATION

Financial
Our business activities require financial capital, which we strive to allocate efficiently
to optimize value and drive sustainable growth. This capital is provided by our equity
and debt holders, as well as by the cash flow generated by our operations. Our
company’s market capitalization as of December 31, 2023, was approximately USD
146 billion, and PMI’s net debt was USD 44.9 billion. At that time, PMI’s long-term
credit was rated A2 by Moody’s, A- by Standard & Poor’s and A by Fitch.

Philip Morris International Integrated Report 2023

CONSUMERS & REVENUES

Value created in 2023
Human
• Expanded lifelong learning program to 77 percent
of PMI employees across the organization• Heightened employees’ sense of belonging and ability toconnect with colleagues based on shared characteristics orlife experiences by facilitating employee resource groups
in partnership with external subject matter experts

Intellectual• Reached around 3,720 patents that relate to smoke-free products
granted in IP5 jurisdictions• Published 532 scientific publications since 2008 to share ourmethods and findings• Completed 287 toxicological assessment studies, 29 clinicalassessment studies, and 69 perception and behavior studies on
smoke-free products since 2015
• Invested a cumulative USD 12.5 billion to develop, scientifically
substantiate, and commercialize smoke-free products since 20086

Natural• Reduced total value chain absolute CO2e emissions (scope
1+2+3) by 13 percent7 and absolute CO2e emissions fromdirect operations (scope 1+2) by 36 percent versus 20197• Purchased 94 percent of tobacco at no risk of deforestationof managed natural forest and no conversion of natural
ecosystems, and maintained 100 percent of tobacco purchased
at no risk of deforestation of primary and protected forests• Covered 76 percent of shipment volume by markets with
anti-littering programs in place for combustible cigarettes• Covered 17.6 percent of shipment volume by markets with endof-life take-back programs in place for smoke-free consumables8• Optimized 8.1 million cubic meters of water in
our tobacco supply chain since 2019
• Achieved 89 percent recycling rate of IQOS devices in
the context of our CIRCLE program (weighted-average
percentage of each device that is recycled)9• Refreshed or repaired a cumulative number of 320,000
smoke-free electronic devices since 2021
• Virtually zero waste to landfill achieved in 99.9 percent of ourmanufacturing operations
Note: Presentation of information in this visual is informed by the Integrated Reporting
Framework of the IFRS Foundation.
1 Incorporating Vectura Fertin Pharma, as well as the 2022 acquisition of Swedish Match, PMI
employed approximately 82,700 people worldwide at year-end 2023.
2 Data reflects the number of factories operated and owned by PMI, including the factories in our
Swedish Match and Vectura Fertin Pharma businesses, at the end of the respective year.
3 Excluding Russia, including only boutique stores.
4 Suppliers refer to tier 1 suppliers: for definitions, see Glossary.
5 Figures are based on IQOS user panels and PMI Market Research. Estimated user numbers for oral
nicotine and e-vapor are approximate, with further methodology details to be provided in future
disclosures. See Glossary.
6 Investments reflect research, product and commercial development, production capacity, scientificsubstantiation, and studies on adult smoker understanding. Figures do not include Swedish Match and
Vectura Fertin Pharma.
7 Including Swedish Match.
8 Shipment volume includes heated tobacco units, e-vapor cartridges, and e-vapor disposables.
See PMI’s Sustainability KPI Protocol 2023 for further details.

Manufactured• Expanded our portfolio to commercialize 13 smoke-free (heat-notburn and e-vapor) devices and 86 taste variants for PMI heated
tobacco units to meet the needs and preferences of adult smokers• Extended the number of markets in which PMI smokefree products are available for sale to 84, of which
39 are in low and middle-income markets10

Social• Reached approximately 33 million users of our smoke-free products,
including approximately 28.6 million IQOS users, of whom anestimated 20.8 million have switched to IQOS and stopped smoking11• Maintained high proportion of shipment volume—98 percent—covered by youth access prevention programs in our indirect retailchannels12• Continued to monitor and reduce prevalence of child labor among
contracted farmers supplying tobacco to PMI, achieving 0.1 percent
in 2023, and resolving 97 percent of identified cases• Fostered a living income among contracted farmers supplying
tobacco to PMI (achieving 96 percent) and a minimum wage
for tobacco farmworkers (achieving 99.8 percent)• Completed eight human rights impact assessments since 2018,as well as ongoing monitoring and implementation of action plans• Representation of women in management positions increased to41.8 percent (up from 40.7 percent in 2022) and our employee
inclusion Net Promoter Score (iNPS) increased to 62 versus 56
in 2022

Financial• Derived 36.4 percent of our annual adjusted net
revenues from smoke-free products out of total
adjusted net revenues of USD 35.3 billion13• Achieved an 18.6 percent smoke-free product shipment ratio14• Reported USD 2.3 billion in corporate income taxes• USD 74 billion in excise tax paid on PMI products• Increased annualized dividend rate to USD 5.20 per
share; 16 consecutive years with a dividend increasesince becoming a public company in 2008

9 Recycling rate: percentage of the weight of each device that is recycled, weighted-average depending
on device type and processing facility. Reporting in 2023 includes CIRCLE hubs (Hungary and Japan)
and validated local recycling vendors that started recycling activities, namely South Korea and Egypt.
Including recycling (89%) and incineration with energy recovery (4%).
10 Excluding PMI Duty Free. World Bank report issued in 2023 is used on a comparative basis for income
level classification. For definition of low- and middle-income markets, see Glossary.
11 Figures are based on IQOS user panels and PMI Market Research. Estimated user numbers for oral
nicotine and e-vapor are approximate, with further methodology details to be provided in future
disclosures. See Glossary.
12 See PMI’s Sustainability KPI Protocol 2023 for further details.
13 For definition of net revenues related to smoke-free products, see Glossary. Data excludes the impact
related to termination of distribution arrangement in the Middle East in 2023.
14 These indicators are calculated based on millions of units. For definition of smoke-free products
and combustible tobacco products, see Glossary. Smoke-free products shipment volume includes
volume of smoke-free products that can be converted into cigarette equivalent units, such asheat-not-burn, e-vapor, and oral nicotine. Total shipment volume includes the listed smoke-free
products as well as combustible tobacco products: cigarettes and other tobacco products expressed incigarette equivalent units. Data does not include wellness and healthcare products.

20

Overview

Strategy

Governance

Product impact

Operational impact

Reporting and performance

Fundamentals

Transforming for good
Our business transformation
We strive to become a company that has a net
positive impact on society.
This ambition starts with researching, developing, andcommercializing less harmful alternatives to cigarettes for
those adults who otherwise would continue to smoke,
ultimately allowing us to phase out cigarettes and become an
entirely smoke-free business. In the longer term, we intend to
consider avenues beyond smoke-free products and continue
to explore the potential expansion of our offerings to include
products that fill critical unmet needs within the wellness andhealthcare space.
To achieve our purpose, we are radically transforming ourbusiness. Our strategy is to responsibly transition from acigarette company into a world-leading smoke-free businesswhile simultaneously exploring adjacent avenues of growthin wellness and healthcare. Our North Star is to create a net
positive impact that benefits our company and employees,
shareholders, consumers, and society.
Transforming our company is not simply about substituting
one product with another. It requires changing our entire value
chain, as well as the way in which we engage with society.
This has required a holistic review and overhaul of our entire
business model and value proposition, which brings challenges
and opportunities to all aspects of our business.
Sustainability stands at the core of PMI’s transformation. It
spurs innovation, better positions the company for long-term
success, and helps to address specific challenges stemmingfrom our transition. Simultaneously managing the impactsof two value chains—the one we are moving away from (ourcigarette portfolio) and the one we are moving toward (oursmoke-free portfolio)—while also managing the impacts of thetransition itself makes our strategy even more complex.
In developing and implementing our sustainability strategy, wemust consider a range of trade-offs among different forms ofcapital (read more here).

Producttransformation

Internaltransformation

Externaltransformation

Innovating for
better products

A new organizationand value chain

Changing the way weengage with stakeholders

Our product lines are the most visible aspect of ourtransformation. Over the past decade and a half, wehave harnessed scientific and technological advances todevelop alternatives to cigarettes that are scientifically
substantiated to be a better choice for adult smokers
than continued smoking. To achieve a smoke-free future,
we work relentlessly to phase out cigarettes by replacing
them with these less harmful alternatives as quickly as
possible. We are increasing access for adult smokers by
improving and expanding our portfolio of smoke-free
products to meet their varying needs and preferences.

Since announcing our smoke-free vision, we have undergone
a meaningful reorganization, which unfolds as we progress on
our transformation journey.

Engaging with external stakeholders is critical to achieving our
purpose. Our ability to successfully transform requires that wework with multiple segments of society to create a paradigm
shift in which cigarettes become obsolete.

With an eye on the longer term, we are taking concrete
steps to build the foundations for our wellness andhealthcare business.

Supporting transformation

Continuous engagement also allows us to build a sharedunderstanding of contingency issues, proactively respond toconcerns, identify potential areas of compromise, and findsolutions that are good for our stakeholders, and for ourbusiness and long-term success.

Beyond our own operations, we are transforming every step ofour value chain to serve our company purpose. We recognize
the challenges these changes pose and are actively helping all
those impacted (in our direct and indirect operations) to best
manage the transition.

Value chain

Key stakeholder groups

SOURCING

Combustible tobacco products

Growth priorities

Transitioning to an increasingly
diversified supply chain, including
electronics sourcing

Smoke-free products

Emerging opportunities

Wellness and healthcare

Consumers

OPERATIONS

Reallocating R&D expenditure towardsmoke-free product innovation andscientific capabilities, while reorienting
manufacturing toward smoke-free products

COMMERCIALIZATION

While a transformation of this magnitude and complexity
cannot be achieved overnight, we are committed to making it
happen as fast as possible.

Philip Morris International Integrated Report 2023

Internally, we continue to invest in our employees to upskill
their knowledge and build the capabilities they need tocontribute fully to our business transition. Simultaneously, we
are recruiting top talent and acquiring new capabilities. We
are also incorporating new ways of working as we become anincreasingly digitalized, project-based organization focused on
consumer-centricity, agility, and data-driven decision-making.

Civil society

Employees

Public healthcommunity

Supply chain
and business
partners

Financecommunity

Regulators

Moving from B2B to an increasingly
consumer-centric model to commercialize
smoke-free products

CONSUMERS & REVENUES

Shifting revenue source from majority
cigarettes to majority smoke-free products
while addressing post-consumer waste

Read more about our value chain transformation

Read more about our stakeholder engagement

21

22

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

23

Message from our Chief Sustainability Officer
We are delighted to share with you an updateon the remarkable progress our company has
made. The past year was filled with importantdevelopments, and we remain steadfast in ourcommitment to sustainability as a driving force
behind our purpose-led approach to business.
Since the beginning of sustainability at PMI, our strategy
has gone beyond minimizing negative externalities andmitigating risks.
Deeply connected to our transformation strategy,
sustainability has always been intended to embody a
profound opportunity for innovation, growth, and long-termvalue creation. Our dedication reflects our response to theconcerns of our shareholders and other stakeholders alike.
Comparable and reliable nonfinancial data allow external
stakeholders to understand not only our performance but also
how we are responding to a rapidly changing environment andplanning for the long term, fostering a more sustainable andtransparent business landscape. From a strategic standpoint,
ESG data help inform our organization on how, when, andwhere to allocate resources to make our sustainability efforts
relevant, meaningful, and fully aligned with our businesspriorities.
We firmly believe that high-quality data are a prerequisite for
accurate and meaningful reporting. Consequently, in 2023 we
continued developing robust systems and processes to ensure
sound data governance and integrity. This approach allows
us to measure and account for our progress effectively while
addressing the concerns of our diverse stakeholders, including
shareholders. As we forge ahead, we remain committed totransparent, consistent, and reliable reporting practices.
Country-level case studies that shed light on our work onpriority sustainability areas and market stories that seek tocomplement our reporting, by connecting and highlighting
the impact that our initiatives are seeking to have on society
and the environment around the world are available on
PMI.com. The cover of this report intends to reflect thediversity of contexts in which we operate and how progresson sustainability is delivered on the ground: it includes designs
prepared by our local teams in different markets, showcasing
what sustainability means to them.

Philip Morris International Integrated Report 2023

We will continue to leverage integrated reporting tocommunicate holistically how we identify and address
the most material ESG-related risks related to both ouroperations and product offerings.
During 2023 we conducted a light sustainability materiality
refresh to reassess and further confirm our priority ESG
topics. To do this, we considered changes to the externallandscape since 2021, including geopolitical shifts. We also
considered changes to our business, product portfolio, andgeographic expansion.
The sustainability materiality refresh completed in 2023
also allowed us to assess our preparedness to comply withcurrent and upcoming regulatory requirements, notably the
EU Taxonomy Regulation and the EU Corporate Sustainability
Reporting Directive (CSRD). As a company with an importantpresence in the EU region, we will be required to comply withthis Directive in the coming years. Related to governance,
we have taken significant steps to strengthen the role,
structure, and processes of our risk functions by improving
synergies with our sustainability team. These enhancements
are intended to make progress toward ensuring that ESG
considerations are fully integrated into our risk management
practices.
By embedding sustainability in our risk management
practices, we strengthen our ability to respond to regulation,navigate future challenges, seize opportunities, and drive
sustainable value creation for all stakeholders, including ourshareholders.
Moreover, we remain vocal in our support and active
in an engagement that endorses efforts toward further
harmonization and standardization of nonfinancial reporting.
In line with this, we continue participating in consultations
with the International Sustainability Standards Board (ISSB).
In 2023, we also engaged with the International Auditing
and Assurance Standards Board (IAASB) and participatedin a consultation focused on standards for assurance onsustainability reporting. Further, after completing a fullclimate change risk and opportunities assessment andpublishing our first Task Force on Climate-related Financial
Disclosures (TCFD) report in April 2023, we are proud to bean early adopter of the Taskforce on Nature-related Financial
Disclosures (TNFD) framework. Looking ahead, we anticipate
this trend to continue and new regulatory developments
and evolving stakeholder expectations to further shape how
companies define success and report their performance.

As we present this Integrated Report 2023, we emphasize thatdelivering a smoke-free future is not just a priority; it is theessence of our purpose. The path we tread is marked by ourambition to lead, our vow to operate transparently, and our
dedication to ensuring that cigarettes are relegated to history.
We acknowledge the difficulties that lie ahead and reaffirm
our dedication to the vision that propels us forward: one
where cigarettes are supplanted by smoke-free alternatives inthe shortest time frame possible.
We would like to express our gratitude to our employees,
partners, and stakeholders who challenge and push us to
do better.
We understand that our journey toward sustainability relies
on building trust and legitimacy with all of them. And so, toall our stakeholders, I would like to say: your support andengagement have been vital in helping us drive our progress
thus far. We value your feedback, ideas, comments, andquestions as they inspire us to continuously improve and findbetter solutions. As we enter a new year, we are energizedby the opportunities that lie ahead and remain committed
to our purpose, dedicated to sustainability, and focused ontransforming for good.

Jennifer Motles
Chief Sustainability Officer

24

Overview

By transparently reporting periodically on these KPIs–sharing
both year-on-year and cumulative progress–we enable
external scrutiny and allow our stakeholders to assess thepace and scale of our transformation.
For all our Business Transformation Metrics, we aim to report
our historical performance, ensuring a consistent scope andcalculation methodology, and we strive for external assurance.
In 2023, 14 out of 15 Business Transformation Metrics were
subject to external assurance by our independent auditor,
PwC, confirming that our transformation is both measurable
and verifiable (read PwC’s limited assurance report here].

Business transformation aspirations
Aspirations linked to our Business Transformation Metrics
give us a clear roadmap. Early in our transformation journey,
we set ambitious 2025 aspirations that grounded our purposeand gave direction to both our organization and external
stakeholders as we ventured into what was then uncharted
territory. Our commitment to champion a smoke-free futureremains unwavering. However, nearly eight years sinceannouncing our smoke-free vision, and with more data anda better understanding of the business environment, it wasprudent to pause and revisit our aspirations as we look toward
the next horizon: 2030.

Since we started our journey with IQOS in 2014 with one
device and two consumables, our portfolio has evolved andexpanded. Our smoke-free portfolio now consists of three
categories of tobacco and non-tobacco containing products,
13 different smoke-free (heat-not-burn and e-vapor) devices,and multiple consumables (notably 86 taste variants for PMI
heated tobacco units).
As we fine-tune our strategy, our aspirations must also
be able to account for challenges linked to uncontrollable
factors—especially those related to the operating environment
born primarily from policy and regulation (or lack thereof)in certain countries that directly influence our ability tocommunicate about or, in extreme cases, even commercialize
our smoke-free products. Such challenges have directly
contributed to a stronger-than-anticipated resilience of the
combustible tobacco product business and thus influenced
the pace of our transformation. Other, unforeseen challenges
relate to the continued repercussions of the COVID-19
pandemic, the ever-evolving geopolitical situation, and related
global supply chain disruptions.
Against this backdrop, our priority in the short to medium
term is to capitalize on our smoke-free products’ growthpotential, including in the U.S. Accordingly, while we still
believe in the natural fit and considerable potential thatwellness and healthcare can bring to our business in thelonger run, we recognize that more investment, research, anddevelopment are required before we generate meaningfulincremental net revenues. Consequently, our strategic reprioritization—particularly following our acquisition of Swedish
Match—results in us no longer maintaining our aspiration ofderiving USD 1 billion net revenues from this business by theend of 2025.

• By 2030, we aspire for around 60 of our markets to havesmoke-free products making up over 50 percent of our net
revenues. Of these markets, we aim for around 40 to derivemore than 75 percent of their net revenues from smokefree products and around 20 to derive between 50 and 75
percent of their net revenues from smoke-free products.

Fundamentals

25

Reporting and performance• By the end of 2025, we remain committed to expanding thegeographic availability of PMI’s smoke-free products to 100
markets, of which at least half are targeted to be low- andmiddle-income markets.
Moreover, in markets where our smoke-free products wereavailable for sale1 as of the end of 2023, our combustible
tobacco product shipment volume decreased by more than
33 percent versus 2015, when our transformation had juststarted (and by 27.9 percent in all markets). If we continue
on this trajectory, we expect that the growth of smokefree products and consequent replacement of cigarettes
will translate into a more than 50 percent decline of our
combustible tobacco product shipment volume in thesemarkets by 2030.
2015
baseline

2021

2022

2023

Total number of users of PMI smoke-free products(in millions)¹*

0.2

21.7

24.9

28.6

Estimated number of users who have switched to PMI smokefree products and stopped smoking (in millions)¹*

0.1

15.3

17.8

20.8

0.7%

29.5%

32.1%

36.4%

>2/3 by 2030

Number of markets where smoke-free products are available
for sale³*

7

71

73

84

100 by 2025

Number of markets where adjusted net revenues from smokefree products exceed 50% of adjusted total net revenues*

0

10

17

25

~60 by 2030

Number of markets where adjusted net revenues from smokefree products exceed 75% of adjusted total net revenues*

0

0

0

3

~40 by 2030

Proportion of markets where smoke-free products are available
for sale that are low- and middle-income markets 4*

17%

42%

42%

47%

>50% by 2025

Commercial (marketing) expenditure ratio (smoke-free/total)*

8%

73%

74%

74%

Smoke-free product shipment volume – heated tobacco units(billion units)⁵*

0

95

109

125

Shipment volume – nicotine pouch (million cans)*

0

1

42

421

Combustible tobacco product shipment volume (billion units)⁵*

877

645

642

633

Change in combustible tobacco product shipment volume(billion units) vs. 2015 baseline⁵*

n/a(26.4)%(26.8)%(27.9)%

Adjusted R&D expenditure ratio (smoke-free/total)⁶*

70%

99%

99%

99%

Supply chain direct spend expenditure (smoke-free/total)⁷

n/a

35%

43%

41%

Number of factories producing smoke-free products out of
total number of factories⁸*

3 out of48

9 out of38

14 out of49

16 out of50

Business Transformation Metrics

Adjusted net revenues ratio (smoke-free/total)²** The 2023 metrics marked with an asterisk (*) are subject to PwC’s Limited Assurance Report.
Notes:
Unless otherwise stated, all applicable business transformation metrics include Swedish Match
related data as of November 11, 2022 (acquisition date), as well as Vectura Fertin Pharma.
In 2023, we evaluated and republished a new set of aspirations for 2030 to ensure they remain
ambitious, reasonable, and achievable in the context of a dynamic and evolving smoke-freeindustry, and the impacts of our recent acquisitions.
1 Figures pertain to total IQOS users. See Glossary.
2 For definition of net revenues related to smoke-free products, see Glossary. Data excludes
the impact related to termination of distribution arrangement in the Middle East in 2023 andthe impact related to the Saudi Arabia customs assessments in 2021.
3 For definition of available for sale, see Glossary.

Philip Morris International Integrated Report 2023

Operational impact

1 For definition, see Glossary.

Consumers & Revenues

To make our progress toward achieving our purpose of
becoming a smoke-free business both measurable andverifiable, we developed our Business Transformation Metrics,
a bespoke set of financial and nonfinancial key performanceindicators (KPIs). These metrics showcase how we areallocating resources away from our legacy business as we
advance toward a future in which we will no longer base our
success on making or selling cigarettes.

We have undertaken significant business development
activities in recent years. Most notably, we acquired Swedish
Match in 2022. As the undisputed leader of the nicotine
pouch category, Swedish Match fits squarely into our smokefree strategy and is accretive to our growth. This means
we are now fueling our transformation with two powerfulengines: ZYN and IQOS. One key rationale for the combination
was to enter the world’s largest smoke-free market of the U.S.
ZYN is already well-established in the market, and we plan tostart commercializing IQOS in 2024 with select pilot city tests.

Product impact• By 2030, we aim to be a substantially smoke-free business,with smoke-free products representing over two-thirds of
our annual net revenues globally.

Commercialization

We recognize that business transformation is acompany-specific journey, which sustainability
reporting standards and frameworks fail toadequately capture.

GovernanceOur refreshed business transformation-related aspirations
are as follows:

Sourcing & Operations

Business Transformation Metrics

Strategy

Aspirations

4 Excluding PMI Duty Free. World Bank report issued in 2023 is used on a comparative basis
for income level classification. For definition of low- and middle-income markets, see Glossary.
5 These indicators are calculated based on millions of units. For definition of heated tobacco
units and combustible tobacco products, see Glossary. Combustible tobacco products
shipment volume includes cigarettes and other tobacco products expressed in cigarette
equivalent units.
6 Adjusted R&D expenditure excludes asset acquisition cost related to OtiTopic, Inc. in 2021.
Total reported R&D expenditure in 2021 including these items amounted to USD 617 million.
7 Direct spend focuses on materials used in the manufacture of our products; it includes
tobacco leaf, direct materials, and electronic devices and accessories. Data excludes Swedish
Match and Vectura Fertin Pharma.
8 Data reflects the number of factories operated and owned by PMI at the end of therespective year. As of 2023, “Smoke-free products factories” is defined as manufacturing
facilities producing heated tobacco units and oral nicotine products. Additionally, in 2023, PMI
evolved its approach to report the number of factories based on location instead of based onplant. If a facility is one location, but has several physical areas (plants), the facility is counted
as one. To provide comparability, 2022 data has been restated on the same basis.

26

Overview

Anchoring sustainability at the core of our strategy
We can only achieve our purpose by embedding
sustainability in every aspect of our business.
Sustainability is more than just a means to minimize
negative externalities and mitigate risks while maximizing
operational efficiency and resource optimization. We see it
as a fundamental opportunity for innovation, growth, andpurpose-led, impact-driven, long-term value creation.

I M PAC T
I M PAC TO P E R AT I O N A L

PRODUCT

Our approach to sustainability is guided by the outcomesof our most recent full-fledged sustainability materiality
assessment (read more here). During 2023, we conducted alight refresh of our assessment, accounting for two meaningful
developments: our change in footprint (driven both by theacquisition of Swedish Match and by our announcement toenter the U.S. in 2024) and recent regulatory developments—
especially those focused on mandatory nonfinancial
disclosures. Besides minor calibration, this internal review
confirmed the outcomes of the 2021 assessment and did not
result in changes to our priority ESG topics.

The result of this assessment is a structured ESG framework(depicted below) that showcases those ESG topics we focus
and prioritize our resources on. This framework recognizes
two distinct forms of issues: those that relate to our products(what we produce), which are part of the “Product Impact”
pillar, and those related to our business operations (how we
produce), which are part of the “Operational Impact” pillar.
We classify each issue based on its environmental, social,or governance-related nature.
Building on our ESG framework, and to properly address thesepriority issues, we developed eight strategies (discussed on
the next page) targeting our most pressing areas of impact.
To accompany those strategies, we established 11 goals,
which form the basis of our 2025 Roadmap.

E

S

G

ENVIRONMENTAL

SOCIAL

GOVERNANCE

Materials andproduct eco-design–
Post-consumer
waste

Product healthimpact–Sales, marketing,and consumer
communications–
Innovation inwellness and healthcare

Responsible R&D–
Product reliability–
Nicotine science

Climate–
Water–
Biodiversity

Diversity and inclusion–
Socioeconomic wellbeing of tobacco-farming
communities–
Human capitaldevelopment

Business integrity–
Respect forhuman rights–
Sustainable supply
chain management

Operational discharge–
Animal welfare

Labor standards–
Health and safety at work–
Employee well-being–
Philanthropy

Stakeholder engagement–
Data privacy–
Fair fiscal practices

Philip Morris International Integrated Report 2023

Strategy

Governance

Product impact

Our sustainability strategy
Consistent with the outcomes of our sustainability materiality
assessment, addressing the social impacts of our products
stands at the core of our sustainability strategy.
The health impact of cigarette smoking is the most significant
negative externality we aim to address. Lessening this impact
is the most valuable societal contribution we can make andis the cornerstone of PMI’s purpose and business strategy.
Focusing our resources on innovating and developing
solutions that can contribute to solving some of society’s
most pressing challenges represents an opportunity for
growth and our strongest competitive advantage.
We deploy a three-pronged approach to address the social
impacts of our products:
1. Maximize the benefits of smoke-free products:
Research, develop, and commercialize nicotine-containing
products that are scientifically substantiated to be lessharmful than cigarettes, and then seek to ensure that thoseadults who would otherwise continue to smoke havebroad access to these products to expedite the decline ofsmoking prevalence.

Operational impact

Fundamentals

Reporting and performance27

2. Purposefully phase out cigarettes:
Work to make cigarettes obsolete, with the aim that smokefree products ultimately replace cigarettes for those who
continue to use nicotine, driving their obsolescence.
3. Seek net positive impact in wellness and healthcare:
With a longer horizon in mind, we are exploring adjacent
opportunities for growth in wellness and healthcare,leveraging the capabilities we have accrued and developed
while transforming our business.
Our approach to sustainability must also address othermaterial ESG topics related to our products and business
operations, including the environmental impact of our
products, and the environmental and social impacts acrossour value chain. To address this broad range of considerations,
our three-fold approach to addressing the social impact ofour products is complemented with five other impact-driven
strategies. Altogether, these eight strategies are equallydivided between those that focus on the impacts of our
products and those that focus on the impacts of our business
operations. Last but not least, all-encompassing governancerelated topics set the basis of our success.

28

Overview

You can learn more about this mapping exercise
in our 2021 Sustainability Materiality Report.
Our Roadmap offers straightforward direction
to our stakeholders by clearly outlining thesocial and environmental impacts we aim toachieve with our strategies in relation to both
our products and our operations.

P R O D U C T I M PAC T

Running to the end of 2025, it comprises 11
headline goals, each connected to our eightstrategies, which aim to address the priority
ESG topics identified by our sustainability
materiality assessment.

Purposefully phaseout cigarettes

Progress key

O P E R AT I O N A L I M P A C T

PMI Sustainability Index
PMI’s Sustainability Index directly connects
our 2025 Roadmap to specific KPIs andaspirations, allowing us to link sustainability
performance to long-term executive
compensation (read more here).

Seek net positive
impact in wellness
and healthcare

2

3

4

5

Reduce postconsumer
waste

We believe business can and must help toachieve the UN Sustainable Development Goals(SDGs) adopted in 2015. Accordingly, we have
explicitly linked each of our eight strategies to
the SDG(s) to which it aligns and can contributetoward achieving.
Specific performance metrics (all available atthe end of this report) allow us to measure
the progress we are making toward achieving
our aspirations and evaluate the effectivenessof our programs. We provide on this page asummary of our performance in 2023, which
we further detail in the respective sections of
this report.

Maximizethe benefitsof smoke-free
products

1

Foster anempoweredand inclusive
workplace
Improve the qualityof life of peoplein our supply chain

Tackle climatechange

6

7

8

9

10

11

Preserve nature

Progress further than anticipated

Philip Morris International Integrated Report 2023

Product impact

Operational impact

Fundamentals

Reporting and performance29

Priority ESG topics
and primary SDGs

Intentionally work toward phasing out cigarettes by
ensuring that we become a substantially smoke-freecompany by net revenues by 2030 and continue toreduce our combustible shipment volume

Smoke-free products represented 36.4 percent of our adjusted annual
net revenues in 2023 (2022: 32.1 percent),1 and 18.6 percent of our total
shipment volume (2022: 15.3 percent).2 Meanwhile our combustible tobacco
product shipment volume decreased by 27.9 percent versus 2015.

Product health impact

Develop and commercialize science-based smokefree alternatives, making them available in 100
markets (of which at least half are low- and middleincome markets) and continue to increase the total
number of users

By the end of 2023, our smoke-free products were available for sale in 84
markets,3 of which 47 percent were low- and middle-income markets (2022:
73; 42 percent).4 We estimate that approximately 33 million adults worldwide
were using our smoke-free products, including around 28.6 million adults
worldwide who were using IQOS (2022: 24.9).5

Product health impact;
Sales, marketing,and consumer
communications

Deploy robust youth access prevention programs inindirect retail channels and ensure that sales of our
products abide by our Marketing Codes

During 2023, we strengthened governance for youth access prevention
programs in our indirect retail channels and continued to cover a high share(98 percent) of our total shipment volume with these programs.

Lay the foundation to evolve into a broader lifestyle,consumer wellness, and healthcare company in thelong term

While we focus in the short- to medium-term on capitalizing on our smokefree products’ growth potential, we remain convinced of the longer-term
potential of our wellness and healthcare business.

Innovation in wellness
and healthcare

Reduce post-consumer waste and prevent littering
by implementing comprehensive programs covering
all our consumables

We have expanded the scope of anti-littering programs for cigarette butts to
76 percent of sales volumes while continuing to roll out end-of-life take-backprograms for smoke-free consumables, now covering 17.6 percent of sales
volumes.6

Materials andproduct eco-design;
Post-consumer waste

Follow eco-design and circularity principles for all
smoke-free electronic devices

Smoke-free products—and heated tobacco products, in particular—are a
relatively new product category. As such, they are generally not covered byexisting product category rules. We have further defined our framework foreco-design and integrated several sustainable design principles into selectpilot projects.

Nurture a more diverse culture that promotes equity
and inclusion by providing access to lifelong learning
to all our employees and improving gender and local
representation in management globally

In 2023, 32.0 percent of senior roles were held by women. We continued
to expand opportunities for learning and development: By the end of 2023,
77 percent percent of our employees worldwide could access structured
lifelong learning offers.

Diversity and inclusion;
Human capitaldevelopment

Eradicate systemic child labor in our tobacco
supply chain

In 2023, child labor prevalence affected 0.1 percent of our purchased
tobacco and, while we broadly eradicated systemic child labor issues in thefarms we contract with, we remain committed to eradicating isolated cases.7

Socioeconomic
well-being of tobaccofarming communities

Ensure all contracted tobacco farmers make aliving income; partner with our direct suppliers
to promote a living wage for their workers

In 2023, we strengthened our tobacco farmer living income calculation
methodology and, by the end of the year, 96 percent of contracted farmers
supplying tobacco to PMI made a living income.

Achieve carbon neutrality in our operations andaccelerate our decarbonization toward net zeroacross our value chain

In 2023, our CO2e scope 1+2 emissions decreased by 36 percent versus our2019 baseline and our net CO2e scope 1+2+3 emissions decreased by 13
percent within the same time frame, which keeps us on track to reach carbon
neutrality in our direct operations by 2025 and net zero across our value
chain by 2040.8

Promote biodiversity, address critical water
challenges, ensure no conversion of natural
ecosystems, and halt deforestation in both ourtobacco and pulp and paper supply chains

In 2023, we achieved 94 percent of tobacco purchased at no risk of net
Biodiversity; Water
deforestation of managed natural forest and no conversion of natural
ecosystems, and 95 percent of paper, board, and pulp-based supplies
purchased at no risk of gross deforestation of primary and protected forests.9
Our water stewardship initiatives have contributed to optimizing a total of
8.1 million cubic meters of water in our tobacco-growing areas since 2019,
putting us well on track to achieving our aspiration to optimize 25 million cubic
meters of water by 2033.10

Progress with challenges
Progress on track

Governance

Progress
in 2023 Performance summary

Goals

Our 2025 Roadmap
PMI’s 2025 Roadmap outlines our
key goals and informs the routeof our company’s long-term plan.

Strategy

Note: Goals 1 and 4 were adjusted to reflect revised aspirations linked to our business
transformation (read more here).
1 For definition of net revenues related to smoke-free products, see Glossary. Data excludes
the impact related to termination of distribution arrangement in the Middle East in 202.
2 These indicators are calculated based on millions of units. For definition of smoke-free
products and combustible tobacco products, see Glossary. Smoke-free products shipment
volume includes volume of smoke-free products that can be converted into cigarette
equivalent units, such as heat-not-burn, e-vapor, and oral nicotine. Total shipment volume
includes the listed smoke-free products as well as combustible tobacco products: cigarettes
and other tobacco products expressed in cigarette equivalent units. Data does not include
wellness and healthcare products.

3 For definition of available for sale, see Glossary.
4 Excluding PMI Duty Free. World Bank report issued in 2023 is used on a comparative basis
for income level classification. For definition of low- and middle-income markets, see
Glossary.
5 Figures are based on IQOS user panels and PMI Market Research. Estimated user numbers
for oral nicotine and e-vapor are approximate, with further methodology details to beprovided in future disclosures. See Glossary.
6 Shipment volume includes heated tobacco units, e-vapor cartridges, and e-vapor
disposables. See PMI’s Sustainability KPI Protocol 2023 for further details.
7 For further details on how we calculate the prevalence of child labor in PMI’s tobacco supply
chain, please see PMI’s Sustainability KPI Protocol 2023.

Climate8 Including Swedish Match.
9 For definitions, please see PMI’s Zero Deforestation Manifesto and PMI’s Sustainability KPIProtocol 2023.
10 Indicator is based on the World Resources Institute’s volumetric benefit accounting
methodology and is verified by an external third party.

30

Overview

Governanceand management
Board of Directors and Company Management

p32

Sustainability Index

p34

Operational management and program delivery

p36

Risk management

p38

Philip Morris International Integrated Report 2023

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

31

32

Overview

Board of Directors and Company Management
PMI’s governance structure is designed to ensure
we act with integrity and hold ourselves and ourbusiness to the highest ethical standards. Integrating
sustainability into our Company relies on a formal
structure with clear accountabilities at different
levels of the organization.
Our Board of Directors
The primary responsibility of the Board of Directors is
to support the long-term success of our Company. The
Board establishes broad corporate policies, sets strategic
direction, and oversees Company Management—the
individuals responsible for PMI’s day-to-day operations.
The Board has established various standing committees toassist with the performance of its responsibilities and has
adopted corporate governance guidelines that—together
with the Company’s charter, bylaws, Board committee
charters, code of ethics, code of business conduct andethics for directors, and related-person transactions policy—
serve as the governance framework for the Company.
Each of these documents is available on PMI.com.

Sustainability responsibilities:
Board of Directors
While the Nominating and Corporate GovernanceCommittee (NCGC) oversees the Company’ssustainability strategies and performance, several
other committees are tasked with oversight
responsibility for specific sustainability topics. For
instance, the Audit and Risk Committee reviews
with management and internal and independent
auditors any sustainability information to be includedin the Company’s financial reporting frameworkand the internal controls and procedures related tosustainability materiality assessments and disclosures.
The Compensation and Leadership Development
Committee (CLDC) is responsible for executive
compensation matters, which consists of, among
others, evaluating the Company’s performancein relation to the PMI Sustainability Index. PMI’s
Chief Sustainability Officer, a member of PMI’s
management, updates the CLDC, the NCGC, andthe full Board of Directors at least once per year on
sustainability-related matters, including progress inpriority areas and an overview of key initiatives.

Philip Morris International Integrated Report 2023

PMI’s 2024 Proxy Statement contains detailed informationon our Board and committee structure, the independence
and diversity of its members, and the responsibilities
and meeting frequency of each committee.

Strategy

GovernanceOperational impact

Fundamentals

Reporting and performance

Sustainability governance and management

Board of Directors
Full Board of Directors

Our Company Management
PMI’s Company Management primarily consists of our Chief
Executive Officer, his direct reports leading our different
business functions and regions, and other senior management,such as the Vice President of Treasury and Corporate
Finance, the Vice President & Controller, and the Deputy
Chief Financial Officer & Head of Finance Transformation.
Our Company Management, which totals 27 employees asof March 11, 2024, of whom five are women, includes the
11 employees who are executive officers under Section
16 of the Securities Exchange Act of 1934. A biography ofeach member of our Company Management can be foundon PMI.com.

Product impact

Nominating and Corporate
Governance Committee (NCGC)

Other Committees of the Board

Company Management
Sustainability Committee• Members of Company Management, including Chief Executive Officer• Meets quarterly• Reviews and validates sustainability materiality analysis, strategy,commitments, goals, and annual reporting

Chief
Financial
Officer

Operational management
and program delivery

Sustainability responsibilities:
Company Management
Anchoring our sustainability priorities with executive
responsibilities and accountabilities helps embed ourstrategy into our daily operations.
Members of Company Management are responsiblefor driving progress and delivering on oursustainability aspirations within their respective areasof responsibility. We have included feature boxes foreach of our eight strategies in dedicated chaptersof this report to highlight reporting lines for specifictopics.
Composed of members of Company Management,
including our Chief Executive Officer, PMI’s
Sustainability Committee meets at least four times
per year. In 2023, quarterly Sustainability Committee
meetings focused on the review of the Company’s
performance against the current Sustainability
Index (vesting in 2024) and the introduction of a
new Sustainability Index (vesting in 2025), publicsustainability disclosures (including PMI’s Integrated
Report 2022 and TCFD Report 2022) and reporting
strategy, performance of the Company in ESG ratings,
outcomes of PMI’s 2023 sustainability materiality
assessment refresh, the Swedish Match integration
progress, and progress of key sustainability initiatives.

Sustainability Group• Senior representatives from global functions• Meets quarterly

Chief
Sustainability
Officer• Ensures alignment and coordination of efforts
across the different functions in the Company,
provides recommendations for program portfolio,
and monitors performance

Sustainability TeamWorking groups• Cross-functional representatives• Meet periodically• Defines corporate sustainability
materiality and strategy, coordinates
program implementation by working
closely with all business functions
and with markets, and manages
reporting on performance• Coordinate development and deploymentof specific cross-functional programs

Global functions and markets

All PMI employees

Drive execution of sustainability programs, including
development of policies, procedures, and roadmaps,
establishment of performance metrics and targets, andmonitoring and reporting on progress within the organization

Play a critical role in delivering progress on sustainability

33

34

Overview

Sustainability Index

Over the past two years, a number of our shareholders
and other stakeholders singled out the incorporation of the
Sustainability Index into our PSU performance metrics as apositive development. Accordingly, we have continued thepractice of linking our sustainability performance to our longterm equity compensation by leveraging an updated version of
the Sustainability Index for subsequent three-year PSU cycles.
For more information, please refer to PMI’s
2024 Proxy Statement.

• PMI’s annual Proxy Statement for disclosure of
performance achievement for vested awards.
• PMI’s annual Integrated Report for disclosure of thestructure of the version of the index introduced in the year
on which the report is focused. Accordingly, our Integrated
Report 2022 presented the Sustainability Index informing
the PSU 2022–24 cycle; this year’s report introduces theSustainability Index informing the PSU 2023–25 cycle andnext year’s report will introduce the Sustainability Index
informing the 2024–26 cycle, and will report on vesting
performance for the Sustainability Index 2022–24.
• For details on the definition, scope, and methodology forthe 2023 reported figures pertaining to each KPI includedin the Sustainability Indices for the cycles 2022–24 and2023–25, please visit PMI’s Sustainability KPI Protocol 2023.
For greater transparency, PMI.com discloses the
structure of each version of the Sustainability Index.

Sustainability Index 2023–2025

TSR 40%20%

PRODUCTS U S TA I N A B I L I T Y

O P E R AT I O N A LS U S TA I N A B I L I T Y

Philip Morris International Integrated Report 2023

Sustainability Index mechanics
Using predefined target ranges approved by our Board of
Directors, we assess and assign a score to each KPI annually.
Thereafter, using a weight assigned to each KPI (informedby the results of our sustainability materiality assessment),
we calculate the total Sustainability Index score (read more
about the index mechanics here). The index is based on
three-year cycles. The number of KPIs in the index, andrelative weightings, are not identical for each PSU cycle.
To avoid confusion while maintaining transparency, PMI
invites stakeholders to consult the following sources:

The 2023–25 Sustainability Index has 16 KPIs; most are
the same as in the 2022–24 Sustainability Index, guided
by our 2021 sustainability materiality assessment andaligned with our 2025 Roadmap. While the 2023–25
Sustainability Index retains a KPI measuring progress
toward achieving scope 3-related ambitions, the KPI
used has been replaced to align with our recently
introduced Forest, Land, and Agriculture (FLAG) sciencebased target, which measures absolute GHG reductions
for scope 3 in agriculture. We also removed three KPIs
linked to the Product Sustainability part of the index,
to account for our revamped business transformation
aspirations (read more here). Accordingly, the weight of
the KPIs removed has been adjusted on a pro rata basis
within the Product Sustainability category to ensure the
distribution of parts within the index remains 20 percent
Product Impact and 10 percent Operational Impact.

Purposefully phaseout cigarettes

P R O D U C T I M PAC T

In 2022, to better align with shareholder and otherstakeholder expectations, the Compensation and Leadership
Development Committee of PMI’s Board of Directors decided
to enhance the Company’s practices, explicitly strengthening
the link between long-term executive compensation andsustainability performance. For that purpose, our Sustainability
Index was linked to part of our performance share unit (PSU)
award and represents 30 percent of its total for the 2022–
2024 performance cycle.

10%

Product impact

Operational impact

Fundamentals

35

Reporting and performance

Key performance indicators

Maximize the benefitsof smoke-free products

Reduce post-consumer
waste

2025
aspirations

1

Adjusted net revenues ratio (smoke-free/total)*†

>50%

2

Number of markets where smoke-free products areavailable for sale*†

1003Proportion of markets where smoke-free products
are available for sale that are low- and middle-income
markets*†>50%

4Proportion of shipment volume covered by markets withyouth access prevention programs in place in indirect
retail channels†

>90%

5

Proportion of shipment volumes covered by markets with
anti-littering programs in place for combustible cigarettes

≥80%

6

Proportion of shipment volume covered by markets with
end-of-life take-back programs in place for smoke-freeconsumables

≥80%

7

Proportion of PMI smoke-free devices with eco-design
certification

100%

8

Cumulative number of smoke-free electronic devices
refreshed or repaired since 2021 (in thousands)>1,000

Foster an empowered
and inclusive workplace
Improve the qualityof life of people inour supply chain

Tackle climate change
Preserve nature

KPI
weight

80%

20%

100%

Product Sustainability performanceO P E R AT I O N A L I M P A C T

Linking our sustainability performance
to long-term executive compensation
Our long-term executive compensation program reflects
our commitment to position sustainability at the core of ourcorporate strategy.

GR APHIC TO BE
EPSDISCUSSED
30%

Governance

Sustainability Index 2023–2025

In 2021, we developed PMI’s Sustainability
Index to measure objectively and communicate
rigorously progress toward our aspirations, using
a set of clearly defined and verifiable metrics.
Our Sustainability Index comprises KPIs that arealigned with our 2025 Roadmap.

Sustainability
Index 30%

Strategy

9

Proportion of women in senior roles†

35%

10

Proportion of PMI employees who have access to
structured lifelong learning offers †

70%

11

Cumulative number of human rights impact assessments
conducted since 2018, with findings addressed†

12

Prevalence of child labor among contracted farmers
supplying tobacco to PMI

zero

13

Proportion of contracted farmers supplying tobacco to
PMI who make a living income

100%

14

Net carbon emissions in scope 1+2 (in thousands ofmetric tons)†

zero

15

CO2e scope 3 FLAG absolute reduction versus 2019baseline (in line with science-based target)†1

18%

Proportion of tobacco purchased at no risk of

16 deforestation of managed natural forest and noconversion of natural ecosystems

10

50%

50%

100%

Operational Sustainability performance100%

PMI Sustainability Index

100%

The metrics marked with an asterisk (*) are subject to limited PwC’s Assurance Report in 2023. For definitions of the KPIs please refer to the PMI’s Sustainability KPI Protocol 2023.
The aspirations for metrics marked with a cross (†) include Swedish Match’s operations in the Sustainability Index 2023–25.
Note: The Sustainability Index reflects KPIs approved by the Compensation and Leadership Development Committee of PMI’s Board of Directors on a yearly basis, and is not intended toreflect, among others, the current forward-looking goals or aspirations of the Company.
1 Typographical error corrected April 11, 2024.

36

Overview

Operational management and program delivery

Strategy

Governance

Product impact

Governance structures and policies• Performance indicators that allow us to define success, measure progress, and evaluate our efforts.

Integrating sustainability into our Company relies on aformal governance and management structure with clear
accountabilities at every level of the organization. Our
business is governed by a set of policies and principles.
Our Code of Conduct sets clear standards and expectations
addressing key risk areas. The code is complemented by aset of internal policies, which provide more specific guidanceon the various topics covered by the code (read more in the“Uphold business ethics and integrity” section of this report).
Within the sustainability area, a set of thematic publications
and commitments is available for download on PMI.com.
They guide our work and express our view on specificissues considered critical from an environmental or social
perspective. Read more in the policies and standards featureboxes in each of our eight impact sections.

• Aspirations (which also include interim targets) linked to KPIs that drive improvement and provide clarity on desired
outcomes.

Performance indicators and aspirations

Approach to sustainability programs
Our harmonized approach to designing and managing material sustainability topics is built on the following
foundational elements:• A deep understanding of the topic, context, materiality, external expectations, and interdependencies with other issues.
• Governance structures for target setting and policies that formally guide our actions and ambitions, oversee progress,and establish accountability.

• Concrete activities to achieve progress against communicated ambitions.
• Transparent reporting on progress, which encourages dialogue by allowing stakeholders to scrutinize our actions.
The sustainability landscape is dynamic. We continuously update and strengthen our programs as knowledge improves,progress is made, or the relative importance of topics fluctuates.

Integrating ESG drivers into a business strategy cansignificantly enhance sustainability performance. Accordingly,
our Chief Sustainability Officer (CSO) reports to PMI’s Chief
Financial Officer, a member of our Company Management andhead of the Sustainability, Finance, and Strategy functions—
three essential components that work hand in hand to drivestrong and coherent value creation and deliver long-term
success.
Our CSO leads the integration of sustainability across ourbusiness, updates the Sustainability Committee—composedof members of Company Management— and hosts theSustainability Group at least quarterly.
The CSO also heads PMI’s Sustainability Team, which leads
PMI’s sustainability materiality analysis, defines strategy,
manages reporting on performance, and coordinates strategy
implementation across business functions and markets.
Program-specific working groups meet periodically tocoordinate the strategy, aspirations, and performanceof specific sustainability programs across functions.
At the regional and market level, dedicated sustainability
coordinators help ensure that sustainability priorities
are cascaded and programs are localized. Under
central guidance, market coordinators meet monthly
to ensure a concerted effort and that progress isachieved and tracked in a consistent manner, including
via KPIs derived from the PMI Sustainability Index.

Philip Morris International Integrated Report 2023

Understanding our impacts andprioritizing ESG topics
A robust sustainability materiality analysis allows us to identify,
assess, and prioritize ESG topics. Our 2021 sustainability
materiality assessment helped identify the ESG topics onwhich we should focus. In line with the principle of double
materiality, the assessment consisted of a five-pronged
approach that evaluated both outward and inward impacts
and considered stakeholder expectations.
In 2023, we undertook an internal materiality refresh exercisethat largely confirmed our 2021 findings.
In addition to our formal sustainability materiality assessments,
we keep abreast of trends by engaging continuously withstakeholders and external organizations (read more here) andanalyzing key external megatrends (read more here). Further,our enterprise risk assessment considers sustainabilityrelated risks and opportunities and leverages the Company’ssustainability materiality assessment process (read more here).
Additional targeted, topic-specific assessments—including,among others, climate change-related risk and opportunities(CCRO) assessments, water risk assessments, human rights
impact assessments and saliency mapping, and product lifecycle assessments—complement our more holistic efforts.
Read more about how we integrate ESG-related risks into our
broader enterprise risk management processes here.

Clearly articulating progress against our aspirations andexplaining how we measure progress is imperative. For internaland external stakeholders, this provides clarity on what we
aim to achieve and visibility into the way forward, ensuring wehold ourselves accountable.
Our complete set of sustainability-related performanceindicators—alongside our respective aspirations,where applicable—can be found in the Reporting andperformance section of this report and are available fordownload on PMI.com.

Activities to deliver on our aspirations
We discuss activities in place to deliver on our ambitions
throughout the eight impact sections of this report. These
activities are carried out by a range of internal functions. For
each topic disclosure, we clearly highlight reporting lines that
demonstrate who has responsibility and accountability foreach strategy.

Operational impact

Fundamentals

Reporting and performance37

One important commonality shaping the way we design andimplement programs is our understanding that many of thechallenges we face are systemic and cannot be addressed inisolation. Accordingly, we support and engage with a range oforganizations and initiatives that seek to drive change. Learn
more here. Further, we recognize that many factors beyond
our direct or indirect control can influence our ability toprogress against our aspirations. Despite sound planning, ourwork must account for some level of uncertainty, especially as
our ambitions extend beyond our organization’s fences.

ReportingTransparently reporting on governance, strategy,
aspirations, programs, and metrics for our ESG priorities
helps us communicate progress in a structured way.
We complement our annual Integrated Report withadditional materials online, including reporting indices,
case studies, and downloadable data, as well as dedicateddisclosures that dive deeper into specific ESG topics.
You can learn more about our approach here and visit
our sustainability resources page here to learn more.
Regulators and other stakeholders continue to expect
increased transparency, reliability, and accountability
in sustainability information. Consequently, thesustainability reporting landscape is evolving toinclude more mandatory reporting requirements.
PMI supports harmonization efforts that enhance therobustness and comparability of sustainability information.
We are well positioned to align our reporting withemerging expectations because our voluntary Integrated
Report, alongside other disclosures such as our 2022
TCFD Report, 2021 Low Carbon Transition Plan, andannual submissions to CDP, already consider and seek
alignment with voluntary standards and frameworks thateither form the basis of or contribute significantly to thedevelopment of emerging regulation (read more here).

Connectivity and trade-offs
Sustainability challenges do not exist in a vacuum. They are often linked, and we must consider their interdependencies—
including the direction of causality and magnitude—as we craft appropriate strategies and develop programs to address
our Company’s impacts. Where possible, we seek solutions that are mutually reinforcing. Addressing one topic may,
however, limit how we tackle another. Necessary trade-offs often occur in the course of our business transformation.
Given the multifaceted and complex nature of sustainable development, trade-offs are inherent to decision-making.
In some circumstances, we are compelled to make sacrifices in one sustainability area to obtain benefits in another,at least for a period. In designing our strategies and programs, it is vital that we accurately analyze, comprehend, andaccount for situations of forced compromise. This process is guided by our sustainability materiality assessment, which
serves as a compass with which to calibrate and prioritize competing ESG issues. When appropriately addressed, sometrade-offs serve as a source of innovation, pressing us to define novel ways to address the tensions that are present. By
embedding an integrated approach to sustainability within our business, we are able to monitor and tackle multiple issues
simultaneously, identifying effective solutions that leverage interdependencies to achieve progress.

38

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

Risk management
Our risk management practices address significant
and emerging strategic, external, inherent process,and project deployment risks that could undermine
our ability to achieve our principal businessobjectives and create value over time. Within thiscontext, ESG-related risks and opportunities are
considered as part of our risk management practices.
Risk governance
We assign ownership of each prioritized key risk area to amember of our Company Management. Furthermore, risk
oversight is conducted by the full Board of Directors, aswell as by Board committees in their respective areas of
responsibility. Throughout the year, Company Management
regularly updates the Board and its committees on theevolution of key risk areas. Our Enterprise Risk Management(ERM) practices are designed to support Company
Management and the Board in their respective roles andto ensure the adequacy of PMI’s responses against eachkey risk area.

Risk management
Our risk management model is facilitated through a
combination of practices deployed by “first line” business,“second line” risk management, and “third line” audit functions.
First line business functions own risks and define risk
responses. Business functional stakeholders actively identify
risks and monitor their programs in response to those risks.
In addition, they leverage PMI’s Risk Control Self-Assessment(RCSA) capability at an early stage to evaluate operational
end-to-end process risks and the effectiveness of internal
controls.
Beyond the first line, our risk management framework involves
a leading ERM function reporting to the Chief Risk Assurance
Officer, as well as an Internal Controls function and various
specialist risk functions (e.g., Compliance, Information Security,
Data Privacy, Quality Compliance, Operations Risk andResilience, etc.) as second line risk management functions. The
second line is responsible for providing expertise and support,monitoring and challenging to the first line on risk-related
matters, such as risk identification, prioritization, monitoring,and response.

Additionally, as part of our risk management practices, wehave established the Corporate Risk Governance Committee(CRGC), consisting of a subset of our Company Management
and other key leaders from the organization. The CRGC
is tasked with identifying and monitoring developments in
key risk areas and oversees the Company’s governance, risk
management, and compliance environment and strategy,
including the establishment, maintenance, and enhancementof effective risk management and assurance capabilities
within PMI.

The ERM function plays a leading role in orchestrating thedelivery of a consistent view of PMI’s risk landscape anddefining the necessary enterprise-wide risk management
structures and capabilities. Our continuous enterprise risk
assessment practices are a cornerstone of these efforts,bringing together various functions, including business, risk
management, assurance, and internal controls. As part of suchpractices, key risk areas are identified and prioritized basedon four essential dimensions: impact, likelihood, velocity, andinterconnectivity with other risks.

The CRGC consists of senior executive officers, including
the Chief Executive Officer, Chief Financial Officer, SeniorVice President Operations, Senior Vice President & GeneralCounsel, Vice President & Controller. Chief Digital andInformation Officer, Chief Risk Assurance Officer, Chief
Information Security Officer, and Chief Compliance Officer,
among others. In addition, the Vice President & Corporate
Secretary is informed of any risk management observations
or insights shared with the CRGC. The committee receives
updates related to the Company’s risk management practices
at least once per quarter.

Next to ERM, our third line comprises the Risk & Assurancefunction as an internal, independent audit function,
structurally reporting to the Audit and Risk Committee of
the Board. It is responsible for providing an independentand objective opinion on the effectiveness of first line
implemented risk responses and various subject matters.

Philip Morris International Integrated Report 2023

Taking a holistic approach, these functions collaborate tocontinuously identify, assess, and respond to evolving or
emerging strategic, external, inherent process, and project
deployment risks.

Our risk management framework

First line

Internal Controls

Second line

Externalrisks

Strategicrisks
Board ofDirectors

Specialist Risk Functions

Enterprise Risk Management*

Third line

Corporate
Risk
GovernanceCommittee

Business functions

Inherent
processrisks

Project
deployment
risks
Board
Committees

Internal Audit / Assurance** PMI’s Enterprise Risk Mangement (ERM) and Internal Audit / Assurance activities are organizationally consolidated within our Risk & Assurance function

As required by the U.S. Securities and Exchange
Commission and the applicable laws and regulations, all of
PMI’s material risk factors are disclosed in 10-K and 10-Q
submissions to the U.S. Securities and Exchange Commission.
Our latest submissions are available on PMI.com.

Risk management for sustainability
Given the significance of our sustainability practices inachieving our strategic ambitions, we have adapted our risk
management framework to address uncertainties related toour sustainability agenda.
As such, we proactively manage sustainability risks andopportunities to safeguard our long-term enterprise value,ensure access to sustainable financing and meet the
expectations of our shareholders and other stakeholders.
Our specific ESG-related risk management practices areorganized around the following key activities:

39

40

Overview

1. Strategic risk management
The Company’s strategic risk management program, as
orchestrated by the ERM function, targets, among others,risks impacting our ability to achieve the objectives outlined
in our sustainability agenda. At a corporate level, ownership of
ESG-related strategic risks is assigned to the Chief Financial
Officer, who appointed the Chief Sustainability Officer tomanage ESG-related risk response efforts.
Beyond the umbrella ESG-related strategic risk category, we
are working on embedding specific ESG-related risks linked
to our Company’s most material sustainability topics within
other strategic risks. Our strategic risk management efforts
involve strategic risk working groups composed of subjectmatter experts. These groups regularly identify, (re)assess, anddefine responses to key risk drivers and factors that have thepotential to impact our ability to meet growing stakeholder
and shareholder expectations as we progressively adopt
sustainable practices and to respond to the dynamic evolving
regulatory landscape surrounding our sustainability agenda.

2. Sustainability materiality assessment
Our most recent sustainability materiality assessment—
conducted in 2021 and refreshed in 2023—consideredboth inward and outward impacts (read more here). The
ERM function provided input into the inward (or financial
materiality) aspect of this assessment.
In 2023, the ERM and Sustainability functions commenced
structural efforts to actively integrate specific sustainability
materiality assessment practices within our broader
enterprise-wide risk assessment practices as orchestrated
by the ERM function. This work will help ensure an aligned
and consistent view between the assessed risk severity andimpact of ESG topics as part of the sustainability materiality
assessment. It will lay the foundation for adapting ourassessment methodology in line with regulatory expectations
moving forward.
3. Specialized ESG-related risk assessments
ESG-related risks can be multifaceted and vary in nature.
To comprehensively address them, we perform specializedrisk assessments. Examples of such assessments have beenreported in PMI’s Human Rights Report and Task Force on
Climate-related Financial Disclosures (TCFD) Report 2022
and have been performed to identify nature- and biodiversityrelated risks and dependencies.
These assessments are designed to delve into the uniqueaspects and intricacies of specific sustainability matters. By
performing these specialized assessments, we can pinpoint
and address the nuances of the underlying identified ESGrelated risks, ensuring that risk management responses are
tailored to the distinctive characteristics of each concern.

Marie-Pauline Lauret
Chief Risk Assurance Officer“Where our specific ESG-related risk management practices
were initially deployed on a voluntary basis, recent
developments in response to emerging regulatory requirements
demanded further collaboration amongst our Sustainability and
Risk teams. In 2023, we continued seeking ways to leverage ourenterprise risk management practices to embed environmental
and social matters, and we set up a specialized team to supportand deliver assurance on nonfinancial disclosures.”

Philip Morris International Integrated Report 2023

Strategy

Governance

Product impact

We progressively integrate the risks and insights identified bythese specialized risk assessments into our broader enterprisewide risk management practices. Moreover, we build synergies
by aligning terminology, processes, methodologies, andcapabilities across functions to strengthen integration.
4. Risk management of sustainability performance
We put specific risk management practices in place to identify,
assess, and respond to risks in relation to key performanceindicators (KPIs) used to measure our progress against oursustainability aspirations. As a priority, we developed acomprehensive approach to manage risks and opportunities
that could impact the achievement of our performancetargets linked to KPIs as defined within the Sustainability
Index (read more here). Our quarterly forecasting process,which measures the progress against our defined performancetargets, is enhanced by incorporating specific risk management
activities to identify and assess potential risks that could
hinder our ability to achieve our targets. Our priority is toensure robust governance surrounding the Sustainability
Index is in place. We regularly monitor KPIs and adjust them asnecessary, by implementing cross-functional risk responses.

Operational impact

Fundamentals

Reporting and performance

Reginaldo Dobrowolski
Vice President and Controller“Our nonfinancial disclosures have been
evolving from initially being voluntary to
become driven by mandatory regulatory
requirements and external stakeholder
expectations. To address this, in 2023 we
set up a dedicated team within our Internal
Controls function, collaborating with our
Sustainability, ERM and business functions
to develop a robust internal control
framework for nonfinancial reporting.
This partnership aims to embrace a notionof ‘control and assurance by design’ toestablish, from its onset, trustworthy andtransparent nonfinancial disclosures.”

41

42

Overview

Strategy

Product impact

GovernanceOperational impact

Our aspirations

Product impact

SI

Of PMI’s total shipment volume
covered by markets with youth
access prevention programs inindirect retail channels

SI

100

SI

Number of markets where
PMI smoke-free products
are available for sale

p44

Purposefully phase out cigarettes

p64

2030

 eek net positive impact
S
in wellness and healthcare

p70

>2/3

Reduce post-consumer wastep74≥1 million

Markets where net
revenues from smoke-free
products exceed 50% of
total net revenues

SI

Smoke-free electronic
devices refreshed or repaired(cumulative since 2021)

CONSUMABLES

DE VICES
Philip Morris International Integrated Report 2023SI

Of markets globally where
PMI smoke-free products
are available for sale thatare low- and middle-income
markets~40

Markets where net
revenues from smoke-free
products exceed 75% of
total net revenues

2025

≥80%

PACK AGING

1 The effective recycling rate is calculated based on the proportion of device sales volume covered by
the CIRCLE program multiplied by the actual recycling rate of devices recycled within the scope of
the CIRCLE program (weighted average) excluding energy recovery. Excludes disposable products
and non-PMI-designed devices.
2 Excludes disposable products and non-PMI-designed devices. We recalibrated our 2025 aspiration
to 90 percent during 2023 to account for regulatory and market developments. Collected devices
are considered covered by the CIRCLE program if they are either processed at our centralized
CIRCLE hubs or by validated local recycling partners.

Effective recycling rate ofour smoke-free electronic
devices1

>50%

~60

SI

Net revenue ratio(smoke-free/total)

2023

Notes: Aspirations referring to smoke-free electronic devices exclude disposable products andnon-PMI-designed devices.

Sustainability Index

KPI included in Sustainability Index 2022–2024 or 2023–2025

Maximize the benefits ofsmoke-free products>70%

Reporting and performance

2025

Maintain90%

Fundamentals

95%

SI

Of shipment volumes coveredby markets with anti-littering
programs in place for
combustible cigarettes

Of packaging materials comingfrom renewable sources

100%

SI

Of smoke-free electronic
devices introduced on themarket as of the end of2025 that have eco-design
certification

≥80%

90%

Of PMI smoke-free electronic
device sales volume covered by
the CIRCLE program2SI

Of shipment volumes coveredby markets with end-of-lifetake-back programs in place forsmoke-free consumables

15%

Average packaging weight
reduction for combustible
products versus 2018 baseline

15%

Average packaging weight
reduction for heat-not-burnproducts versus 2018 baseline

100%

Proportion of packaging
formats that are designed
for recyclability

43

44

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

45

Management approach

PRO D U C T I M PAC T

Maximize the benefitsof smoke-free products
At PMI, we are accelerating the end of smoking by making cigarettes obsolete. To that end, weare transforming our operations and value chain to develop, assess, and commercialize smoke-free
products that are scientifically substantiated to be a better alternative to continued smoking.
INWA RD IMPAC T

OUT WA RD IMPAC T

The business case

The right thing to do

Through our early and sustained investment in R&D andconsequent leadership in technology and innovation, we
have built a powerful position and competitive advantage inscientifically substantiated smoke-free products that can help
accelerate the decline of cigarette smoking. By allocating the
majority of our resources to the research, development, andcommercialization of these better alternatives to continued
cigarette smoking, we are accelerating our progress toward
becoming a smoke-free company and, in doing so, are building
legitimacy and stakeholder trust. Moreover, pioneering smokefree alternatives to cigarettes allows us to grow our overallmarket share in the nicotine space, increasing our current andfuture revenue base as we seek to encourage all adult smokers(this includes the estimated 130 million adult smokers of ourcigarette brands, as well as the hundreds of millions of adultsmokers who buy competitor brands) who would otherwise
continue to smoke to switch to better alternatives. Further, oursmoke-free product consumables drive higher net revenues perunit than cigarettes, with the accretive product contribution
per unit already helping to generate returns on our significant
investments in developing the smoke-free category.

The best choice a person can make is to never start smoking.
For those who do smoke, their best course of action is to quit
tobacco and nicotine use altogether. However, many do not.
Those adults who would otherwise continue to smoke shouldhave access to nicotine-containing products that represent a
better alternative than continued smoking.

It is critical for us that the marketing and sale of our products
does not interfere with cessation efforts but does encourageswitching to better alternatives among those adults who do
not quit. Importantly, we also aim to ensure that we do not
encourage initiation of nicotine use and that we avoid appealing
to youth and other unintended audiences. Disregarding theseprinciples could significantly undermine our credibility, harm our
reputation, and even trigger regulation that could hinder ourability to engage freely with adult consumers or enter certain
markets, thereby impeding us from achieving our purpose.

In this section

Scientific and technological innovation have made suchalternatives available today. The vast majority of harmful
compounds found in cigarette smoke and associated withsmoking-related diseases are generated by combustion.
Nicotine-containing products that do not involve combustion(smoke-free products), such as e-vapor, oral nicotine, and heatnot-burn products, while addictive and not risk-free, are likely topresent a much better alternative than continued smoking.
For adults who would otherwise continue to smoke,scientifically substantiated smoke-free products represent asignificant opportunity, as switching to these products has
the potential to reduce the risk of developing smoking-relateddiseases versus continued cigarette use.
Seizing this opportunity to achieve a public health benefit
depends not only on the scientifically substantiated riskreduction profile of these smoke-free products but also on adultsmokers successfully switching to them and stopping cigaretteuse completely. It is therefore critical that all adult smokers
are made aware of and have access to smoke-free products,
understand their benefits versus continued smoking, find them
acceptable, and can afford to buy them.

To maximize the benefits of our smoke-free
products to individual smokers and the population
as a whole, we deploy a threefold approach.

Secondly, we work to ensure that adult smokers have accessto and successfully switch to smoke-free products, which canhelp accelerate the decline in smoking prevalence. By “access,”
we mean:Firstly, we focus on researching and developing less harmful
alternatives to continued cigarette smoking for the benefit ofthose adults who would otherwise continue to smoke. It isvital that the health risk profile of these smoke-free products
be thoroughly assessed and scientifically substantiated. Our
research program is inspired by long-held practices of thepharmaceutical industry and is in line with the 2012 draft
guidance from the U.S. Food and Drug Administration (FDA)
for Modified Risk Tobacco Product (MRTP) applications.
We follow scientific standards, including Good Laboratory
Practices (GLP) and Good Clinical Practices (GCP). Ourassessment program covers a wide range of areas, pre- andpost-market. It encompasses product development, laboratory
clinical research, perceptions and behavior, and monitoring thein-market use of the smoke-free products we commercialize.

• Awareness: Adult smokers are conscious that smoke-free
products exist and understand the benefits of switching tothem (relative to continued cigarette use).

Broadening access to smoke-free products49

Marketing and selling our products responsibly57• Affordability: The cost of smoke-free products is reasonable
to enable smokers to acquire them and facilitate switching.
Thirdly, we deploy responsible marketing and sales practices
to propel our smoke-free vision while guarding against the riskof use by unintended consequences, such as youth access, toour products.

An essential element of optimal access is a regulatory
framework that allows smoke-free products to be sold in aparticular market, permits engagement with adults who smoke
to increase their understanding, and facilitates smoke-free
portfolio expansion to improve acceptability and affordability.

Individual risk
reduction

Responsible
marketing and sales

Access to smokefree products andcigarette phase-out

Reaching theintended audience

Consumerswitching

Maximized
benefits of smokefree products

Population
harm reduction

PMI Science: Our Standards
46• Availability: Smoke-free products are conveniently
attainable and available for purchase by adult smokers.

The role of regulation

Science-based,
less harmful
alternatives tocigarette smoking

PMI’s policies and standards

Developing science-based alternatives to cigarettes• Acceptability: Adult smokers who would otherwise continue
to smoke consider smoke-free products an adequate andviable alternative to cigarettes.

Marketing Code for Non-Combusted Alternatives
Marketing Code for Combusted Tobacco Products

Our commercialization activities across the world are
guided by applicable laws and a set of core principles (readmore here).
Management
Developing, improving, and assessing smoke-free
products is a cross-functional responsibility jointly
headed by our Chief Life Sciences Officer, Chief Product
Officer, President of Smoke-Free Inhaled Products &Chief Consumer Officer, and President, Smoke-Free Oral
Products, all members of PMI’s Company Management.
Our President of Smoke-Free Inhaled Products & Chief
Consumer Officer and President, Smoke-Free Oral
Products oversee PMI’s smoke-free products growthtrajectory, fostering consumer centricity and leveraging
the strengths of our markets and regions. Their teams
work hand in hand with our markets, led by ourCompany’s regional presidents, to support the responsible
expansion of smoke-free products worldwide and ensure
the deployment of all smoke-free product marketing andsales activities is in accordance with applicable laws and
PMI’s Marketing Codes.

Overview

Progress in 2023
Challenges• We improved availability by expanding into new
countries in 2023: as of year-end, our smoke-free
products were available for sale in 84 markets worldwide,
including 39 low- and middle-income markets.
Further, we were able to expand IQOS ILUMA, thelatest generation of our main heat-not-burn product,
to 51 markets by year-end (2022: 16 markets).

• Restrictive regulations, including bans of smoke-free
products, are in force in certain markets. This can hinder
our ability to operate with smoke-free products in thesegeographies and effectively deprives adult smokers ofaccessing accurate information about better alternatives tocontinued smoking, or even prevents access to such products
while leaving the most harmful—combustible products—theonly legally available option if they do not quit smoking.

• We increased acceptability to adult consumers by
expanding our range of tobacco- and non-tobaccocontaining consumables in the heat-not-burn category
with the launch of TEREA CRAFTED, DELIA and LEVIA.

• While aiming to broaden awareness, we remainedcommitted to guarding against unintended consequences.
Accordingly, we strengthened governance for youth accessprevention activities in our indirect retail programs.

Developing science-basedalternatives to cigarettes
Since 2008, PMI has invested USD 12.5 billion
in research, product development, scientificassessment, and manufacturing capacity to advancetobacco harm reduction and maximize the benefits
that smoke-free products can bring to public health.
PMI’s scientific assessmentof smoke-free products
We continued to dedicate almost all our R&D expenditure(99 percent in 2023) to noncombustible products, which
include smoke-free as well as wellness and healthcare
products.

Philip Morris International Integrated Report 2023

• Despite a political and regulatory need for disease-specific andepidemiological data, there are headwinds within the scientificcommunity that make it challenging in practice to collect andpublish science-based findings funded by the tobacco sector.

Between 2015 and year-end 2023, our R&D work and its
associated innovations resulted in around 3,720 patents
granted for smoke-free technologies by the world’s five largest
intellectual property offices (IP5).
PMI has also further diversified its smoke-free productportfolio (see an overview here) to provide adult smokers whowant to switch with multiple better choices than continued
smoking. None of these products involve combustion, andtherefore all of them expose the human body to significantly
lower levels of toxicants, compared with cigarette smoking.
Although addictive and not risk-free, this makes them a better
choice for adults than continued smoking.
Evidence available to date on our smoke-free products has
already demonstrated, or at least points firmly in the directionof, harm reduction.

Heat-not-burnOur most thoroughly assessed smoke-free product is the
IQOS tobacco heating system. The available data range
from aerosol chemistry to toxicology as well as clinical andbehavioral studies. The data consistently demonstrate that
IQOS is a better alternative to cigarettes for existing adultsmokers. These data resulted in the U.S. FDA determiningthat the marketing of the original version of IQOS, which relied
on a heating technology using a blade, in the U.S. would beappropriate to promote public health.
In addition to the original version of IQOS, a newer version(IQOS ILUMA) is now available using induction technology.
Most of the studies referenced above were conductedwith the blade version of IQOS and additional research was
conducted with the induction technology. We believe that
there is full comparability between the subsequent versions,and that the data from the studies conducted with the blade
version of IQOS remain valid and applicable to the newer
version.
In 2023, for IQOS ILUMA we completed a pharmacokinetic
study and a clinical study over five days to assess the exposure
to toxicants in users of the product. The studies demonstrated
that product acceptance was similar between IQOS ILUMA(with induction heating technology) and our previous IQOS
platform (with blade heating technology). It also found that themagnitude of reduction of exposure to toxicants was similar
between the two versions of IQOS.
Moving forward, we are planning to further evaluate the harm
reduction potential of IQOS and to launch studies in countries
including Japan and other countries around the world where
IQOS has been in the market for a number of years and have a
sizeable population using the product.

Operational impact

Fundamentals

Reporting and performance

Our strategy is to show direct benefit of switching fromsmoking to IQOS on the health of smokers with a smokingrelated disease in its early stages, evaluating symptoms,
function, and mortality, and healthcare utilization, suchas hospitalization. The primary diseases we are targetingare chronic obstructive pulmonary disease (COPD), where
beneficial changes from switching from cigarettes to IQOS
could be rapid for some symptoms and functions, and in
cardiovascular disease, such as heart attack and stroke, where
the beneficial effects from switching from cigarettes to smokefree products could be seen in about two years.
For COPD, we have started a three-year study to assess
progressive lung damage from smoking compared with using
IQOS. We will start a six-month study assessing symptoms andfunctional impairment in COPD with the same product. We
plan to retrospectively analyze real-world data for COPDrelated hospitalization in subjects using heated tobacco
products. For cardiovascular disease, we plan to conduct an
outcome study assessing mortality, heart attack, and stroke,preferably retrospectively using real-world data. In somemarkets, we intend to launch a product registry to establish
a research infrastructure on our products that would allow
long-term follow-up on various aspects such as product use
trajectories and health effects and benefits compared withsmoking.
It is important to recognize that real-world-evidence studies
are challenging to conduct as medical and insurance records
need to be linked to product use. In addition, high data quality
must be ensured for all data we want to evaluate, for example
mortality status. Real-world-evidence studies have limitationsin terms of what they can or cannot show.

Our scientific research
We conduct rigorous scientific studies to substantiate
the harm reduction potential of our smoke-free products
compared with continued cigarette use, including aerosol
characterization, nonclinical, clinical, perception, andbehavior studies as well as real-world evidence studies.

Platform
Development

Toxicological
Assessment

Clinical
Perception and Long-term
Assessment
Behavior
Assessment

47

Our scientific assessment is built on a collaborative approachand expertise in multiple fields, such as chemistry, biology,
clinical, medical, behavioral, and data sciences. Since 2015, wehave completed a total of 287 toxicological assessment studies,
29 clinical assessment studies, and 69 perception and behavior
premarket and post-market (surveillance) studies on smokefree products.
The results of our studies are publicly available on our
dedicated scientific website, PMIscience.com, publishedin peer-reviewed scientific publications, and have been
submitted to numerous regulatory authorities, including
the U.S. Food and Drug Administration (FDA). Further,our periodically updated scientific booklet provides themost up-to-date findings of our assessment program.

Reduce post-consumer waste• We refreshed our e-vapor product portfolio with
the introduction of VEEV ONE and VEEV NOW,
currently present in 26 markets. We also expanded
our oral smokeless commercialization, launching
ZYN in 10 markets. Thanks to the acquisition of
Swedish Match, our oral nicotine category growth
has positioned us as a leader in the U.S.

• The lack of an effective regulatory framework and its
enforcement, particularly for vaping products, including
youth access prevention measures and productstandards, undermines the integrity of the category
and public support for harm reduction and hinders
progress because it creates ambiguity around whichtypes of innovation and prevention measures will bedeemed acceptable, disrupting the level playing field.

Product impact

Seek net positive impact
in wellness and healthcare• To improve our offer in the affordability space withregards to smoke-free devices, we introduced lil solid EZ
in more than 20 markets, coupled with a continued focus
on BONDS in select low- and middle-income markets.

• Bans of the use of characterizing flavors in smoke-freealternatives such as heated tobacco products, alreadyintroduced in the EU or contemplated by regulatorsin other geographies, may undermine the role of suchproducts in accelerating the decline of smoking rates by
discouraging switching to better alternatives by thoseadults who would otherwise continue to smoke.

GovernancePurposefully phaseout cigarettes

Highlights

Strategy

Maximize the benefitsof smoke-free products

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46

Overview

Harm reduction potential of oral smoke-free products: snus and nicotine pouches

ZYN showed no presence of polycyclic aromatichydrocarbons or nitrosamines. The number of harmful
and potentially harmful constituents measurable withcurrent capabilities was comparable between ZYN
and oral nicotine replacement therapies (including gum
and lozenges).

Growing external scientific consensus
We welcome and encourage independent researchand verification of our products, methods, and results.
Over the past several years, a growing numberof organizations and institutions have initiated orcompleted studies on our smoke-free products or on
the methodologies and results supporting them.
1 Source: Wong et. al. Archives of Toxicology (2021) 95:1805–1829, https://doi.org/10.1007/
s00204-021-03020-4: https://pubmed.ncbi.nlm.nih.gov/33963423/

Philip Morris International Integrated Report 2023

Broadening access to
smoke-free products

Operational impact

Fundamentals

Reporting and performance

49

However, that potential can only be realized if adults who
would otherwise continue to smoke switch to these better
products. While adhering to strict marketing codes, wework relentlessly to enhance consumer awareness and theacceptability, availability, and affordability of our smokefree alternatives to cigarettes. As of the end of 2023, weestimate that approximately 33 million adults were using
our smoke-free products.1 This includes some 28.6 million
adults worldwide who were using our IQOS heated tobacco
products, of whom an estimated 20.8 million had fully
switched and stopped smoking.

The introduction of smoke-free products in themarketplace has the potential to reduce theindividual risk of smoking-related disease versus
continued smoking and benefit public health.

ACCESS

Awareness

1 Back et al. BMC Chemistry (2023) 17:9, https://doi.org/10.1186/s13065-023-00918-1
2 Incidence data: Swedish National Board of Health and Welfare Statistical Database(Accessed 5/2023); prevalence data: 1980–1998 – Henningfield J, Fagerstrom K
Tobacco Control 2001;10:253–257
3 2004–2022 – National Public Health Survey/Living Habits/Tobacco and Nicotine(Accessed 6/2023)

Acceptability

Availability

Affordability

R EG U L ATO RY FR A M E WO R K

These include public health institutions in several countries
that have used their findings to inform policies and regulations,as shown here.
The number of independent studies on heated tobacco
products published each year—many of them on PMI’s heatnot-burn products—has significantly increased over the past
years, as shown on PMIscience.com.
In general, these studies confirm important elements ofour research results. However, some third-party researchstudies have reported different results, approached datainterpretation differently (e.g., used smoking cessation as
the comparator), have methodological differences, or haveoverstated conclusions. Addressing some of the above anddeveloping more of a consensus in the scientific community
could drive a faster impact on public health but requires anopen dialog and discussion between industry, academia, andregulators. Refusing a scientific debate or prohibiting the
publication of valid scientific results conducted by the industry
hinders scientific and public health progress.

INCREASING AWARENESS
Adults who would otherwise continue to smoke should
understand the risks and benefits of switching to better
alternatives. They also should know that smoke-free products
are not risk-free and contain nicotine, which is addictive.
The best choice a smoker can make is to quit tobacco andnicotine altogether.
As of the end of 2023, we estimate that around 23 percent of
the adult smokers in the markets in which PMI commercializes
IQOS were aware of the product’s features and benefits
compared with continued cigarette use.2 It is clear that thelack of information about—and awareness of—smoke-free
products continues to present a significant hurdle to achieving
population-level tobacco harm reduction.

The regulatory environment is key to driving consumerawareness and encouraging adult smokers to switch
to better alternatives. When PMI enters markets withregulations that limit or prevent direct communication with
consumers, smokers adopt smoke-free products at a medianrate of 2 percent after six years. In markets where we cancommunicate more openly, we see a median 7 percent
adoption rate after six years and a best-in-class market
adoption rate of 15 percent.3

1 Figures are based on IQOS user panels and PMI Market Research. Estimated user numbers
for oral nicotine and e-vapor are approximate, with further methodology details to beprovided in future disclosures.
2 Excludes Russia, Albania, Bahrain and Kuwait.
3 The median rate reflects the median quarterly HTU market share six years after the launch of
IQOS. The data reflect markets (i) where IQOS has been present for at least six years and (ii)qualify as PMI top-40 income markets for 2022. “Markets where we can communicate more
openly” reflect markets that have regulations that are generally more permissive with respect
to communication and awareness building for heated tobacco products compared withcigarettes. “Best-in-class” markets reflect the median share of the top five markets where wecan communicate more openly.

Reduce post-consumer waste

E-vapor
We conducted a study in humans in the U.K. that compared
four groups over five days in confinement: a group of
smokers who continued smoking, two groups of smokers
who switched to our e-vapor product with either tobacco
or menthol flavor, and a group that stopped smoking.1
Results at day five showed reduced exposure to harmful
and potentially harmful constituents in the e-vapor groupsubjects that were comparable with subjects who stopped
smoking for the duration of the study. Compliance with theallocated intervention was 100 percent due to the study
being conducted in confinement and under the control ofthe study staff.

It would be reasonable to assume that the data fromsnus would apply to the nicotine pouch ZYN, given
some fundamental assumptions are met. For example,
the chemical composition of nicotine pouches containthe same or less amount of harmful and potentiallyharmful constituents compared with snus. No additionalharmful or potentially harmful constituents are added to
the nicotine pouch compared with the constituents insnus. Nicotine exposure for users of nicotine pouches
is comparable with that of a snus user. And finally, thenicotine pouch is used in a similar way as snus.

Product impact

Seek net positive impact
in wellness and healthcare

Snus showed no presence of polycyclic aromatichydrocarbons, which are known carcinogens, and only
traces of nitrosamines NNN and NNK—two strong,
tobacco-specific carcinogens found in tobacco products.
Generally, nominal amounts of these carcinogens arearound sevenfold lower (in micrograms per gram oftobacco) in snus compared with reference cigarettes.

Moreover, real-world and epidemiological data for snus
in Sweden provides evidence of population-level harm
reduction, which the U.S. FDA reviewed as part of theirauthorization of the modified risk claim for snus. “Using
General Snus instead of cigarettes puts you at lower
risk of mouth cancer, heart disease, lung cancer, stroke,emphysema, and chronic bronchitis.” It is important tonote that between 1980 and 2023, use of oral nicotine
products in Sweden increased, while smoking prevalencefell from about 35 percent of the adult male population
to about 6 percent.2 This period also saw a reduction inischemic heart disease and lung cancer in Swedish men.3

GovernancePurposefully phaseout cigarettes

Similar to heat-not-burn products, oral tobacco products
do not combust tobacco, so they inherently expose thebody to lower levels of toxicants and do not expose
the lungs directly to any toxicants. A study published in
2023 screened oral tobacco and nicotine products for 36
compounds identified as relevant harmful or potentiallyharmful constituents in the context of oral tobaccoand nicotine products. Only four of these compounds(excluding nicotine) were measurable with current
technological capabilities in ZYN nicotine pouches, andonly 15 were measurable in snus.1

Strategy

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48

Overview

Digital communication
Our online presence also drives awareness among legalage consumers. Our primary channel of our online
communications is conducted through our age-gated
IQOS.com website, which contains a listing of scientifically
substantiated smoke-free product statements to enable adultsmokers to better understand how our smoke-free products
fundamentally differ from cigarettes.

We seek to improve awareness of the smoke-free productcategory among adult smokers, enhance understanding of
key concepts underpinning it—such as the role of combustion,
nicotine, and tar, and the potential for harm reduction—andaddress widespread misconceptions.

Where allowed, we deploy customer care initiatives andother commercialization activities leveraging communication
platforms, which include inbound/outbound phone calls,
emails, SMS, and messaging applications. Where permitted,
we complement this engagement via our social media
accounts targeting legal-age nicotine users. Best-in-classsearch engine optimization (SEO) allows us to engage withlegal-age nicotine users and provide them with useful
information about our smoke-free products in a responsible
manner (learn more about our approach to responsible
marketing here).

Reaching out to smokers via cigarette packaging
Where permitted, we seek to engage with adult smokers via
our cigarette packaging. We do this using JustScan, an online
platform available on devices in more than 60 markets, asof year-end 2023. Adults who purchase our cigarettes canaccess content about smoke-free products through a QR code
or weblink typically featured on the cigarette pack itself or on
an insert.

In 2023, this allowed us to reach approximately 1.3 million
adult consumers across 36 markets globally, increasingawareness of our smoke-free products and explaining theirpotential benefits compared with continued smoking. Our
direct retail universe leverages trained staff who can engage
appropriately with adult smokers and apprise them of thebenefits of smoke-free alternatives compared with continued
smoking. We have implemented face-to-face trainings as well
as digital training modules in approximately 50 percent of ourindirect retail point of sales.

We also utilize communication campaigns and platforms tobuild a sense of community. For example, Together Forward isan integrated campaign that aims to address the motivations
and desires of millions of diverse adults across the globe who
would otherwise continue to smoke. It seeks to help themmake better choices. Within this campaign, we have built abrand engagement platform called Together X: Experience theUnexpected. It organizes national and cross-national events
for adult users of our smoke-free products that are co-createdwith our consumers.

STRIVING FOR HIGH PRODUCTACCEPTABILITY
Consumer acceptance is critical. Even the lowest-risk productwould not confer any benefit to individual and public health if
adult smokers did not switch to it.
We conduct post-market studies to understand how oursmoke-free products are used, helping us evaluate theiracceptance among adult users.
We consider conversion a critical indicator of whether oursmoke-free products meet consumer expectations. The
conversion rate is the percentage of adults who switch to
our less harmful products and successfully stop smoking
cigarettes versus the total number of adult users.1 In 2023, theglobal average full conversion rate for our leading smoke-free
product, IQOS, was approximately 73 percent.
We deploy a broad set of engagement actions to help
adult smokers navigate our portfolio of better products
and successfully embark on their smoke-free journeys. For
example, where permitted, we allow adult nicotine users to
try our heat-not-burn products before purchase via guided
trials and lending programs, and we support consumers in
the first 90 days of their smoke-free conversion journey via
onboarding programs that provide information on the chosen
product and available flavors. As part of these engagement
efforts, we reinforce scientifically substantiated statements
regarding the potential benefit of switching to smoke-freealternatives versus continued smoking.
Acceptability is driven by a seamless, consumer-centric,
and superior consumer experience deployed by our go-to
market infrastructure and our broad set of programs andservices. We consider Net Promoter Scores (NPS) to be strong
indicators that the commercial engine we have built createshigh satisfaction among our consumers. We have seen agrowing channel NPS in 75 percent of our markets, whichplaces us best in class in the tobacco industry and as a strong
competitor within the broader consumer goods category.

Operational impact

Fundamentals

Reporting and performance

Expanding our smoke-free portfolio
We understand it is impossible for any one product to meetthe individual preferences of all adult smokers. To accelerate
the decline of smoking prevalence, we continue to expand ourmulti-category portfolio of better, science-based alternatives
to cigarettes. We offer a broad variety of experiences,
technologies, tastes, and price options to suit the wideranging preferences and needs of adult smokers. In 2023, we
significantly expanded our smoke-free portfolio, offering 13
smoke-free (heat-not-burn and e-vapor) devices for sale by
year-end.
Heat-not-burnWith heated tobacco unit (HTU) manufacturing constraints
now normalized following the COVID-19 pandemic andreconfiguration following disruption from the war in Ukraine,
we were able to expand IQOS ILUMA, the latest generation of
our main heat-not-burn product, to 51 markets by year-end(2022: 16 markets).
IQOS ILUMA is bladeless and has significantly enhanced
consumer experience, resulting in higher NPS andstrong growth in launch markets. We also invest in novel
consumables with different price points and responsible flavor
directions (read more about the role of flavors here).
Oral nicotine
Our oral nicotine products do not produce vapor and smoke
altogether, making their use convenient.
Acquiring Swedish Match in late 2022 has allowed us toexpand both our product portfolio and geographic footprint.
Within this category, ZYN has delivered rapid acceleration of
our smoke-free business, with U.S. sales volumes growing byover 50 percent since the acquisition. ZYN now represents
72.8 percent of the U.S. nicotine pouches market.2
The international expansion of nicotine pouches remains a key
medium-term opportunity. Expanding our presence in the oral
smokeless category will further increase the acceptability of
our smoke-free value proposition. It also aligns with changing
consumer trends and our strategy to help bring an end tocigarettes globally.
E-vaporIn the e-vapor category, our approach in select markets is
progressing, with VEEV ONE and VEEV NOW commercialized
in 26 markets as of year-end 2023 (2022: 12).

1 Considering that individual consumption of PMI heated tobacco units represents
the totality of their daily tobacco consumption in the past seven days or, for markets
where there are also competitors’ heated tobacco products, at least 70 percent of their
daily individual consumption is with PMI heated tobacco products. See Glossary.
2 Based on a 13-week period.

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51

Reduce post-consumer waste

Communication at the point of sale and other retail locations
We also leverage offline communication to engage with ourconsumers and other adult smokers about our smoke-free
products. For example, we place communication materials inindirect retail points of sale and other locations, such as hotels,
restaurants, and cafes.

Product impact

Seek net positive impact
in wellness and healthcare

In markets where smoke-free products are available, we
leverage JustScan to drive brand awareness among adultsmokers and support their conversion to better alternatives.
Engagement via JustScan has proven successful. Over40 percent of adult smokers who have accessed it havedemonstrated interest in receiving more information or trying
smoke-free products.

Smoke-free products consumer engagement
Our consumer programs facilitate awareness. For example, therefer-a-friend program allows current adult users to introduce
smoke-free products to an adult friend who already uses
nicotine products and share their firsthand experience of thebenefits of a smoke-free journey. Our consumer relationshipmanagement (CRM) initiative ensures our user base is always
up to date with relevant information about our smoke-freetransformation while respecting their privacy.

GovernancePurposefully phaseout cigarettes

Informing adult nicotine users about
the smoke-free category
There is widespread confusion about basic concepts
underpinning the smoke-free products category. This leads
to misunderstandings about the harm reduction potential ofscientifically substantiated smoke-free products for adults
who would otherwise continue to smoke, and slows down the
decline in cigarette smoking prevalence.

Strategy

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50

The role of flavors and nicotine insmoke-free product acceptability
The responsible use of flavors is a critical factor in helping
adults who would otherwise continue to smoke to fully
switch from combustible tobacco products to smoke-freealternatives. We seek to expand our flavor offerings in amanner that guards against use by unintended audiences,including youth (read more about youth access preventionhere).

Currently, TEREA, used with IQOS ILUMA, delivers a superior
tobacco experience with eight classic tobacco variants.
We are further exploring ways to enhance our tobacco
flavor experience.
In addition to the HTU products we currently offer, webegan launching products such as TEREA CRAFTED (initiallydeployed in Switzerland), a curated collection of tobacco
flavors mixed with botanicals such as rosemary, star anise,and clove. By year-end, we offered 86 taste variants for PMI
heated tobacco units.
While reinforcing our leadership in tobacco taste, we arealso investing in novel consumables for our heat-not-burnproducts that go beyond tobacco to increase acceptability
among adult smokers.

Strategy

Governance

Product impact

For example, we have launched LEVIA, our innovative
consumable product line that contains nicotine but does notcontain tobacco. Instead of tobacco, the core of the LEVIA
stick is made up of ingredients mostly derived from cellulosebased ingredients which are carefully processed and act asa neutral carrier without additional aromas. This allows us toinfuse the flavors and nicotine into the stick to experience the
LEVIA flavors to the fullest.
LEVIA is designed to be used only with IQOS ILUMA devices.
When heated by IQOS ILUMA devices, it creates a nicotinecontaining aerosol. LEVIA sticks are not risk-free and provide
nicotine, which is addictive. The absence of tobacco does notmean that this product is safer than other sticks used withIQOS ILUMA.
Within our oral category, mint-type flavors continue to leadthe ZYN portfolio, representing over 60 percent of sales.
We have seen growth in our unflavored variants, which now
represent about one-fifth of our portfolio.

Fundamentals

Reporting and performance

53

Evolving device range, personalization, and flexibility
IQOS is evolving to give users more flexibility to customize
and personalize their devices. Our device range has evolved
from a single model in standard colors into a full range ofmodels and a wider palette of color choices. To maximize
lifestyle integration, we elevate our approach by offering
limited editions and accessories, creating an engaging storyled communications approach, and expanding our partnershipfootprint.
Supporting adult smokers to switch
to smoke-free products
In addition to product characteristics, it is essential that wehave the right infrastructure in place to support adult smokers
along every step of their journey away from cigarettes.
In line with the requirements of our Marketing Codes, wedeploy consumer programs in a holistic direct retail channel
ecosystem, allowing our adult consumers to find and purchaseproducts conveniently.
Digital capabilities also help us serve adult consumers more
efficiently and engage with them in a more personalizedfashion via a specific electronic customer relationshipmanagement (eCRM) conversion journey.

Seek net positive impact
in wellness and healthcare

Finally, within the e-vapor category, we have developed aproprietary e-liquid formulation using genuine tobacco flavors
from real tobacco leaves. VEEV Accents delivers real tobacco
taste and demonstrates better conversion and retention rates
of adult smokers than regular tobacco flavors. This has beenshown not only in our consumer research but also in the
product’s significantly better sales performance in retail storescompared with regular tobacco variants in our first launchmarket, Canada.

Operational impact

Purposefully phaseout cigarettes

The difference in taste between smoke-free products
and adult smokers’ preferred cigarette brands can be an
obstacle. Tobacco taste remains the most popular flavor,
with 91 percent of exclusive legal-age smokers of cigarettes
globally using tobacco flavors.1

Overview

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52

Our perspective

1 Source: PMI Financials or estimates as of July 2023

Philip Morris International Integrated Report 2023

Reduce post-consumer waste

Consistent with our support for a comprehensive
approach to the regulation of all tobacco- andnicotine-containing products, we advocate for acomprehensive and risk-proportionate regulatory
framework that puts in place safeguards against
unintended use and robust post-market monitoring ofreal-world data to assess the actual impact of policy
interventions. Further, and in relation to flavors usedin smoke-free products, we advocate for regulations
on flavors that we believe are predominantly
appealing to adult smokers and can help themswitch to smoke-free products (such as tobacco,
menthol, and mint). The use of any additional flavors
should undergo stringent scrutiny to guard against
unintended use (in particular among underage, absent
fully enforced controls on underage sales) and in any
event be strictly regulated.

Overview

The role of regulation
Our ability to make our smoke-free products available
for sale to adult smokers depends on several factors—
including some beyond our control—that dictate
our capacity to scale and legally commercialize our
products in certain countries.

Philip Morris International Integrated Report 2023

SI

Number of markets where PMI
smoke-free products are available for sale
2025

A SPI R AT ION

100

2023

84

2022

73

2021

71
0

25

50

75

100

Note: For deﬁnition of available for sale, see Glossary.

Our geographic expansion improved year-on-year but is still
constrained by certain regulatory factors.
In 2023, we focused on expanding the availability of oursmoke-free products, most notably our flagship heat-not-burnproduct, IQOS ILUMA. By year-end, IQOS ILUMA was available
in 51 markets (2022: 16), while our e-vapor products, including
VEEV ONE and VEEV NOW, were commercialized in 26
markets (2022: 12). Our oral products were commercialized
in more than 30 markets.
Beyond external factors, such as the regulatory landscape,the rate at which we can roll out smoke-free products globallydepends on certain internal constraints. Notably, we mustevaluate the products’ commercial viability based on the sizeand capacity of our local organizations across the 175 markets
in which our cigarette products are present and prioritizeinternal resources accordingly.

Further, our ability to manufacture smoke-free products
at scale requires significant investment in our production
capacity. To launch these new products, we must build
factories or convert existing cigarette factories and modernize
our production lines. As of the end of 2023, including Swedish
Match and Vectura Fertin Pharma, 16 of our 50 factories
worldwide were either partially or fully dedicated to the
manufacture of our heated tobacco units or oral nicotine
products (2022: 14 out of 49). This includes the opening of a
new factory dedicated to the production of heated tobacco
units in the U.S.

Unlocking the opportunity for
IQOS in the U.S.
In October 2022, we announced an agreement with
Altria Group, Inc. to end the companies’ commercial
relationship covering IQOS in the U.S. as of April 30,
2024. Thereafter, PMI will have full rights tocommercialize IQOS and other smoke-free productsin that market, providing a clear pathway to reachthe estimated more than 28 million Americans whocurrently smoke cigarettes.1
We view IQOS as a very substantial growth
opportunity in the U.S., given the clear demand
among adult smokers for credible smoke-freealternatives to cigarettes and the limited successto date that existing offerings have had in termsof enabling adults to switch away from cigarettes
entirely. Furthermore, there are ample opportunities
in this market to build adult smoker awareness andunderstanding of smoke-free products.
This is especially the case for IQOS given its MRTP
FDA authorizations, allowing the product to bemarketed in the U.S. with reduced exposure claims.
In 2023, we also submitted Premarket Tobacco
Product Applications (PMTAs) and Modified Risk
Tobacco Product Applications (MRTPAs) for IQOSILUMA heated tobacco products with the U.S. Foodand Drug Administration (FDA).
1 Source: Centers for Disease Control and Prevention, Data and Statistics,
Smoking and Cigarettes.

Operational impact

Fundamentals

Reporting and performance55

Increasing availability within each market
In addition to international expansion, we must ensure oursmoke-free products are conveniently available to adultconsumers within the markets in which we operate.
When launching a product in a new market, our strategy has
been to start in a key city, then progress to smaller cities, andeventually, the entire geography.
Beyond our geographic footprint, we seek to increaseavailability within markets by leveraging a variety of retailchannels, including:• Direct retail channels, such as brand retail locations (e.g.,
IQOS stores) and e-commerce websites (where permitted).
As of the end of 2023, there were over 1,300 direct retailtouchpoints (including 286 permanent PMI-owned IQOS
boutiques and 120 temporary touchpoints) worldwide ande-commerce sites for our smoke-free products in 58 markets(2022: >1,800; 285; 140; 56).
• Indirect retail channels, such as tobacconists, convenience
stores, gas stations, consumer electronics or vape stores,
and online channels. Some of these retailers only sell smokefree consumables while others allow consumers to purchasesmoke-free devices. Others—called “IQOS partners”—offer
consumers a wide range of services and experiences,including product trials for existing adult nicotine users.
As of the end of 2023, there were 3,900 IQOS partners
worldwide and over 900,000 points of sale at which oursmoke-free product consumables were sold (2022: 3,259;
over 800,000).

Reduce post-consumer waste

We call on governments to regulate the industry,
implement responsible marketing practices,and enable a level playing field with appropriate
product standards, strong youth access prevention
safeguards, and commercial and fiscal regulation.

Making our smoke-free products available
in an increasing number of markets
As of year-end 2023, our smoke-free products were available
for sale in 84 markets, either in key cities or nationwide(2022: 73). We aspire to make them available in at least
100 markets by 2025.

Product impact

Seek net positive impact
in wellness and healthcare

Encouragingly, we have witnessed growing scientificand regulatory consensus supporting science-backed
smoke-free products. An increasing number ofgovernments now complement traditional tobacco
control measures (i.e., those intended to discouragesmoking initiation and encourage cessation) witha harm-reduction-based approach (i.e., providing
adults who would otherwise continue to smokewith access to scientifically substantiated smokefree alternatives). Visit PMI.com for an overview ofsignificant regulatory developments in recent years.

To achieve our vision for a smoke-free future, we are working
to ensure these better alternatives are available in as many
countries as possible.

GovernancePurposefully phaseout cigarettes

Tobacco and nicotine product marketing coveringsmoke-free products is subject to extensive
restrictions worldwide, including outrightmarketing bans in some countries. Such regulatoryenvironments limit our ability to increase awarenessof and access to smoke-free products as it makes it
difficult or sometimes impossible to enter a market(by banning the sale of smoke-free products) or
restricting opportunities to raise awareness among
adults who would otherwise continue to smoke that
better alternatives to cigarettes exist. Excessively
restrictive regulations may also limit our ability tooffer adult smokers acceptable alternatives, forexample in case of complete bans of smoke-free
products with characterizing flavors. Taxing all
tobacco- and nicotine-containing products without
differentiating or recognizing their different risk
profile also hinders our ability to shift adult smokers tobetter alternatives (read more about our perspective
on regulation here).

EXPANDING PRODUCTAVAILABILITY

Strategy

Maximize the benefitsof smoke-free products

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54

Overview

ADDRESSING PRODUCTAFFORDABILITY
Price must not be a barrier to achieving a smoke-free future.
Besides working to increase awareness, acceptability, and theavailability of smoke-free products across markets, we mustensure that our portfolio includes products that are affordable
by all adult smokers. Our vision of a smoke-free future canonly materialize if all adult smokers who don’t quit tobaccoand nicotine altogether can afford to and do switch to better
alternatives.

We have progressed on our 2025 aspiration to have low- andmiddle-income markets represent at least half of the markets
where we commercialize our smoke-free products. As of theend of 2023, our smoke-free products were available in 39
low- and middle-income markets, or 47 percent of the markets
where we commercialize them globally (2022: 30; 42 percent).

Proportion of markets where PMI
smoke-free products are available for salethat are low- and middle-income markets
2025

A SPI R AT ION

47%

2022

42%

2021

42%
25

50

75

100

Note: Excluding PMI Duty Free. World Bank report issued in 2023 is used on
a comparative basis for income-level classiﬁcation. For deﬁnition of low- andmiddle-income markets, see Glossary.

Smoke-free consumables
Our smoke-free consumables are of three types: those thatcan be used without a device (e.g., nicotine pouches), thosethat require a device (e.g., heated tobacco units or e-liquid
cartridges), and those that are all-in-one (e.g., our disposable
e-vapor product). Several factors contribute to their price and,
therefore, their affordability.

To alleviate the cost barrier some adult smokers who would
like to switch may experience, we deploy various solutions
across certain markets, such as:

The recommended price of our consumables is determinedby costs related to R&D, production, compliance, andcommercialization, as well as the excise taxation regime in the
countries where they are sold.

• A range of price points: Our diversified portfolio offers avariety of price points to facilitate access by adult consumers
regardless of their income. Beyond IQOS, we aim to broaden
our legal-age smoke reach with a lower-priced heat-not-burnportfolio, currently consisting of BONDS by IQOS, available ina few selected low- and middle-income markets, and lil solid,
commercialized in 31 markets.
• Lending and refunds: We allow adult consumers to try the
product for a defined period before paying the full upfront
price. Depending on its condition, consumers may return thedevice for a refund.
• Payment in installments: We are piloting “buy now, pay
later” solutions in specific markets where purchase barriers
can hinder access to our smoke-free products.

• Second life: We remarket used products that have beencollected and refreshed or repaired according to stringent
standards (read more here).
• Extended life: We continuously work to enhance device
longevity, which lowers the average annual cost for the adultuser while also improving the devices’ ecological footprint(read more here). Further, our boutiques, flagship stores,
and trade partners make available an extended set of free
support services, such as professional cleaning of devices,
airflow checks, and firmware upgrades. Our contact centersassist adult consumers with their devices and ensure theirpurchase is complemented by best-in-class after-salesupport.

Looking at our most broadly available smoke-free product,
IQOS, overall costs of the heated tobacco units are, on
average, much higher than those of cigarettes, due toadditional R&D, manufacturing, and commercialization costs
as well as costs for devices. However, a key factor driving
tobacco and nicotine product retail prices is the excise tax.
Taxing products according to their risk profile is a strong
demand measure that can contribute to behavioral change andencourage adult smokers to switch to less harmful alternatives.
Accordingly, excise taxes on cigarettes generally tend to (andshould) be much higher than those on smoke-free products.
The combined effect of manufacturer costs and tax
differences is such that the price at which the consumer
buys heated tobacco units is typically below that of premium
cigarettes—or can even be at the low end of cigarette pricing.
As of the end of 2023, we estimate that our heated tobacco
units are, on average, priced the same as or lower than an
adult smoker’s current cigarette brand for 68 percent ofsmokers in the geographies where we commercialize IQOS
(2022: 65 percent).
To accelerate category and share growth, we are expanding
the reach of our induction consumables. In select markets,
there is an opportunity to further our reach among legalage smokers via a below-premium proposition. SENTIA wasdeveloped with a focus on the essentials of taste at a more
affordable price. It was launched in Japan in April 2022. In
2023, building on our success and learnings in Japan, wedeveloped DELIA, the consumer-qualified name outside Japan,
with the same spirit and essence of taste at a more affordable
price for select markets.

Operational impact

Fundamentals

Reporting and performanceMarketing and selling our
products responsibly
Our marketing and sales policies and practices
reflect our commitment to market all our products
responsibly. This means increasing adult consumers’
awareness and understanding of our smoke-free
product portfolio while guarding against the risk ofaccess by unintended audiences.
Marketing Codes
Our Marketing Codes embody PMI’s commitment to ethicalbehavior and lay the groundwork for responsible productdevelopment, design, marketing, consumer engagement, andsales practices. They comprise one Code for Non-Combusted
Alternatives and one Code for Combusted Tobacco Products.
Internal implementation guidelines accompany these codes.

A glance at our path to integrate
Swedish Match
Information and data in this section do not
integrate Swedish Match and thereby exclude theU.S. However, beginning in November 2023, PMI
Marketing Codes and the associated implementation
guidelines have been rolled out across the Swedish
Match organization. A U.S.-specific Marketing Codefor smoke-free products became effective in early2024.
Our affiliates’ marketing practices in the U.S. set ahigh benchmark for the industry. Our affiliates do notuse social media influencers in the U.S. and refuse all
requests for such partnerships. Moreover, Swedish
Match’s own digital platforms used to engage with
ZYN consumers are age-gated and restricted tocurrent legal-age nicotine users. Our U.S. affiliates
also support the We Card and TruAge initiatives,
which are programs designed to prevent underagepurchase of age-restricted products at retail. Swedish
Match’s advertising features only individuals aged 35
or older. Learn more here.
Moreover, all Swedish Match employees who are
directly involved in developing or deploying product,
packaging, advertising, marketing, engagement, or
sales initiatives will participate in mandatory training
on the Marketing Code and implementation guidlines.

Philip Morris International Integrated Report 2023

57

Reduce post-consumer waste

2023

0

Devices
Some of our smoke-free products—such as our heat-not-burnproducts and e-vapes—require the use of electronic devices
together with consumables. These quality devices rely on
innovative technologies and incur significant development andproduction costs to ensure they meet our science-based harm
reduction objectives.

• Trade-in: To further minimize barriers to purchase,
consumers can exchange their current device for a newer
version and benefit from a discount.
>50%

Product impact

Seek net positive impact
in wellness and healthcare

SI

GovernancePurposefully phaseout cigarettes

This means deploying inclusive solutions to meet the needsof different population segments while accounting for the
economics of smoke-free products—which are significantly
different from those of cigarettes.

Strategy

Maximize the benefitsof smoke-free products

MA XIMIZE THE BENEFITS OF SMOK E-FREE PRODUC TS

56

Our Marketing Codes-related training includes global
compliance e-learning courses, an instructor-led classroom,and online training sessions for our employees and third
parties.

Monitoring and remediation
We have infrastructure in place to monitor compliance with
our Marketing Codes and provide any necessary clarification
to functions or markets regarding code implementation.
During 2024, we will build on the learnings from selfassessments and internal monitoring to strengthen thefoundation for external monitoring, which can complement
and add robustness to our processes.

We conducted our 2023 self-assessment program andcollected input from over 110 markets, which represents
receiving answers to nearly 11,000 checks. The process
allowed us to confirm a high level of compliance with therequirements in scope for this wave. As part of this wave, we
also tracked the completion rate of delivering trainings andsending youth access prevention letters as part of our youth
access prevention programs (read more here), both due by
year-end, and could confirm that all markets completed thisimportant undertaking.

Processes and controls were reviewed in each of thesemarkets and global functions, and auditors conducted fieldvisits to certain points of sale to assess the steps taken to
implement and to comply with our Marketing Codes. No
significant issues related to youth access were identified in thelocations visited based on the audit procedures performedby the internal audit teams. Audit procedures vary per audit
depending on various factors, but generally include fieldvisits, testing of the age verification process, and inspecting
programs that have been deployed such as marketing andcommunications.
We require the inclusion of strict minimum contractual
requirements in our agreements with third-party retailers who
sell tobacco and other nicotine products, requiring them toensure the products are being sold to age-verified consumers
prior to sale, as mandated by our codes. Those were generally
implemented in accordance with the codes’ requirements and
we are not aware of any breach that would have required thetermination of an existing contractual relationship.

Product impact

Operational impact

Fundamentals

Reporting and performance

Ensuring that our marketing and commercialization activities reach intended audience
As part of our governance process for premarket
assessment of flavored products, we conducted six
studies on our heat-not-burn and e-vapor products inseven markets in 2023, including interviews with morethan 9,500 adults who were not consumers of tobacco
or nicotine-containing products. The results of thosestudies show very low intention to use our smokefree products among adult former users of tobacco or
nicotine-containing products (between 1.3 percent and3.3 percent across the six studies) and adults who had
never used tobacco or nicotine-containing products(between 0.7 percent and 2.7 percent across the same
six studies).
We do not conduct studies involving individuals under
the legal age to purchase tobacco or nicotine-containing
products. However, results of our studies among theyoungest legal-age adults who were not consumers of
tobacco or nicotine-containing products—those aged
18 (or higher, depending on the legal age in the country)
to 24—show very low intention to use our smoke-free
products (between 0.7 percent and 3.3 percent acrossthe six studies).
We also conduct post-market studies to understand how
our smoke-free products are used and by whom, once
made available for purchase in the market.

Preventing youth access and use of our products
We have developed a holistic and comprehensive approach toguard against youth access to our products.
These measures primarily consist of ensuring that, whenattempting to purchase our products, potential buyers are
age-verified across all access channels, including PMI-managed
boutiques, PMI e-commerce platforms, third-party retailers,and online marketplaces. While our control over thesechannels varies, we make every effort to guard against youth
access to our products regardless of the point of sale.

These studies confirm the results of our premarket
perception and behavior assessment studies, measure theextent to which adult smokers switch to our smoke-free
products, and monitor whether never and former smokers
use our smoke-free products.
The data from recent post-market studies conductedin Asia and Europe—involving, per country and year,
between 3,000 and 7,000 adults from the general
population as well as about 2,000 adults from IQOS user
samples—confirm that IQOS is reaching the intended
audience (adult smokers).These studies also confirm that
IQOS use by adults who had never smoked or had alreadyquit using tobacco and nicotine products is very low.
Specifically, the results in these markets show that morethan 96 percent of IQOS users were already using tobacco
products when they switched to IQOS.
Finally, the results from our premarket perception andbehavior assessment studies, which are conducted as partof PMI’s scientific assessment of IQOS, show that adultconsumers understand that IQOS presents less risk ofharm than cigarettes but is not risk-free; this is confirmed
by our post-market studies.1
1 AlMoosawi S, Bajec M, Mainy N, Kallischnigg G, Zwisele B, Fischer K, Magnani P,
Roulet S. Risk perception of IQOS™ and cigarettes: Temporal and cross-country
comparisons. SSM Popul Health. 2022 May 17;18:101123. doi: 10.1016/j.
ssmph.2022.101123. PMID: 35669892; PMCID: PMC9162949

Vaping made right
Vaping made right is critical to sustainable growth.
The e-vapor segment poses several key issues
that overshadow its harm reduction benefits and,altogether, jeopardize business longevity. Next toenvironmental impact and noncompliance withexisting product regulations, one of the mostpronounced concerns is the potential appeal, access,and use of e-vapor products by youth.
We are disrupting the status quo, leading by example,
and preventing youth access through a responsible
approach to product development, communication,and commercialization.
We offer a selection of crafted flavors appealing
to mature palates but no dessert-like tastes. Our
devices are not flashy, nor game- or beauty-inspired.
They represent curated designs, colors, materials,
and finishes, following strict flavor communication
guidelines and responsible marketing practices.
These practices apply to our full e-vapor category.

Philip Morris International Integrated Report 2023

59

Reduce post-consumer waste

Self-assessments
Our codes require that a self-assessment program be
implemented to evaluate compliance at market level. In 2023,
all our markets completed the self-assessment questionnaire
for the second consecutive year.

Complementing the self-assessments performed, audits
conducted by our Risk & Assurance function’s internal audit
team in 2023 found that issues related to compliance with theMarketing Codes for PMI’s Combusted Tobacco Products andNon-Combusted Alternatives were insignificant in nature, andthese issues were mainly procedural. As an outcome of theenterprise risk assessment, the internal audit team conductedmarket and global function audits that covered local as well as
global processes and controls.

GovernanceSeek net positive impact
in wellness and healthcare

Around 67,000 people participated in at least one Marketing
Codes-related training session in the past two years. Of thistotal, approximately 27,000 were PMI employees and around
40,000 were third-party workers. In 2023, we delivered
Marketing Codes training to new hires and refresher courses,
including specific training on youth access prevention, to PMI
salespersons engaged in brand retail or our contact centers.

Internal monitoring
Our Compliance function investigates potential incidents ofnoncompliance with applicable laws, regulations, the PMI
Code of Conduct, and PMI Policies, including PMI’s Marketing
Codes. In 2023, there were 28 substantiated allegations ofviolations of our Marketing Codes (2022: 14). In responseto these violations, PMI took disciplinary action against the
involved individuals as appropriate, ranging from verbal
warnings or counseling, written warnings, and suspensions totermination of employment.

Strategy

Purposefully phaseout cigarettes

Employee and third-party training
Our responsible commercialization efforts rely on our
employees and the third parties with whom we work
strictly adhering to our responsible marketing policies. All
PMI employees involved in our commercialization activities
must follow the Marketing Codes and be trained on them atleast every two years. Third parties we engage and who are
involved in commercialization activities (including agencies,
promotional staff, and call center agents, among others) mustalso be trained at least annually on the relevant parts of thecodes and follow those portions that relate to the roles they
perform.

Overview

Maximize the benefitsof smoke-free products

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58

Specific requirements in our Marketing Codes
to guard against youth access
The global youth access prevention requirements in ourMarketing Codes apply to all our commercial activities, evenwhen not required by local laws. These stringent standards,
combined with our responsible approach to marketing(regarding channels and content), guard against the likelihoodthat our products and related consumer communications willreach or appeal to youth.

The methods used to age-verify consumers vary by channel
and market. For instance, individuals attempting to purchaseproducts through a PMI-operated branded website may be
asked to upload a copy of their ID or provide certain personal
data which can identify them.

Alternatively, when purchasing at our branded brick-andmortar retail location, an individual will be age-verified visually
by a trained salesperson and asked for a copy of their ID incase of doubt.

Consequently, we place our advertising, marketing, andsales materials in locations where at least 75 percent of theaudience is reasonably estimated to be above legal age or atleast 18 years old in markets without a minimum legal age.
Digital content creators
Digital channels play an important role in allowing adult users
to access accurate information about our products. Last year,
we completed a controlled pilot program for digital content
creators. These are adult users who create content about
our products, such as technical reviews, product unboxing,
or describing their personal conversion journey. The decision
to run the pilot was fundamentally based on the existenceof established social media age-gating features, which help
guard against the content becoming accessible by unintended
audiences. In addition, we use reputable audience analysis
tools to validate that the social media audience of creators
we collaborate with is fulfilling the same strict demographic
criteria we apply to all our communication channels.

Philip Morris International Integrated Report 2023

PMI is committed to using flavors responsibly and has a central
governance process under which all new flavored productvariants are evaluated.
In addition, flavored product propositions are assessed
premarket to minimize the risk of adverse consequences,including appealing to youth and other unintended audiences.
The assessment framework considers, among other things,
the flavor dimension of the product, how the product will belabeled and marketed, and the regulatory and commercial
environment.
Moreover, our flavored product variants are named in a waythat either gives no indication to consumers about the flavor
direction (beyond tobacco, menthol or kretek) for combustible
and heat-not-burn products, or is intended to be factual(e-vapor and oral nicotine products), avoiding names that
could particularly appeal to unintended audiences.
In 2023, we built out internal capabilities to extend thisgovernance process to our full oral nicotine category.
Youth access prevention in indirect retail:engaging with our trade partners
We do not own or control the vast majority of retail outlets
that sell our products. A significant portion of our cigarettes
and smoke-free consumables are sold in indirect channels.
We set robust requirements and work with retailers to ensure
they understand why they should not sell nicotine-containing
products to youth. These measures complement local
regulations for youth access prevention, which we comply
with and which retailers must enforce.
In 2023, we continued strengthening our youth accessprevention program for indirect retail:• Increased global footprint: markets where PMI has minimalbusiness presence are required to comply with the program
via distributors or third parties where such deployment ispossible.
• Proof of performance guidelines for markets provide
evidence on the program implementation.
• New centralized data collection and storage tool for programplans and results.
• Improved governance and program oversight by central andregional cross-functional teams.

Product impact

By the end of 2023, markets representing 98 percent of our
total shipment volume were implementing such programs,
which supplement our Marketing Codes requirements.
SI

Proportion of shipment volume coveredby markets with youth access prevention
programs in indirect retail channels
Maintain

A SPI R AT ION

>90%

2023

98%

2022

91%

2021

91%
0

25

50

75

100

Note: See PMI’s Sustainability KPI Protocol 2023 for further details.

Youth access prevention in direct retail:efforts in our owned channels, in-person and online
At our brick-and-mortar branded retail outlets, any consumer
who wishes to purchase our products must be age-verified
by a trained salesperson. When selling our products online,
we implement age-verification methods integrating the latest
technologies, such as data match, ID match, call center video
calls, and facial analysis age verification. We made significant
progress in implementing online age-verification technologies
during the year, increasing from 22 markets representing
64 percent of smoke-free product shipments in 2022 to 32
markets reaching 71 percent of shipments in 2023.
Enhanced online age-verification
When performing age verification online, there are several
options implemented by our markets. One option is to ask
the consumer to upload a copy of their ID so that we canvalidate their age. Alternatively, we can leverage third-party
databases from reliable and credible sources (e.g., governmentorganizations, telephone network operators, or banks). Here
we ask the consumer to provide us with personal data thatenables us to identify them, which we then use to validatethat they are an adult in such third-party database. Anotheroption is for a contact center agent to age-verify a consumer
face-to-face via a virtual video call.
During 2023, PMI continued making progress on ourcommitment to develop, test, and deploy a range ofenhanced online age-verification technologies for our
e-commerce sites. For example, Yoti—certified by the Age
Check Certification Scheme in the UK—is an innovative facial
analysis age verification tool which has been tested acrossmultiple industries and proven a reliable means of verifyingthat an individual is an adult, It simplifies and speeds up thepurchase experience for our adult consumers and in thepast year was piloted in five markets with IQOS and VEEV
e-commerce sites, with additional expansion planned in 2024.

Operational impact

Fundamentals

Reporting and performance

61

Where the necessary technology is not available,or where a person cannot be age-verified using anyof these methods, we apply alternative processes.
These include face-to-face age verification by couriers
on delivery or at collection pickup points.
Age-verification technology in our electronic devices
On-device access restriction through age-verification
technology could serve as an incremental measure tocomplement our existing suite of youth access prevention
tools to help prevent unintended audiences from accessing
our electronic smoke-free devices—when and wherecommercially feasible and viable. Since 2020, PMI has invested
in R&D and tested a range of novel technologies and user
experiences that aim to verify the age of consumers prior to
the first usage of our electronic smoke-free devices. These
have varied across our smoke-free products (from IQOSILUMA to VEEV and BONDS by IQOS).
From 2021 to 2023, these technologies and consumer
experiences were tested in iterative consumer research labs inFrance, Japan, and the Philippines. Simultaneously, live market
tests with real trade partners and consumers were conducted
in France and New Zealand.
Our findings demonstrated positive acknowledgment fromadult consumers and trade partners alike that restricting
access to nicotine-containing products to adults is the rightthing to do. However, they also demonstrated that 28 percentof consumers felt negatively about the consumer experience,indicating that it was intrusive, impractical, and represented
a barrier to purchase and conversion to better alternatives tocontinued smoking.
We will utilize current and future learning to guide ourambitions around device-level age verification and assess
our aspirations, remaining steadfast in our commitment toprevent access to these products by unintended audiences.
Monitoring effectiveness of youth access prevention programs
Mystery shopper programs—in which legal-age adults
attempt to buy our product and then report back to us onwhether they were age-verified—remain an effective way
to monitor compliance with our responsible marketing andcommercialization requirements.
In 2023, our focus has been on laying the foundation for acompany-wide mystery shopping program, ensuring the mostefficient and effective verification system of compliance with
our youth access prevention requirements. Starting from theidentification of worldwide best practices from regulatedindustries, we have developed the plan, identified the best
business partners, and developed a methodology to identify
focus markets (based on key parameters such as youth
smoking prevalence and markets’ rule of law index).

Reduce post-consumer waste

Marketing communications
PMI’s Marketing Codes requirements also shape our creative
materials, ensuring, for instance, that they do not containimages of youth-oriented celebrities or of models who are, orappear to be, under 25 years of age. They also guard against
product placement.

Our product portfolio, including cigarettes and smokefree products, features a wide range of taste variants so it
can adequately cater to individual adult consumers’ taste
preferences (read more here).

GovernanceSeek net positive impact
in wellness and healthcare

In the case of the latter, we then use that data to identify that
person and verify that they are of legal age via a reliable thirdparty database (such as one operated by a financial institution
or government agency).

Assessment of flavors
By design, smoke-free products do not burn tobacco and,
therefore, provide a different sensory experience fromcigarettes. Flavors can help adults who would otherwise
continue to smoke to overcome barriers related toacceptability and switch completely to better alternatives.

Strategy

Purposefully phaseout cigarettes

Age verification
A fundamental requirement is that a consumer’s age beverified prior to product purchase. Only those of legal age—orat least 18 years old in markets without a higher minimum
legal age—are permitted to buy our products.

Overview

Maximize the benefitsof smoke-free products

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Overview

Looking ahead

Badrul Chowdhury
Chief Life Sciences Officer“Policymakers and regulators express the need for real-world data (e.g., diseasespecific, epidemiological) before they can embrace tobacco harm reduction, but few
within the scientific world appear willing to participate in that data collection andanalysis. We are launching studies in countries where the inhaled smoke-free
products have been in the market for a number of years and have reasonable market
penetration. Our strategy is to show direct benefit in patients with disease byevaluating datasets of symptoms, function, and mortality, and in healthcare
utilization, such as hospitalization. Internationally, IQOS ILUMA products havedemonstrated how ground-breaking consumer-centric innovation can lead more
adults to stop smoking. We believe that same success can be replicated in the U.S.
and drive a rapid decrease in smoking rates among adults. Following our PMTA
and MRTP applications, we are awaiting decisions from the U.S. FDA.”“As we plan to enter the United States market with IQOS, adults who would
otherwise continue smoking will be offered a range of smoke-free options thatare a better choice than cigarettes. Swedish Match’s nicotine pouch business is ahomegrown success, and, as of the end of 2023, ZYN was available via e-commerce
and in over 150,000 stores nationwide. In 2024, we will expand our smoke-free
portfolio in the United States with PMI’s IQOS heat-not-burn product. As we help
deliver a cigarette-free U.S., we continue to guard against underage access by
restricting marketing and sales to those aged 21 and above, including by age-gating
our digital channels. As we further our market expansion, we will ensure that
our marketing and commercialization practices follow the stringent requirementsof our Marketing Code.”

Philip Morris International Integrated Report 2023

Paul Riley
President, East Asia, Australia,
and PMI Duty Free Region

Operational impact

Fundamentals

Reporting and performance“Awareness plays an important role in accelerating adult smoker conversion tosmoke-free products. While a significant number of adult smokers are consciousthat smoke-free products exist, not many understand the benefits of switching tothem (relative to continued cigarette use); importantly, even fewer smokers believethese benefits are true. This is because in many countries where we operate,
restrictions related to consumer communication forbid us from openly engaging
with them to properly raise awareness. We focus our efforts on reaching adultsmokers, while also avoiding unintended audiences such as youth or never smokers.
During 2024, we will continue to work on building awareness, focusing on lagging
audiences in higher-awareness countries, and building infrastructure, visibility,and especially organizational capabilities in the more restricted, lower-awarenessones. In doing so, we will leverage learning on what has worked so far and replicate
where applicable (e.g., re-creating awareness-building approaches that proved
successful in restrictive high-awareness countries; deploying experiential retailinfrastructure in rural areas; continuing to build credible brands), but also on
innovative ways to credibly reach consumers both digitally and physically, andcontinuing to develop programs that allow us to help smokers better understandthe value proposition of our products and strengthen their credibility.”“Affordability plays a fundamental role in maximizing access to smoke-free products.
We recognize the need to continue expanding our portfolio to develop and offer
better alternatives than smoking for adults who would otherwise continue to smoke
among different segments of the population, especially in the growing economies.
We are committed to serving the over half a billion smokers in these countries
globally who deserve better alternatives to continuing smoking. This is why wecreated this region, to focus on their needs and preferences, and to allow availabilityof and information on our products while improving our routes to market. We arealso adapting our products and programs to different trade environments to ensurethat we can improve access to smoke-free products, including by offering adultsmokers more affordable solutions. This is how we can make a difference andcontinue to effectively address the health impact of our combustible products. As ofthe end of 2023, we were present in 39 low- and middle-income markets worldwide.
Looking ahead, we remain committed to ensure that at least half of the markets
where we make smoke-free products available for sale worldwide are LMICs.”“As a key driver of acceptability, a broad product portfolio can help us accelerate
the pace of our transformation, switching adults, who will continue to smoke, awayfrom cigarettes. The IQOS ILUMA induction system, with its superior induction
heating technology, has been successful in facilitating conversion to heat-not-burnproducts, complemented by TEREA consumables addressing consumer preference
for flavors and innovation. At the end of 2023, TEREA was the number one tobaccobrand in Japan, overtaking both combustible and heated tobacco competitor
offerings. The commitment to support adult smokers to switch to smoke-free
products continues. We believe our focus on refining the heat-not-burnconsumables portfolio to address the needs of full flavor cigarette smokers
across different price categories, and enhancements to the communication andonboarding processes at scale, will help us to drive this ambition.”

63

Reduce post-consumer waste“During 2024, to build further robustness in PMI’s approach to guarding against
youth access, we will review current practices and work on testing new ways
to complement our preventive measures. This will include exploring ways tostrengthen the monitoring of the implementation of our Marketing Codes andcommercialization practices. In particular, we intend to pilot our revamped mystery
shopper program in select markets in the course of 2024 for our own channels,
with the expectation to scale it for a global rollout in 2025. We will aim to focus
on direct retail (online and in person) where we have the highest level of control.
As we do so, we plan to develop clear standards to define deployment criteria,
program scope, and governance, and to issue detailed market-level guidelines withthe aim of objectively measuring and reporting on the effectiveness of our youth
access prevention efforts.”

Frederic de Wilde
President, Southand Southeast Asia,
Commonwealth of
Independent States, Middle
East and Africa Region

Product impact

Seek net positive impact
in wellness and healthcare

Stacey Kennedy
President, Americas
Region & CEO of PMI’s
U.S. Business

Massimo Andolina
President, Europe Region

GovernancePurposefully phaseout cigarettes

Stefano Volpetti
President, Smoke-Free
Inhalable Products &Chief Consumer Officer

Strategy

Maximize the benefitsof smoke-free products

MA XIMIZE THE BENEFITS OF SMOK E-FREE PRODUC TS

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Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance65

Our priority is to address the health impacts
associated with smoking by offering smoke-free,science-based alternatives that have been provento be a better choice than cigarettes for thoseadults who would otherwise continue to smoke.

PRO D U C T I M PAC T

However, we do not believe it is enough to simply offer morechoice to consumers. Rather, we are seeking to persuade adultsmokers to switch to the better alternatives now available andput cigarettes behind them.

Our intention is not only to develop, scientifically substantiate, and responsibly commercialize
smoke-free products to offer a better alternative to adult smokers, but also to make sure theseproducts ultimately, and as soon as possible, replace cigarettes completely.
OUT WA RD IMPAC T

The business case

The right thing to do

Despite being well on our way to delivering a smoke-free
future, we still have some distance to travel, as our combustible
tobacco product business still represents the majority of ourrevenues. The operating cash flows generated by cigarettes
serve an essential role, supporting ongoing investments todrive the growth of smoke-free products and in building new
capabilities in wellness and healthcare.

Even though selling off our cigarette business would makeour Company achieve its smoke-free ambition faster, it would
not resolve the cigarette problem—and indeed would risk
exacerbating the issue as a new owner would more likely befocused on maximizing cigarette consumption.

Our legitimate ambition to maintain market share in the
declining combustible tobacco product category does not meanthat we aim to continue selling cigarettes in the long term.
Our purpose is clear: our smoke-free business is our focus
area of growth, as these are the products needed to enable
our transformation and, most importantly, to help makecigarettes obsolete.
Smoke-free products offer the prospect of higher and moresustainable returns than cigarettes over the long term, as
reflected in the premium observed in our equity valuation
multiples relative to the majority of our cigarette-focused peers.
The business case is clear, with compelling financial incentives
for us to transform as fast as possible.

While perhaps contradictory in the eyes of some stakeholders,
this is a necessary trade-off that is vital to driving a successful
industry transition for the benefit of public health.
We are convinced that impactful and systemic change can best
be achieved by transforming from the inside out, engaging
constructively with different parts of society, and ultimately
influencing our entire industry to follow our lead and adopt
business models that also seek to completely replace cigarettes
with smoke-free products for those who continue to use nicotine.

Combustible tobacco product shipment volume (billion units)
and change versus 2015 baseline*

900
850

877

800
750

(27.9%)

700
650

633

600
550
500

2015
Baseline* For definition of combustible tobacco products, see Glossary.

Philip Morris International Integrated Report 2023

Reduce post-consumer waste

Staying competitive in the cigarette category during thisinterim period provides the infrastructure needed to support
our smoke-free growth, allowing us to create a future wherecigarettes no longer exist. Notably, where permitted, it remains
the primary way we can engage and connect with adult smokers
and trade partners to raise awareness of smoke-free products
and explain why they are a better option than continued
smoking. Exiting the cigarette category and therefore ceding
market share to competitors is unlikely to provide them withstrong motivation to follow our smoke-free lead.

Our aim is not only to make our Company smoke-free, but also
to make cigarettes obsolete. To achieve this, we will continue toresponsibly sell cigarettes, taking a consistent, disciplined, andsteadfast approach to one day completely leaving them behind.

We also recognize that PMI alone cannot achieve a smokefree future. Such systemic change requires a collaborative,
multistakeholder approach. In particular, we encourage
policymakers for scientifically substantiated smoke-free
products to replace cigarettes as quickly as possible for those
who continue to use nicotine.

Seek net positive impact
in wellness and healthcare

INWA RD IMPAC T

To achieve this objective, we are dedicating the vast majorityof our resources to commercializing our smoke-free products(see our Business Transformation Metrics) and are committed
to market all our products responsibly, guided by ourmarketing and sales policies and practices (read more here).

In pursuing our vision of a smoke-free future, we are eager
to see measures introduced that drive large-scale consumer
switching as quickly as possible. We are confident that theright mix of government leadership and commercial initiative
would dramatically accelerate efforts to reduce smoking. We
believe that, with the right regulatory encouragement andsupport from civil society, cigarette sales can end within 10 to
15 years in many countries (see our Statement of Purpose).

Purposefully phaseout cigarettes

Purposefully phaseout cigarettes

We are also actively advocating for others in the industry tofollow our lead by transforming their businesses, phasing out
cigarettes, and reporting transparently on their progress byadopting our Business Transformation Metrics.

Maximize the benefitsof smoke-free products

Approach and progress

2023

Overview

Allocating our resourcesto smoke-free products
Our efforts center on the development of scientifically
substantiated, better alternatives to smoking and broadening
access to smoke-free products for adults who would
otherwise continue smoking. The Maximize the benefitsof smoke-free products chapter of this report details ourapproach and the progress achieved to date on these fronts.

SI

Adjusted net revenue ratio(smoke-free/total)
A SPI R AT ION

2030

>2/3
36.4%

2022

32.1%

2021

29.5%
0

25

50

75

100

Note: For deﬁnition of net revenues related to smoke-free products, see Glossary.
Data exclude the impact related to termination of distribution arrangementin the Middle East in 2023 and the impact related to the Saudi Arabia customs
assessments in 2021.

Number of markets where adjusted
net revenues from smoke-free products
exceed 50% of adjusted total net revenues
2030

A SPI R AT ION

25

2022

17

2021

10
25

2022

0

2021

0
0

10

20

30

40

50

75

Moreover, in markets where our smoke-free products wereavailable for sale1 as of the end of 2023, our combustible
tobacco product shipment volume decreased by more than
33 percent versus 2015. If we continue on this trajectory,
we expect that the growth of smoke-free products andconsequent replacement of cigarettes will translate into a
more than 50 percent decline of our combustible tobacco
product shipment volume in these markets by 2030.
While the global cigarette category is already in structural
decline, our intention is to accelerate the decline bymaximizing adult smoker access to better alternatives. Overall,
the total international cigarette industry has been declining
at a moderate rate of 2.1 percent between 2019 and 2023,
mainly driven by secular trends, regulations, and priceelasticity. When looking at industry dynamics in key IQOS
markets2 within the same timeframe, we observe a much more
pronounced decline of approximately 4 percent, which notablyreflects the growth of the smoke-free category.

Other markets

2.5

1.9
1.7

IQOS markets

2.5

2.5

1.8

100

Reporting and performance

2.4

−2.1%

1.8

1.8

−1.4%

0.8

0.7

0.7

0.7

0.7

−3.9%

2019

2020

2021

2022

2023

2019–2367

CAGR

1 IQOS markets include all markets that launched IQOS by 2023 and reached a share of market of >5% nationally.
Note: Excluding China and U.S. Reflects cigarette industry sales volume, including cigarillos in Japan.
Source: PMI Financials or estimates.

Advocating for appropriate regulation andtaxation to drive cigarette obsolescence
Regulation of all nicotine-containing products (including both
combustible tobacco products and smoke-free products)
is essential. We advocate for a comprehensive and riskproportionate regulatory and taxation framework that
acknowledges that not all tobacco and nicotine products are
the same. Regulation and taxation should subject the mostharmful products—those that combust tobacco—to the mostrestrictive measures and should encourage those adults
who would otherwise continue to smoke to switch to lessharmful alternatives. Read more about the role of regulationin accelerating smoking decline by improving access to better
alternatives here.
Government action heavily influences how quickly society can
see an end to cigarettes. To accelerate the timeline, regulatorsand public health authorities can ensure that adult smokers
have access to accurate information about smoke-free
products. They can introduce product standards to ensurethat only scientifically substantiated smoke-free products arecommercialized and promote responsible marketing practices.

1 For definition, see Glossary.
2 IQOS markets include all markets that launched IQOS by 2023 andreached a share of market of >5% nationally.

Philip Morris International Integrated Report 2023

2.6

50

Our transformation also translates to a shift in the compositionof our total shipment volumes. In 2023, we shipped a totalof 145 billion units of smoke-free products (2022: 116) anda total of 633 billion units of combustible tobacco products(2022: 642). Otherwise put, the proportion of smoke-free
products in our total shipment volume grew to 18.6 percent
in 2023, versus 15.3 percent in 2022. Importantly, our
combustible tobacco product shipment volume has decreasedby 27.9 percent versus a 2015 baseline.

~60

2023

0

3

Fundamentals

Moderate industry decline, more pronounced in IQOS markets1:
Cigarette industry evolution (in ’000bn cigarettes)

~40

2023

Operational impact

And, through risk-proportionate regulation and taxation, they
can provide the right incentives to encourage adults who
smoke and would otherwise continue smoking to switch fromcigarettes to alternatives that are scientifically substantiatedto be better. Importantly, this would also further encourage
manufacturers to direct their investments and R&D toward
these better products.
Overall, we are encouraged by 2023 regulatory and fiscal
developments, as an increasing number of governments havecomplemented, or plan to complement, traditional tobacco
control measures (i.e., those intended to discourage smoking
initiation and encourage cessation) with a harm reduction
approach (i.e., providing adults who would otherwise continue
to smoke with access to scientifically substantiated smokefree alternatives).
We continue to engage with governments, regulators, andlegislators to support the development of differentiatedlegislation and regulations that will enable adult smokers
to understand there are different tobacco- and nicotinecontaining products and their corresponding risk profiles
compared with continued smoking. In addition, we strongly
support regulation that helps accelerate switching to maximize
the benefits of smoke-free products while minimizing
unintended consequences, like access and use by unintended
users, in particular underage.

Reduce post-consumer waste

Moreover, as of the end of 2023, smoke-free products
represented over 50 percent of adjusted net revenues in 25of the 84 markets where we commercialized them (2022: 17),and over 75 percent of the adjusted net revenues in three ofthese markets.

A SPI R AT ION

Product impact

Seek net positive impact
in wellness and healthcare

2023

2030

GovernancePurposefully phaseout cigarettes

Our efforts have led to a continued rapid increase in
the proportion of our total net revenues represented bysmoke-free products, reaching 36.4 percent in 2023—thus
accounting for over one-third of our total business in lessthan a decade since beginning our transformation.

Number of markets where adjusted
net revenues from smoke-free products
exceed 75% of adjusted total net revenues

Strategy

Maximize the benefitsof smoke-free products

P U R P O S E F U L LY P H A S E O U T C I G A R E T T E S

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Overview

It allows us to focus our commercial efforts on raisingawareness of—and informing adult smokers about—smokefree products and the benefits of switching to those versus
continued smoking.

Staying competitive in the cigarettemarket while hastening its end

It also generates the financial resources needed to continue
investing in scientific research, product development, and the
manufacture and commercialization of smoke-free products.
Importantly, it maintains competitive pressure on the rest of
the industry, increasing the incentive to also invest in smokefree products.

Despite being well on our way to delivering a smoke-free
future, we still have some distance to travel. Maintaining
our competitive position in the cigarette market during thetransition period is essential.

As an example, it allows us to deploy JustScan, a mobile digitalplatform allowing adult smokers to access online content
about smoke-free products by scanning a QR code or using
a weblink typically featured on the cigarette pack itself or an
insert (read more in the Maximize the benefits of smoke-free
products chapter.

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

Looking ahead
Jacek Olczak
Chief Executive Officer

Supply and demand measures that can accelerate change

Such a roadmap may consist of elements addressing:• Increased investment in prevention, quitting campaigns, and cessation
services, with a particular focus on vulnerable populations• Measures to address adult smokers’ confusion about the role of combustionin the development of smoking-related disease

Emmanuel Babeau
Chief Financial Officer• Regulatory and fiscal differentiation between combustible tobacco products and noncombustible
forms of tobacco and nicotine, coupled with robust safeguards against unintended use◦ Regulation and tax should recognize the different risk profiles and economics of smoke-free products versus
cigarettes– Communication to adult smokers should only be permitted for smoke-free products– Differentiated flavors, labelling and product display for smoke-free products versus cigarettes– Differentiated tax (cigarettes should be taxed much higher) to incentivize smokers to switch to smoke-free products
and industry to invest◦ Safeguards against unintended use– Minimum age and enforcement measures (access control), retail licensing, technology on age verification– Bans on marketing that appeals to minors (e.g., social media influencers with mainly youth audience, youthappealing characters on ads, kid friendly food and drink, etc.)– We advocate for regulations on flavors that we believe are predominantly appealing to adult smokers and can help
them switch to smoke-free products (such as tobacco, menthol, and mint). The use of any additional flavors should
undergo stringent scrutiny to guard against unintended use (in particular among underage, absent fully enforced
controls on underage sales) and in any event be strictly regulated.
• Post-market monitoring and surveillance to assess public health outcomes and the impact of policy interventions• Phase-out measures that help to achieve countries’ set smoke-free targets• Post-phase-out support for adult smokers who still continue smoking• Robust anti-illicit trade policies

Philip Morris International Integrated Report 2023

Werner BarthPresident, Combustibles
Category and Global
Combustibles Marketing“Cigarettes continue to represent a sizeable portion of our volumes andan opportunity to engage with adult smokers around better alternatives
than smoking. We are committed to selling them responsibly whiletransitioning to smoke-free products. We will continue implementing
our youth access prevention efforts globally and investigate ways ofcontinuing to strengthen their enforcement.”

Reduce post-consumer waste“Industry disruption only looks easy in hindsight. At present, we are in
mid-stride: with one foot in our past, operating in a fiercely competitive
legacy cigarette business, and one foot in our bold future, building anentirely novel and improved category of products. We recognize themagnitude of the challenge and remain committed to continuing to lead,
track progress, and report on it transparently to ensure that cigarettes
become obsolete as soon as possible.”• Misunderstanding about the relative harms of nicotine, i.e., while it is addictive andnot risk-free, it is not the primary cause of smoking-related diseases

Seek net positive impact
in wellness and healthcare

We believe that a clear roadmap agreed by political, regulatory, and public health stakeholders, supported byboth civil society and businesses, offers the best prospect for further accelerating the end of smoking.

“While cigarette sales today remain the largest part of PMI’s businessin most countries, this is changing rapidly. PMI is actively accelerating
the decline in cigarette smoking beyond what traditional tobacco
control measures can achieve alone. It is important to note, however,that no phase-out plan will work unless phase-out policies andregulations take a comprehensive approach to driving commensurate
reductions in demand for cigarettes. This should include measures toensure fewer people initiate smoking, more people quit smoking, andthose who don’t quit are encouraged to switch away from cigarettes
to better, smoke-free products. We believe that with the right kind ofpolicies and regulations, many countries could soon be on the verge of
beginning the phase-out of cigarettes altogether. While PMI has a vitalrole to play in accelerating the transition from cigarettes to smoke-freealternatives, we cannot achieve this objective alone. We will continue
to engage with our industry peers, the tobacco control community,
policymakers, and all relevant stakeholders with an interest in bringing
about the end of smoking.”

69

Purposefully phaseout cigarettes

We call on governments to assess the science and evidence
and responsibly regulate smoke-free products. Cigarettes
and combustible tobacco products should have the strictest
regulation and highest level of taxation, taking into accountunintended consequences (e.g., illegal market). Smoke-free
products regulation and taxation should be differentiatedversus combusted products, so to nudge smokers who
would otherwise continue to smoke to switch to these better
alternatives, while providing strong youth access prevention
safeguards.

Strategy

Maximize the benefitsof smoke-free products

P U R P O S E F U L LY P H A S E O U T C I G A R E T T E S

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Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance71

PRO D U C T I M PAC T

As we work to become a company that has a net positive impact on society, we believein the importance of continuing to invest in a future that allows us to expand our offerings
to products that are suited to address critical unmet consumer and patient needs within
the wellness and healthcare space.

OUT WA RD IMPAC T

The business case

The right thing to do

As described in our Statement of Purpose, with a longer
horizon in sight, the critical next step in PMI’s transformationis leveraging our expertise and capabilities to expand into
products beyond tobacco and nicotine as part of a natural
evolution into a broader wellness and healthcare business.

Researching and developing smoke-free alternatives that are
scientifically substantiated to be less harmful than cigarettes
was the first step in our journey to address our most significant
negative externality: the impact of cigarette smoking on health.

Although we are at the beginning of this journey, our intention
is set: we are transforming our Company to ultimately havea net positive societal impact. Pursuing adjacent avenues ofgrowth by tapping into the skills and assets we have accruedand developed over the course of our transformation will bringlong-term value.

In the process, we have expanded our social, human,
intellectual, and manufactured capital in ways that allow us tomove from a value proposition centered on doing less harm
toward one where we can seek to have a net positive impact
on society. With an eye on the long term, we intend to use thiscapital to develop adjacent avenues of growth in wellness andhealthcare.
PMI’s investment and innovation approach in wellness andhealthcare is part of a larger transformation that puts science,technology, and sustainability at the heart of our Company’s
future. We aim to deliver products and solutions that improve
people’s lives.
To achieve this objective, we will rely on and expand ourexisting core capabilities and seek partnerships with respected
entrepreneurs and companies that offer complementary
experience and qualifications in relevant fields.

Vectura Fertin Pharma is centered on health, science, andtechnology to deliver innovative products and solutions thatare safe to use and can improve people’s lives.
We aim to deliver innovations in fields with clear unmet
medical or consumer needs. Leveraging and enabling theunique R&D capabilities of Vectura Fertin Pharma, we see
sizable long-term potential in the pharmaceutical, medical,
and consumer wellness segments.
While still recognizing the natural fit and considerable
potential wellness and healthcare can add to our business in
the longer term, we are prioritizing our smoke-free products’
growth potential in the short to medium term.
More investment, research, and development is still required
before generating meaningful revenues in the wellness andhealthcare segment. Therefore, we have retired our previously
stated aspiration to derive USD 1 billion from this business by
the end of 2025.
At present, we are focused on specific opportunities in inhalable
medicines; medical cannabinoids; consumer wellness products;
nicotine replacement therapy (NRT); and our Contract
Development and Manufacturing Organization (CDMO).

Philip Morris International Integrated Report 2023

3. Nicotine replacement therapies (NRTs): There is anunmet need in the nicotine replacement therapy market,
which, combined with our existing expertise and ability
to innovate, positions us well to participate in this market
segment.
4. Contract Development and Manufacturing Organization(CDMO): Drawing on our unique technologies, delivery
platforms, and capabilities, we strive to grow our CDMO
business—serving other companies in the pharmaceuticaland consumer health and wellness industry on a contract
basis—and expand it geographically.

Management of Vectura Fertin Pharma
In 2023, we further refined the operating model we had
defined for Vectura Fertin Pharma the year prior. We
established the leadership team for this new business, theorganizational build-up, decision-making procedures, andscientific governance, as well as key processes. Vectura
Fertin Pharma is operationally separate from otherbusinesses owned by PMI. This means the business has
its own executive leadership team overseeing day-today operations and dedicated governance for projects.
The business is headed by the President of Vectura
Fertin Pharma. It is collectively supported by theleadership team, employees, and a substantial
investment by PMI to enable its continued build-out.
Its operational model is based on distinct productcategories with governance designed to enableefficient delivery of the product pipeline. Oversightis strengthened by stage-gate review committees,scientific advisory boards, and functional review boards.
Revenues generated by Vectura Fertin Pharma arereinvested into its wellness and healthcare business.

Reduce post-consumer waste

Leveraging our Company’s expertise in aerosol chemistry
and physics, best-in-class preclinical safety and toxicology
and clinical research capabilities, and continued investment
in our capabilities and R&D programs, we intend to develop
and responsibly commercialize innovative and differentiatedproducts to address unmet patient and consumer needs.

To complement our in-house science and innovation
capabilities, we acquired three innovative and forward-looking
companies in 2021 (read more in our Integrated Report 2021).
In March 2022, we launched a new wellness and healthcare
business consolidating these three entities into Vectura Fertin
Pharma. The business brings together Vectura’s expertise ininhalation delivery systems used for prescription drugs, Fertin
Pharma’s leadership in oral and intra-oral delivery systems, andOtiTopic’s inhaled aspirin asset.

2. Consumer health: We are moving into consumer
health products targeting the energy segment, offering
consumers innovative, healthier, and holistic solutions toenhance their physical and mental energy levels. We are
evaluating CBD offerings. This area of R&D taps into ourexpertise in assessing the quality of novel oral delivery
formats, inhalation science and technologies, and plant
substrate formulations.

Seek net positive impact
in wellness and healthcare

INWA RD IMPAC T

Our business model for the wellness and healthcare category
is not necessarily to pursue or internalize the entire value
chain, from drug identification and upstream development
to downstream commercialization. Instead, we aim to use
our technology platforms to rethink and reposition existing
medication and consumer health products to address
specific unmet needs. Central to our efforts will be our skills
in device and formulation development, our responsiblecommercialization, and our experience in product assessment.
For skills we do not have, we will partner, outsource, andorchestrate an ecosystem to bring products to market.

1. Inhaled therapeutics: We can apply our expertise andexperience in device technology for medical applications
and the delivery and scientific assessment of aerosols,
including preclinical safety and toxicology, clinical,
medical, regulatory, and quality capabilities to developthese products.

Purposefully phaseout cigarettes

Seek net positive impact
in wellness and healthcare

Over the course of our transformation journey,
PMI has developed a strong foundation andsignificant expertise in life sciences—particularly in
product formulation, aerosol chemistry and physics,
device technology, clinical research, and best-inclass preclinical safety and inhalation models.

Maximize the benefitsof smoke-free productsManagement approach

Overview

Progress in 2023
Vectura Fertin Pharma is developing a pipeline of products to
support PMI’s ambition to explore adjacent avenues of growth
beyond smoke-free products.

The business’s net revenues related to wellness and healthcare
products amounted to USD 0.3 billion in 2023. They primarily
consisted of operating revenues generated from the sale ofinhaled therapeutics and oral and intra-oral delivery systems
through the CDMO or co-development business. In parallel,
Vectura Fertin Pharma has re-evaluated the developmentof its proprietary pipeline assets to ensure its resources arefocused on projects with a high probability of success.

In the area of neuropathic pain, Vectura Fertin Pharma
is working with a third party on an inhaled drug-device
combination, progressing work on the early development
pathway toward clinical proof of concept in 2025. The
Company is on track to deliver on its aspirations forthis product and other inhaled therapeutics products indevelopment.

Fundamentals

Reporting and performance

Looking ahead
In 2023 Vectura Fertin Pharma also created the foundations
for a category expansion that seeks to explore medicalcannabis. Progress consisted of building new capabilities,
including building the framework for a rigorous patientand healthcare professional insights program to inform its
product development. The team worked on developing oral
and inhalable CBD-containing products, with the aim ofcommercializing them using a partnership approach.
In 2023, the business made its first consumer health minority
investment in Neuro through PMI’s corporate venture
capital fund PMEP. Neuro is a U.S. company developing andmarketing gum and mints which seek to provide consumers
with energy, calm, or focus.
In December 2023, the first Vectura Fertin Pharma consumer
health product was launched under Vectura Fertin Pharma’s
partnership with Neuro. Called “Sleep & Recharge” andcontaining the active ingredient melatonin, the product wasdeveloped by and is manufactured by Vectura Fertin Pharma.
In nicotine replacement therapies (NRT), Vectura Fertin
Pharma continues to explore potential opportunities to
disrupt the market with over 200 patents and a dedicatedscience center.

PM Equity Partner
PM Equity Partner Sàrl (PMEP), PMI’s corporate
venture capital arm, was launched in 2016. To date,it has committed USD 350 million to build anddevelop a portfolio of minority strategic investments,from early- to growth-stage companies, to supportdelivery of our smoke-free vision and beyond nicotine
objectives. PMEP invests across four main corridors:• Wellness and healthcare• Inhalable therapeutics• Smoke-free products• Impact Investing
Read more about PMEP here.

Philip Morris International Integrated Report 2023

Operational impact

Jacek Olczak
Chief Executive Officer“Some years ago, we opened a chapter we called ‘beyond nicotine,’
which we presented externally as ‘seeking net positive impact inwellness and healthcare.’ When we began communicating about‘beyond nicotine’ and started crafting an ambitious long-term vision
for our business, we did not know exactly how it would unfold.
Unfortunately, how some vocal individuals and organizations in theexternal environment have reacted to PMI entering this space hasdelayed our ability to fully harness the potential of the assets andcapabilities we have built over our transformation journey. Against
this backdrop, we are exploring different configurations that could
allow us to maximize these in the future.
While we will continue to explore the potential expansion of ourofferings in the wellness and healthcare space, our current priority
is on developing and commercializing science-based smoke-free
products—especially as we prepare to enter the U.S. with IQOS.
We remain convinced that our wellness and healthcare business canprovide a very sizable, yet long-term, potential—especially in the fieldof pharmaceutical, medical, and consumer wellness segments.”

73

Reduce post-consumer waste

In inhaled therapeutics, the Company received its first clinical
trial results for its inhalable aspirin product in development.
While it was observed that the experimental product had arapid-onset effect (the key medical advantage sought), there
was significant variability in the actual inhaled doses among
patients subject to trial. The study was therefore deemed
unsuccessful and, as a result, product design improvements
are required.

Product impact

Seek net positive impact
in wellness and healthcare

In 2023, Vectura Fertin Pharma continued its organizationalbuild-up across its business categories while also undertaking
product development activities, establishing new B2C
capabilities, and honing its marketing and commercial
expertise.

GovernancePurposefully phaseout cigarettes

Since its inauguration in 2022, Vectura Fertin Pharma has
consistently refined its business and portfolio strategy basedon lessons learned, advice from its scientific advisory board,and the macroeconomic challenges and business headwinds
it faces.

Strategy

Maximize the benefitsof smoke-free products

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74

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance75

PRO D U C T I M PAC T

Reduce post-consumer waste
We understand that our product proposition needs to address both the health impacts of our
products, as well as their environmental impact. To address the latter, we embed principles of ecodesign and circularity. We also implement effective post-consumer waste management solutions to
reduce waste, prevent littering, and promote the responsible disposal of products at end-of-life.

The business case

The right thing to do

Many consumers consider the environmental impact of
products and services in their purchase decisions. Regulators
also are increasingly focused on corporate responsibility
regarding the manufacture and use of materials (e.g., single-use
plastics, electronic device repairability, packaging, end-of-life
management). Appropriately addressing post-consumer waste
mitigates negative impacts on our bottom line, as producers
increasingly are asked to participate in cleanup costs or cover asignificant share of the product end-of-life waste managementcost. It also helps us to enhance our brand equity and corporate
reputation, and to meet consumer expectations.

Reducing and appropriately managing post-consumer wastemeans we extract, convert, and use fewer raw materials froma planet with limited natural resources. By reducing materials
used in our packaging, combustible products, smoke-freeconsumables, and electronic devices, we can reduce ourenvironmental footprint and decrease our negative impact on
the planet and society.

Heightened consumer expectations and regulatory trends
further motivate us to innovate in ways that can drivecompetitive advantage. Devising more circular value chains
not only reduces waste and litter but also promotes better use
of materials and higher operational efficiency—all of which aregood for our bottom line.

In this section

Philip Morris International Integrated Report 2023

Moreover, committing to the safe and responsible disposal of
post-consumer waste addresses society’s concerns regarding
the impacts of litter. Among others, there are concerns over thepollution resulting from improper disposal of plastic, tobacco,and other materials such as metals, potentially resulting in harm
to wildlife and humans alike. We recognize the imperative ofdesigning lower-impact products and working to protect natureand preserve the environment.

• Smoke-free electronic devices: With each new generationof our products, we aim to improve the consumer
experience and device performance, including its robustness
and durability. We seek to minimize waste and raw material
extraction and increase resource efficiency by incorporating
recycled materials into our products where feasible. We
also integrate eco-design principles into the early stages of
product design to improve, among other considerations,product recyclability and repairability. These measures also
improve our ability to refresh and repair used devices. We
contribute to circularity by scaling our end-of-life and endof-use take-back programs and finding ways to make repair
services more accessible to our consumers.
• Packaging: We incorporate the principles of the circular
packaging economy and design for recyclability. We alsoseek to, wherever possible, reduce our carbon footprint
and intensity, by reducing packaging material, size, volume,
and weight. We seek to only use the minimum amount ofmaterial needed to adequately protect our product.

Addressing cigarette butt littering

76

Managing waste from our smoke-free consumables

79

Improving the sustainability of our smoke-free devices

81

Reducing and improving packaging

85

Further, we inform our strategy by considering policy andregulation governing post-consumer waste. Specifically, we areconsidering how government-regulated extended producer
responsibility (EPR) schemes can effectively support efforts to
reduce post-consumer waste toward a more sustainable andcircular economy.

PMI’s 2023 plastics footprint (%)
Cigarette ﬁlters

55.7%

Heated tobacco
unit ﬁlters

28.8%

Packaging

14.9%

Electronic devices

0.7%

Note: The plastics footprint is calculated excluding
nicotine pouches and disposable vaping devices.

PMI’s policies and standards
Environmental Commitment
Sustainable Design Framework
Management
Our President of Smoke-Free Inhaled Products & Chief
Consumer Officer and our President of Combustibles
Category & Global Combustibles Marketing drive ouragenda on post-consumer waste management for theirrespective categories. Additional efforts to improve
product design and increased circularity are steered crossfunctionally, involving teams headed by our Chief Product
Officer and Senior Vice President Operations. With
regards to our smoke-free products, dedicated crossfunctional platforms monitor strategies and progress
related to our smoke-free product sustainability initiatives.

Reduce post-consumer waste

OUT WA RD IMPAC T• Smoke-free consumables: As we grow our smoke-freebusiness, we seek to prevent littering behaviors inheritedfrom smoking. Our programs to prevent littering focus on
raising awareness and ensuring consumption behavior that
includes the responsible disposal of our products after use.
We have in place end-of-life take-back programs that consistof simple and convenient ways for our consumers to collectand return their used consumables to us so we can manage
this waste responsibly.

As a global manufacturer, we source plastic materials
and plastic-containing items for a variety of products,
including devices, packaging, pods in our e-vapor
devices, and the filters in our heated tobacco units
and cigarettes. We are working to reduce plastic
across our product categories. Globally in 2023, wepurchased approximately 160,000 tons of plastic.
The largest share was cellulose acetate, a bio-based
plastic used in the filters of cigarettes and heated
tobacco units. Learn more about our plastic reduction
activities in general on the following pages and for
filters specifically here.

Seek net positive impact
in wellness and healthcare

INWA RD IMPAC T• Cigarettes: We aim to reduce cigarette butt littering byencouraging behavior change through impactful awarenessraising campaigns and by empowering consumers to disposeof cigarette butts properly. We also invest in R&D andcontinuously work toward replacing our filters with plasticfree alternatives.

Striving to reduce plastic

Purposefully phaseout cigarettes

We aim to preserve resources, reduce waste, andprevent inappropriate disposal of our products,
including littering. We seek to design and implement
impactful strategies tailored to our entire productportfolio, including packaging and tied to specificaspirations:

Maximize the benefitsof smoke-free productsManagement approach

Overview

Progress in 2023
Highlights• We continued consumer-testing new filter materials inan effort to reduce our plastic and carbon footprint byreplacing cellulose acetate (CA) in our cigarette filters.

• We have pivoted to local recycling solutions toappropriately respond to regulatory developments.
Moreover, we have begun piloting local repair options
to make these services more accessible to consumers.

Challenges• Consumer acceptance of any new filter material
continues to be one of the barriers to theadoption of filters not composed of CA.

• Today, the fragmented regulatory frameworks acrosscountries impact our ability to efficiently collect electronic
devices and process them as e-waste for circularity, posing
complexity for reverse logistic operations and valorizationof post-consumer waste through efficient treatment.
• The limited availability of recycled content directly
influences the rate at which we can incorporate itin our packaging. This is because recycled content
must be approved for use in contact-sensitive
applications as well as a lesser environmental
impact (compared with nonrecycled content).

1.	Sustainable design: We invest in researching anddeveloping filters made of plastic-free alternatives.
2.	Encourage behavior change: We inspire change in
consumer habits through impactful anti-littering awarenessprograms and initiatives to empower consumers to disposeof cigarette butts properly, regardless of filter materials.

Sustainable design
From an environmental perspective, the most sustainable
scenario would be for our products to generate zero litter
post-consumption. We continue to work toward this end,
seeking options that avoid, or at least significantly reduce, theimpact of cigarette butts on the environment. We are working
to develop filters with a lower environmental footprint. We
know materials changes alone will not solve the problemof littering. Still, they may help mitigate the environmental
impacts of residual littering by those smokers who do not
engage in behavioral change driven by anti-littering programs.

The Single-Use Plastics (SUP) Directive requiresthat manufacturers of tobacco products with filters
containing plastic participate in industry-wide
extended producer responsibility (EPR) schemes tobear certain cost of managing the post-consumption
waste from tobacco product filters. EPR is anestablished governance scheme for circular waste
management.

We continue to explore and test options as new materials
and processes become available, and science and innovation
evolve. In 2023, we accelerated our efforts to develop filter
prototypes composed of materials and technologies that areclassified as nonplastic according to EU guidelines (associatedwith the Single-Use Plastic Directive), and tested some ofthem among consumers in multiple markets. The results haveencouraged us to further invest in this endeavor and key
learnings from these efforts are helping us focus our efforts
moving forward.

To replace CA in our combustible cigarette HTU filters, weevaluate alternative filter materials via extensive analytical
testing, machinability trials, and prototype testing tounderstand whether consumers will accept them.

• Acceptable taste characteristics and experience for
consumers• Meets quality and performance criteria that are consistent
with CA filter product design• Similar or reduced material carbon footprint compared with
CA filters• Favorable to industrialization at scale
Some materials we have tested have met one or more ofthese criteria, but we have yet to find an alternative to CA thatsatisfies them all.

Fundamentals

Reporting and performance

77

Encourage behavior change
While many consumers dispose of their cigarette butts properly,
too many butts end up in the environment. We believe thatto change this reality consumers need to know that cigarette
filters contain plastic and should not be littered in theenvironment.
Consumer insights data show us that only about one-quarterof adult smokers are aware that CA is one of the main
constituents of cigarette filters and only about half of themmention either the cigarette filter or the plastic wrap outside
the pack as main pollutants.1
Accordingly, to drive behavior change, we will continue
to focus on raising awareness and ensuring that littering
is considered socially unacceptable. This requires that wedevelop and implement actions that account for local realities
and the socioeconomic and cultural specificities of the various
places where we operate.
Our anti-littering toolkit for markets has two focuses:
1.	Reach activities: Convey the message directly to
consumers, mainly via our owned channels. Examples
include on-pack and point-of-sale messaging.
2.	Impact activities: Raise awareness of the issue beyond
the consumers of our brands and develop solutions
in partnership with civil society organizations, local
governments, and other stakeholders. Examples include
corporate communication campaigns, initiatives to identify
litter hotspots and improve public infrastructure, making
portable ashtrays available, etc.
In order to meet their objective, our markets must deploy atleast one reach and one impact activity each year.

Any new nonplastic filter material or design must satisfy thefollowing criteria:

Focus on filter materials
Tobacco product filters are traditionally made from CA, a bio-based material considered to be one of the world’s firstplastic materials derived from wood-based cellulose. The material is used in many applications and different forms, such as
in eyeglass frames, textiles, and medical consumables, among others.
There is a range of scientific views regarding the environmental impact of CA, including the sustainability of feedstock, its
footprint, and its end-of-life impact. PMI researchers continue efforts to develop more sustainable, nonplastic alternatives
to our filters.
Biodegradation is often discussed as a solution to the problem of plastic litter accumulating in the environment. We
support the development of standards for measuring biodegradability of alternative materials to plastics that would reflect
real-world conditions, particularly their value in addressing the problem of littering. As science-based policies evolve, we
seek to align our R&D activities with them as we continue to pursue viable and more sustainable alternatives to CA.
Beyond these R&D activities, and acknowledging that littering is a behavior, we remain focused on encouraging consumer
behavior change to prevent cigarette butt littering and on implementing end-of-life take-back programs for our smoke-freeconsumables (read more here).

1 OPINION-WAY, Enotiko, “Les fumeurs et la gestion de leurs mégots dans les lieux publics
extérieurs”, Paris, April 2019 see at OPINION-WAY-Etude-Consommateurs.pdf (alcome.eco)

Philip Morris International Integrated Report 2023

EU Single-Use Plastics Directive

Operational impact

1 Based on claimed response as part of PMI cigarette butt littering impact knowledge checkconducted in 2022 in France, Indonesia, Japan, Kuwait, Netherlands, the Philippines, Poland,
Saudi Arabia, Spain, and Switzerland.

Reduce post-consumer waste• We face challenges in implementing consumableend-of-life take-back programs due to regulatory
restrictions related to shipping waste and the limits
on local recycling capabilities. The relatively low valueof recycled materials compared with recycling costs
also impacts the business case for implementation.

To tackle cigarette butt littering, we center our work along
two pillars:

Product impact

Seek net positive impact
in wellness and healthcare• Our packaging reduction efforts yielded significant
results in both smoke-free and combustible
categories, closing approximately half of theremaining gap in reaching our 2025 aspirations.

Although most cigarette butts are disposed of properly,
too many are casually littered into the environment.1

GovernancePurposefully phaseout cigarettes• To appropriately address the post-consumer waste of oursmoke-free consumables, we improved market guidancefor end-of-life take-back programs to provide options
that are more adaptable to local realities based on market
maturity and available waste management infrastructure.

Addressing cigarettebutt littering

Strategy

Maximize the benefitsof smoke-free products

R E D U C E P O S T- C O N S U M E R WA S T E

76

Overview

SI

Proportion of shipment volumes coveredby markets with anti-littering programs inplace for combustible cigarettes
2025

A SPI R AT ION

≥80%
76%

2022

68%
0

25

50

75

100

In 2023, over 55 markets put in place anti-littering programsfor combustible cigarettes, moving us closer to our 2025
aspiration of 80 percent weighted coverage, within regulatory
restrictions.

• In September 2023, PMI’s affiliate in Kazakhstan kicked
off the fourth iteration of their “Stop Musor” (Stop Litter)campaign. Read more in our online market story here.
• PMI’s affiliate in Colombia initiated “Bogotá No es un
Cenicero” (Bogotá is Not an Ashtray) in Bogotá in 2022 andcontinued this campaign in 2023. Read more in our online
market story here.
• In Germany, PMI’s affiliate actively supports the KIPPENBUDDIES project, an initiative under the broader ALLES IM
FLUSS campaign by nonprofit organization wirBERLIN. Read
more in our online market story here.
Raising awareness globally
Tackling littering with global campaigns and activities will allow
us to address the issue on a larger scale and with a greater
impact. We seek to educate and engage our employees,
consumers, and other relevant external stakeholders, as well
as local communities. Our efforts aim to reduce littering.
Coordinating our efforts enables consistency and more
effective and efficient use of our resources.
Cleanup campaigns are predominantly designed to raise
public awareness of the littering problem in the communities
in which they occur. They are not intended to resolve littering
overnight or replace more cost-efficient public cleaning
services. In 2023, as part of our annual mobilization around
World Cleanup Day—the world’s largest litter cleanup event—
we engaged over 6,000 PMI employees in over 60 countries
in a global cleanup challenge. We estimate that we reachedover 16,000 people globally, including our employees, theirrelatives, and members of partner organizations.
We also continued to host “Our World Is Not an Ashtray,” anonline nonbranded corporate platform that seeks to educate,inspire, and engage the public on the issue of littering. Throughthis campaign, we share facts and figures, testimonials, andcalls to action. Some of our affiliates also use this platform for
local awareness-raising initiatives.

Philip Morris International Integrated Report 2023

Multistakeholder engagement
We understand that scalable solutions require
multistakeholder engagement with environmentalorganizations and public authorities as well as crossindustry collaboration to achieve the right kind ofpartnership.
To better address post-consumer waste, PMI
continues to collaborate with Litterati. We utilize
Litterati’s technology to engage users in documenting
litter through geotagged images. This contributes
to insightful analysis that helps us identify littering
hotspots and implement effective prevention
strategies, such as placing more bins in high-litterareas. Read more in our online market story here.
PMI and Litterati’s partnership, initiated in 2019 withthe “CleanDeinWien” campaign in Austria, continues
to develop post-consumer waste management
solutions. With the learnings from market activities,
we aim to expand best practices to global campaigns
and initiatives.
For example, in 2023 PMI’s affiliate in Bulgaria
conducted research and activation events in
Sofia with the support of the Litterati team that
demonstrated tangible results. A park experiment
revealed a 56 percent decrease in cigarette butt
littering density in locations where the team displayed
informative campaign posters and handed out
portable ashtrays. The campaign reflects a localized
effort aligning with Philip Morris Bulgaria’s waste
management strategy, with plans for future activities
and integration with art festivals. Read more about
the work in PMI’s affiliate in Bulgaria, including its
broader #ChangeThePicture campaign, in our online
market story here.

Operational impact

Fundamentals

Reporting and performance

79

Managing waste from oursmoke-free consumables
Over the long term, we aim to reduce our postconsumer waste by design and explore lowercarbon, recyclable, and biodegradable alternatives
to the materials currently used in our smoke-freeconsumables (read more about plastics in our filtershere). In the interim, we are focused on scaling our
end-of-life take-back programs.
The consumption and post-consumption behaviors related
to our smoke-free products differ drastically from cigarette
consumption. Unlike cigarettes, our smoke-free consumables
do not require combustion to be used; in turn, they do notneed to be stubbed out after use, and they do not containsmelly smoke residues. Consequently, we have observed that
consumers tend to be more likely to hold on to the productpost-consumption and keep it until they can dispose of it
properly.
At the end of 2023, we conducted a large-scale survey
involving close to 2,000 adult participants in Germany, Italy,
and Japan. Across these markets, on average, 47 percent ofrespondents said they were less likely to litter HTUs thancigarettes butts, and only a small minority (5 percent) ofrespondents reported they were more likely to litter HTUs
than cigarettes.
We seek to minimize the environmental impact of HTUs usedin our heat-not-burn devices and pods used with our e-vapor
devices. Since our smoke-free portfolio is diverse, so is theimpact each product can have on the environment basedon their different designs, composition, and consumption
methods. As our portfolio evolves, we seek to design anddeploy tailored post-consumer waste management programs
based on the specificities of each product category.
We continue to require that affiliates launching VEEV pods
and TEREA HTUs put in place end-of-life take-back programs
prior to launch (with an intent to recycle collected products).
We deem such programs for all of our heat-not-burn ande-vapor consumables to be business critical based on theirenvironmental impact, consumer needs, and market feasibility.

Reduce post-consumer waste

You can find case studies and market stories that sharedetails about the different creative solutions our markets
have introduced reach and impact activities on PMI.com.

Some examples from around the world include:

Product impact

Seek net positive impact
in wellness and healthcare

2023

They explain how local realities are relevant when deploying
successful programs, and consist of concrete examples ofwhat local initiatives can look like. Collectively, they seek
to address the issue of cigarette butt littering at all levels ofactivity, from on-the-ground activations, local partnerships,
experts, and trade partners to local authorities and online
campaigns. We believe that markets that activate thesetypes of multilevel campaigns have a better chance of making
littering socially unacceptable.

GovernancePurposefully phaseout cigarettes

Tackling cigarette butt littering locally
Global campaigns and activities to raise awareness and reduce
littering are driven by individual markets, each with uniquechallenges and opportunities related to the issue. For example,
smoking habits, environmental consciousness, and disposal
practices vary by country. By allowing markets to drive
their own activities, we ensure the efforts respond to local
contingencies and are tailored to each location’s specific needs
and circumstances, thereby increasing impact. Our affiliates
follow a global methodology, yet also focus on impactful,context-based strategies appropriate for their respective
markets. These local anti-littering campaigns are run by ouraffiliates, with central support and guidance.

Strategy

Maximize the benefitsof smoke-free products

R E D U C E P O S T- C O N S U M E R WA S T E

78

Overview

Since launching our end-of-life take-back programin 2021, we have expanded the program to 28
markets around the globe (2022: 12 markets).

Disposable e-vapor products

Deploying end-of-life take-back programs

SI

Proportion of shipment volumes coveredby markets with end-of-life take-back programsin place for smoke-free consumables
A SPI R AT ION

≥80%

2023

17.6%

2022

8.5%
0

25

50

75

100

Note: Shipment volume includes heated tobacco units, e-vapor cartridges,
and e-vapor disposables. See PMI’s Sustainability KPI Protocol 2023 for further details.

In addition, there are differences between product categories
depending on the material composition of the consumables.
Building on learnings from previous years and the growthand expansion of our portfolio, our guidance for markets
evolved to respond to new realities, and in 2023 we decided
to decentralize the process of developing end-of-life takeback programs and empower markets to craft local solutions
informed by basic criteria, which we centrally communicate
through tools, frameworks, principles, and databases.
The guidance we offer provides a holistic understandingof our product portfolio, a regulatory overview, market
learnings to date, a roll-out guide to support preparation andimplementation, post-consumer waste management principles
and guidelines, and standard operating procedures to ensure
consistence, impact, and credible program deployment.
The updated guidance encourages markets toconsider a broader range of mechanisms for their endof-life take-back programs and to focus on locally
relevant cost-effective and impactful programs.
In response, we have managed to support markets inlaunching a locally relevant program in 16 new markets
in 2023, bringing the total to 28 markets to date.

Improving the sustainabilityof our smoke-free devices
By integrating sustainability considerations into our
product design—from choice of materials to end-ofuse and end-of-life—we can reduce environmental
impacts, improve circularity, and better manage
associated costs. We aim to understand and manage
environmental impacts across our entire value chain,including assessing and extending the life cycles ofour smoke-free devices.
Improving the sustainability profile of our smoke-free products
is particularly important as we continue to expand our productportfolio to incorporate products with electronic components
for adults who would otherwise continue to smoke orconsume nicotine. These products are at the heart of ourtransition to a smoke-free future.
We work with our electronics suppliers and retail partners toprogress on these topics. We have also been engaged with
the World Business Council for Sustainable Development(WBCSD) on its Circular Transition Indicators (CTI) project.
Utilizing life-cycle analysis
We use life-cycle analysis (LCA) to assess the carbon footprintof our products, from tobacco sourcing to end-of-use andend-of-life. This analysis applies to devices, consumables,and packaging. In 2023, we further increased our internal
LCA modulation capabilities, allowing us to incorporate LCA
simulations as early as the design phase. As a result, we now
have a single tool with which to assess our footprint acrosssmoke-free categories.
On average:1• Our heat-not-burn product category (including bothconsumables and devices) has an average carbon footprintof approximately 28.4 kg CO2e/year, of which consumables
contribute 84 percent and devices 16 percent. This reflects aslight increase compared with 2022 due to the introductionof new consumables and devices in our portfolio.
• Our e-vapor product category (including both consumables
and devices) has an average carbon footprint ofapproximately 15.4 kg CO2e/year, of which consumables
contribute 96 percent and devices 4 percent. There has
been a decrease of 3.3 kg CO2e/year compared with 2022
due to the introduction of new consumables and devices
with lower carbon footprints
Our heat-not-burn and e-vapor products have a higher carbon
footprint than do combustible cigarettes. This is primarily due
to the inclusion of an electronic device, which involves newcomponents and requires electricity to charge.
1 In line with the adaptation of our LCA calculation method to an EPD PCR, we
anticipate that reported values will increase in the coming year. Figures are based ondata compiled from different LCAs. Scope includes materials, manufacturing, andend-of-life, but excludes logistics.

Philip Morris International Integrated Report 2023

Operational impact

Fundamentals

81

Reporting and performance

To mitigate these additional product impacts, we aim to
decrease our total carbon footprint through smart materials
selection, sustainable design practices, the collection andtriage of devices, expanding our refresh and repair capabilities
for device life extension, and remarketing refurbishedproducts (read more about device second life here).
In addition to the impact of electronic devices, the processused to manufacture consumables is more resource-intensive
than for cigarettes due to the production of cast leaf tobacco,
which requires more water and energy. Learn more about
our efforts to conserve water here and decarbonize ouroperations here.
Eco-design certification
We aim to drive continuous improvement in future productgenerations. To this end, we have explored eco-design
standards and identified the criteria applicable to smoke-free
products to further embed sustainability into the early stagesof the product design process and across the product cycle.

2025
Aspiration

SI

100%

Of smoke-free electronic
devices introduced on themarket as of the end of2025 have eco-design
certification

Note: For further details please see PMI’s Sustainability KPI Protocol 2023. In 2023, 100% of
product project briefs in scope had eco-design certification requirements included.

Embedding eco-design principles in our products throughan end-to-end approach helps minimize impacts related tomaterials selection and sourcing, components production,
product manufacturing, use, and product end-of-life stages.
Our framework helps us anticipate and proactively implement
design features that may be regulated in the future.
Eco-design certification can drive product performanceby raising environmental and social standards and educate
consumers so they can make more informed choices.
Smoke-free products—and heated tobacco products, inparticular—are a relatively new product category. As such,they are not covered by existing product category rules,
making it challenging to find external partners to work with orrecognized eco-labels for them.
In 2023, we further defined our framework for eco-design
and initiated the application of several sustainable designprinciples into select pilot projects.

Reduce post-consumer waste

2025

Despite our progress, we recognize the difficulties markets
face in executing these programs. Recycling smokefree consumables is a technical process that requires
recycling partners to separate and process multiple
material streams, and many of these streams do not
produce valuable outputs. It is, therefore, difficult to findstrategic partners at the local level willing to collect andproperly recycle consumables. This systemic issue requires
more time for markets to be able to find the right local
partners to build a long-term strategic partnership.

Product impact

Seek net positive impact
in wellness and healthcare

To mitigate the risk of littering, we set an aspiration to
implement context-based, impactful end-of-life take-backprograms to collect and manage post-consumer waste fromour smoke-free consumables in markets representing atleast 80 percent of our smoke-free shipment volume as partof our Sustainability Index. The programs align with global
requirements to ensure consistency and comparability overtime but are adapted to deployment realities in each market.

Among our consumers, the program has generated increasingawareness, positive sentiment, and interest in participating.

GovernancePurposefully phaseout cigarettes

Our disposable e-vapor products, including VEEVNOW, are categorized as consumables within PMI.
Similar to other smoke-free consumables, we seek tominimize the environmental impact of these products.
We continue to require that affiliates launching VEEVNOW put in place end-of-life take-back programs
prior to launch (with an intent to recycle collected
products).

Strategy

Maximize the benefitsof smoke-free products

R E D U C E P O S T- C O N S U M E R WA S T E

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Overview

Extending the smoke-free product life cycle
We strive to extend our product life cycles. Achieving
this starts with imposing high standards of quality andreliability (read more here) and extends to preserving devices
through proper device care, enabling their refresh, repair,and refurbishment, and establishing take-back programs.
Preserve through proper device care
We strive to help users of smoke-free electronic products
extend the life of their devices through better care. We aim
to minimize consumer pain points with simple tips based on
usage and behaviors to optimize legal-age user experience.
Firmware updates, proper charging, and regular device
cleaning at home or professionally in our boutiques help
reduce the number of devices ending up as waste.

Commercialization

Use

Returned
devices

Battery replaceability

Second life

Product refreshor repairPreserve
Proper device care

To ensure compliance with this new regulatory
framework, electronic consumer products using
lightweight portable batteries would need to beredesigned in order to facilitate the reuse, repair, andrecycling of batteries and improving the circularity of
products.
Further guidance from EU institutions is expected tocomplement and clarify this design requirement andpotential exemption cases. In this regard, we continue
to proactively prepare for and anticipate regulation by
ensuring that we are embedding eco-design principles
that will respond to these requirements.

Promote device second life: refresh and repair
We strive to establish commercially viable programs fordevices that, once returned, can find a second life in theeconomy.
As part of various commercial programs, we also haveactive device take-back programs in 18 markets (2022: 10
markets). Device take-back programs provide our consumers
the opportunity to return their old and unused devices to
us for proper disposal. Collected devices are either given asecond life or recycled. The parts that are not recyclable areincinerated with energy recovery.
We are continuing to mature our circular model. To guide us inthis journey, we have set an ambitious aspiration to refresh or
repair at least 1 million smoke-free electronic devices by 2025
(cumulative since 2021), which we are on track to achieve.

Energyrecovery

Source: Adapted from the Ellen MacArthur Foundation Butterfly diagram.

Philip Morris International Integrated Report 2023

Successful second-life strategies rely on the ability tocollect and sort devices, distinguish between those to berecycled and those to be recovered, and repair or refresh
devices according to quality and safety standards. Also vitalis simplifying the experience for consumers and making it
more accessible.

Fundamentals

83

Reporting and performanceSI

Number of smoke-free electronic
devices refreshed or repaired(cumulative since 2021), in thousands
2025

A SPI R AT ION≥1,000

2023

320

2022

157
0

200

400

600

800

1,000

In 2023, we made strong progress against our 2025
aspiration. We shifted our focus on refresh and repair
capabilities from IQOS DUO to IQOS ILUMA MID. In parallel,
we started building and qualifying repair and refresh
capabilities for ILUMA ONE for deployment in 2024.
During 2023, we expanded our refreshed portfolio in the
Netherlands, Portugal, and Switzerland, and we will continue
deploying in other markets.
An important purchase driver for many adult smokers
considering converting to smoke-free alternatives is the
upfront price of the device. Typically, refreshed devices are
priced 20 to 30 percent lower than new devices, diversifying
the price point offering (read more about affordability here).
Overall increases in Net Promoter Scores (NPS) in our
e-commerce channels demonstrate that these offerings have
had a positive impact on consumer satisfaction. For example,
during the same period in 2023, IQOS Refreshed owners in
the Swiss market reported an NPS of 54.4 compared with theaverage IQOS user NPS of 38.9, demonstrating significantly
increased satisfaction among IQOS Refreshed users.
Enhance circularity: device recycling
For those products that cannot be given a second life, our
CIRCLE hubs inspect, process, and separate materials forrecycling.
We continued to face logistical and regulatory complexity
as we worked to onboard markets into the CIRCLE hubs incertain countries, limiting our pace of deployment. To addressthese challenges, we began looking at more local recycling
options to complement our CIRCLE hubs solutions. We
expanded the scope of our CIRCLE program to include six
local recycling solutions where transportation to our central
hubs was not possible.

Reduce post-consumer waste

Our aspiration

PMI parts
manufacturers

RecycleThe combination of product quality improvements andconsumer-facing efforts has contributed to increased device
longevity. This extended life cycle has led us to explore arange of additional services that would not otherwise be
viable. For example, in the Swiss market in 2023, we piloted
our first cosmetic-part servicing plan for ILUMA ONE andILUMA MID, allowing users to change the casing of theirfunctioning devices.

Operational impact

Seek net positive impact
in wellness and healthcare

Disposal

Into raw materials,
parts, or energy
recovery

Product impact

Along with other mandatory requirements aroundsafety, labeling, and due diligence, the newly adopted
EU Batteries Regulation requires portable batteries
to be readily removable and replaceable directly by
consumers, from 2027 onwards.

Third-party partsand components

Manufacturing
process

GovernancePurposefully phaseout cigarettes

Building on this work, we are leveraging our B2C
commercialization model and related processes and tools inour sales channels (e.g., our stores, e-commerce websites,
and IQOS coaches) to prolong the life of our devices andavoid unnecessary e-waste through appropriate device care.
These efforts may include engaging with the consumer
both in person or remotely to explain device functionality,
thus avoiding unnecessary product replacements throughaccurate device diagnosis and streamlined procedures
for returns, warranties, and loyalty programs. We aim to
introduce new tools that will allow us to build predictivemodels to further enhance our device life cycle.

Strategy

Maximize the benefitsof smoke-free products

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Overview

We have put in place strong governance mechanisms toidentify local solutions and maintenance of all onboarded
markets and may change or remove local partners if they do
not meet or exceed our minimum requirements related torecycling performance, transparency of reporting, auditability,
certifications, and no direct waste to landfill policy.

Proportion of smoke-free electronic device
sales volume covered by the CIRCLE program
2025

A SPI R AT ION

90%
82%

2022

61%

2021

63%
0

20

40

60

80

100

Note: Excludes disposable products and non-PMI-designed devices. We recalibrated our2025 aspiration to 90% during 2023 to account for regulatory and market developments.
Collected devices are considered covered by the CIRCLE program if they are either
processed at our centralized CIRCLE hubs or by validated local recycling partners.

In 2023, we met our effective recycling rate aspiration.
Our CIRCLE hubs in Hungary and Japan continued to drive
excellence in e-waste management.

Our CIRCLE hub activities produced 315 tons of shredded
materials coming from dismantled devices during 2023. The
recycling rate of our products in our CIRCLE hubs in Hungary
and Japan and the two validated solutions that initiatedrecycling activities combined stood at 89 percent in 2023
(excluding 4 percent energy recovery through incineration).
We remain committed to maintaining an overall combined
recycling rate higher than 80 percent.

Philip Morris International Integrated Report 2023

2022

53%

2021

53%
20

40

60

80

100

Note: The eﬀective recycling rate is calculated based on the proportion of device sales
volume covered by the CIRCLE program multiplied by the actual recycling rate of devices
recycled within the scope of the CIRCLE program (weighted average) excluding energy
recovery. Excludes disposable products and non-PMI-designed devices.

During the year, we reconsidered our use of the effective
recycling rate metric. We determined that this metric is notbroadly comparable across companies, does not provide
additional insights into PMI-specific performance comparedwith the recycling rates and coverage of smoke-free electronic
device sales by the CIRCLE program, and may not be easy forusers of this report to interpret. We therefore will continue
reporting on the smoke-free electronic device sales coveredby the CIRCLE program and the overall recycling rate of ourdevices at the CIRCLE hubs and local validated solutions, butwill discontinue our reporting on the effective recycling rate.
Currently, we are exploring the use of recycled content
sourced from third parties in certain parts and componentsof our products. At the same time, we are researchingpotential applications to close the loop by integrating
recycled material, including from our portfolio, if
possible, into our own products in the future. Battery
components, specifically lithium, are recovered and soldto battery producers for new battery production.

Our sustainable packaging strategy seeks to keep pace withthese changes, reflecting best-in-class leadership in packaging
recyclability and packaging material reduction. In 2023, werevisited each element of our existing strategy to test forcontinued relevance in an external sustainability landscapethat has grown in sophistication.
We continue to invest in proprietary researchand to test alternative materials and formats forpotential displacement of hard-to-recycle packaging
across our consumable portfolio and participate inmultistakeholder initiatives to remain apprised ofpackaging trends, new technologies, and regulation.

A glance at our path to integrate
Swedish Match

The packaging most closely associated with nicotine
pouches across geographies and brands is a rigid
single-use polypropylene can, which poses immensely
different sustainability challenges compared with themostly fiber-based packaging formats associated withthe other types of products offered by PMI.
The integration of these offerings into PMI’s portfolio
provides a great opportunity to design the next
generation of nicotine pouch packaging according
to the hierarchy of circular economy principles. As
we continue to integrate Swedish Match into PMI
operations, we will leverage our existing processes tobest evaluate packaging alternatives. This will include
refill and reuse options, as well as the potential toreduce materials use and incorporate carbon footprint
advantaged recycled content.

85

Reporting and performance

Utilize renewable sources
Renewable sources are those that can replenish themselves ata sustainable rate, such as from properly managed agricultural
sources. To date, over 90 percent of our packaging comesfrom renewable materials and we maintain close to 90 percent
chain of custody (CoC) of our sourcing of these materials,
positioning us well within our industry.
We recognize that in the context of the scalable and circular
packaging economy, renewability is lower in the ideal
packaging hierarchy than reduction, reuse, and recyclability.
It is also more a consequence of a portfolio rich in fiber-based
packaging than a reflection of specific initiatives intended toincrease renewability as an attribute.
As such, we have determined that our renewable sources
aspiration is less relevant and strategic than when we set
it in 2018 and have decided to retire it. We will instead
amplify our efforts to improve recyclability and will focus
in 2024 on identifying opportunities where regulation,
infrastructure, and performance criteria allow theincorporation of recycled content.

Proportion of packaging materials
coming from renewable sources
2025

Swedish Match data is not included in the “Reducing
and improving packaging” sub-section.

Fundamentals

A SPI R AT ION

95%

2023

90.9%

2022

90.1%

2021

89.7%
0

20

40

60

80

100

Within our portfolio, the term renewable sources mainly refers
to fiber-based material used in our paperboard packaging,which remained the primary packaging material we used in
2023, representing around 383,140 tons, or 92 percent, of
our total packaging portfolio. Paper and board are primarily
used in packs and bundles, inner liners, and shipping cases.
Of this, 88 percent was sourced from suppliers with CoC
certified according to the Forest Stewardship Council (FSC),
Programme for the Endorsement of Forest Certification(PEFC), or Sustainable Forest Initiative (SFI) standards.

Reduce post-consumer waste

Validated local solutions in Egypt and South Korea initiatedrecycling activities during the year. The recycling rate at our
local solutions is mainly driven by their dismantling capabilities
to separate the different components and to find capable local
downstream recyclers.

73%

As our product portfolio changes, so does our
packaging, which continues to evolve in linewith our expansion into new product categories,
adaptations to better meet consumer expectations,and shifts in regulation.

Operational impact

Seek net positive impact
in wellness and healthcare

2023

70%

2023

0

Product impact

Purposefully phaseout cigarettes

By year-end, we had expanded the scope of our CIRCLE
programs to include local solutions in different markets
including Egypt, Indonesia, Italy, Serbia, and South Korea.
Globally, including validated local solutions, we achieved
CIRCLE coverage of 82 percent of market volume in 2023
(2022: 61 percent).

A SPI R AT ION

Governance

Reducing and improving
packagingEﬀective recycling rate of our smoke-freeelectronic devices
2023

Strategy

Maximize the benefitsof smoke-free products

R E D U C E P O S T- C O N S U M E R WA S T E

84

We work in close partnership with our major suppliers toachieve the highest possible proportion of CoC-certified
board material to ensure our packaging does not contributeto deforestation. In collaboration with industrial material
and machine suppliers, we focus on reducing material
consumption. For example, we are engaged in 4evergreen, across-industry alliance of over 100 members representing theentire life cycle of fiber-based packaging. Its members work
together on guidelines, tools, and alignment within the paper
recycling value chain toward the goal of reaching a 90 percent
recycling rate for this stream by 2030.

The limited amount of aluminum we used across our
packaging formats in 2023 represented 2,220 tons, of which
100 percent was Aluminum Stewardship Initiative (ASI)
certified, either under the performance standard or the CoC.

Other materials, such as inks and composites used in tobacco
product packaging, represented 6,960 tons, or 2 percent, of
our global packaging footprint. These will also be integrated
into our designed-for-recycling reporting moving forward.

Philip Morris International Integrated Report 2023

Going forward, we will report on the average packaging
intensity reduction for two distinct product categories
versus the 2018 baseline: combustibles and heat-not-burnconsumables, as these are the primary volume drivers for thismetric. We will retain our aspiration of a 15 percent reduction
by 2025 in each of these categories.
We continued our program to reduce consumption of ourmain material, paperboard. By the end of 2023, we achieved
an estimated annual reduction of 2,000 tons of paperboard
across our portfolio, for both combustibles and smoke-free
products. Between 2018 and year-end 2023, this resulted
in a reduction of more than 13,700 tons of paperboard. As
previously stated, going forward this program will integrate
plastic reduction efforts into our overall material reduction
work.

Product impact

We made significant progress on reducing the average
packaging weight within our product range in 2023. For
example, we reduced by 4.5 percent the weight of the board
used in several pack formats in the combustible category andby 11 percent in the heat-not-burn category.

Average packaging weight reduction forheat-not-burn products versus 2018 baseline
2025

A SPI R AT ION

15%

2023

13.4%

2022

10.3%

2021

8.3%
0

10

20

30

40

50

Within the e-vapor category, the packaging of our recently
launched VEEV ONE Mobility Kit has been redesigned
to reduce the amount of material required and minimize
unnecessary plastic. This resulted in a 53 percent reduction inpack volume and a 95 percent reduction in plastic per pack.

Digital printing
Average packaging weight reduction
for combustible tobacco products versus
2018 baseline
2025

A SPI R AT ION

Sustainable packaging activities go beyond material
and format; they also include how we manufacture
and convert our pack materials.
15%
12.9%

2022

10.6%

2021

8.8%
10

20

30

40

50

Over the past few years, PMI has led and driven
progress with the disruptive technology of digitalprinting. This technology platform helps ourcommercial teams learn and react to consumer needs
as we grow new categories. It also supports PMI
pack sustainability goals by removing converting
steps, reducing logistics and CO2 emissions, and evenreducing needed inventories and material waste, as
we can now differentiate our materials later in thevalue chain. For example, in 2023 we saved 606 tonsof metal by avoiding the purchase of some printing
cylinders.

Fundamentals

87

Reporting and performance

Improve circularity
To improve our packaging footprint, we focus on recyclable
packaging.
In 2023, we restated our forward-looking aspiration to focus
on design for recyclability for our packaging. In the past, we
broke this data into the material components of a packaging
format that are technically ready for recycling (i.e., can berecycled only if the correct market infrastructure is in place).
Going forward, we will focus on packaging formats and willreflect this approach in our updated aspiration. The term
packaging format refers to what the consumer needs todispose of after usage and can, in some cases, have several
components (e.g., inner liner, hinged lid), integrated into one
format (e.g., pack). This change was made to better represent
the reality for the consumer, who is unlikely to separate all
elements of a package after use unless specifically instructed
to do so.

Proportion of packaging formats thatare designed for recyclability
2025

A SPI R AT ION

100%

2023

98.3%

2022

97.8%

2021

97.9%
0

2023

0

Operational impact

20

40

60

80

100

Note: Prior years' data have been restated for alignment with the principles of design
for recyclability by format, as well as expanding coverage of the portfolio.

We have continued to ensure that the vast majority of our
packaging is designed for recyclability. For example, in 2023,
we started deployment of a new solution for other tobacco
product (OTP) pouches, moving away from nonrecyclable
formats to formats designed to be recycled.
At the same time, we recognize that without establishedcollection and infrastructure in the markets we serve, claims
on design for recyclability can be interpreted as misleading.
This is why we are driving toward 100 percent as an aspiration
but will never claim 100 percent recyclability of our portfolio
in practice.

Reduce post-consumer waste

As we adjust our approach to reporting on packaging formats
that are designed for recycling, we will integrate inner liners
as a specific component of our designed-for-recycling metric(learn more about these concepts here).

In 2023, we reconsidered our aspiration regarding
absolute packaging weight reduction. In the past, webased the reporting of weight reduction on all packaging
materials we procured and in absolute terms. While thissimplified reporting, it failed to provide transparency to ourstakeholders on our packaging weight reduction efforts. We
will be decoupling these from supply chain and inventory
contributions by moving to a packaging intensity calculation
based on a standard number of servings (e.g., 20 cigarette
sticks or smoke-free product consumables).

GovernanceSeek net positive impact
in wellness and healthcare

Currently, the plastic wrap around our packs of consumables
and secondary cardboard packaging is designed for recycling(learn more here). In 2023, we continued our plastic reduction
efforts, removing 59 tons of plastic film by reducing material
thickness. Moving forward, we will incorporate this program
into our overall material reduction aspirations since we havereached the point at which plastic wrap has been reduced tothe minimum required for product protection. We will also
explore introducing recycled content according to the previous
guidelines discussed around regulation, infrastructure, andcarbon footprint benefits.

Reduce packaging

Strategy

Purposefully phaseout cigarettes

Plastics represented 24,610 tons, or 5.9 percent, of our global
packaging footprint in 2023. Plastics are primarily used in the
overwrap of our packs and bundles, as well as in pouches, seal
inner liners, and labels.

Overview

Maximize the benefitsof smoke-free products

R E D U C E P O S T- C O N S U M E R WA S T E

86

In reality, the recycling landscape is highly complex. Even if
all packaging were collected and routed to the appropriate
facilities for recycling, yields for both fiber-based and plasticbased processes are not 100 percent, due to a variety offactors. Any claims of infinite recyclability, of any material
or format, do not reflect reality in even the most advanced
markets for post-consumer processing.
It is our responsibility as a leader in sustainable packaging tohelp drive the parts of the value chain that will improve therates at which materials are truly recycled using processes thatare lower in carbon footprint than equivalent virgin materials.

We are also exploring reusable components within our
logistics footprint and packaging. For example, we now
reuse filter trays in our factories up to three times to reducematerial consumption, saving an estimated 500 tons ofmaterial in 2023.

We have programs in place to increase the use of recycledcontent in our packaging but face some structural challenges.
The availability of recycled polypropylene, particularly forsensitive contact applications, remains scarce due to theunderdeveloped circular materials supply chain. This scarcity
leads to a high cost premium for recycled materials that does
not necessarily provide an overall carbon footprint benefit
versus the use of virgin materials.
The use of chemically recycled polypropylene, for example,
remains contested, as industrial processes are starting to scale
and third parties are pressure-testing the environmental claimsof material suppliers. We continue to monitor this area andapply our own due diligence, and will provide transparency on
our use of chemically recycled material for packaging in ourreporting. We are actively seeking partnerships to improve thepost-consumer value chain for recycled polypropylene.

Scott Couts
Senior Vice President,
Operations

Bin Li
Chief Product Officer

Operational impact

Fundamentals

Reporting and performance“Our efforts to find suitable alternatives to replace cellulose acetate in our cigarette andheated tobacco unit filters are under way and will continue into 2024. With regard to
packaging, we are focused on delivering against our 2025 aspirations and will continue
deploying programs to reduce packaging weight and to ensure all our packaging formats
are designed for recycling. The Swedish Match integration into PMI will bring a new andchallenging dimension to our packaging portfolio. We recognize this as a great opportunity
to take a refreshed look at more circular packaging solutions, such as refill or reuse, for thisgrowing format as we drive alignment with our PMI sustainability goals.”“In 2024, we will continue maturing PMI’s eco-design program by further embedding theseprinciples across our devices, consumables, and accessories portfolio. Concretely, on thedevices portfolio, we will continue improve our eco-certification framework by testing theapplication of eco-friendly design specifications into select pilot projects in our heat-not-burnand e-vapor categories, and seek to obtain independent verification of the implementation ofthis framework. In this context, we also plan to evolve our LCA methodology and apply it toselect variations of our smoke-free devices. Moreover, we will review PMI’s repair strategy
with the aim to refine our design guidelines for repair and recycle, and work on improving
device robustness with the aim to extend product longevity and minimize electronic waste.
Within our consumables portfolio, we will continue exploring technical solutions to reduce
the plastic content in heat-not-burn consumables. Finally, across our accessories portfolio, wewill drive further adoption of environmentally responsible materials in our offerings. Building
on our progress to date, we remain committed to maintaining a recycling rate within our
CIRCLE program above 80 percent.”“We will continue deploying and expanding the reach and impact of the anti-littering
programs we deploy across the many countries in which we operate, leveraging ourawareness-raising efforts to the greatest extent possible, to prevent inappropriate
disposal and inspire behavioral change in consumers’ habits. Meanwhile, we will
also continue to explore and test nonplastic filter materials that fulfill demanding criteria
and meet consumer expectations.”“We will remain committed to anchoring sustainability in our brands. During 2024, we will
deploy our sustainability roadmap (covering product design, packaging, post-consumer
waste management initiatives, and consumer-facing communications) for our fairly recent
categories of e-vapor and oral products. Reducing post-consumer waste remains a strong
focus, and we expect to expand the geographical coverage of our smoke-free consumables
end-of-life take-back program. Our aim is to reach 80 percent of global volume coverage andwe are on track to achieving that. As we continue to deploy our program at scale, we plan to
conduct studies to better understand use patterns and inform our waste treatment strategies.
Further, understanding the importance of prolonging the lifespan of our devices, we plan toscale the deployment of our second-life IQOS proposition to reach our 2025 aspiration.”

89

Reduce post-consumer waste

Werner BarthPresident, Combustibles
Category & Global
Combustibles Marketing

Stefano Volpetti
President, Smoke-Free
Inhaled Products andChief Consumer Officer

Philip Morris International Integrated Report 2023

Product impact

Looking ahead

Despite these challenges, individual markets have madeprogress on incorporating recycled content into packaging.
For example, in 2023, we launched a commercial initiative infour new markets featuring packs with all board made fromrecycled waste originating in the packaging value chain.
The regulatory landscape for product packaging is also
evolving, particularly in Europe with the forthcoming
European Packaging and Packaging Waste Regulation thatseeks to ensure packaging becomes more reusable andrecyclable and that over-packaging and packaging waste is
reduced. Such an EU-wide framework is expected to help in
harmonizing regulatory approaches to post-consumer waste
management, including efficient sorting and recycling at scale
to improve packaging material circularity. This has the potential
to help customers to understand recycling properties of
products they choose and help to drive progress toward amore circular economy across the industry.

GovernanceSeek net positive impact
in wellness and healthcare

Beyond ensuring our packaging is designed for recyclability,
we seek to ensure recyclable content is actually recycled byhelping consumers understand how to recycle their packaging.
For example, several markets utilize bar codes on packs
that leads directly to information about how to recycle thepackaging when scanned by smartphone.

Recycled content

Strategy

Purposefully phaseout cigarettes

We believe these updated aspirations, along with ourapproach to recycling, will best demonstrate our efforts andprogress in this area. Moving forward, we will work to further
understand the effective packaging recycling rates for themost common packaging formats in our highest-volume
markets to better focus our efforts in the post-consumer
waste management chain.

Overview

Maximize the benefitsof smoke-free products

R E D U C E P O S T- C O N S U M E R WA S T E

88

90

Overview

Strategy

Governance

Product impact

Operational impact Fundamentals

Our aspirations

SI

Foster an empowered
and inclusive workplace
Improve the quality of lifeof people in our supply chain

employee Net Promoter Score (eNPS)<0.65 collision rate in our fleet
Global EQUAL-SALARY certification<0.3	Total Recordable Incident Rate (TRIR) for
PMI employees, contracted employees, andcontractors (per 200,000 hours worked)

p92

p110

p126

Preserve naturep142

of senior roles held by women SI≥60%	representation of local talent
in the executive management teamsof at least 80% of our markets orclusters>70%	score on self-perception of
psychological well-being among
our employees1≥20%	of senior roles held by
Asian talent globally22025>90%	PMI-purchased tobacco volume for which labor
practices and adherence to our Agricultural
Labor Practices Code are systematicallymonitored
100%	of contracted tobacco farmers and farmworkers
supplying tobacco to PMI have access topersonal protective equipment for theapplication of crop protection agents andprevention of green tobacco sickness

Zero coal used as
curing fuel for the
tobacco we source

100%	of contracted farmers
supplying tobacco to PMI
paying their workers at least
the minimum legal wage or
agricultural benchmark
100%	of tobacco farmworkers
are provided with safe andadequate accommodation3

2030

Carbon neutrality in our direct
operations (scope 1+2) SI
35%r eduction in absolutegreenhouse gas (GHG)
emissions in our tobacco
supply chain versus
2019 baseline

MaintainZero gross deforestation of primary and protected
forests associated with our tobacco supply chain
100%	of tobacco purchased without detection ofresidues attributable to the use of highly hazardous
pesticides>70%	of flue-cured tobacco purchased cured withrenewable fuel sources (self-sufficient firewood orbiomass)≤3.1	water ratio in our manufacturing facilities(water withdrawn in cubic meters per million
cigarettes equivalent)
Virtually zero waste to landfill in
manufacturing operations4

2030

100% of contracted farmers supplying tobacco to PMI
make a living income SI
10 	highest-risk countries covered by external human rights
impact assessments, with findings addressed SI
0% 	prevalence of child labor among contracted farmers
supplying tobacco to PMI SI
100%	of contracted farmers supplying tobacco to PMI
that have basic water access
100%	of spend with critical suppliers from whom PMI sources
sustainably

2025

100%	of our manufacturing
facilities certified carbon
neutralPhilip Morris International Integrated Report 2023

35%

Maintain

Maintain*Scope covers Swedish Match operations.
Note: Aspirations marked with” SI” symbol are constituents of the PMI
Sustainability Index, which is tied to our long-term executive compensation forthe period vesting either in 2024 (see Sustainability Index 2022–2024 here) orin 2025 (see the PMI Sustainability Index 2023–2025 here).

70% 	of PMI employees with access to
structured lifelong learning offers SI≥40% of management positions held by women

Tackle climate change

1 We measured perception of psychological well-being on a five-point scalefrom very bad to very good through our ongoing company-wide employee
survey.
2 For the purpose of measuring progress against this indicator, PMI uses thenationality data of employees recorded in our HR systems. The
determination of Asian nationalities is based on the regional groupings aslisted by the United Nations, and we consider the following regions: Central
and Southern Asia, Eastern and South-Eastern Asia.
3 Scope is limited to farmers who provide accommodation to workers(approximately 4 percent of the total farmer base in 2023).
4 Virtually zero waste to landfill is achieved when the landfill diversion rate isequivalent to 99 percent or greater. This aspiration covers our
manufacturing site and PMI-owned tobacco stemmeries.
5 Aspiration pertains to priority manufacturing facilities identified based onsite overall risk in relation to the watershed, water withdrawal, water
consumption, product portfolio, and other strategic considerations. PMI
sites that are in low to medium water risk areas and below 2.5% of PMI
manufacturing water footprint are excluded.

Sustainability Index

2025

100% of PMI employees earning at least a living wage

Operational
impact91

KPI included in Sustainability Index 2022–2024 or 2023–2025

Maintain≥30

Reporting and performance

2040

18% 	
reduction in absolute scope 3 Forest, Land and50%	reduction in absolute scope 1+2 GHG
100%
of contracted
farmers
Agriculture (FLAG) GHG emissions
versus2019
emissions versus 2019 baseline (SBT)*
supplying tobacco to
PMI havebaseline SI
33.3%	reduction in absolute scope 3 FLAG
basic
water access
100% of electricity used and purchasedin our
GHG emissions versus 2019 baseline
factories derived from renewable sources(SBT)*

15%	of suppliers by spend (covering purchased
goods and services) will have science-basedtargets (SBT)

27.5%	reduction in absolute scope 3
industrial GHG emissions versus
2019 baseline*75%	
reduction of CO2e intensity in tobacco curing
versus 2019 baseline

50%	absolute reduction of CO2e scope 3
in our tobacco supply chain

2025

Zero net deforestation ofmanaged natural forest andno conversion of natural
ecosystems in our tobacco
supply chain SI
Net positive impact onforests associated with ourtobacco supply chain
100% of our tobaccogrowing areas covered by
local water risk assessments(cumulative since 2018)2030

100% of our manufacturing
facilities certified to the
Alliance for Water Stewardship(AWS) standard5
Zero gross deforestationof primary and protected
forest associated with
our supply of paper andpulp-based materials

100% 	of contracted farmers
supplying tobacco to
PMI have access to basic
sanitation and hygiene

Zero netdeforestation ofmanaged naturalforest and noconversion ofnatural ecosystems
in the paper
and pulp-based
products supply
chain

72%	reduction in absolute scope
3 FLAG GHG emissions
versus 2019 baseline (SBT)*
90%	reduction in absolute scope
1+2+3 GHG emissions
versus 2019 baseline (SBT)*Net zero GHG emissions in ourvalue chain (scope 1+2+3)(SBT)*

2033

2050

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

Contribute toward
a net positive
impact on nature≥25 million cubic
meters of water
optimized in our
tobacco-growing areas(cumulative since 2019)

Contribute towarda positive impact onwater resources

Scale solutions towarda positive impact
on water resources,
measured as volume
of water optimized
and restored

92

Overview

Strategy

Governance

Product impact

Operational impact Fundamentals

Reporting and performance

Our ambition is to be an employer of choice,fostering an inclusive culture wherever we operate
in the world.
O P E R AT I O N A L I M PA C T

Foster an empowered
and inclusive workplace
Our employees are drivers of innovation and the ambassadors of our purpose. We aspire to provide
meaningful and fair employment, opportunities to grow, and a workplace that champions well-being
and inclusion.
OUT WA RD IMPAC T

The business case

The right thing to do

Our long-term business success relies on our people­—on the
dedication, talent, and passion they bring to work. Accordingly,
it is essential for us to provide a fair and inclusive workplace that
upholds good working conditions and labor rights, protects thehealth and safety of employees, promotes well-being, and offers
opportunities to grow, upskill, and improve their employability.

Equitable and fair employment conditions are crucial for societal
harmony and well-being and are central to a sustainable andprosperous future for all. Effective professional development
opportunities ensure that employees can pursue professional
opportunities and contribute meaningfully to society.
By ensuring that all people who work with us enjoy a safe andhealthy work environment, and by attending to their physicaland mental well-being, we can positively impact their lives
beyond the workplace.
Moreover, by protecting and promoting diversity, equity,
inclusion, and fair treatment—essential to unlocking social andeconomic development—we instill in our people a sense of
belonging and purpose. This can have positive spillover effects
outside of our organization and sets an example for corporate
best practice.

As a global company, we consider it our duty to ensure that
our entire workforce (regardless of local or national regulation)is treated fairly, respectfully, and in line with our principles.
We operate in multiple countries with widely varying legal
employment frameworks. For example, in some countries theright to freedom of association is restricted; in such cases, we
strive to work with employees’ consultative committees andother suitable mechanisms of representation.
We value dialogue with properly appointed employee
representatives (e.g., trade unions and works councils,
European Works Council) and regularly engage with themand learn from best practices. This dialogue occurs at local,
regional (e.g., European Federation of Food, Agriculture andTourism Trade Unions), and global (e.g., the IUF – International
Union of Food, Agricultural, Hotel, Restaurant, Catering,
Tobacco and Allied Workers’ Associations) levels.

Our internal communications team, headed by our SeniorVice President, Global Communications, facilitates greater
employee engagement and nurtures a positive workplaceculture.

Workplace integrity principles at PMI
We strive to maintain an inclusive, safe, andprofessional environment. We promote diversity,
equity, and inclusion in our organization, ensuringthat all employment-related decisions are meritbased. We do not tolerate harassment, discrimination,
abuse or misuse of company assets or resources,
violence, or the use of alcohol or drugs. We do not
engage in or condone child labor, forced labor, orother human rights abuses. We encourage effective
engagement and dialogue with employees and theirproperly appointed representatives. Read more in our
representatives (read more in our Code of Conduct).

We encourage our employees to speak up about
employment-related concerns, ask questions, and recommend
improvements via their supervisors, P&C teams, our Ethics &Compliance function, or our helpline (read more here).
In this section

Providing fair employment

95

Protecting the health, safety, and security of our employees

96

Developing our human capital

99

Fostering diversity, equity, and inclusion

103

Promoting mental health and well-being

106

PMI takes allegations of sexual harassment and discrimination
seriously and will investigate allegations and apply disciplinary
measures (up to and including termination), as appropriate. See
the “Uphold business ethics and integrity” section for more
information about our Speaking Up program and Complianceinvestigations.

PMI’s policies and standards
Code of Conduct
Human Rights Commitment
Environmental, Health, and Safety (EHS) Manufacturing
Sustainability Commitment
Fleet Safety policy

Philip Morris International Integrated Report 2023

Preserve nature

As our Company continues to rapidly transform, appreciating
the value of human capital becomes key. Investing in ourpeople and enhancing their skills, knowledge, and experienceby providing meaningful opportunities helps us to recruit andretain talented individuals who can contribute fully to ourCompany’s mission in a context of change. Furthermore, westrongly believe that an inclusive culture that embraces diversity
better attracts talent and improves decision-making, innovation,customer orientation, and employee satisfaction.

We ensure our employees are informed of their rights by theirlocal People & Culture (P&C) teams, our Code of Conduct
and related principles and practices—including our Workplace
Integrity policy, and Global Non-Discrimination and AntiHarassment policy—and collective labor agreements.

Our Chief Diversity Officer oversees the development
and deployment of strategies to foster diversity, improve
inclusion, and promote well-being in the workplace.
Our Senior Vice President, Operations oversees theCompany’s health and safety strategy and performanceon health and safety across our manufacturing sites, fleet,and offices.

Tackle climate change

INWA RD IMPAC T

The importance of human capital development is center toour strategy. Training and communications help employees
understand the standards and processes relevant to their roles
and how to apply them in their daily work. We use multiple
formats and languages to optimize our reach across theorganization.

Improve the quality of lifeof people in our supply chain

This means ensuring that our employees experience fairworking conditions, opportunities to develop skills andboost their employability, and a workplace that protects andpromotes their psychological and physical health, safety, andwell-being.

Management
Employee-related matters are the responsibility of all
members of Company Management and functional
heads. Beyond reporting lines, dedicated teams within
our People & Culture function—headed by our Chief
People & Culture Officer, a member of Company
Management—lead efforts on labor relations, employee
engagement, talent attraction and retention, humancapital development, performance management, andcompensation.

Foster an empowered
and inclusive workplace

Management approach

93

Overview

Progress in 2023

• Our aspiration of maintaining at least 40 percent
representation of women in managerial roles has been
exceeded for the second consecutive year: in 2023, weachieved 41.8 percent, up from 40.7 percent in 2022.

• While setting and implementing global diversity
and inclusion standards as a multinational company
with a broad geographical footprint is essential, we
must remain mindful to respect local cultures andsensitivities in the countries where we operate.
• Project and construction activities in our manufacturing
sites have increased. This reinforces the need to
improve the quality of method statements andensure proper supervision of such activities.
• As we expand our operations in the U.S., it is essentialthat we build a competitive U.S. organization, while
growing organizational capabilities at pace and at scale.
• Fostering an empowered and inclusive workplace, with aworkforce reflective of our consumers and wider society,requires us to increase our efforts to equip each and every
leader in our Company, encouraging them to embrace
inclusion in their day-to-day interactions with their teams.

Maintaining sound labor relations
Maintaining sound labor relations promotes sustainablesuccess for our business and our employees. We achieve
this by creating an environment conducive to proactive,
productive, and results-oriented collaboration among
management, employees, and their properly appointed
representatives.
We respect employees’ rights to form or join trade unions
and other employee representative organizations of theirchoice. In 2023, we had 85 collective labor agreements in 35
countries, covering 63 percent of our workforce (2022: 79, 35,61 percent).
We have continued to build on our commitment to further
develop and strengthen local labor relations strategies andaction plans by supporting affiliates as they develop theirthree-year labor relations plan. In 2023, we have completed
the work for 15 affiliates, including follow-up sessions on theoriginal plans for some of them.
One point of concern is the working conditions and standards
for workers throughout our supply chain (read more about
PMI’s Responsible Sourcing Principles (RSP) implementationhere).

Workplace information and data for Swedish Match, which employed around 7,400 people as of December 31, 2023,
is not included in this report. Following our acquisition, we are welcoming Swedish Match employees with unique knowhow, who will be instrumental in the success of our common vision to make cigarettes obsolete, and are seeking to ensure
their smooth inclusion in PMI.

95

Reporting and performance

Providing fair compensation
We are committed to upholding and promoting a fair and justworkplace, rewarding employees based on their performance.
Our compensation, recognition, and benefits programs,
platforms, and policies differ by location, taking into accountlocal regulations, agreements, needs, and preferences. Most
programs incorporate bonus plans, life insurance, long-term
illness and disability plans, retirement-related arrangements,
and paid leave programs for all employees. Furthermore, there
are some global elements, such as our Employee Assistance
Program.
We regularly review our offerings to ensure they meet theevolving needs of our workforce.

Upholding a living wage for our employees
We are committed to ensuring that all our employees globallyearn at least a living wage. Paying at or above the living
wage benefits employees, their families and communities,
and our business. It fosters talent attraction, retention, andproductivity, while securing our social license to operate.
A living wage, distinct from a minimum wage, provides an
employee with the means to enjoy a decent standard of living,
including the ability to buy goods and services and accumulatesavings. A living wage takes local living standards into account.

Proportion of employees earningat least a living wage

Maintain

A SPI R AT ION

100%

2023

100%

2022

100%
0

20

40

60

80

100

Our preliminary assessment as we began the integration process highlights the need to join efforts in improving diversity
across the organization, in particular within senior roles. We anticipate existing gaps will be addressed as we pursue our
integration journey and ensure that our diversity, equity, and inclusion (DEI) strategy is implemented across our entire
organization.
We are partnering with Swedish Match to ensure we harness and retain the capabilities across both organizations throughonboarding the Swedish Match workforce and building collaboratively the future ways of working.
We will continue integrating the Swedish Match workforce during 2024 and expect to disclose further information anddata in a consolidated fashion in our next integrated report.

Promoting employee volunteering
PMI has a long-standing commitment to support the communities where our employees live and work and from which wesource tobacco. Support takes many forms, including monetary contributions, in-kind donations (see the list of our 2023
social contributions here), and employee volunteer work. All PMI employees are eligible to take two days per year of paid
leave for volunteering activities. In addition, the Company commits to match—with up to five additional paid leave days—any
additional volunteer work employees choose to do in their own time.
We also continue to support Projects with a Heart, a global grassroots, employee-driven philanthropic movement thatconnects internal employee donors and would-be volunteers with people in need. In 2023, PMI employees initiated morethan 300 humanitarian projects, impacting the lives of over 50,000 people across 34 countries.

Philip Morris International Integrated Report 2023

Preserve nature

A glance at our path to integrate Swedish MatchAll employees, irrespective of role, location, or
length of service, have the right to work under fairand just conditions. Treating people with respectand dignity is central to the fundamental principles
that guide our business conduct and unite us as acompany.

Operational impact Fundamentals

Tackle climate change• We expanded our portfolio of employee resourcegroups (ERGs) by introducing two new ones dedicatedto supporting parents and caregivers, and to promotingintergenerational collaboration. These enhance ourexisting array of ERGs, which are instrumental infostering inclusion throughout the organization.

Product impact

Improve the quality of lifeof people in our supply chain

Challenges• We saw a significant increase in the usage of ourlearning platforms, Udemy and Rosetta Stone, as aresult of our efforts promoting lifelong learning offers.

Governance

Providing fair employment

Highlights• Our employee engagement remained above
external benchmarks despite a challenging
external context in many countries this year.

Strategy

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

94

Overview

We have worked with leading sustainability consultancy BSR
since 2018 to assess living wages for our employees globally.
We plan to keep conducting a living wage assessment at least
every two years and initiate actions as necessary to ensurethat we continue to meet our global living wage commitment
to our employees.
Our most recent survey in 2023 confirmed that we continue
to pay at or above the living wage for all our employees
worldwide.

Equal pay for equal work
In April 2022, we achieved recertification of our initial
global EQUAL-SALARY certification from 2019. This global
certification verifies that PMI continues to pay female andmale employees equally for equal work in all the markets
where we operate.1 This is an essential building block on theroad to creating a more inclusive and diverse workplace andmaintaining our status as a top employer.

Aspiration
Global EQUAL-SALARY
certification

Third-party workforce
In 2023, we established a cross-functional program to improve
management of our third-party workforce, i.e., individuals
that we do not directly employ but who are engaged throughexternal entities such as staffing agencies, outsourced
providers, or independent contractors. These external workers
often provide specialized skills or services on a temporary
or project basis. We have developed a policy which will be
deployed in 2024, as well as piloted in Switzerland and the UK
a management system to enhance the visibility of our thirdparty workforce.

1 Excluding Russia.

Philip Morris International Integrated Report 2023

These systems enable us to analyze safety losses and toprioritize, plan, and monitor health and safety performance.
We routinely update our standards and train our staff toensure teams understand and align with the requirements.
Our health and safety performance monitoring covers PMI
employees, contracted workers employed by a temporary
employment agency (we had over 4,600 contracted
employees on average per month in 2023, compared witharound 7,000 in 2022), and contractors when on PMI
premises (see Glossary for definitions).

Total Recordable Incident Rate for
PMI employees, contracted employees,
and contractors
Maintain

A SPI R AT ION

<0.3

2023

0.11

2022

0.12

2021

0.09
0

0.05

0.10

0.15

0.20

0.25

0.30

Note: Metric based on actual data from 2023 (usually from January to September—someto August) and estimates for remaining months. This data will be restated with full-year
actual ﬁgures and made available on our website during 2024.

In 2023, our Total Recordable Incident Rate (TRIR) for
employees, contracted employees, and contractors was 0.11
(2022: 0.12). We are proud of the progress made to date andremain committed to sustainably maintaining a TRIR below 0.3.

Our Lost Time Incident Rate (LTIR) for employees,
contracted employees, and contractors was 0.08 in
2023 (2022: 0.07). We do not set targets on lost time
incidents as we wish to handle every incident with thesame level of importance, quality of analysis, mitigating
action, and worldwide reapplication of learnings,
regardless of whether the incidents result in lost time.

Embedding a safety culture across PMI
Our ambition is to create an interdependentculture in which highly skilled individuals andautonomous teams own responsibility for healthand safety, and the workplace environment.
In our markets, we use a variety of communication
platforms to increase engagement on market andfleet safety, as well as sustainability topics. In 2023,
we enhanced the criteria of our recognition programs.
We identified over 100 improvement initiatives
embedded across three categories, and over 20
employees were recognized for their contributions
to fleet safety and environmental sustainability.
In our factories, we conduct annual sustainability
culture assessments involving representatives
from all levels of the local organizations,combined with anonymous employee
surveys, to evaluate our sites’ safety cultures,
identify opportunities for improvement, andcheck the effectiveness of our actions.
In 2023, our employee survey drew over 16,000
participants (including almost 2,000 contractors)
and returned a score of 4.19/5 (2022: nearly
15,000 participants and a score of 4.17/5). Site
leadership teams take ownership to prioritize
the gaps and incorporate identified actions andtheir follow-up into each site’s master plan.
Another example of how we embed safety in
manufacturing is through our “risk-hunting days,”first introduced in 2022. These series of events
consist of an education campaign focused on raisingawareness and helping employees identify top
factory risks, followed by organized visits to areas
outside participants’ regular work spaces to seekout hazards and potentially unsafe conditions.
This process helps employees learn how to identify
risks and importantly to feel comfortable reporting
issues as they occur. In 2023, “risk-hunting” days
were held in all our factories, attracting more than
5,600 participants, including contractors, across theglobe. In all, more than 23,000 potential hazards wereidentified, classified, prioritized, and followed up on.

Operational impact Fundamentals

Reporting and performance

97

Moreover, each manufacturing site has established an
Environmental, Health, and Safety (EHS) pillar, which
focuses on building capabilities across the organization toautonomously identify, classify, and mitigate risks. This is done
through daily management systems applied at all levels of theorganization, which consists of incorporating EHS results,
issues, and in-process measures review into the daily work, inorder to identify risks and take timely actions.
The root causes of all occurred incidents and near misses are
identified, analyzed, and communicated to ensure learning andapplication of new insights. These capabilities are an integral
part of our teams’ upskilling, enabling our manufacturing sites
to develop an interdependent sustainable culture.

Safety in manufacturing
Health and safety in our factories is coordinated centrally by
our Global Manufacturing Sustainability team. At site level,
each facility has a dedicated team that ensures standards are
met on the ground.
As part of ISO 45001:2018 requirements, each site performs
an annual management review, which highlights its main risks andopportunities and planned actions. The review is conducted inalignment with the site’s entire management team.
External certification helps us continuously improve anddrive efficiency. In 2023, 100 percent of our factories
that individually produce the equivalent of a minimum of
3 billion cigarettes annually were covered by global multi-site
certification to ISO 45001:2018. The process requires yearly
third-party surveillance audits of sampled sites and resulted
in zero major or minor nonconformities for the second
consecutive year. This highlights the excellence in some crucial
parts of an effective occupational health and safety (OHS)
management system, including but not limited to:• Prioritization and integration of action plans with quantified
targets to address OHS risks• Integration of actions to prepare for and respond to
emergency situations• Evaluation of progress in reducing and preventing healthissues and risks against targets• Internal inspections• Procedures to investigate work-related injuries, ill health,diseases, and incidents
All manufacturing sites perform full-scope risk assessments
to identify hazards and implement necessary controls.
Our corporate targets on incidents help us evaluate theeffectiveness of our safety policies and programs.

Preserve nature

Equal pay for equal work is a first step in ensuring thatwomen’s work is not undervalued. With this foundation inplace, we are now working to close our gender pay gap (theaverage pay for women versus the average pay for men),
including by, among other actions, improving gender diversity
at senior levels of the Company (read more here).

The health and safety of employees and contractors inmanufacturing facilities, offices, and our fleet is covered byour management systems, which are based on recognized
guidelines and standards, including ISO 45001:2018(Occupational Health and Safety Management Systems), andassessed and audited internally and externally.

Product impact

Tackle climate change

Maintain

We have embedded clear methodologies,
procedures, and robust controls in our factories,
offices, and fleet aimed at ensuring that ouremployees and others on-site stay safe.

GovernanceImprove the quality of lifeof people in our supply chain

We are also committed to improving the quality of life of thepeople in our supply chain (read more here).

Protecting the health, safety,
and security of our employees

Strategy

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

96

Historically, the emphasis on safety topics has been
predominantly directed toward the production floor. We work
to extend focus and enhance safety measures and protocols
across all areas of our facilities, including nonproduction
areas where we record an important proportion of incidents.
This year we introduced dedicated safety inspections to
nonproduction areas (i.e., utilities rooms, waste water
treatment plants, warehouses, waste storage areas) to allaffiliates.

We conducted an in-depth review of our internal processes,
from design and procurement through execution. We havestrengthened our procurement processes, and deployed
our first internal construction safety manual to help ensurethat construction activities are supervised by a dedicatedconstruction management services expert.

In 2023, in the third wave of our global fleet safety e-learning
program, 95 percent of the current company drivers
commenced the program, which includes eco-driving modules.
Of the Company’s approximately 21,000 drivers, two-thirds
have completed the program, and the remaining one-third iscurrently enrolled. Starting in 2024, we expect to continue
implementing this technology-enriched annual program forthe next three years.
Together, our standards, programs, and technology are
creating significant improvements in road safety.

Vehicle collision rate in our ﬂeet
(collisions per million km driven)
Maintain

A SPI R AT ION

<0.65
0.40

Safety and security in our markets

2022

0.44

A dedicated team manages safety in our commercial andsales environments, as well as physical security across
PMI. This team works closely with stakeholders across ourbusiness, developing and deploying risk-focused procedures,programs, and training courses, fostering engagement at thecountry level, and using technology, monitoring systems, andperformance indicators to evaluate progress. This helps ensure
the safety of company personnel in the office, in the field, on
the road, and while traveling.

2021

0.44

Through our fleet safety management program—based onrecognized standards, including ISO 14001 and ISO 39001—
we equip PMI with standards, tools, training, and capabilities
to protect the safety of all personnel driving company vehicles.
To achieve our aspiration of zero preventable fleet safety
accidents, we provide safe vehicles and driver safety
awareness programs. Our aim is to reduce high-severity
collisions, with an ongoing goal of eliminating fatal accidents
completely.
To improve driver behaviors, we leverage awarenesscampaigns, training, and connected fleet technologies.
By the end of 2023, 85 percent of our working-tool cars
were equipped with vehicle telematics systems, providing
drivers and the Company with accurate data on driving
behaviors. Telematics and subsequent analytics allow us toreduce collisions, injuries, and fatalities, and decrease carbon
emissions. We aim to have all our over 17,000 workingtool vehicles equipped with tools and new ways of working
by 2024.
Philip Morris International Integrated Report 2023

0

0.2

0.4

0.6

0.8

1

Note: Metric based on actual data from 2023 (usually from January to September—someto August) and estimates for remaining months. This data will be restated with full-year
actual ﬁgures and made available on our website during 2024.

The implementation of behavioral fleet safety programs andtechnology has contributed to further decreasing the numberof fleet collisions (severe incidents), further decreasing ourcollision rate from 0.44 collision rate in 2022 to 0.40 in 2023.
Significant fleet safety and sustainability improvements wererealized in Indonesia, the PMI affiliate with the largest numberof working-tool cars and the highest fleet safety risk. Full
implementation of vehicle telematics technology (in morethan 4,500 vehicles), an outstanding participation rate in
PMI’s global fleet safety e-learning program (99.8 percent),
and the exceptional leadership from the country management
team contributed to the elimination of fleet safety-related
fatalities (0 in 2023 versus 8 in 2022), a 50 percent reductionin the collision rate (from 0.64 in 2022 to 0.31 in 2023), andimprovements in fuel efficiency and CO2e emissions.

Product impact

Although we continue to show progress in this area across ourmarkets, it is to our deep regret that some of our employees
were involved in three separate road traffic accidents in 2023
that led to three fatalities among members of the public(2022: nine fatalities). The accidents occurred in the South andSouth East Asia region and involved challenging circumstances
related to the public members on the road. The investigationof these incidents emphasized the importance of continuing
our defensive-driving trainings, along with our technologyenhanced robust fleet safety management program.
As with our systemic approach to manufacturing safety,
all fleet safety and security incidents are subject tothorough investigation and in-depth root cause analysis,
including cooperation with law enforcement authorities
where applicable, and robust corrective actions have been
implemented to prevent the risk of reoccurrence in thesemarkets and in similar operating environments.
In 2023, our Security & Market Safety department also
maintains a comprehensive security management program
to assess and mitigate physical security risks for company
personnel and assets. Physical security incident data arecollected and maintained separately from PMI’s health andsafety performance metrics. Continuous improvement efforts
to improve preemptive security controls, particularly in highrisk locations, have resulted in zero fatalities related to security
risks in PMI’s operating environment, inclusive of the Swedish
Match footprint.
To continuously improve knowledge and awareness of
security and safety practices among local teams, we deployeda program in 2023 whereby a group of over 50 trained PMI
professionals was formed to act as a center for expertise.
They help markets improve their safety maturity levels(assisting them to set action plans), promote the enhancementof existing safety tools and procedures, and support event
investigation (i.e., understanding what really led someone toact in an unsafe way).
To complement these efforts, we extended usage of our
security incident reporting platform to introduce virtualor remote safety audit tools. All PMI markets (which cover
offices, warehouses, and fleet) undergo an annual risk
assessment. In 2023, these audits covered warehouses in six
markets and fleet safety in another six markets. This approachhelps ensure the safety of markets even when employees areoperating remotely.

Operational impact Fundamentals

99

Reporting and performance

Developing our human capital
We provide our employees with opportunities tolearn, develop, and contribute to our ambitious
company purpose. Learning new skills enables
employees to adapt to our evolving needs andexpectations. It also deepens their sense of
belonging and helps them to recognize the positive
impact they are having on the Company. Helping
our people grow and expand their skill sets also
positively impacts the communities in which they
live and work.
In 2023, we were proud to have been certified as a global Top
Employer by the Top Employers Institute for the eighth year
in a row. PMI is one of only 15 organizations to have been
accorded this recognition. In addition, our affiliates were also
recognized as leading employers in 33 countries.

Listening to our employees
Ongoing listening to our employees helps us to understandwhat matters most to them and better respond to their needs.
Each year, we conduct a company-wide employee survey tobetter understand employee engagement and satisfaction.
The annual survey is supported with shorter surveys
throughout the year.
Monitoring employee sentiment continuously over years andbenchmarking ourselves against other organizations allows
us to enable and enhance the culture and behaviors that
underpin our desired ways of operating.
Preserve nature

2023

GovernanceTackle climate change

No employee, contracted employee, or contractor occupational
fatality occurred in our manufacturing sites in 2023.

Our immersive, global fleet safety e-learning program
launched in 2021 is tailored to each driver’s core competency
score, driving style, and local traffic conditions. This program
is connected to onboard vehicle telematics systems wherelegally permitted, which helps us assess driver competencies
and real-world driving behaviors.

Strategy

Improve the quality of lifeof people in our supply chain

During 2023 we faced incidents in our construction
activities. Concretely, there were two incidents involving
contractors related to work at heights and overall construction
management process. This reinforced the need to improve
the level of detail in methodology statements and ensure theproper supervision of complex construction activities.

Overview

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

98

Employee Net Promoter Score
2025

A SPI R AT ION

≥30

2023

51

2022

56

2021

35
0

10

20

30

40

50

60

Note: We measure the engagement of our workforce using the employee Net
Promoter Score (eNPS), following a methodology similar to that which we use tomeasure consumer engagement. The score can range from -100 to +100. 2023
and 2022 ﬁndings exclude Russia (2021 data excluding Russia is 34).

Overview

To support line managers, we launched the People Manager
hub in November 2023, which is a go-to place for guidance,
tools, and trainings to help people managers on their
managerial journey. The hub has been visited more than
17,000 times since launch.

During the year, we deployed an enhanced methodology tocapture employee engagement, using an index comprisingsix questions (gathering inputs through our company-wide
survey). Accordingly, our Employee Engagement Indexreached 85 percent in 2023. Going forward, we will monitor
engagement based on this improved index which provides
a more holistic understanding of the underlying drivers ofengagement of our colleagues and more actionable insights.

Attracting and developing young talent
Our early-career programs aim to equip new graduates,interns, and apprentices with the skills and knowledge needed
to jump-start their careers. Our Company currently offers
three different types of early-career programs, available inclose to 50 markets. In 2023, we welcomed over 800 people
into our Company as graduates, interns, and apprentices.

From each company-wide survey, we analyze what are themost important drivers of engagement. In 2023, these drivers
were PMI’s compelling smoke-free vision, well-being benefits,
career opportunities, and cross-functional collaboration.

Talent management
PMI’s ambition to deliver a smoke-free future helps to attract
and retain talent by providing purpose and the opportunity tocontribute toward making a positive societal impact. We seek
to equip line managers with the tools and knowledge needed
to keep employees fully engaged and support their personal
and professional growth.

While we recognize that with continuous transformation
comes the need to recruit external talent to bring in new
skill sets, we prioritize upskilling our employees and fosteringinternal mobility over external hires, when possible. Ourinternal careers market provides transparency and easy accessto opportunities for current employees, supporting their
growth and increasing job satisfaction.
During 2023, around 4,200 employees were promoted tomore senior positions, with an additional 8,400 employees
moving positions. During the year, we hired more than 12,100
people worldwide, the majority of whom were hired into
entry-level roles.

In 2023, 86 percent of our employees were covered by formal
performance reviews against their individual objectives.1
Our performance management approach is built on two
adjacent elements: our delivery against objectives derived
from the company strategy and our behavioral assessment
conducted through continuous feedback from multiple
sources. In 2023, we extended the approach to include nonmanagerial positions. In total, almost 49,000 employees are
now using this approach.
Leadership programs
To manage our talent pipeline needed to meet our evolvingorganizational needs, we have developed a core curriculumthat gives leaders and potential leaders the resources, tools,
and motivation they need to succeed. These programs include
the following:• Our development pathway for high-potential employees,“Accelerate,” expanded from 70 participants in 2022 to 140
in 2023. This program empowers key talents to prepare formore complex or critical roles. It supports them in becoming
future leaders at PMI.
• In 2023, 1,700 line managers (of which almost 50 percent
were women), newly hired or appointed, were trained in our“License to Lead” program, focused on developing critical
people management capabilities.

1 The calculation is based on the almost 57,000 employees maintained in PMI’s central humanresources (HR) system as of November 1, 2023.

Philip Morris International Integrated Report 2023

• Our “Women in Leadership” program, since 2021, focuseson personal growth, development, and senior leader
sponsorship. It offers strategies and tactics to navigate
common barriers, build confidence, and create a sense ofcommunity and belonging. In 2023, over 50 female leadersparticipated in the eight-month program.
• “Elevate” is a global program to support the development
and career progression of women in managerial roles.
Following its successful pilot in 2022, we launched eight
central cohorts of 15 women each this year, from across ourorganization. Five of those cohorts were region-based, while
the other three were dedicated to the Operations function.

Mentorship program — iGrow
For more than three years, all PMI employees
have had access to iGrow, an employee-led, crosscompany mentoring program. This program offers
employees at all levels unique opportunities to createconnections across the organization to learn fromeach other. In 2023, over 2,300 individuals from79 countries have participated. At the end of theyear, 90 percent of participants reported that the
mentoring program has contributed to creating amore inclusive and supportive work environment.

Technical flagship programs
We continue to develop blended training
programs that cater to our employees’
diverse learning needs while equippingthem with relevant skills for the future.
The Brand Accelerator program supports PMI’s
long-term vision by upskilling managers andabove in commercial functions, starting at the
top of the organization. Through this program,we aim to establish a common language andconsistent approach to brand building and key
commercial activities based on best practices.
As of the end of 2023, more than 1,000 participants
had completed the nine-month journey, 82 percentof whom reported having high confidence in key
tasks, with 66 percent saying they have alreadyacted on some of the things they learned.
Our Brand Accelerator program received agold Brandon Hall Group Excellence Award
for Best Use of Blended Learning in 2023.

Operational impact Fundamentals

Reporting and performance

101

Continuous employee learning and development
We know that external acquisition of talent and businesses
alone will not provide all the capabilities we require in PMI.
Creating opportunities for PMI employees to upskill, re-skill,and have new experiences is equally, if not more, important.
Much of this employee development comes from being
supported and having space to learn “on the job,” as wellas having access to opportunities to contribute to projects
outside of their traditional role and responsibilities.
In 2023, we defined our workforce capability model, whicharticulates the technical, core business, and leadershipcapabilities that are critical for our Company’s success. This isthe backbone of our PMI-wide learning catalog, which will belaunched in 2024.
Boosting employability
We seek to provide PMI employees with access to structured
learning activities to meet personal and professional growth
aspirations.
Our lifelong learning offers include access to learning
opportunities (e.g., courses, resources, sessions, andcommunities) provided by PMI that empower individuals
to proactively develop skills relevant for current and future
employability and performance.
In 2023, we continued to strengthen our digital learning
offerings, expanding access for various content digitalplatforms to all digitally enabled employees. These platforms
include the following:• FUSE digital learning platform offers a wide range ofcontent, from foundational knowledge of our products andscience, to effective leadership, well-being management,
and IT and digital capability development. It also allows
employees to access two externally provided solutions(Rosetta Stone and Udemy). At the end of 2023, more than
56,000 employees had access to this platform with over
36,000 active users.
• Our digital language learning program, through ourpartnership with Rosetta Stone, continues to be available
to all employees worldwide. At the end of 2023, more than
9,000 employees were actively learning or perfecting a new
language.
• In 2023, we continued to promote Udemy, an external
content library for digital learning, and make it moreaccessible to all our digitally enabled employees. Our
partnership with Udemy, provides a broad range ofdevelopment offerings and skills trainings in multiple
languages. Collectively, our employees spent over 55,000
hours learning in Udemy.

Preserve nature

Recruiting and retaining talent
Our overall employee turnover rate has increased slightly from
9.3 percent in 2022 to 10.3 percent in 2023. This includes
4.4 percent voluntary turnover (2022: 4.6 percent).

Performance and career development
Regular reviews of performance and career development
support employee growth and contribute to skills management
and the development of human capital within PMI.

Product impact

Tackle climate change

In addition, we leverage a holistic approach to employee
listening during various moments in an employee’s career at
PMI, such as onboarding, change of position, or a promotion.
We also introduced a new quarterly report for such surveys
in 2023 to better highlight key areas of success and where
potential improvements could be sought.

As our business evolves, it’s imperative that we build theright capabilities and skills—and not just for today but for
the longer term. We also must ensure early-career hires areequipped with the right tools and resources to support theirdevelopment and help them feel they are an integral part ofthe organization.

GovernanceImprove the quality of lifeof people in our supply chain

In 2023, we collected 47,328 responses and achieved an
eNPS of 51 (2022: 46,306, 56). This is 36 points above theglobal benchmark provided by our external partner IPSOS
Karian and Box, and 21 points above our aspiration tomaintain an eNPS of 30.

Strategy

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

100

Overview

SI

Proportion of PMI employees with accessto structured lifelong learning oﬀers
2025

A SPI R AT ION

70%

2023

77%

2022

80%
0

10

20

30

40

50

60

70

80

90

100

Future of work
Every employee should be prepared to face an unknown andrapidly changing future. Accordingly, we take steps to boost
the employability of our workforce, with particular focus on
the more vulnerable sectors, for example with the global
deployment of lifelong learning offers.

In addition, we have implemented a global outplacement
policy which outlines a standard framework to ensure
employees across the world are treated equally in case oflayoff or restructuring. It offers a standard portfolio of services
to support employees’ career transitions beyond PMI throughcoaching, trainings, networking, and job fairs, as well asplacement services.

Governance

Product impact

Fostering diversity, equity,and inclusion
We regard our employees’ diversity as one of ourgreatest assets. We therefore seek to cultivate an
inclusive environment in which the full power of
a diverse workforce can be realized, because all
employees feel respected, supported, and engaged.
Enhancing diversity and championing equity
At PMI, we celebrate all types of diversity, both demographic(e.g., race, ethnicity, sexual orientation, gender identity or
expression, age, creed, national identity, marital or family
status, and visible or invisible disability) and experiential(how people think, work, communicate, and live). Our global
forward-looking aspirations, however, specifically center on
gender diversity, and having a talent mix that is representativeof our consumer base.

Improving gender diversity in leadership
Our aspiration is to have at least 40 percent of management
roles filled by women globally, while increasing gender
diversity in managerial roles in most of our functions andregions.

C A S E S TUDY

Building confidence
and HOPE in
Indonesia
An example of our commitment
to promote employability andreskilling is our voluntary programin Indonesia, HOPE. It aims toequip hand-rolling employeeswith the skills, knowledge, andresources to establish a new daily
life beyond retirement.
Read the case study here

Philip Morris International Integrated Report 2023

Proportion of management positions
held by women
Maintain

A SPI R AT ION

≥40%

2023

41.8%

2022

40.7%

2021

39.7%
0

10

20

30

40

50

We also set an aspiration to have at least 32 percent of senior
roles held by women globally by 2023 and 35 percent by
2025. In 2023, women represented 32.0 percent of senior
positions (2022: 30.5 percent).
SI

Proportion of senior roles held
by women
2025

A SPI R AT ION

35.0%

2023

A SPI R AT ION

32.0%

2023

32.0%

2022

30.5%

2021

31.1%
0

5

10

15

20

25

30

35

We achieved our aspiration of having 32 percent female
representation in senior roles by the end of 2023. This wasa result of collective efforts across our regions and business
functions management in maintaining equity and fairness in
our recruitment, retention, and promotion practices.
We continue investing in training and development programs
to increase gender diversity in senior roles. Examples include
our global “Women in Leadership” and “Elevate” programs(read more here).
Towards the end of 2023, PMI became a hiring partner for
the Bring Women Back to Work (BWBW) initiative. BWBW
is a nonprofit organization based in Switzerland, aiming toreintegrate women who have taken a career break into theworkforce. Following our internal “Make Your Comeback”
program, launched by Philip Morris Pakistan, our partnershipwith BWBW is an exciting opportunity for us to further
support women to re-enter the professional sphere withconfidence and to showcase our continued commitment togender equity.

Preserve nature

Globally, 42.9 percent of our employees were women in 2023,
and 41.8 percent of our management positions were held by
women (2022: 42.1 percent, 40.7 percent).

103

Reporting and performance

Tackle climate change

Advancing gender diversity and empowering women
A gender gap is a talent gap. Building a gender-diverse
organization and improving gender inclusion at PMI are
therefore top priorities.

Operational impact Fundamentals

Improve the quality of lifeof people in our supply chain

In our manufacturing organization, we saw the need toproactively equip our technicians with capabilities that will
help them become more confident with their future careers.
To address this, we have piloted the Own Your Future
Program across six manufacturing sites. This program provides
a career planning approach and targeted learning offers thatwill help our technicians address their skill gaps.

Strategy

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

102

Overview

Closing the gender pay gap
PMI’s global EQUAL-SALARY certification gives us confidence
that we provide equal pay for equal work (read more here).
Alongside equal pay, we seek to close our gender pay gap,
defined as the percentage difference between the average pay
for men and for women.
When we look at our company as a whole, without adjustingfor factors such as location, tenure, seniority, or education,
the average pay for men was 29 percent higher than pay for
women in 2023 (2022: 30 percent).

Raw gender pay gap
2023

2022

29%

30%

1 The mean gender pay gap is calculated as the percentage difference between the sum ofannual base salary, bonus, and stock options.

Share of women in each pay quartile
2023

2022

Top pay quartile globally

39%

37%

Upper-middle pay quartile globally

35%

34%

Lower-middle pay quartile globally

24%

25%

Lowest pay quartile globally

76%

73%

Management
positions

Indonesian

31.3%

7.4%

Filipino

6.9%

3.5%

Polish5.9%

8.1%

Russian

4.4%

6.3%

Italian

4.4%

4.6%

Other nationalities

47%

70%

We have set an ambition to develop local talent for leadership
positions, and we aspire to have at least 60 percent
representation of local talent in executive management teams
in 80 percent of our markets and clusters. To support thisaspiration, we are exploring more flexible ways of working in
PMI and looking into different solutions to overcome potential
language barriers, in our global events and programs.

A SPI R AT ION

2025

80%

2023

60%
0

20

40

60

80

100

Reporting and performance

105

Creating a safe space for our employees to take an active role
Our employee resource groups (ERGs) play an importantrole in driving inclusion at PMI. Each of them focuses on adifferent dimension of diversity and helps raise awareness andunderstanding, creates a sense of belonging and connection,and promotes allyship across our Company.

≥20%

Each ERG is led by a committee of employee volunteers,
sponsored by a member of Company Management, and mostare supported by an external subject-matter expert. They areopen to all PMI employees.

2023

17%

In 2023, we launched two new global ERGs:

2022

17%

2025

Overall
workforce

Note: Our diversity and inclusion data covers around 80% of PMI’s total workforce.
Considers managing directors and their direct reports within PMI markets and clusters
who have local nationality registered in PMI HR systems. Excludes countries where
employee nationality is not collected in PMI HR systems.

Philip Morris International Integrated Report 2023

Representation of Asian talent
in senior roles globally

Top five nationalities in PMI’s workforce and theirrespective representation in our overall workforce
and in management positions

Proportion of markets with at least 60%
representation of local talent in the executive
management teams

Our second key focus is to increase Asian representationin senior roles to at least 20 percent by 2025. This will help
bridge the current representation gap.

Operational impact Fundamentals

A SPI R AT ION

0

5

10

15

20

Note: Our diversity and inclusion data covers around 80% of PMI’s total workforce.
For the purposes of measuring progress against this indicator, PMI uses the nationality
data of employees recorded in our HR systems. The determination of Asian nationalities
is based on the regional groupings as listed by the United Nations and we consider thefollowing regions: Central and Southern Asia, Eastern and South-Eastern Asia.

Building a culture that promotes
and protects inclusion
PMI prides itself on its culture of respect, innovation, andmutual support. We seek to foster a culture of feedback,dialogue, psychological safety, and collaborative andsupportive leadership styles. Only a truly inclusive culture willallow us to benefit fully from the value diversity can bring toour organization.

• Parents@PMI aims to create an inclusive community ofenthusiastic caregivers and leverage the workforce’s diverse
experiences and available resources to support PMI parents
in managing their responsibilities and establishing a healthy
work–life balance.
• advantAGE promotes intergenerational collaboration by
supporting employees of all ages throughout their careers
by fostering a workplace that welcomes age diversity andpromotes intergenerational collaboration and understanding.
Learn more about our six global ERGs here.
In 2023, we also maintained our focus on the local expansionof our ERGs, to be able to meet the specific needs of different
geographies. By the end of the year, we had over 50 local
ERG chapters established, and participation in our global ERG
events reached more than 11,000 attendees.
Raising awareness and knowledge
Our mission is to fuel an ongoing and productive dialogue
on diversity, equity, and inclusion (DEI), while designing anddriving strategies and initiatives to ensure equality, equity,
representation, safety, and well-being. In 2023, we conducteda range of activities to foster engagement on DEI topics.

Measuring inclusion
In 2023, we continued to capture employee sentiment on inclusion, through iNPS (inclusion Net Promoter Score),as part of our global employee listening survey (read more here). Through iNPS, we ask our employees how likely
they would be to recommend PMI to their friend or colleague from an underrepresented group as an inclusive
place to work. We also ask our colleagues to voluntarily self-identify as part of an underrepresented group basedon gender, nationality, sexual orientation, ethnicity, disability, creed, or other dimension. We do this to be able
to see and assess the difference between the overall PMI score and the iNPS for underrepresented groups.
Compared with 2022, we observed an increase both in the total PMI iNPS (amounted to 62 versus 56, in 2022)
and iNPS among underrepresented groups (42 versus 35, in 2022). To better understand and analyze the driversof the feeling of inclusion, we also ran a dedicated inclusion study in six pilot markets. As per the initial results,
uniqueness and belonging are the key drivers for inclusion but they need to be supported by psychological safety
and fairness at organizational level. We are considering learnings from this study and our company-wide employee
survey to develop a comprehensive inclusion index that we will use as of 2024 to measure and report on inclusion.

Preserve nature

PMI's global mean (average) raw gender pay
gap1

Product impact

Tackle climate change

Over the past years, our efforts on attracting, upskilling,promoting, and retaining female talent are contributing togradually closing the gap with representation of women
increasing among our managerial population.

Our employees represented 139 nationalities at year-end
2023, contributing to an international culture that many
employees value. Despite this international composition,
we aspire to increase the diversity in our leadership tobetter reflect PMI’s geographic footprint, consumer base,and the diversity of its overall workforce. Employees in all
positions, including management, need to better reflect
PMI’s geographic footprint.

GovernanceImprove the quality of lifeof people in our supply chain

This gap needs to be viewed in the context of two factors –our overall workforce demographics and underrepresentationof women in senior leadership roles. With respect to ourdemographics, over a third of PMI employees are hand-rollingcigarettes at our manufacturing facilities in Indonesia. These
employees are mostly women and they are competitively paid
on a piece-work basis. This employment opportunity, whileempowering thousands of women in the country, impacts ourglobal gender pay gap. If we exclude the Indonesian piece rate
employees from the calculation, our 2023 pay for women wasslightly higher than for men.

Focusing on local representation
We seek to strengthen the diversity of nationalities within our
global workforce and, in particular, to grow local talent within
executive management teams.

Strategy

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

104

To communicate and cascade our global DEI strategy, we
continued to hold bimonthly community calls with our inmarket DEI representatives as well as monthly ERG connect
sessions.
To date, our global ERGs have collectively organized over 20
events to raise awareness on a variety of issues and promoteallyship and inclusion networking. More than 10 percent of
PMI employees globally have participated in an ERG-hosted
event or initiative and receive regular updates on ERG
activities.

Following the March events, we continued to cascade our
Inclusion Workshop to different functional management
teams, including an action planning session to ensure inclusion
at key moments, such as meetings, onboarding, and talentreview discussions.
In late 2023, we introduced “I’m Remarkable” workshops,
open to all employees and delivered by the DEI team and ERG
representatives. The workshops celebrated the workplaceachievements of members of underrepresented groups andchallenged social perceptions around self-promotion. By
the end of 2023, there were approximately 30 workshops
held, virtually or in person, with more than 400 employees
participating.

Philip Morris International Integrated Report 2023

Building a holistic approach to well-being
Our vision is to provide an environment which nourishes
people’s energy.
Well-being of employees is an outcome of an inclusive work
environment. We developed a holistic global framework,
launched in 2021, which helps us move toward realizing thisaspiration.
We defined well-being as physical and psychological needs,
and self-fulfillment, underpinned by ways of working,leadership behaviors, and psychological safety. We are guided
by this framework in the development of an integrated datadriven roadmap of priority actions supported by insights
gathered through our employee listening surveys, benchmarksof best-in-class practices, and the help of external experts.
This year, we focused on the physical needs and psychologicalneeds in our initiatives, such as annual leave guidelines, andwe launched BeWell, a network of well-being champions
across the Company.
To enable markets to implement this global framework in
a holistic and structured way, and thus help them improve
the well-being of their employees, we conducted a market
maturity assessment pilot in 2023. Sixteen markets fromdifferent regions completed a dedicated questionnaire,
providing both quantitative data through surveys and P&C
data, but also participating in qualitative interviews andworkshops.
During the process, markets shared their initiatives andwere exposed to best practices within and outside of PMI tohelp inform local well-being strategies, benefits, and action
planning. Each market received a maturity score, ranging from
1 = “minimum” to 5 = “enlightened.” The results showed usthat we are doing well in many locations, with most markets
rated as a level 4 (proactive).
All participating markets received a dedicated report, outlining
their results, areas of improvement, and examples of bestpractices, to support and inform the development of their2024 action planning.
For this project, we partnered with consultants and used
the approach outlined in WBCSD’s Healthy People, Healthy
Business report (2022) as a starting point, as well as otherexternal guidelines.

Product impact

Measuring well-being to drive action
Data and insights are key to introducing relevant interventions
in support of employee well-being (read more about data
privacy here).
As part of our regular employee listening (read more here), we
ask employees three times a year to answer questions related
to perceptions of psychological well-being. We avoid “opentext” boxes to help prevent the identification of individuals
and the collection of any health-related data. There are also
minimum reporting thresholds to maintain confidentiality.
Well-being is measured on a five-point scale, from very bad tovery good. All PMI employees are invited to participate in thissurvey. In 2023, 47,574 employees completed the survey outof the 53,584 invited to participate (89 percent response rate).
In October 2023, 72 percent of employees responded “good”
or “very good” on these statements (2022: 74 percent).
These results show that we maintained our employees’ wellbeing above 70 percent, exceeding our annual aspiration andexternal benchmarks, specifically in positive responses to thestatement “PMI cares about my well-being,” which we track
regularly alongside the self-perception of psychological wellbeing.
In our company-wide survey, we include questions related
to key well-being drivers identified in an in-depth study weconducted in 2021 to ensure that our initiatives are targeted.

Perception of psychological well-being
among our employees
2025

A SPI R AT ION

>70%

2023

72%

2022

74%

2021

61%
0

20

40

60

80

Note: The indicator represents the percentage of employees who responded “good”
or “very good” to the question, “How would you rate your current psychological oremotional well-being at present?” in our regular employee listening survey.

In our fall 2023 survey, we incorporated well-being questions
pertaining to sense of control over job (decisions on how tomanage your work and ability to share your needs), perceived
demand (workload and deadlines), and support (feeling that
PMI cares about your well-being).
The survey results gave us additional insights into priority
areas, such as managing workloads and establishingreasonable deadlines, which can be addressed throughorganizational support, and by empowering colleagues toprioritize self-care.
We will continue to track progress on this indicator, and aim tocontinue achieving scores that exceed 70 percent.

Operational impact Fundamentals

Reporting and performance

107

Promoting the importance of self-care
One of the most basic needs is sufficient time to recharge,
so it is important for us to provide our employees with
ample paid time off work. We launched internal annual leaveguidelines in early 2023, which outline that all our employees
should have the opportunity to take all or most of theirannual leave entitlement during the year it is granted and fully
disconnect from work. The guidelines aim to ensure that all
our employees can fully utilize their annual leave benefits, andset out our suggested standards for paid annual leave policies
and practices across PMI affiliates.
We also ran a global fitness challenge, with over 20 markets
and over 3,000 employees taking part. The desired impactof the initiative was to encourage people to look after theirhealth. As a result of this initiative, the large majority of theparticipants felt motivated to continue working on their healthand well-being after the challenge was completed.

A global focus on mental health
Mental health is a critical component of employee well-being,
and we have made removing the stigma around mental healtha top priority.
To equip employees to support themselves and others, we
refreshed our self-paced, online training, which we makeavailable to our employees on our internal e-learning platform,
PMI Campus. Our “Mental Health for All” training offers
insights into the science of mental health, teaches employees
how to spot signs of common problems and offer their help,
and introduces proven and easy self-care practices. The
training is available in 10 languages and has been incorporated
into our leadership and management development programs
and our well-being champions training.
After a successful pilot, we have continued our well-being
champions training program, which aims to remove thestigma around conversations about mental health and help
employees prioritize self-care. As of the end of 2023, over
200 employee volunteers had been trained as well-being
champions. Moreover, more than 80 colleagues from our P&C
and Security & Market Safety functions received training tobecome trainers themselves. The trainers adjust the training
materials to local language and cultural nuances, and deliver it
locally to champions in over 25 markets.
To bring this community of trained champions together, welaunched BeWell, a network for our well-being champions,which has an executive sponsor, as well as a steeringcommittee representing our colleagues in diverse locations
around the globe.

Preserve nature

During and after this month, we received very positive
feedback about our focus on inclusion (including the sharing of
simple but intentional behaviors), which has been reflected in
the iNPS scores in the April 2023 survey. Our global webinar
hosted around 2,000 colleagues who participated in thelive event, and our digital engagement campaigns triggered
attention from all over the world. Having a panel of speakers
from diverse backgrounds and different seniority level, andthe open discussion with senior leaders (most of whom
participated in the live event), set a very powerful example.

We seek to promote an environment that supports
employee well-being as an enabler of professional
and personal fulfillment, sustainable highperformance, and business results.

GovernanceTackle climate change

To raise awareness of the need to be intentional in our efforts
to build a more inclusive workplace, we dedicated March 2023
to our “All IN for Inclusion” campaign. Throughout this month,
we organized global events, hosted virtual coffee chats with
our employee resource groups, and released several new
resources, along with practical tips for daily inclusion.

Promoting mental healthand well-being

Strategy

Improve the quality of lifeof people in our supply chain

We also continue to offer employees access to online
unconscious bias training, personalized cultural diversity
training and workshops, as well as newly introduced
psychological safety resources, including an “Escape Game”
simulation with psychological safety theme. These trainings
raise awareness of implicit bias and the various ways it shows
up in organizations and helps employees minimize biases
when making decisions. Through these learning platforms,
participants receive practical tools and techniques tocombat prejudice and preconceived notions that constitutebarriers to inclusion. In 2023, we organized several “train the
trainer” sessions to conduct cultural diversity workshops anddiscussions in their respective market or function.

Overview

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

106

From feedback we have received from our well-being
champions, we know that people managers could benefit
from a better understanding on how to support someone
returning to work after a prolonged absence, especially due
to a mental health condition. In response, we developed andlaunched return-to-work materials, offering best practice tips
for managers.

Supporting our employees
We aim to provide well-being offerings that meet employee
needs and expectations and that are anchored in the local
contexts of where our people live and work.

In parallel, we continue to provide access to an external online
platform called Circle-In, launched in 2021. The platform
offers resources to support employees with the professional
and personal challenges they may encounter as caregivers,
and we developed a new employee resource group forparents (read more about our ERGs here].

Philip Morris International Integrated Report 2023

Frederic Patitucci
Chief People &Culture Officer

Mimi Kurniawan
Chief Diversity Officer

By year-end 2023, all our markets had implemented Smart
Work. We will use our learnings to adjust our guidelines andprovide resources to support employees and managers to help
use time most productively in the hybrid world, as well as tosupport an individual’s well-being. In addition, in almost two
thirds or our markets, employees have the option of choosing
to work part-time.

Scott Couts
Senior Vice President,
Operations

1 The calculation is based on the almost 57,000 employees maintained in PMI’s central HR
system.

Operational impact Fundamentals

Reporting and performance

Looking ahead

Supporting our employees and their families
Our global Employee Assistance Program (EAP) offers first-line
support to our employees and their close relatives in the areasof psychological, financial, and legal counseling. Support isprovided in local languages across all 92 countries under highstandards of confidentiality. By the end of 2023, the program
covered 100 percent of our total workforce maintained in
PMI’s central HR system.1 The majority of countries are served
by a global provider, with the remainder covered by local
schemes. For instance, Indonesia has a local EAP solution
covering all its employees (approximately 20,000), which ismanaged locally.
Flexible working arrangements
In 2023, we continued Smart Work, a global hybrid work
plan that generally permits employees to work remotely up
to 60 percent of the time each month, with the remainder
spent on-site. The program is deployed and adjusted locallyto account for cultural, operational, tax, and legal factors,
which vary at the national level.

Product impact“Starting in 2024, we plan to roll out a new company-wide ‘PMI DNA’program centered around our people being at the core of our businesssuccess and integrated into everything we do; it will focus on threecore values: (1) we care, (2) we are better together, and (3) we are gamechangers. Further, during the year we plan to establish a global network
to create a global–local feedback loop on all labor relations matters.
We will also work on leveraging our enhanced approach to employee
listening to inform our organizational strategy. Committed to humancapital development, we will continue to expand and improve our learning
portfolio and platforms supporting employability and measuring the impactof our interventions. Integration of Swedish Match and expansion of our
U.S. business remain key priorities, as well as continuing to meet our living
wage commitments and deploying our third-party workforce policy.”“In 2024, we will continue all our efforts to improve gender diversity in ourleadership. Yet we understand that gender is just one aspect of diversity.
Going forward we will continue addressing the need for local talent
representation mirroring our consumer base. Providing support in setting
up local ERG chapters is our priority moving forward, as we continue toappreciate ERGs’ role in improving inclusion and a sense of belonging forunderrepresented employees. We also aim to expand BeWell and makethe resources available to employees and people managers to take care of
their mental and physical health. We are developing inclusive leadershipworkshops, tools, and training resources to equip each employee withthe tools needed to be truly inclusive leaders in everything they do andmeasure our progress through the Inclusion Index.”“Safety is in everything we do, not as a task, but as a mindset that we seek
to embrace across the organization. The robustness of our environmental,
health, and safety (EHS) policies and practices ensures that PMI continues
to be a safe place to work. We will continue to do everything to prevent
accidents on the road or in the workplace, operating responsibly andcontinuing on our journey to interdependent culture by enhancing ourefforts on people training. We will drive our EHS standards adherence
through leadership, ownership, and discipline from everyone with acontinuous focus on contractors, nonroutine activities, and construction.”

109

Preserve nature

We also provided support to parents returning to work fromparental leave and parents of small children through our global
parent peer coaching program in partnership with parents@
work. The program participants benefit from personal
exchanges with a PMI experienced parent who is a trained
peer coach. This tailored program supports parents to copewith common parental challenges while recognizing that theexperiences are shared by other parents at PMI. By the endof 2023, we had four global cohorts and 28 trained peer
coaches.

Paid family or care leave beyond parental leave is offered in
more than half of our markets. Examples may include care fora child, spouse, partner, dependant, parent, sibling, or otherdesignated relation with a physical or mental health condition.

GovernanceTackle climate change

Family and caregiver support
We seek to promote an inclusive and equitable vision of carethrough our global parental leave principles, which provide all
PMI employees who are primary caregivers a minimum of 18
weeks of fully paid parental leave and secondary caregiver
employees a minimum of eight weeks of fully paid parental
leave (read more on PMI.com).

Back-up childcare services or childcare subsidies throughcompany or government support are available in around halfof our markets. Approximately two-thirds of our markets
also offer private spaces to be used as lactation rooms forbreastfeeding, or other lactation benefits through company or
governmental support.

Strategy

Improve the quality of lifeof people in our supply chain

We continued to promote the awareness of the importance ofwell-being and self-care by running several global awarenesscampaigns. In May, we focused on mental health, and in
October, we focused on celebrating our well-being champions
and the support available for self-care at PMI.

Overview

Foster an empowered
and inclusive workplace

FOSTER AN EMPOWERED AND INCLUSIVE WORKPL ACE

108

110

Overview

Strategy

Governance

Product impact

Operational impact Fundamentals

Reporting and performance111

O P E R AT I O N A L I M PA C T

Improve the quality of lifeof people in our supply chain
Our supply chain connects us with millions of people, from the farmers and farmworkers who
cultivate our tobacco and other agricultural products to workers at the supplier companies thatprovide the products and services we need to run our business.

The business case

The right thing to do

Caring for the quality of life of the people in our supply chain isa major contributor to our preparedness, resilience, and longterm success.

Promoting and adhering to sustainable business practices
in our direct and indirect operations helps safeguard humanrights, improve labor conditions, protect workers’ health andsafety, tackle social inequities, and contribute toward alleviating
poverty. As a globally operating company with hundredsof thousands of people engaged in our value chain, oursubstantial scale provides us with the opportunity to contributemeaningfully to the advancement of fair labor standards and tofostering prosperity.

This will enable us to continue fostering sustainable andresponsible corporate behavior anchored in human rights andenvironmental considerations in our value chain. Importantly,
as new rules norming how businesses address and report on
the impacts of their supply chains emerge, strategic focus on
this topic will allow us to limit our potential exposure to humanrights issues, child labor, forced labor, and other labor-related
violations, import bans, as well as reputational damage.

In this section

Within our supply chain we can find parts of our business thatare particularly vulnerable to the effects of poverty, including
human rights abuses.
The tobacco we source is often grown on smallholder farms inmany regions of the world, including low- and middle-income
countries. Working to improve farmers’ livelihoods mitigates
the risks of human and labor rights violations, including childlabor and forced labor. Activities and investments in our supply
chain extend beyond our direct effect on farmers, impacting
people’s assets, capabilities, opportunities, and standards ofliving. As our business continues to transform, we are cognizantof the specific risks facing the electronics sector supply chain,including pervasive modern slavery risks.

Promoting fair working and living conditions in our tobacco supply chain

114– Contributing toward alleviating poverty in our tobacco supply chain

114– Eliminating labor abuses

118

Promoting fair working and living conditions in our broader supply chain

Philip Morris International Integrated Report 2023

Our Leaf team, tobacco suppliers, contracted farmers, andfarmworkers are regularly trained on the ALP Code. Our
integrated production system (IPS) enables traceability at thefarm level (read more here). Moreover, we have a robust due
diligence framework in place to evaluate the implementationof the ALP Code (read our 10-year anniversary report here).

122

Monitoring the implementation of our ALP CodeOur due diligence framework to evaluate theimplementation of our ALP Code comprises internal farmby-farm monitoring by field technicians, employed by our
suppliers or our own Leaf operations, whose role is to visit
the farms, oversee and support the crop production, andmonitor the implementation of social and environmental
practices. This internal monitoring is complemented byexternal assessments performed by Control Union, an
independent third-party auditor who check ALP program
implementation and progress (from a management systemperspective) and by local specialized third parties thatverify social practices in high-risk markets (learn moreon PMI.com).

• Eliminating child labor• Payment of at least a minimum legal wage or agricultural
benchmark• The availability and appropriate use of personal protective
equipment (PPE)• Adequate accommodation for workers where farmers
choose to provide housing
Step Change aims to resolve the root causes of these
persistent issues in priority countries—which we assess
periodically—and is guided by our long-term strategic partner
on the ALP program, Verité.
Beyond tobacco, we are leveraging the extensive learnings
from the ALP program and our human rights impact
assessments to address challenges in our electronics
supply chain. We are also exploring pathways to promotea living wage across our broader supply chain. We are at
the early stage of this journey and are focused on building
our understanding and identifying meaningful strategies todeploy in the years to come, grounded in our Human Rights
Commitment and Responsible Sourcing Principles (RSP).

PMI’s policies and standards
Human Rights Commitment
Responsible Sourcing Principles (RSP)
Agricultural Labor Practices (ALP) CodeGood Agricultural Practices (GAP)

Preserve nature

OUT WA RD IMPAC T

Since 2018, we have deployed a step change approach to our
ALP program focused on four priority areas to ensure:

Tackle climate change

The mid- and long-term aspirations connected to this coverfundamental human rights, such as child labor, income,working hours, health and safety, accommodation, and accessto water, sanitation, and hygiene.

INWA RD IMPAC T

We anticipate that the time, energy, and resources we haveinvested in developing, implementing, and monitoring theapplication of our due diligence processes to monitor andimprove the quality of life of those working in our tobacco
supply chain will allow us to continue to gather learnings thatwill help us uphold high standards throughout the rest of our
supply chain, with a particular focus on our relatively recent yet
fast expanding electronics supply chain.

Tobacco is the core material used in our legacy products—
cigarettes, and in most of our smoke-free alternatives.
Accordingly, a long-standing and principal aim of PMI is toprovide a decent livelihood to all contracted farmers supplying
tobacco to PMI. This has been a focus since we introduced ourGood Agricultural Practices (GAP) and our Agricultural Labor
Practices (ALP) program in 2011, revised and updated in 2018by our ALP Step Change.

We use a risk-based approach to prevent, identify, mitigate,
and address human rights and labor rights incidents in our
tobacco supply chain. This entails ongoing collaboration
with key stakeholders—including suppliers, farmers andfarmer associations, civil society organizations, academics,
governments, and the private sector—to tackle persistent andsystemic issues in the agricultural sector.

Improve the quality of lifeof people in our supply chain

Sound governance, policies, and practices tomanage our supply chain responsibly (read morehere) and safeguard human rights (read more here)
are vital prerequisites to harnessing the connections
in our supply chain to improve the quality of life of
those who are part of it.

Foster an empowered
and inclusive workplace

Management approach

Overview

In addition, in 2023, PMI became a launch sponsor for theWage Indicator Foundation’s mission to publish its living wage
benchmarks and make them freely accessible in over 2,300
regions within at least 165 countries. Publishing this data will
be a first step toward massively increasing access to living
wage benchmarks across the world, ensuring equal access todata for all stakeholders involved in wage-setting practices
and closing the living wage gap.

We are committed to sourcing sustainably from all our criticalsuppliers (read more here) and conducting human rights
impact assessments in our 10 highest-risk markets by 2025
(read more here).
Management
PMI’s Senior Vice President of Operations, a memberof our Company Management, is responsible for our
strategy related to supply chain management and relevant
programs. Operational responsibility for our agricultural
supply chain work lies with our Vice President, Global
Technical Operations. A management team oversees its
implementation. Operational responsibility for PMI’s workin the broader supply chain, including electronics, lies
with PMI’s Chief Procurement Officer. Our Operations
Sustainability department is responsible for strategy
development and stakeholder engagement, and acts as
the center of expertise related to potential social issues.

Governance

Product impact

Operational impact Fundamentals

Progress in 2023
Highlights

Challenges• We continued to support farmer income through enhanced
productivity, continuous training, and alternative income
initiatives. In addition, we invested in strengthening our
farmer income data collection processes, providing us witha more holistic view of farmers’ income levels globally.

• We face challenges evaluating, measuring, and reporting
quantifiable impacts of social initiatives in the absence of
globally accepted standards and guidance. Continuous
improvements we do make—though useful moving forward
and further enhancing data reliability—make it difficult tocompare and analyze year-on-year trends and progress.

• We introduced the household dependency model in
our living income KPI calculation, which allows us toanalyze in more granularity the segments of farmers’groups falling below the living income and assess theirrequired income levels based on specific family size.
• We continued initiatives to prevent children
from being used as farm labor through various
interventions, including targeted training and afterschool and school improvement programs.

At the forefront of our approach to continuously strengthen our ALP program is PMI's Sustainable Tobacco Supply Chain(STSC) framework, a comprehensive approach that PMI initiated in 2022. The aim of this approach is to address
sustainability risks and impacts in the countries where PMI sources its tobacco.

It is important to note that, while the data reported confirms that the tobacco we purchase is almost completely free fromkey labor issues (read more here), this does not mean that labor issues, including child labor, do not continue to exist in the
tobacco-growing areas from which we source. Read more about the STSC framework here.
It is worth mentioning that the data reported in this report exclude opportunity purchases, i.e., unplanned purchases orpurchases from new suppliers for which we do not have access to a full set of sustainability information. During 2023, we
further refined our controls and system to monitor these volumes and ensure they do not exceed 10 percent of our totalpurchased volume in any given year.

Philip Morris International Integrated Report 2023

• The increasing share of smoke-free consumables
in our product portfolio is leading to a gradualdecrease in our demand for tobacco leaf.
• Despite our best efforts, isolated cases of child labor—even when systemic occurrences are addressed—may
persist. It is tackled promptly when identified.
• Despite improved data collection and farmer
income modelling, we still face challenges withthe verifiability of non-tobacco income data.

A glance at our path to integrate Swedish Match
Supply chain data and information in this section does not include Swedish Match.
Notably, sustainable policies and practices in place prior to the acquisition continued to apply in Swedish Match’s supply
chain during the year. Concretely, during 2023 Swedish Match continued to ensure that their suppliers would adhere to
their Supplier’s Code of Conduct. More specifically, with regard to due diligence in the smoke-free tobacco supply chain,
Swedish Match continues to be part of the Sustainable Tobacco Program (STP)—an industry-wide initiative developed by
tobacco manufacturers designed to assure standards in agricultural practices, environmental management, and key socialand human rights.
As integration progresses, we will work to expand PMI’s existing stringent due diligence programs to Swedish Match’s
supply chain. Considering the complexity, wide-scale, and diversified nature of our respective supply chains, we expect
to gradually integrate Swedish Match in our supply chain-related sustainability data reporting where material by 2026.

Preserve nature

In this respect, during 2022 we analyzed past results from internal monitoring and various external assessments anddecided to revisit our methodologies to become more stringent in our purchasing practices. Our aim is to ensure that
PMI’s packed products contain tobacco that is cultivated and sourced aligned with key sustainability criteria, as per our
ALP program requirements. This framework breaks down our tobacco supply base into three categories: (1) PMI’s supplierfarm base, applying PMI’s GAP and ALP; (2) eligible farmers contracted by suppliers, who comply with a predefined set ofsustainability criteria aligned with ALP requirements; and (3) eligible contracted farmers supplying tobacco to PMI. The
sustainability progress included in this report pertains only to category (3), i.e., farmers whose tobacco volumes are directly
included in PMI’s purchased tobacco, whom we refer to as “contracted farmers supplying tobacco to PMI.”• We completed our first gender-inclusive humanrights impact assessment in Pakistan. This work
covered our operations in Pakistan, our manufacturing
facilities, and our tobacco supply chain.

• As we progress toward our aspiration of having
100 percent of contracted farmers supplying tobacco
to PMI who have basic water access by 2025, we facechallenges in reaching isolated farmers with water
access, sanitation, and hygiene (WASH) interventions.

113

Tackle climate change• We piloted two Responsible Business Alliance(RBA) tools and resources—the Responsible Factory
Initiative and Responsible Labor Initiative—to further
enhance our electronic suppliers’ capabilities andimprove their sustainability performance.

Sustainable Tobacco Supply Chain (STSC) framework

Reporting and performance

Improve the quality of lifeof people in our supply chain

We understand that promoting fair working conditions anda living wage across a global and complex supply chain must
rely on data that are often fragmented or unavailable. In that
context, we participate in the Business Commission to Tackle
Inequality (BCTI) efforts led by the World Business Council
for Sustainable Development (WBCSD), a cross-sectoral andmultistakeholder coalition of organizations and their leaderswith the mission of mobilizing the private sector to tackle
inequality and generate shared prosperity for all. In May 2023,
the BCTI published their flagship report, Tackling Inequality:
Agenda for Business Action, a case for business efforts totackle inequality and to identify and assess inequality-relatedrisks and opportunities.

Strategy

Foster an empowered
and inclusive workplace

I M P R O V E T H E Q U A L I T Y O F L I F E O F P E O P L E I N O U R S U P P LY C H A I N

112Promoting fair working andliving conditions in our tobacco
supply chain
Since the introduction of our ALP program, over a
decade ago, we have put in place several initiatives
to continuously strengthen our policies, practices,
processes, and methodologies.

Contributing toward alleviating poverty
in our tobacco supply chain

Assessing income levels in our tobacco sourcing markets
Robust analyses and studies to define living income values
and assess current farmer incomes (and the potential delta
between the two) form the backbone of our approach topoverty alleviation across our sourcing markets.

For identified priority and low- and middle-income countries,
we use the following Anker Research Institute’s proposed
methodologies (see Glossary for further details):• Full benchmark: Since 2020, we have tasked Social
Accountability International with conducting full living
income benchmark studies (in line with the methodologyof Anker Research Institute). This starts with the analysis ofsecondary data (e.g., government-issued household welfare
surveys). The resulting benchmarks are then adjusted
through on-the-ground field visits. Following India, Mexico,and Pakistan, in 2023, we finalized a full benchmark study in
the Philippines.

Philip Morris International Integrated Report 2023

To establish the living income status of farmers in higherincome markets from which we source tobacco (such as
Canada, Greece, Italy, North Macedonia, Spain, and theU.S.), we partner with BSR, the global provider of living
wage estimates for PMI employees (formerly Business forSocial Responsibility). We use BSR’s living wage benchmarks,
alongside the reference family size, to assess whether farmers
in these countries are achieving a living income. In 2023, BSR
provided us with living wage benchmarks for two additional
higher-income markets: South Africa and Switzerland.
We periodically review the living income benchmarks toaccount for annual inflationary increases, and revise farmer
income studies to consider market dynamics that may impact
farmers’ overall income.
In parallel to establishing the living income values, we assess
the income level of farmers supplying tobacco to PMI in eachsourcing market to determine the potential delta between the
two. We include both on-farm and off-farm activities, net of
production costs, as well as remittances or subsidies.
On-farm activities include income generated from the saleof tobacco and the production of other crops and livestock.
Off-farm income derives from revenue-generating activities
outside of the farm, such as waged employment. These
analyses rely on our internal farm-by-farm monitoring andalso incorporate studies performed by our local partners(read more about our living income methodology in PMI’s
Sustainability KPI Protocol 2023).
Our STSC framework also dictated how we reported our living
income KPI in 2023 (i.e., reporting on contracted farmers
supplying tobacco to PMI).

Product impact

Living income program methodology
As our living income program has become
more sophisticated and mature, we have beenable to develop a more granular approach toanalyze farmers’ income based on extensive
research on existing methodologies.
Accordingly, in those markets where we still havefarmers below living income, we have adopted asecondary layer of analysis, called the household
dependency model. This is applied for thosesegments below living income, where we further
segment our most vulnerable farmer base toaccount for household size (instead of relying on
averaged data). This enables us to establish—in amore granular way—the income in relation to family
size. We can then assess whether a household canachieve the equivalent living income. This allows
us to better identify potential income gaps and,most importantly, it helps us focus our effortson the most vulnerable households and develop
targeted initiatives to increase their income.
We rolled out this new methodology in2023 and applied it to report on the year’s
progress, thereby setting a new baseline.
A crucial component of the rollout was to engage
with our suppliers in order to improve the collectionof household-related data, which is essential to thenew methodology. In order to strengthen internal
supplier knowledge, we commissioned the Anker
Research Institute to conduct three targetedwebinars during the year for PMI’s suppliers andrelevant company stakeholders, reaching close
to 200 participants. The objective was to further
explain relevant living income concepts and explain
the change in methodology. We believe this helped
foster a more robust implementation of the program.

Operational impact Fundamentals

115

Reporting and performance

Implementing targeted interventions
to close the living income gap
In 2023, we significantly improved the number of contracted
farmers supplying tobacco to PMI who make a living income.
This increase can be attributed to multiple factors, including:• Significant improvements in data collection and farmer
income modeling which has allowed for a more holistic andcomprehensive analysis of farmer income, particularly for
non-tobacco income, where previously data were limited.
• The introduction of the household dependency model,
which takes into account the size of the family whenassessing the farmer income versus the living income
benchmark.
• Further expansion of initiatives that aim to improve farmer
income levels. While we tailor activities to local realities andneeds, our strategy is universal: we aim to improve tobacco
crop productivity and competitiveness while supporting
households in diversifying their sources of income.
SI

Proportion of contracted farmers supplying
tobacco to PMI who make a living income
2025

A SPI R AT ION

100%

2023

96%

2022

73%
0

20

40

60

80

100

Note: Excludes China and Switzerland due to restrictions on farmer income data as
well as benchmark development in China. In 2023, we applied new methodology
which requires updated family size deﬁnitions for our farm proﬁle data, and a
resulting detailed and robust set of family size data for each farmer’s family.
Considering this preparatory work, we were only able to implement this secondary
layer of modeling for Indonesia in 2023. As of 2024, household dependency
modelling will be applied for all markets/farmer segments below living income.
See PMI's Sustainability KPI Protocol 2023 for further details on methodology.

As we get closer to our aspiration of reaching 100 percent ofcontracted farmers supplying tobacco to PMI earning a living
income, we continue to monitor and design comprehensive
action plans, with the aim to exceed the living income
benchmark targets required to achieve a decent standardof living. We also continue to monitor the potential impact
of climatic shocks or market volatility, including inflationarychanges impacting farmers’ income.
Mindful that we set a very high ambition, and that asmall portion of farmers may not reach the living income
benchmark, despite our best efforts, by 2025, we are working
to strengthen our focus and shift our resources toward thosemost vulnerable farmers and their households.

Preserve nature

The living income value determines the net annual income
required for a household to afford a decent standard of living
for its members. It is based on a variety of mechanisms,
depending on the economic characteristics of individual
countries from which we source tobacco.

• Regional adjustments: In markets where Anker benchmarks
already existed covering other regions than our sourcing
footprint, Anker conducted regional adjustments. Thisapproach relies on previous full benchmark assessments
conducted in the country and splits the country into
regions that share similar characteristics. If needed, theseassessments are complemented with on-the-groundadjustments by researchers from Anker Research Institute.
In 2023, we finalized this work in India.

GovernanceTackle climate change

We aim to improve the livelihoods of the farmers supplying
tobacco to PMI, thereby advancing the socioeconomic
development of the communities in which they live. We see
this as fundamental to addressing social inequality and otherhuman rights issues born from poverty.

• Reference value: For some countries, such as Argentina,
Mozambique, and Turkey, when determining living income
rates, Anker Research Institute’s approach is to use reference
values established in previous years, which represent typicalor average living incomes for rural and urban areas withineach country. They are not location-specific, and so are notrepresentative of a particular region or city.

Strategy

Improve the quality of lifeof people in our supply chain

Our intention is to influence the rest of the industry and ourpartners in tobacco-growing countries, to accelerate actions
to address sustainability challenges. We will also continue
to implement targeted initiatives to address labor issues
identified on the ground within our broader total farm baseof contracted farmers.

Overview

Foster an empowered
and inclusive workplace

I M P R O V E T H E Q U A L I T Y O F L I F E O F P E O P L E I N O U R S U P P LY C H A I N

114

I M P R O V E T H E Q U A L I T Y O F L I F E O F P E O P L E I N O U R S U P P LY C H A I N

116Overview

Improving productivity
We support farmers in their efforts to maximize efficiencies on
their farms. Some examples include supporting them to hire
only the labor required, to make judicious use of inputs (suchas fertilizer), to find ways to increase yields per hectare, toimprove irrigation, and to mechanize certain steps of tobacco
cultivation.

Supporting households in diversifying their income
We also look at opportunities to implement other incomegenerating activities. Notably, cultivating complementary
crops beyond tobacco can improve farmer income while
enhancing resilience against climate change and economic
uncertainty. In 2023, we estimate that around 70 percent ofour contracted farmers grew crops other than tobacco.

In Malawi in 2023, we introduced, together with a third party,
a soil health program based on correcting the acidic pH of
the soil. This program benefits the entire crop rotation. By
focusing on applying lime, reducing tillage, improving soilorganic carbon, and ultimately increasing the yields of crops
such as corn, the farmer has more disposable income.

In Mozambique, in a bid to tackle child labor, we developeda treadle pump program in 2018 to provide an innovative
way to irrigate tobacco nursery crops with reduced labor.
We found that the pumps also irrigate winter crops more
effectively. Consequently, we incorporated a starter kit ofwinter crop seeds and fertilizer to be provided to treadle
pump beneficiaries in their first year of receiving the pumps.
A 2020 internal study found that farmers who grew two to
three crop cycles per year generated an additional income of
USD 300 to 400 (i.e., representing approximately 15 percentof the average annual income). Furthermore, a 2022
farmer income study demonstrated that these farmers canincrease their vegetable garden sizes, thereby increasing theamount of vegetables they can produce per cycle for saleor consumption. In 2023, we provided winter crop kits to
1,320 treadle pump beneficiaries from 2022 and placed anorder for an additional 1,264 pumps that were distributed tobeneficiaries in early 2024. Since 2018, we have distributed
7,384 pumps.

During the 2023 crop year, we also further expanded themechanization projects of Burley tobacco in Vinukonda, India.
This involved the introduction of an additional two seeder
machines and 371 sewing machines. The cumulative total of
14 seeder machines, 294 cultivator and fertilizer applicators,
805 sucker applicators, and 885 sewing machines have helped
improve productivity by reducing labor demands per hectare.
Increased productivity and reduced labor requirements
translated to cost savings for farmers. Based on the latest
study, we are currently able to reduce labor hours by up to
8 percent, which translates into savings of USD 63 per hectarewith the combination of seeder machines, cultivators, sucker
applications, and sewing machines.
Additionally, we expanded initiatives to promote sun-cured
production with an additional 664 hectares introduced in India
during the 2023 crop year. To date we have introduced 228
cultivators and fertilizer applicators, 1,235 sucker applicators,
and 164 sewing machines. By targeting a proper crop window
with consideration of weather and field selection and ensuring
farmers followed best practices, such as plant spacing, proper
fertilizer application, and top dressing, we increased farm
productivity by around 3 percent versus 2022.
Although on a small scale, these projects are indicative ofinitiatives we implement on the ground.

Beyond Mozambique, we deploy similar targeted initiatives
to support households in diversifying their income in various
tobacco-growing countries, such as India, Indonesia, andMalawi.
Mitigating the impact of the gradualdecrease in our tobacco demand
The growth of our smoke-free business will result in asimultaneous decline in our cigarette business. While thisconsequence is fully intended, it also translates into a gradualdecrease in our demand for tobacco leaf, which will impact ourcontracted farmers. Since 2016, our demand for leaf has fallen
approximately 17 percent. This has resulted in a reduction in
the volume of tobacco we purchase in some markets and theelimination of our sourcing activities in others.
We seek to minimize the effects of the gradual decrease intobacco demand by improving tobacco-farming communities’socioeconomic well-being and resilience. We do thisthrough a dedicated assessment of the unique realities
and contingencies that define each country or region fromwhich we source tobacco, building an understanding of thelocal ecosystem so we can tailor and implement sustainable
solutions that help farmers transition to sustainable alternative
livelihoods where needed.

Strategy

Governance

Product impact

In some cases, farmers are not heavily reliant on tobacco
production for their livelihoods, have the means to switch
to other crops easily, or will continue to grow tobacco forother customers. In other geographies, we provide additional
support to mitigate the negative impact of our reduced
purchases.
The initiatives we implement to help contracted farmers
earn a living income include improving crop productivity andhelping them diversify their crop production. We expect these
efforts to play an important role in minimizing the potential
negative economic impacts on contracted farmers of ourtransformation and consequential reduction in demand for
tobacco.
Empowering women involved in tobacco farming
Around the world, women participate in agriculture as
members of family farming households and as hired wage
labor on farms owned and operated by other households
or companies.
Many of the gender inequalities women face in general areexacerbated for women in agriculture. Globally, less than
15 percent of agricultural land is owned by women, andwomen involved in tobacco farming often face structuraland cultural barriers.1

MARKET STORY

Promoting crop
diversification in Brazil
Philip Morris Brazil, in partnership with theBrazilian Agricultural Research Corporationfrom the Ministry of Agriculture, Livestock, andFood Supply (EMBRAPA), has been working tohelp rural community members who have thespace to create and maintain smallholdings togrow a range of plants, fruits, and vegetables,
through a project called “Home Garden.”Read the story here

1 Source: Food and Agriculture Organization of the United Nations (FAO).

Philip Morris International Integrated Report 2023

Operational impact Fundamentals

Reporting and performance

117

Since our ALP Step Change in 2018, our ALP program has
deployed several initiatives focused on women empowerment
across our sourcing markets.
For example, since 2020 we have been delivering “train the
trainer” workshops to empower women in our tobaccogrowing areas in India. To date, 846 women participating in
87 self-help groups (SHG) have been trained in leadershipskills and micro-entrepreneurship. Since 2020, 707 microenterprises have been established, of which 423 were directly
funded by PMI and 284 were funded by SHG members who
previously had established their own businesses (read more inour dedicated ALP Progress Update here).
Another example is our Access to Farmer Families project
introduced in 2022 in Pakistan, a country where many
tobacco-related activities (e.g., stringing or sometimes curing)take place in people’s homes. Given the country’s culturalconsiderations related to women, male field technicians areunable to access the homes, which leads to blind spots in
our monitoring. To address this, we continued this project in
2023, working with 10 women, called social mobilizers, who
are tasked with raising awareness of and providing training on
Agricultural Labor Practices (mainly on safety and child labor
topics) and conducting farm-by-farm monitoring, including inhomes, which are inaccessible to male field technicians.
During 2023, we also completed a human rights impact
assessment (HRIA) in Pakistan, where we introduced for the
first time a gender-inclusive lens in our analysis. Our work
included our tobacco supply chain there (read more about ithere).
In Malawi, we continue to expand the Village Saving Loans
Associations (VSLA) initiative, a woman empowerment
centered program in which affordable cash loans are madeavailable to VSLA members, facilitating them to start up or
further expand existing micro-enterprises. The initial programcommenced in 2019 and has grown to a total of 213 groups
with approximately 3,909 women members involved to date.
An impact assessment conducted in 2021 showed a significant
positive impact on the financial well-being of the members
involved, with an estimated USD 160 additional income from
nonfarm enterprises.
In 2023, in collaboration with USAID, the VSLA initiative
scope was expanded to the provision of mini drip kits to
446 members from 26 VSLA groups. The aim of this arm of
the project is to encourage group members to collectively
cultivate combined vegetable sites, which are expected togenerate an additional USD 120 income per annum for themembers involved, in addition to improving households’ foodsecurity.

Overview

Eliminating labor abuses
Our ALP Code principles include no child labor, fair income
and working hours, no forced labor or human trafficking, asafe work environment, fair treatment, freedom of association,and established terms of employment.

Our 2023 ALP monitoring farm-level dataset covers 21 of the
23 countries from which we sourced in 2023. Tanzania andUganda were not included in this dataset as these volumes areclassified as opportunity purchases (read more here).

Maintain

A SPI R AT ION

>90%

2023

91%

2022

95%
0

20

40

60

80

100

Across the countries from which we source tobacco, themost recurrent and complex challenges relate to a safe work
environment and the use of personal protective equipment(PPE). This is an area where we continue focusing our efforts
through regular training and continuous improvements in the
comfort and usability of PPE.

Philip Morris International Integrated Report 2023

In 2023, external verifications by local third-party
organizations were undertaken in Argentina, Malawi,
Mexico, and Mozambique, covering our eligible farm base ofcontracted farmers. Some data discrepancies were highlighted
in Argentina, Mexico, and Mozambique. Action plans havebeen agreed with the suppliers and external verifications will
be repeated in 2024 to ensure that identified issues wereaddressed in a timely fashion. The external verification in
Malawi showed an adequate level of alignment between
internal monitoring and the external verification’s results.
In addition, we cancelled the external verification in Turkey
since some of the areas under the scope of the verification
were affected by the 2023 earthquake. However, we
conducted an internal assessment mimicking the externalverification methodology, which demonstrated positive
correlation between suppliers’ internal monitoring datacollected in the field and PMI’s internal assessment results.
The vast majority of our relationships with contracted farmers
supplying us with tobacco feature a shared commitment tocontinuous improvement in addressing social issues. As partof our STSC framework, the list of eligible farmers from whom
we may source tobacco for our finished products includes preselected farmers based on their performance implementing
PMI ALP Code requirements.
With regard to PMI’s supplier farm base and PMI Leaf
operations’ farmer base, a consequence management and due
diligence process is still being implemented to strengthen andenforce the implementation of ALP across the entire supply
chain.

Eliminating child labor
We maintain a relentless focus on preventing incidents of childlabor, and we take immediate action when they arise.
Our objective is to eradicate, by 2025, child labor cases in our
tobacco supply chain. While we are confident that child labor(as a systemic issue in our supply chain) has been eradicated,
we acknowledge that isolated cases might persist due tofarmer turnover or unintentional misbehaviors, and we willremain alert and tackle them promptly when identified.

A SPI R AT ION

Zero

2023

0.1%

2022

0.1%
0

0.2

0.4

0.6

0.8

119

Reporting and performance

Total number of prompt actions recorded in 2023
relating to child labor among contracted farms
supplying tobacco to PMI, by type2023

Children under 18 performing hazardous tasks

207

Children under 15 hired

3Children under 13 performing light work

7

Granular information on child labor, which provides the age
breakdown and types of issues identified, allows us to address
them more efficiently with targeted interventions.

Prevalence of child labor among contracted
farmers supplying tobacco to PMI
2025

Operational impact Fundamentals

1

Note: For further details on how we calculate the prevalence of child labor in
PMI’s tobacco supply chain please see PMI’s Sustainability KPI Protocol 2023.

In line with our STSC framework, our child labor datasets
depict the prevalence of child labor among contracted farmers
supplying tobacco to PMI.
We use International Labour Organization (ILO) standards
to measure our progress toward our aspiration of zero childlabor. Our methodology centers on preventing children underage 13 from doing any tobacco-related tasks, restricting
employment to those aged 15 and older, and preventing
anyone under age 18 from engaging in hazardous tasks. Thisfocus reinforces our risk-based due diligence processes byimproving visibility and granularity on child labor across oursourcing markets.
Child labor prevalence affected 0.1 percent of the contracted
farmers supplying tobacco to PMI in 2023. While this data
point does not reflect child labor prevalence in PMI’s global
supplier farm base, we have seen a continuous reduction inchild labor incidences among farmers supplying tobacco to
PMI due to years of implementation of our ALP program,ongoing training, and targeted interventions. While isolatedcases of child labor do persist, systemic cases have beenbroadly eradicated in the farms we contract.
Our field technicians conduct farm-by-farm monitoring andsupport farmers in addressing and remedying child labor risks
and incidents. During 2023, field technicians recorded a totalof 217 prompt actions. In total, these prompt actions involved
357 children, with 94 percent of them being the farmers’
children.

Turkey, Mozambique, and Pakistan recorded the largest total
number of child labor prompt actions during 2023, while we
saw a decrease in child labor prompt actions in the Philippines
and Indonesia. In the case of child labor cases in Turkey, we
saw a reduction in child labor prompt actions originating fromour regular volume purchases during 2023; however, we
had additional prompt actions related to purchased volumes
originating from the current and previous crop seasons, which
we were required to purchase due to challenges faced withmarket dynamics.
Continued progress made in Malawi demonstrates how
targeted interventions can maintain the reduced risk ofprevalence of child labor. A key initiative was our primaryschool feeding and after-school activity program, piloted in
2019. In 2023, we increased the number of schools in thisprogram, bringing it to a total of 19 schools with over 19,000
children participating (not limited to our contracted farmers’
children).
We have a scholarship program in place in response to the factthat only 41 percent of children who start school in Malawi
complete their primary education, and that only 16 percent of
14- to 17-year-olds enroll in secondary school.
For our initial 2022/23 scholarship program cohort, wesponsored 50 secondary school learners and 30 university
students. During the 2023/24 intake, we expanded thisto another 90 secondary school learners and 30 tertiary
students, bringing the total beneficiaries to 200 learners.
The long-term plan is to support a total of 625 participants
with comprehensive scholarships.
Our intent with this initiative is not only to address childlabor issues in our supply chain but also to contribute to thedevelopment of future leaders in Malawi by providing endto-end educational support for children in tobacco-farming
communities.

Preserve nature

In 2023, field technicians reported a total of 7,301 prompt
actions across all sourcing markets, of which 88 percent wererelated to safe working environment issues, 3 percent to childlabor incidents, and 7 percent to income and working hours. In
total, 94 percent of the prompt actions raised were resolved
during the year, with the remaining 6 percent of prompt
actions followed up not yet resolved, predominantly due tothe timing of the crop stage.

We recently revised guidelines to help clarify the role ofexternal verification under the STSC framework (read more
about the framework here) and slightly modified the aim of
the guidelines to focus on increasing confidence in internalmonitoring data, validating this data, and identifying potential
data discrepancies so suppliers can implement corrective
actions, such as more regular unannounced visits, targetedtraining, etc.

Product impact

Tackle climate change

Proportion of purchased tobacco volume
for which labor practices and adherence
to our Agricultural Labor Practices Code aresystematically monitored

We will publish the findings of this assessment once complete.
This brought the total number of Control Union external
assessments conducted on our total base of contracted
farmers to 39 since 2013 (all available on PMI.com).

GovernanceImprove the quality of lifeof people in our supply chain

In 2023, 3,121 field technicians contracted by PMI or our leaf
suppliers systematically monitored the implementation of our
ALP Code principles and measurable standards on 91 percent
of tobacco volume purchased by PMI. The remaining
percentage pertains mainly to spot unplanned purchases forwhich sustainability data were not available.

Strengthening our controls
In addition to internal farm-by-farm monitoring, Control
Union conducted an external assessment in Thailand in
2023, evaluating the management system in place for
ALP implementation, reviewing prompt action protocols
and procedures to identify, record, and address issues,and examining the internal capacity to implement the ALP
program.

Strategy

Foster an empowered
and inclusive workplace

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Overview

To ensure the successful implementation of the full program,
we’ll continue to support the primary school feeding programand after-school activities to promote increased attendance
and improve the completion rate at primary schools (with atarget of 60 percent of learners being selected for secondary
school).
Despite the improvements reflected above, we stay alert
to potential child labor issues in all sourcing markets, withparticular attention to Turkey, Mozambique, and Pakistan.

2023

52%

Stringing

25%

Carrying heavy loads

6%

Working with sharp tools

3%

Driving a tractor or operating machinery1%

Handling or applying CPA or fertilizer

1%

Other

12%

Of all child-labor-related prompt actions recorded in 2023,
97 percent were resolved, and the remaining 3 percent had
monitored action plans in place.
Field technicians further support our efforts to remediate
prompt actions and eradicate child labor by raising awarenessand educating farmers on the issue, promoting school
access and attendance, conducting vocational training, andsupporting initiatives to improve household income levels.

During the year, we focused on ensuring access to appropriate
PPE for all our contracted farmers supplying tobacco to PMI
and their farmworkers. Understanding the hazards related tocertain tobacco tasks and encouraging behavior change is vitalto safeguarding the health and safety of those involved.
Prompt actions recorded in 2023 relating to safe working
environment issues among contracted farms supplying
tobacco to PMI primarily related to exposure to CPA due
to not wearing proper PPE (39 percent), exposure to green
tobacco sickness due to not wearing proper PPE (30 percent),
CPAs being stored in a way that could cause a health andsafety incident (13 percent), and working at height without
protection (13 percent).
These topics are always part of annual training provided tofarmers, and a focus of our efforts on the ground.

Proportion of contracted tobacco farmers andfarmworkers supplying tobacco to PMI who haveaccess to personal protective equipment for
the application of crop protection agents andprevention of green tobacco sickness
A SPI R AT ION

Maintain

100%

2023

100%
0

20

40

60

80

100

Note: Less than 0.01% of farmer with unresolved PA related to Personal protective
equipment access.

Philip Morris International Integrated Report 2023

Operational impact Fundamentals

We also monitor the provision of safe and adequate
accommodation by farmers to workers, where relevant(in 2023, around 4 percent of farmers supplying tobacco
to PMI provided accommodation to workers). In 2023, weupdated our ALP Global Accommodation Standards, firstissued in 2020.

Proportion of tobacco farmworkers provided
with safe and adequate accommodation
A SPI R AT ION

Maintain

100%

2023

100%
0

20

40

60

80

100

Note: Scope is limited to farmers who provide accommodation to workers(approximately 4 percent of the total farmer base in 2023).

Advancing minimum wages for farmworkers
In a typical crop season, approximately 26 percent offarmers supplying tobacco to PMI hire workers. Income
earned by farmworkers during a pay period or growing
season should be enough to meet their basic needs. Our
ALP Code requires that the wages of all workers (including
temporary, piece-rate, seasonal, and migrant workers) meet—at a minimum—the national legal standard or formalized
agricultural benchmark standard.

Proportion of contracted farmers supplying
tobacco to PMI paying their workers atleast the minimum legal wage or agricultural
benchmarkA SPI R AT ION

Maintain

100%

2023

99.8%
0

20

40

60

80

100

Reporting and performance121

In 2023, monitoring of the contracted farmers supplying
tobacco to PMI who hire workers found that 99.8 percent offarmers paid their workers at least the minimum wage. Field
technicians recorded a total of 523 prompt actions related tofarmers paying less than the minimum wage to their workers;
55 percent of these prompt actions were resolved during
the season.
Despite targeted initiatives such as awareness raising,
remediation, and increasing farm efficiencies, unresolved
prompt actions related to minimum wage payments werereported in Turkey. While we saw a reduction in minimum
wage prompt actions originating from our regular volume
purchases during 2023, we had additional prompt actions
related to purchased volumes originating from the current andprevious crop seasons, which we were required to purchasedue to challenges faced with market dynamics.
Enhancing access to WASH amongtobacco-farming communities
There is a well-established link between poverty andinadequate access to water, sanitation, and hygiene (WASH).
Enhancing WASH infrastructure can substantially improve thewell-being and livelihoods of community members.
To ensure that all contracted farmers supplying tobacco to
PMI have basic drinking water access by 2025 and sanitationand hygiene access by 2030, we developed a framework
guided by the Joint Monitoring Programme (JMP) for Water
Supply, Sanitation and Hygiene, established by the World
Health Organization (WHO) and UNICEF.
We performed an internal assessment and found thatsome PMI tobacco sourcing locations in rural areas do nothave basic drinking water access. Argentina, Malawi, andMozambique were identified as our priority markets fordrinking water interventions. We have integrated WASH into
our broader ALP monitoring process and have implemented
solutions to bring safe drinking water to these locations,
including drilling boreholes, protecting springs, and providing
continuous household-level solutions.

Tackling the challenges linked to minimum wage
While encouraged by the progress made so far, we know that wage-related challenges relate not only to
substandard payment but also to informal terms of employment, inconsistency between the supply of and demand
for labor, and workers’ lack of knowledge about their rights. We will continue monitoring this issue to proactively
address potential payment gaps and engaging in multistakeholder efforts that contribute to address wage-related
challenges. The targeted initiatives we are implementing include rolling out mechanization for labor-intensive tasks
and piloting payment support to workers.

Preserve nature

The most common tasks field technicians found the children
performing were harvesting or handling green tobacco aswell as stringing tobacco. We noted a significant reductionin the prompt actions related to the handling or applying ofcrop protective agents (CPAs), a challenge previously faced
in Turkey in 2022. This reduction was a result of targetedtraining sessions conducted with our supplier’s management
and a resulting increase in unannounced visits by fieldtechnicians to the farmers. We keep a continued focus on
reducing the risk of the remaining child labor incidences
occurring.

Critical focus areas for PMI include addressing the non-use of
PPE when handling green tobacco, incorrect storage of CPA
containers, and working at height without protection.

Product impact

Tackle climate change

Harvesting or handling green tobacco

Promoting a safe working environment
In line with PMI’s ALP Code, we require all contracted farmers
supplying tobacco to PMI to provide a safe workplace toprevent accidents and injury and minimize health risks. In
2023, field technicians recorded a total of 6,394 prompt
actions related to unsafe working environments.

GovernanceImprove the quality of lifeof people in our supply chain

Types of prompt actions recorded in 2023 relating
to hazardous work performed by children among
contracted farms supplying tobacco to PMI

In many geographies, the findings of external assessments
related to child labor are aligned with our internal monitoring
data, which show continued improvement in our visibility on
the ground and the accuracy of our internal data. We remain
focused on further strengthening our controls, for example byincreasing the number of unannounced visits and improving
the training of field technicians on monitoring techniques.
In addition to stronger controls, in Mexico, where the risk ofpresence of children in the field on Saturdays was reported,
we introduced an action plan to also open the childcare
centers on Saturdays to provide migrant children a safe space
while their parents are in the fields.

Strategy

Foster an empowered
and inclusive workplace

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Overview

Proportion of contracted farmers supplying
tobacco to PMI that have basic water access
A SPI R AT ION

2025

100%

2023

Developing and implementing
household-level solutions to improveaccess to water and sanitation for
our farmers

80%
0

20

40

60

80

100

Note: Covers priority markets only (Argentina Burley, Malawi, and Mozambique).
Estimated based on surveys that indicate whether the farmer has an improved
drinking water source within 1 km or 30-minute round trip.

Aspiration
Proportion of contracted farmers
supplying tobacco to PMI have basic
sanitation and hygiene

Although we have met our aspiration to reach 75 percent ofcontracted farmers supplying tobacco to PMI who have accessto water by 2025, we continue to face challenges in reachingisolated farmers with WASH interventions.
In these cases, water source interventions, such as boreholes,
are not feasible because of groundwater challenges or the
cost/benefit proves challenging. Therefore, we have exploredinnovative household-level solutions to help farmers treat
their water.
In Malawi and Mozambique, more than 80 percent of farmers
supplying tobacco to PMI now have access to water. As wework to increase reach, boreholes were drilled to provide
protected wells, which improved cost-effectiveness. In 2023,
250 protected wells were built, serving over 44,000 people inthese two countries.

Promoting fair working andliving conditions in our broader
supply chain
We aim to leverage our experience in our tobacco
supply chain to promote high labor standards andadvance the socioeconomic well-being of workers
across our broader supply chain.

A SPI R AT ION

100%

2023

91%

2022

93%

2021

83%
0

20

40

60

80

100

Note: Sustainable sourcing is determined based on a minimum threshold score of
45 out of 100 in EcoVadis (direct materials) or 125 out of 200 in RBA with no open
priority issues (electronics). All tobacco purchased by contracted farmers, thereby
covered by PMI’s integrated production system, is considered sustainable.
1 This number is calculated based on stakeholder engagement, whereby our local teams
interviewed the chiefs of each village where we have implemented these initiatives.

Philip Morris International Integrated Report 2023

We monitor adherence to the RSP and the sustainability
performance of our critical suppliers through tailored due
diligence instruments. For our electronics suppliers (read morehere], we rely on the Validated Assessment Program (VAP)and Customer Managed Audits (CMAs) of the Responsible
Business Alliance (RBA) and also conduct targeted humanrights impact assessments (HRIAs) with selected suppliers(read more here). For our direct materials suppliers, we rely on
the EcoVadis platform.

Our electronics supply chain
We aim to proactively address specific social risks in our
growing electronics supply chain.
We continued to leverage resources from the RBA andgathered data through the VAP and CMAs during the year.
These highlighted that the most common social issues
relate to working time, wages and benefits, and emergency
preparedness. Our suppliers have all developed relevantcorrective action plans to address the issues identified.
Our focus in 2023 was to strengthen the due diligenceframework for our current electronics suppliers to address
potential human rights risks and issues, and leveraging the
HRIAs to further engage with suppliers and their workers.
We also leveraged RBA tools and resources to enhance
suppliers’ capabilities and ultimately improve their overallsustainability performance.

Reporting and performance123

We have developed a methodology to assess a supplier’s
sustainability profile to prioritize and select targetedinterventions. We base our analysis on the following
criteria: inherent country risk profile, suppliers’ current audit
performance, and suppliers’ overall sustainability maturity.
We also take into account contextual specificities, including
the percentage of vulnerable groups (e.g., presence of
migrant workers in the suppliers’ workforce).
We understand the importance of engaging and aligning with
our suppliers to achieve our global sustainability aspirations.
Based on our risk assessment methodology, PMI started
piloting two initiatives in 2023 to foster opportunities toimprove suppliers’ sustainability performance:• Responsible Factory Initiative (RFI), a program focused on
helping suppliers with lower maturity in sustainability topics
to identify potential misalignment of their practices with
the RBA Code of Conduct and address them accordingly.
This strengthens their preparation for the RBA audit. Thispilot, which started in mid-2023, will run for 12 months.
Two suppliers located in China are participating in thepilot. Initial learnings show positive results in addressing
issues identified, which mainly related to limited, or lackof, formalization of processes and procedures related tohealth and safety, environmental management, and working
conditions.

Addressing social impacts in our electronics supply chain
When partnering with our suppliers, we engage extensively with them to embed our RSP in their operations. Fromcontractual commitments, to ongoing training, to regular audits, we work with suppliers to ensure their practices live up to
our RSPs.
When we were made aware in the second half of 2023 of concerns related to labor practices at one of our electronics
suppliers in Malaysia, we engaged immediately with the supplier’s senior leadership and the Responsible Business Alliance(RBA) to commission a Specialty Vendor Assessment Program (SVAP) audit. The audit aimed to determine the veracity of
the allegations and the extent of any substantiated failings.

Proportion of spend with critical suppliers
from whom PMI sources sustainably
2025

Our Responsible Sourcing Principles (RSP) set out ambitions
and expectations for our suppliers, including human andlabor rights considerations. In 2023, we deployed our newly
updated RSP (read more here).

Operational impact Fundamentals

The RBA’s SVAP audit identified several issues (mainly pertaining to recruitment practices and management of overtime)and, at our request, the supplier engaged the RBA’s advisory function to develop a corrective action plan (CAP) to address
the audit’s findings. The supplier has begun to remediate the failings identified, and we have engaged our strategic partner,
Verité, to monitor, verify, and report directly to PMI on the supplier’s progress in implementing the CAP.
We suspended a significant portion of our work with the supplier to reflect the gravity of the situation and enable
the supplier to prioritize the actions necessary to ensure that corrective measures are implemented effectively while
minimizing potential detrimental impact on the workers concerned.
The resumption of those projects, and indeed any continued work with the supplier, is conditional on the supplier
remediating the findings from the RBA's SVAP audit.

Preserve nature

In Argentina, by protecting springs, we ensured that both
farmers and community members have access to water thatis less likely to cause runoff contamination. Sustainabilityof WASH infrastructure is one of our greatest challenges,
which we aim to mitigate by working closely with the local
communities and establishing water committees.

Product impact

Tackle climate change

Since its inception, we estimate that our WASH programin Africa has benefited approximately 310,000 community
members.1 Women and children benefited the most from thisinitiative, which reduces the amount of time they must spend
collecting water supplies. This has had a positive impact on
women-led businesses and school attendance.

PMI followed the World Health Organization (WHO)evaluation criteria to assess the solutions, measuring
their effectiveness, appropriateness, acceptability,
cost, and availability, among others. As a result of
the trials, we identified several suitable solutions,and will incorporate them into our WASH strategy
going forward. This will allow us to provide safe
drinking water to those farmers who, because of
their isolated location, previously didn’t have access.

GovernanceImprove the quality of lifeof people in our supply chain

2030

In response to challenges around reaching isolated
farmers, PMI rolled out a pilot in 2023 to assess
various household water treatment solutions(HWTS). These are focused on providing clean
drinking water to those smallholder farmers whoare isolated, often with limited or non-existentunderground water sources nearby. The HWTS
pilot evaluated seven innovative solutions,covering more than 2,000 smallholder farmers.

Strategy

Foster an empowered
and inclusive workplace

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122

Overview• Responsible Labor Initiative (RLI), a program that aims to build andstrengthen the capabilities of PMI’s suppliers and their recruitment
agencies through targeted training and support. It raises awarenessof how to identify and address potential forced labor issues. The
pilots started in mid-2023 and are expected to be completed by July
2024. The focus has been our electronics supply chain in Malaysia,
given the country human rights-related risk profile. Four suppliers andeight of their recruitment agencies are in scope for this pilot and havebeen requested to actively engage with RBA during the course of thisexercise. The first training was delivered in December 2023 and thesecond one is scheduled for January 2024.

Scott Couts
Senior Vice President,
Operations

Product impact

Operational impact Fundamentals

Reporting and performance

Pedro Braga
Braga
Vice President
President,Global
GlobalTechnical Operations
Technical
Operations

Our aspiration to ensure that all contracted farmers supplying tobacco to PMI earn a living income by 2025 remains
unchanged. In 2024, we plan to undertake a living income benchmark exercise in Indonesia and will update all
existing living income values to account for inflationary impacts. Moreover, as we sophisticate our impact-driven
approach to tackle issues related to poverty and inequality, we will shift our focus toward investing in initiatives
that improve the income of the most vulnerable farmers supplying tobacco to PMI, who are still not achieving
a living income—aiming to create interventions that drive a tangible and verifiable positive impact on farmers’
livelihoods. This change shall allow for improved data auditability and further align with emerging regulation.”C A S E S TUDY

Humanrights impact
assessment
in Pakistan
In 2023, we
conducted an HRIA in
Pakistan, one of PMI’s
highest-risk markets.
Read the case study
herePhilip Morris International Integrated Report 2023

Hafed Balhadj
Chief Procurement Officer“During 2024, we plan more targeted supplier engagements to deploy, align, and build capabilities thatwill help our suppliers implement the requirements of our Responsible Sourcing Principles (RSP). We aresupporting RSP compliance through our supplier due diligence programs by applying the EcoVadis andRBA methodologies. During 2024, we plan to further this work by going deeper into industry-specificissues to build a more robust supplier base and to ensure sustainable performance for the future.
We have made excellent progress toward our aspiration to achieve 100 percent of critical suppliers from whom
PMI sources sustainably by 2025. We plan to expand this work beyond critical suppliers of direct materials andelectronics in the future.
We have piloted two RBA programs to improve the sustainability performance of our electronics suppliers:
the Responsible Factory Initiative and the Responsible Labor Initiatives. In 2024 we will assess the effectiveness of thiswork and, if deemed successful, plan for expansion in line with our human rights impact assessment methodology, UN
Guiding Principles on Business and Human Rights, and OECD Due Diligence Guidance for Responsible Business Conduct.”

Preserve nature

Meanwhile, our broad and in-depth human rights impact assessments(HRIAs)—which we aim to conduct in our 10 highest-risk countries by2025—provide granular insights into social challenges along our value
chain (read more about how we tackle human rights issues here).

“Our Agricultural Labor Practices (ALP) program has been the cornerstone of our social strategy and a key
focus for PMI for more than 10 years. In 2024, we will conduct a revision of our ALP Code, as well as analyze
and update the list of hazardous tasks related to child labor. This work will help us account for new risks
pertaining to local and global socioeconomic circumstances and new requirements introduced in new laws.
We will also strengthen our grievance mechanisms, revamping existing escalation processes for potential
forced labor and ethical recruitment issues. We will, accordingly, deploy it in relevant sourcing markets.

Tackle climate change

We are acutely aware of the role we play in creating positive impact for the many people in our supply chain andhave set ambitious aspirations for ourselves. We, however, recognize that external environmental and socioeconomic
factors, and dependencies, influence our ability to fully control and make progress toward these aspirations. We
understand the systemic nature of many of the issues we are trying to resolve and the need for a multistakeholder
approach to tackle them effectively. For that, we will continue to engage with our suppliers, business partners,
others in the private sector, as well as with specialized organizations, academics, and governments.”

125

Improve the quality of lifeof people in our supply chain“We are proud of our progress in addressing labor and human rights challenges in our tobacco supply chain, and weare committed to continue delivering meaningful impact and improving the livelihood of people in our supply chain.
The evolving regulatory landscape makes our efforts only more relevant, as we seek to increase transparency on thesocial impacts in our supply chain and reinforce our ongoing due diligence processes. We will continue to ensure robust
monitoring and quality reporting accompany our social programs, and we will leverage on the learnings gathered
to expand our efforts in our fast-evolving non-tobacco supply chain, with a particular focus on electronics.
Following our acquisition of Swedish Match, a significant stream for the years ahead will focus on ensuringthat their supply chain’s performance, monitoring, and reporting is integrated with ours diligently, building
on existing synergies and assessing actual and potential social impacts to adjust our strategy as needed. Our
aim is to pursue and strengthen our social strategy across our integrated supply chain holistically, designing
initiatives, related measurements of progress, and aspirations that can guide our work moving forward.

Our supply chain, beyond tobacco and electronics, is broad andcomplex (read more here), potentially linked to a large set of social andenvironmental risks. Areas of attention on supplier actions concern
lack of risks assessments around corruption and information security.
Improvement opportunities regarding supplier reporting capabilities wereraised, mainly related to human rights and governance issues.

In 2023, we actively supported 10 supplier CAP reviews with
underperforming suppliers. Overall, 13 suppliers that re-assessed in
2023 as part of current and previous CAP review cycles improved theirscorecards. The average score increase was of 10 points versus previous
assessment in EcoVadis.

GovernanceLooking ahead

Our direct materials supply chain

To address these risks, we focus on critical suppliers (read more here).
In 2023, our critical suppliers of direct materials assessed in EcoVadis
achieved an average Social score of 61 out of 100. To address the issues
identified, we engaged with suppliers showing lower sustainability
performance. We organized deep-dive review sessions of their CAPs
before their reassessment.

Strategy

Foster an empowered
and inclusive workplace

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124

126

Overview

Strategy

Governance

Product impact

Operational impact Fundamentals

Reporting and performance127

Our climate strategy aims to address pertinentclimate change-related risks and build resilience
while seizing opportunities presented by a lowcarbon future.

O P E R AT I O N A L I M PA C T

Climate change is among the greatest threats society faces. There is broad scientific consensus
on the urgent need to reduce greenhouse gas (GHG) emissions to limit the rise in the global
temperature to 1.5oC above preindustrial levels, aligned with the Paris Agreement.
OUT WA RD IMPAC T

The business case

The right thing to do

Climate change and its effects can threaten our business
continuity and endanger our supply chain—especially ouragricultural supply chain which is particularly sensitive
to abrupt climate variations. Furthermore, it can presentrisks with direct impacts on our physical infrastructure, inparticular our manufacturing sites. It can also imperil businessgrowth by exacerbating systems-level disruptions affecting
various stakeholders, including customers, employees, andcommunities.

The climate crisis, as acknowledged by the international
community, threatens the livelihoods of all, but especiallythose most vulnerable, exacerbating inequalities. It impacts
human rights, biodiversity, water access, global health, andfood security, and intensifies environmental threats such as
ecosystem degradation, drought, flooding, and desertification.
While science tells us that climate change is irrefutable andunavoidable, it also tells us it is not too late to limit global
warming to the 1.5°C threshold which is considered the point
beyond which climate-related impacts will be catastrophic.

Developing and implementing robust mitigation and adaptation
strategies can minimize the extent to which climate change
impacts our business. One fundamental strategy is to reduce
our GHG emissions, which allows us to increase efficiency,
deliver energy savings, and boost profitability by promoting
fewer inputs used over outputs.

In this section

Achieving this goal requires fundamentally transforming how
we grow food crops, use land, transport goods, and power our
economies. Implementing carbon emissions reduction initiatives
throughout our direct and indirect operations can contribute to
the mitigation of global climate change and its effects, especiallyin regions most vulnerable to climate-related disruptions. Ourcommitment to climate action can also serve as a catalyst andencourage others—especially those connected to our value
chain—to adopt strategies that can amplify the overall impact ofefforts deployed to combat climate change.

Overview of our carbon footprint

129

Carbon neutrality in our direct operations

131

Carbon reduction in our value chain

137

REDUCES W I TC H

CO M P E N S AT E

We support the Paris Agreement and have set a sciencedriven decarbonization roadmap. Our near-term 2030
absolute carbon emissions reduction targets, including
our most recently approved FLAG and industrial emission
reduction commitments, and long-term 2040 commitment
to net zero emissions have been validated by the Science
Based Targets initiative (SBTi) and are aligned with a scenario
of an increase in global temperature of no more than 1.5°C
above preindustrial levels. To further enable GHG emission
reductions in our value chain, we have set a target for thepercentage of supply chain spend covered by suppliers thathave their own science-based targets. The SBTi validated ourtargets in 2023.

In selecting direct materials suppliers, we consider
their transparency in disclosing emissions factors anddemonstration of significant carbon intensity reductions.
To be successful, combating climate change cannot occur inisolation. PMI engages with sustainability-related initiatives andorganizations, including the Business Ambition for 1.5°C, andwe have publicly reported in line with the recommendations of
the Task Force on Climate-related Financial Disclosures (TCFD).
Our affiliates also belong to national business associations thatare engaging with governments to advance progress on climate
protection at the local level.

Management
Our Senior Vice President, Operations, a member ofCompany Management, is tasked with addressing climaterelated risks across all company activities. This individual
reports findings to the Nominating and Corporate
Governance Committee of PMI’s Board of Directors.
From an operational standpoint, our Operations,Combustible Category, Smoke-free Category, Product,and Finance functions coordinate the company’s climatechange-related activities.

PMI’s policies and standards
Environmental Commitment
Responsible Sourcing Principles
Good Agricultural Practices program
Zero Deforestation Manifesto
Sustainable Design Framework

Philip Morris International Integrated Report 2023

Preserve nature

For that, we put in place policies and practices that allow us to
identify climate-related risks, anticipate and respond to climaterelated regulation in a timely way, support climate policies, andseize climate-related economic opportunities.

Our three-pronged approach to decarbonization

We incentivize our employees through monetary rewards orother forms of recognition for the successful implementationof climate-related initiatives and seek to raise awarenessamong our entire workforce of climate change impacts
through regular internal communications and training.

Tackle climate change

INWA RD IMPAC T

We prioritize reducing absolute carbon emissions by
optimizing efficiency and reducing consumption while
minimizing the use of fossil fuels and promoting the switch
to renewable energy. We choose to compensate for theremaining unavoidable emissions in our direct operations byprioritizing insetting projects in our supply chain when possible
and purchasing certified carbon credits when needed. Our
Portfolio of Climate Investments (PCI) guides our approach tocompensation.

We use internal carbon pricing, including shadow carbon
pricing and an internal carbon levy, to incentivize and drive
reductions in GHG emissions.

Improve the quality of lifeof people in our supply chain

Tackle climate change

To deliver on our climate ambitions, we rely on robust carbon
footprint accounting, regular analysis of climate changerelated risks and opportunities, ambitious mitigation targets,
implementation of adaptation measures, clear management
and governance structures, and key enablers such as ourinternal carbon pricing.

Our decarbonization efforts cover our entire value chain.
Guided by our GHG footprint model, we have in place specificmid-term targets and strategies that account for our mostsignificant impacts on climate, and we conduct periodic
climate change risk and opportunity assessments to inform
our efforts.

Foster an empowered
and inclusive workplace

Management approach

Overview

Progress in 2023
Highlights• We are one of the first few companies to have scope
3 FLAG and Industrial emission targets validated by
the Science Based Targets initiative (SBTi), setting
the necessary focus to continue developing anddelivering targeted carbon reduction strategies
across our value chain in the coming years.
• For the tenth consecutive year, we were awarded an
A score by CDP in recognition of our efforts to combat
climate change and provide environmental transparency.

Challenges• The geopolitical situation and adverse impact of
supply chain disruption have continued to impact
our decarbonization plans in 2023, requiring us
at times to assume trade-offs between financial
and natural capital to ensure business continuity(e.g., sourcing from less mature suppliers or lessfavorable origins to ensure security of supply).

Overview of our carbon footprint

Integrating Swedish Matchin our GHG footprint
In 2023, we successfully integrated the greenhousegas (GHG) inventory of Swedish Match, acquired in
2022, into PMI’s value chain carbon accounting. Thissection of the report therefore presents data in aconsolidated fashion, unless otherwise specified.
Extensive work was undertaken to assess themateriality of Swedish Match’s inventory in relation to
PMI’s, and to identify potential gaps according to thecriteria of the Greenhouse Gas Protocol’s ‘Corporate
Standard’ and ‘Corporate Value Chain (Scope 3)
Standard.’ As part of this exercise, the approach toaccount for Swedish Match’s emissions from scope
3 categories ‘1 Purchased goods and services’ and‘7 Employee commuting’ was revised and aligned with
PMI’s GHG accounting methodology. Additionally,
scope 3 category ‘2 Capital goods’ was calculated for
Swedish Match for the first time.
After these methodological updates, Swedish Match’s
2023 footprint represented 10.8 percent of PMI’s
2023 scope 1+2 emissions and 5.4 percent of PMI’s
2023 scope 3 emissions. As a result of inventory
integration, 2019–2023 emissions were re-baselined
to include Swedish Match’s emissions.
We are currently working to integrate Swedish
Match activities within our low carbon transition
plan, thereby extending our various mitigation
and adaptation strategies and initiatives to theiroperations.
In view of the inventory integration, our sciencebased targets will undergo a revalidation process by
SBTi in early 2024 to ensure alignment between our
ambitions and latest GHG inventory.

We calculate our GHG footprint annually, following
guidance from the Greenhouse Gas Protocol
and accounting for all emissions generated acrossour value chain. Our GHG inventory undergoes
a yearly external verification according to the
ISO 14064-3:2006 and the results of theverification are published on PMI.com.1
We seek to improve the environmental performance ofour direct operations which represented 7.9 percent of
our overall carbon footprint in 2023, and where we haveoperational control.
Our upstream emissions represented 88.0 percent of our total
GHG footprint in 2023. It is critical therefore, that we workwithin our tobacco supply chain and with our broader supply
chain partners to drive impact.
Downstream emissions represented 4.1 percent of our total
footprint in 2023. We have aspirations to embed eco-designprinciples in all our smoke-free products by 2025 (read morehere), to extend our electronic smoke-free device life cycle(read more here], and to reduce our packaging footprint(read more here).

Absolute GHG emissions in our value chain(scope 1+2+3) (in thousands of metric tons)
2040

Net
zero

A SPI R AT ION

2023

4,701

2022

4,818

2021

4,360
0

1,000

2,000

3,000

4,000

5,000

• Our rapid business transformation to deliver a smokefree future means we must double-down efforts toincrease efficiency, as smoke-free products imply
higher manufacturing emissions than cigarettes.
• We face an adverse impact on our carbon emissions dueto the post-COVID normalization of activities with more
employees returning to office, as well as sales activities(fleet-related emissions) ramping up in several markets.

Philip Morris International Integrated Report 2023

1 Climate-related figures presented in this report do not include GHG emissions from
wellness and healthcare acquisitions made in 2021, which we have since consolidated
into Vectura Fertin Pharma. These emissions represented 2.4 percent of PMI’s scope
1+2 emissions and 3.1 percent of scope 3 emissions in 2023 and were calculated inline with PMI’s methodology. They are currently excluded from the inventory as they
are below our materiality threshold set at 5 percent for scope 1+2 and scope 3 each,and are therefore not considered material. Noting recent regulatory developments,
during 2024, we plan to further assess Vectura Fertin Pharma scope 3 carbon
footprint and accordingly reevaluate their integration into our GHG inventory.

Operational impact Fundamentals

Reporting and performance

129

Overall, in 2023, our emissions decreased in absolute terms by
13 percent across our value chain versus 2019. Although ouremissions have dropped from our baseline year, they have notfallen as much as planned. Read more about challenges faced
and ways we have responded in 2023 in this section.
Importantly, PMI has advanced its data verification process
to allow for timely publication of relevant sustainability
metrics, including those related to our GHG inventory. With
this advancement, certain sustainability metrics in this reportare based on actual data from 2023 (typically from January
to September, or for some to August) and estimates forremaining months. This data will be restated with full-year
actual figures and made available on our website during 2024.
For more information on PMI’s approach to GHG calculations
and materiality thresholds, please refer to PMI’s Sustainability
KPI Protocol 2023 and carbon footprint methodology.

PMI’s TCFD Report 2022
After completing our most recent climate changerisks and opportunities (CCRO) assessment in 2022
across our value chain aligned with international
expectations such as those of the Paris Climate
Agreement and the recommendations of the Task
Force on Climate-related Financial Disclosures(TCFD), we published our inaugural TCFD
Report in 2023. This report is intended to be
updated periodically to further align with TCFD
recommendations. Read the report here.

Preserve nature• As part of our strategy to progressively replace spendbased accounting in our GHG inventory with primary data,
the engagement with our suppliers and data collection
process becomes increasingly more complex and resourceintensive. Nonetheless. we expect this effort will contributeto enhancing data quality and GHG accounting from our
suppliers, drive reductions across our value chain, andenable us to fulfill upcoming regulatory requirements.

Product impact

Tackle climate change• During the year, we continued to refine and strengthen
our internal approach to carbon pricing, launching a pilot toapply our shadow carbon price to select scope 3 activities.

GovernanceImprove the quality of lifeof people in our supply chain• We continued to reduce scope 1+2 carbon emissions inline with our SBT for absolute reduction of greenhousegas (GHG) emissions, and further progressed on ourpath toward carbon neutrality in our direct operations
with an increased focus on delivering efficiency gains.

Strategy

Foster an empowered
and inclusive workplace

TA C K L E C L I M AT E C H A N G E

128

Overview

INDIREC T

SCOPE 2: 1.2% SCOPE 1: 6.7%
INDIREC T

SCOPE 3: 4.1%

DIREC T

INDIREC T

Businesstravel0.1%
Waste

Transport anddistribution

HFCs

0.9%

NF3

Employeecommuting

PFCs

2.0%

Fuel
consumption
in our factories,
offices, andwarehouses

3.2%

65.2%

Purchased material and services,and related activities (of which
15.2% from tobacco growing)

UP S TRE A M AC TI VITIE S

Philip Morris International Integrated Report 2023

Purchased
electricity,
steam, heat,and cooling

Fuelconsumption
from ourvehicles andaircraft

DIREC T OPER ATI ONS

Our direct operations are the parts of our value
chain over which we have the greatest control.
Combined, our scope 1+2 emissions represented
7.9 percent of our total carbon footprint in 2023,
of which 63.9 percent were generated by ourfactories, and 9.8 percent were generated by
Swedish Match’s direct operations (including
factories, offices, other facilities, and fleet).

1.7%

Products'
end-of-life

0.1%

Leased assets

1.5%

Transport anddistribution

0.8%

Use of products

D OWNS TRE A M AC TI V ITIE S

SINet CO₂e scope 1+2 (metric tons)
2025

A SPI R AT ION

Zero

2023

301,9782022

329,506

2021

391,011
0

100k

200k

300k

400k

500k

To achieve our ambition of carbon neutrality in PMI’s
direct operations (scope 1+2) by 2025, we combine goodmanagement practices with strategic energy-related
investments. We invest in optimizing energy and process
efficiencies and replacing fossil fuel-based energy withrenewable sources. We compensate for our unavoidable
emissions after we have maximized our emissions reduction.

Decarbonizing PMI factories

As of year-end 2023, with a 36 percent absolute GHG
emission reduction versus our 2019 baseline, we are wellon track to meet our SBTi-validated target of a 50 percent
reduction in our direct operations by 2030 versus our 2019baseline, while absorbing the scope 1+2 emissions from
Swedish Match’s operations.

Our strategy to decarbonize our factories focuses onenhancing energy efficiency and switching to renewables. It is
underpinned by the development and deployment of lowcarbon technologies. Our efforts are coordinated under our
global “Drive 4 Zero” program, aimed at increasing resource
efficiency, reducing energy consumption, raising awarenessamong our employees and increasing PMI’s renewable energy
consumption, ideally through self-generation.

2030

Capital
goods

1.7%

We are likewise on track to achieve our 2025 aspiration to becarbon neutral in PMI’s direct operations (scope 1+2).

Reduction in absolute scope 1+2
GHG emissions versus 2019 baseline

5.0%

Fuel and energyrelated activities

131

Reporting and performance

A SPI R AT ION

50%

2023

36%

2022

37%

2021

31%
0

20

40

60

80

100

Note: The Net CO2e scope 1+2 emissions excluding Swedish Match were equal
to 265,518 metric tons in 2023 and 297,236 in 2022.

In 2023, PMI factories accounted for 5.1 percent of our total
carbon footprint.

In 2023, we revamped our Drive 4 Zero program, which
evolved to cover the entire energy life cycle. From sourcing
to utilization, it ensures an integrated approach where
sustainability is embedded in every facet, valued alongsideeconomic and business continuity considerations.
As one component of our Drive 4 Zero program, we seek toleverage technology to achieve significant carbon savings.
In 2023, we focused on implementing our Zero Carbon
Technology (ZCT) initiatives aimed at fostering the transition
to renewable energy and driving emission reductions in our
manufacturing sites.
While every solution is tailored to the specific energy profileof the site, our efforts are based on a general framework thatconsiders self-generated renewable energy, electrificationof heat production systems, and switch to bio-based fuels
where possible. Through the ZCT program, we expect toreplace 35 percent of our fossil fuel consumption with green
energy and to increase the share of in-house produced
electricity to more than 10 percent of the electricity we use in
manufacturing by 2025. The program was expanded in 2023,
adding two manufacturing sites to its scope, for a total of nine
ZCT projects around the globe.

Preserve nature

15.4%

N2O

SF6

Operational impact Fundamentals

Tackle climate change

1.2%

Product impact

Improve the quality of lifeof people in our supply chain

CH4
CO2

Governance

Carbon neutrality inour direct operations

Carbon emissions along our value chain in 2023

SCOPE 3: 88.0%

Strategy

Foster an empowered
and inclusive workplace

TA C K L E C L I M AT E C H A N G E

130Overview

Our efforts in 2023 led to an overall reduction of 40 percent
in our absolute GHG emissions in PMI factories versus the2019 baseline. During the year, we certified as carbon neutral
five additional reporting entities in Argentina, Indonesia,
Jordan, and Serbia, bringing the total to 21 reporting entities(18 factories) certified to date. In addition, we have moved
from individual to cluster carbon neutral declaration, grouping
all factories in scope under a single declaration. We remain on
track to certify all PMI manufacturing sites by the endof 2025.1 We publish certifications for all carbon-neutral
sites here.

2025

A SPI R AT ION

100%

2023

43%

2022

35%

2021

13%
20

40

60

80

100

Our markets worldwide are undergoing carbon neutrality
certification, following efforts to reduce GHG emissions
and compensating for their remaining emissions through
PMI’s Portfolio of Climate Investments. To date, 11 markets
have been certified as carbon neutral (the certifications areavailable on PMI.com).

To tackle the issue, we deployed internal andexternal resources to run an investigation and root
cause analysis. While preliminary data suggests anunfavorability ranging from one-to-two percent
out of PMI’s total scope 1+2 emissions (i.e.,
below our materiality threshold of five percent),
we have decided to pause the affiliate’s carbon
neutrality certification to ensure alignment with
our principles and practices related to carbon
neutrality. In the meantime, building on the learningsof this experience, we have developed and started
implementing additional protocols to ensure such
issues are prevented or can be promptly identified
and addressed more effectively.

Switching to renewable energy
We continue our gradual switch to renewable energy
sources. Many of our zero-carbon technologies (ZCTs) such as
photovoltaic panels, biomass boilers and heat pumps, and trigeneration processes (combining cooling, heating, and power)
generate renewable energy. In total, 4 percent of the energy
used in PMI’s factories was self-generated in 2023 (2022:
5 percent). From the self-generated portion, 39 percent was
generated through renewable sources (2022: 28 percent).

In alignment with the renewed Drive 4 Zero approach, PMI's
factories have identified and delivered over 200 initiatives
to date, optimizing energy consumption and improving
efficiency. We have successfully piloted innovative artificial
intelligence solutions applied to HVAC systems, heat pumps
for heat waste recovery, alternative conditioning solutions
such as adiabatic humidification, and more granular energy
KPI monitoring and management systems.

In 2023, through our ZCT program, we enabled the switch-offof the gas-fired tri-generation system in our factory in Turkey
and installed 5.5 MW of solar panels, abating more than
40 percent of their 2023 emissions (compared with 2022).
In our factories in Indonesia (Sukorejo), Philippines (Batangas),and Italy we have completed the installation of more than
10 MW of photovoltaics.

1 Carbon neutrality certification plans for PMI’s factories in Russia and Ukraine remain
on hold due to the Russian invasion of Ukraine. Excludes Swedish Match.

Philip Morris International Integrated Report 2023

To deliver on our aspiration to enhance in-house electricity
self-generation through renewable energy, we conducted
a comprehensive feasibility assessment for our global
manufacturing operations. Subsequently, we initiatedimplementation or expansion projects for solar photovoltaics
in our factories located in Argentina, Italy, Lithuania, Mexico,and Portugal. Upon completion, these projects will collectively
add 9.5 MW to our self-generated capacity.
We sourced and certified as biogenic close to 50 percent of
the liquid CO2 supply chain for our affiliate in the Netherlands
and 100 percent for our Indonesian and Philippines affiliates.
This resulted in a total reduction of around 12 kilotons CO2e inour scope 1 emissions.
In addition to self-generated renewable, we continue toconsider opportunities to source electricity through powerpurchase agreements (PPAs).
In 2023, in alignment with the renewed Drive 4 Zero
approach, we redesigned the sourcing process of renewableenergy certificates (RECs), seamlessly integrating it into theoverall energy life-cycle management process. Furthermore,
we strategically decided to purchase additional RECs to offset
a further 11,136 metric tons of CO2 compared with 2022.

Proportion of electricity used and purchasedin our factories derived from renewable sources

2025

A SPI R AT ION

100%

2023

92%

2022

87%

2021

81%
0

20

40

60

80

100

In 2023, we made progress on our aspiration of having 100
percent of electricity used and purchased in PMI’s factories
be derived from renewable sources by 2025, achieving 92
percent.

Operational impact Fundamentals

Reporting and performance

133

Reducing GHG emissions in PMI’s offices
and other facilities
PMI’s offices and warehouses accounted for 0.4 percent of
our total carbon footprint in 2023.
During the year, we continued refining the level of granularityof our carbon accounting, leveraging our growing numberof carbon-neutral offices and warehouses to increase thecollection of primary data and enhance our methodology andresults.
As many of our offices and warehouses are leased andlocated in multi-tenanted buildings, usually managed locally,
identifying and deploying impactful energy efficiency andcarbon reduction initiatives is challenging. To address this, we
introduced a global best practice sharing platform, leveraging
the over 700 initiatives collected through a 2022 employeeengagement campaign, where over 200 employees shared
their ideas on how to reduce energy consumption andcontribute to our carbon emission reduction journey, listing
initiatives from all affiliates and making them accessible to thesites to support their decarbonization journey.
The intention of this shared repository is to foster bestpractices sharing and enable cross-market collaboration. We
expect this platform will help accelerate the implementationof GHG emission reduction initiatives. Our first considerationin the identification of reduction initiatives is the availability of
renewable energy, and, where feasible, its incorporation in ourmarket’s yearly plans.
Although this database is in its infancy, currently all our carbon
neutral markets are contributing to its development, withother markets also beginning to participate.
Beginning in 2023, we have incorporated sustainability criteria
as part of our building scorecard for any new leased and rental
spaces, ensuring a formal, sustainability-driven, decisionmaking process regarding our future footprint.
Overall, this has allowed us to decrease carbon emissions from
PMI’s offices and warehouses by 64.6 percent versus the2019 baseline (2022: 63.7 percent).

Cross-industry collaboration to explore energy-related technology solutions
In late 2023, we announced a new collaboration with Ferrari to study ways to support the decarbonization journey ofour respective factories located in Italy’s Emilia Romagna region. Our collaboration aims to identify solutions for industrial
electrification in the areas of generation, storage, and transformation of renewable energy. The intent is to bring together
our two companies’ technological capabilities to explore and test solutions, including evaluating the potential for lowcarbon hydrogen as a fuel source in manufacturing applications—notably where electrification may not offer a viable
solution—due to water scarcity. A first study, expected to be completed by late 2024, will explore the viability of longduration energy storage technologies.

Preserve nature

Promoting energy efficiency
We rely first on promoting efficient energy use in ourfactories. We achieve this by deploying programs andframeworks across our factories to advance a zero-loss
mindset and empower employees to identify and implement
operational efficiencies related to resource optimization. This
includes energy savings and environmental benefits such as
reduced water consumption and waste generation (read more
about maximizing resource efficiency in our operations here).

Product impact

Tackle climate change0

In 2022, our Mexican manufacturing site faced
technical issues related to the performance of thebiomass boiler, which is one of the technologies
we put in place at the site to switch to renewables,
driving carbon emission reductions. This resulted in
an unforeseen increased consumption of natural gasthat negatively impacted the site’s carbon footprint.
Simultaneously, discrepancies in the metering systemused to calculate the site’s natural gas consumption
were identified, raising concerns about the reliabilityof collected data and related analyses.

GovernanceImprove the quality of lifeof people in our supply chain

Proportion of our manufacturing facilities
certiﬁed carbon neutral

Addressing data quality
challenges in Mexico

Strategy

Foster an empowered
and inclusive workplace

TA C K L E C L I M AT E C H A N G E

132

Overview

Fostering carbon neutrality in PMI’s fleet
Our fleet of over 21,000 vehicles accounted for 1.7 percent
of our total carbon footprint in 2023. Approximately 80
percent of our fleet is composed of working-tool vehicles,
used primarily to visit point-of-sale locations and distribute our
products. The remainder are benefit vehicles.

MARKET STORY

Recognizing the benefits of these programs, we are working
closely with the e-learning providers to extend the value of
their services. We believe using these aggregated insights(based on telematics) will allow us to provide specific andtimely e-learning modules to further enhance their safety
and the safety of other road users while also contributing
to carbon emission reductions.

Compensating for unavoidable emissions
Unavoidable or residual emissions refer to emissions
that cannot be eliminated or reduced through current
technology or practices. To achieve our carbon
neutrality ambition, we strive to maximize our emissions
reductions, and we compensate for the residual
emissions occurring in our direct operations.
We have continued our efforts to certify our factories,
offices and warehouses as carbon neutral, focusing primarily
on efficiency gains and a switch to renewable energy.
Philip Morris International Integrated Report 2023

In 2023, the integration of our shadow carbon price into the
preparation and financial evaluation of business proposals
aimed at structurally reducing our carbon emissions,
supported the approval of 63 carbon emission-reduction
projects, including three projects under our ZCT program.

Switching to hybrid or electricvehicles in Switzerland
Philip Morris Switzerland is working to switch
company and fleet vehicles to hybrid or electric
to ensure every part of the organization is
working toward our sustainability commitments.
Read the story here

Accordingly, for the 18 factories (21 reporting entities)
and 11 markets which were certified as carbon neutral
in 2023, we have reduced our absolute emissions
by 45 percent versus our 2019 baseline, with theremaining 55 percent being compensated.
Our long-term goal is to further explore insetting projects
in our supply chain to generate carbon credits andfocus our investments on nature-based solutions. As
we prepare the organization for the complexity of theseprojects, and considering their lead time to generatecredits, PMI’s Portfolio of Climate Investments (PCI)
purchases carbon credits from the voluntary market
to meet our 2025 carbon neutrality aspiration.
Our PCI investments brings both standardization and arobust technical approach to compensation. This results ina pool of purchased high-quality carbon credits available for
PMI’s compensation activities that fulfill attributes on both
environmental and social impacts.
Our approach to carbon pricing
Assigning a price—and hence a theoretical cost—to carbon
emissions makes the intangible tangible and further
incentivizes action to reduce the emissions that contribute to
global warming. PMI has used two complementary internalcarbon pricing instruments since 2020: a shadow price anda carbon levy. We revise our shadow price and carbon levy
annually to reflect changes in our risks and emission profile.
We also conducted a carbon pricing benchmark assessment,
and evaluated external factors, such as inflation rates anddevelopments in emissions trading schemes in 2022.

Deploying our Portfolio of Climate Investments (PCI)The PCI is a bespoke initiative we introduced in 2021 to
standardize and provide transparency in our approach toinvestments in projects generating carbon credits.
To support decarbonization efforts, PMI believes that limiting
the use of market approaches (offsetting) in the short term byexploring direct investment in our supply chain in the medium
and long term (insetting) will result in a climate investment
strategy that is cost-effective, transparent, consistent, andof high quality. Accordingly, we have significantly reduced
our budget to buy fewer carbon credits from the market andallocate investments in our projects through our insetting
strategy.

Reporting and performance

135

This will allow us to address inward and outward impacts
simultaneously with a more holistic approach to tacklingenvironmental issues, ensuring we attain co-benefits throughour generation of carbon credits. We expect to sustain
a minimum budget to operationalize specific projects orengagement opportunities in the voluntary carbon market.
The PCI is supervised by an advisory committee composedof cross-functional PMI senior leaders (including, among
others, our Chief Sustainability Officer and Senior Vice
President Operations). The committee revises and validates
the proposals prepared by the project team and approves
the allocation of resources to the proposed climate solutions
through an investment strategy that leverages the budget
generated by PMI’s carbon levy scheme.
If additional funding is required for specific investments, suchas unlocking innovative climate solutions or research anddevelopment (R&D), the advisory committee that governs the
PCI decides on approval.
We apply a set of mechanisms and rules—the PCI quality
criteria and due diligence protocol—to efficiently evaluate
which climate solutions are most appropriate to pursue. We
continue investing in nature-based solutions focused onprotecting nature by avoiding deforestation, improving nature
through community projects, and fostering natural ecosystems
beyond forests.

Carbon Border Adjustment Mechanism (CBAM)The Carbon Border Adjustment Mechanism (CBAM) is the European landmark tool aimed at putting a fair price on
the carbon emitted during the production of carbon intensive goods that are entering the European Union (EU), andencouraging cleaner industrial production in non-EU countries.
The CBAM will initially apply to imports of certain goods and selected precursors whose production is carbon intensive
and at most significant risk of carbon leakage: cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. In the
future, the CBAM is expected to be extended to other sectors covered by the EU Emissions Trading Scheme (ETS).
As of October 1, 2023, the CBAM Regulation (EU) 2023/956 entered into application, with a first transitional phase thatwill last until December 2025. During this phase EU importers must report on a quarterly basis the emissions embeddedin CBAM goods imported in the preceding quarter, without paying a financial adjustment, giving time for the definitive
system to be put in place. The first relevant reporting period for importers ends on January 31, 2024.
Once the definitive system enters into force starting January 1, 2026, EU importers will need to declare each year
the quantity of goods imported into the EU in the preceding year and their embedded GHG emissions. They will thensurrender the corresponding number of CBAM certificates.
PMI has already set up proper internal governance for the transitional period applicable to all the in-scope European
affiliates importing CBAM goods. In parallel, readiness work for the definitive phase kicking off in 2026 is ongoing.
PMI is already engaging with major suppliers of CBAM goods to determine the specific embedded emissions ensuring
the completeness and correctness of the reports according to the new EU methodology. This exercise has been greatly
enabled by our thorough and robust GHG accounting process and supplier engagement related to scope 3 primarydata collection.

Preserve nature

Enhancing safe driving behaviors has a direct impact
on the eco-driving practices of individual drivers.
Moreover, 85 percent of our working-tool cars
are equipped with telematics—a technology thatprovides the driver with data on driving behaviors to
improve road safety behaviors and decrease carbon
emissions (2022: 65 percent). Read more here.

Operational impact Fundamentals

Tackle climate change

We leverage eco-training and telematics where legallypermitted to improve driver behavior and further engage
employees in our sustainability agenda. We completed thesecond wave of our e-learning program in 2023 with an
overall completion rate of 98 percent (2022 first wave: 94
percent). In September 2023, we commenced the third wave
for drivers who had not been included yet.

Product impact

Improve the quality of lifeof people in our supply chain

In 2023, we continued to select more environmentallyfriendly powertrains in our fleet renewal decisions. By
year-end, vehicles with electrified powertrains (electric or
hybrid) represented 27 percent of our fleet globally (2022:
19 percent). We remain focused on retiring our most pollutingcars subject to the availability of appropriate infrastructure,legislation, and technological innovation.

Governance

We apply a carbon levy of USD 11 per ton of CO2e to help
determine investments required to compensate our emissions
through offsetting or insetting initiatives. The levy is designed
to internalize costs and support behavioral change by setting
a virtual internal tax on selected business units for their GHG
emissions. This helps us determine a budget for the PCI
described below.

To reduce carbon emissions in our fleet, we invest in
sustainable powertrains and effective driving to optimize
energy consumption and improve operational efficiency.
Our internal Global Vehicle Fleet policy frames our fleet
strategy and moves us to a more centralized operating modelto help ensure that every PMI affiliate contributes to ourglobal carbon neutrality aspiration.

Strategy

Foster an empowered
and inclusive workplace

TA C K L E C L I M AT E C H A N G E

134

Overview

Pricing carbon in scope 3
In 2023, PMI leveraged its long-standing experience ofworking with a shadow carbon price for its scope 1+2
emissions to develop its first internal carbon price pilot projectfor scope 3, focusing on ocean shipping activities.
The exercise was intended to develop a carbon pricereference to assess carbon emissions and value them as acriterion on offered transport services for PMI ocean logistics.
We calculated a reference carbon price range that represents
the cost per ton of CO2e to mitigate risks related to climatechange, through implementation of carbon emission reduction
technologies leading to different levels of decarbonization of
the maritime sector.
The application of the resulting internal carbon price forocean shipping will support the creation of more favorable
conditions in the selection process for suppliers that invest in
reducing carbon emissions in our supply chain and will result in
lower-than-average carbon footprint for the service proposed.

Insetting in our tobacco supply chain to compensate for our direct emissions

Foreseen project outcomes include carbon sequestration
through the reforestation of degraded land, ecosystems
restoration, and social benefits to local communities
such as securing access to sustainable wood to tobacco
farmers who depend on it. During 2023, we completed
the project feasibility study which resulted in a positive
outcome for the value generated and paved the way forthe executive implementation assessment.

Carbon reductionin our value chain
The vast majority (88.0 percent) of our carbon
footprint lies in our upstream value chain. The main
sources of carbon emissions include purchased
goods and services and related activities,
transportation and distribution, tobacco growing,
and business travel and employee commuting.
A smaller percentage (4.1 percent) of our carbon footprint
comes from our downstream value chain, including the use
and end-of-life phases of our products (read more here], andthe transportation and distribution of finished goods.
In line with our 2040 net zero ambition, we introduced a new
categorization of our scope 3 emissions, becoming one of
the first companies to have our scope 3 FLAG and Industrial
emission targets validated by the Science Based Targets
initiative (SBTi).
PMI has set a 33.3 percent reduction target in absolute scope
3 FLAG GHG emissions versus 2019 baseline and a 27.5
percent reduction target in absolute scope 3 industrial GHG
emissions versus 2019 baseline. Our new FLAG target, which
includes Swedish Match emissions, was included in PMI’s
Sustainability Index for the 2023–2025 PSU cycle (read more
about the Sustainability Index here).

Operational impact Fundamentals

SI

Reduction in absolute scope 3 FLAGGHG emissions versus 2019 baseline
2040

A SPI R AT ION

72%

2030

A SPI R AT ION

33.3%

2023

24%

2022

26%

2021

30%
0

20

As a company operating with a significant agricultural
supply chain, the adoption of a science-based FLAG
target provides us with a sound trajectory toward
the further reduction of GHG emissions arising fromland use.

60

80

100

Reduction in absolute scope 3 Industrial GHG
emissions versus 2019 baseline*
A SPI R AT ION

27.5%

2023

4%

2022

(1)%

2021

13%
0

In 2023, the Science Based Targets initiative (SBTi)
has verified PMI’s Forest, Land, and Agriculture(FLAG) emissions reductions targets, with PMI being
one of the first companies to have their own sciencebased FLAG target validated.

40

Our upstream and downstream value chain combines toform our scope 3 GHG emissions. Our 2023 data reflect a 10
percent decrease in our overall scope 3 GHG emissions versus
our 2019 baseline, accounting for the inclusion of Swedish
Match’s related GHG emissions. While our emissions have
dropped from our baseline year, they did not fall as much asplanned in 2023.

2030

PMI’s adoption of Forest, Land, andAgriculture (FLAG) emissions reductions
targets

137

Reporting and performance

10

20

30

*Note: For further details on scope 3 calculation please refer to the
PMI Value Chain Methodology.

Our planned programs delivered reductions to expectation
and are highlighted throughout this section. We faced
unforeseen challenges in 2023 due to unfavorable businessconditions and the execution of business continuity plans,
mostly linked to the sourcing of materials. Some decisions
demanded changes that resulted in unavoidable trade-offs
which, while ensuring the security of supply and business
continuity, compromised natural capital. These included:• Change in sourcing: Increase in tobacco volume purchasedfrom known geographies with higher carbon footprints toenable business activities, as well purchasing tobacco fromnew origins with higher carbon footprints.
• Change in stock: Purchasing additional materials as partof business continuity plans to build up our stock of raw
materials, including tobacco and semi-finished products toensure finished products were available in specific markets.

Philip Morris International Integrated Report 2023

Preserve nature

In 2021, we identified an insetting project opportunity
in our supply chain in Mozambique and kicked off the
project in 2023. We assessed two additional insetting
project opportunities in North and South America alignedwith our “Perfect Forest™” concept, wherein value iscreated by implementing sustainable forestry practices(read more about our Perfect Forest™ concept here).

Product impact

Tackle climate change

We promote insetting by exploring nature-based solutions
in our tobacco supply chain. This allows us to compensate
for residual emissions generated by our direct operations
while also advancing the well-being and socioeconomic
development of tobacco-farming communities andcreating co-benefits such as more resilient ecosystems andimproved safe water access for our farming communities.

GovernanceImprove the quality of lifeof people in our supply chain

To assess whether an investment will meet our quality criteria
and generate a positive impact, we apply an external due
diligence process managed with a proprietary methodology
developed with PMI’s carbon finance adviser, Clarmondial.
This methodology considers GHG mitigation, biodiversity
conservation, and community benefits analyzing evidence
and third-party reporting with quantitative estimationsof the impacts on the environment and society generated
by projects. Clarmondial also helped PMI in establishing
relationships that can support the company’s long-termclimate, community, and nature-related aspirations. In 2023,
PMI’s PCI invested around USD 1.2 million in projects focusedon nature-based solutions (2022: USD 6.6 million). These
projects are taking place in Cambodia and China, and they
aim to generate carbon credits through forest conservation
and afforestation, respectively. Moreover, the PCI focused on
securing high-quality offsets to support PMI’s decarbonization
journey and provided the carbon offsets required for the five
manufacturing sites and 11 markets that achieved carbon
neutrality certification during the calendar year.

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Overview

On the other hand, in 2023, targeted actions were
implemented to reverse past years’ supply chain
disruption impacts, allowing for example to reduceby more than 40 percent emissions related to air
shipments (versus 2022), and developing our firstinternal carbon price pilot project for scope 3, focusing
on ocean shipping activities (read more here).

Our tobacco supply chain
Our tobacco supply chain, including Swedish Match, represented
around 15.2 percent of our total carbon footprint in 2023,
with most activities contributing to our scope 3 FLAG
emissions (61 percent). The main sources of emissions include
the use of fertilizers, the process of curing tobacco, andincreasingly mechanized activities as described in this section.

2030

A SPI R AT ION

50%

2025

A SPI R AT ION

35%

2023

32%

2022

30%

2021

36%
0

10

20

30

Note: Aspirations cover only PMI tobacco supply chain.

40

50

The GHG emissions of flue-cured tobacco represented 5.0
percent of our total carbon footprint in 2023.
Having achieved a 77 percent reduction in GHG emissions
per kilogram of flue-cured tobacco between 2010 and 2020,
we established an additional and more ambitious target toreach 75 percent reduction in carbon emissions generated bycuring one kilogram of flue-cured tobacco by 2025 (versus our2019 baseline). To deliver on this ambitious target, we focus
on improving curing-barn efficiency and increasing the use ofrenewable fuels.
In 2023, we made good progress in most markets, achieving
a 51.4 percent reduction in emissions per kilogram of tobacco
from flue-curing versus 2019. We continued the supplierauditing process run by an external partner based on our
Monitoring, Verification, and Reporting (MVR) Framework for
Sustainable Curing Fuels. These audits covered all flue-cured
origins to verify carbon reduction activities and data on fueluse per kilogram of tobacco cured.
Improving curing barn efficiency
As most farmers own their curing barns, we collaborate withthem and our suppliers to provide guidance and support
to make the barns more thermal-efficient. We support
improvement projects, which typically aim to enhancecombustion efficiency, ventilation, heating control, andinsulation.
In 2023, the improvement projects we carried out increased
the efficiency of 13,897 barns—adding to a cumulative total of
116,703 barns upgraded since 2014—with a focus on Brazil,
China, Mozambique, Pakistan, and the U.S. For example, in our
Brazil flue-cured market, we conducted a pilot study to assess
the feasibility of using photovoltaic energy systems in curingbarns to reduce overall fuel consumption.
In parallel, through our suppliers, we continued to deliver
training to farmers on fuel consumption efficiency, barn
maintenance, and fuel sustainability attributes.

Philip Morris International Integrated Report 2023

Increasing the use of renewable fuels
To reduce GHG emissions, we are gradually phasing out fossil
fuels, such as diesel, in favor of renewable fuels, including
sustainable firewood and biomass. Our MVR allows us tosystematically monitor the sustainability of all fuel types usedin our tobacco supply chain. We published an abbreviatedversion of our MVR framework in 2023 to drive awarenessof its requirements and enable the sharing of best practices
across the industry (read more here).
In 2023, 76 percent of our purchased flue-cured tobacco was
cured with renewables (2022: 74 percent). We will maintain afocus on reducing the use of fossil fuels and ensuring that the
firewood and other wood-based materials used to cure thetobacco we purchase do not contribute to the deforestationof primary forests. Our MVR enables us to monitor this.
In 2023, for the third consecutive year, 100 percent of
the tobacco we purchased was cured with no risk of grossdeforestation of primary or protected forests (read more
about our forestry management ambitions and progress here).
Another driver of progress is our continued phase-out of coalby converting curing infrastructures to enable the switch torenewable fuels.

Proportion of Virginia tobaccopurchased cured with coalA SPI R AT ION

Maintain

0%

2023

0%

2022

6%

2021

3%
0

2

4

6

8

10

12

In 2023, we achieved our ambition of having 0 percent of theflue-cured tobacco we purchased cured with coal, down from
6 percent in 2022.
This was achieved by collaborating with our suppliers toconvert coal to biomass alternatives and increasing controlson the supply chain, which has multiple additional benefits
beyond emission reductions. As a result, 100 percent of thetobacco we purchased from China was cured with biomass.
Additionally, our supply chain partners in China piloted
electrical energy curing barns that will further contribute toemission reductions. As a year-on-year ambition, we aim to
maintain this achievement.

Operational impact Fundamentals

Reporting and performance

139

Reducing GHG emissions from fertilizers
In 2023, emissions related to the use of fertilizers in tobacco
production contributed to 8.4 percent of our total carbon
footprint.
Nitrogen-based fertilizers are essential in commercial
agriculture to assist farmers in obtaining appropriate yields andquality attributes. Achieving a continuous decrease of fertilizer
application is challenging, so we are addressing fertilizer
emissions from different angles, including conducting trials ofdifferent fertilizer options and expanding mechanization to
improve yields without increasing fertilizer requirements.
For example, in Argentina, we are conducting an ongoingpilot testing the optimization of water and fertilizer inputs
by converting to drip irrigation. Although this trial is still inprogress, it has shown a reduction in overall fertilizer andwater use to date, thereby reducing GHG emissions associatedwith fertilizers and preventing excess nutrient loss andagricultural runoff.

The path toward net zero
In 2023, we started an innovative pilot project witha third-party consultant to obtain primary data on
carbon removals resulting from good agricultural
practices in our tobacco supply chain. The projectbuilds on geographic information systems (GIS)
information, meteorological data and machinelearning to identify changes in all carbon pools in theselect tobacco growing areas. Results from this pilot
will help us understand the emission reduction andremoval potential of specific agricultural practices(e.g., regenerative agriculture) and potentiallycontribute to achieve our FLAG target.

Preserve nature

Reduction in absolute GHG emissions in our
tobacco supply chain versus 2019 baseline*

Decarbonizing tobacco curing in PMI’s value chain
We mainly source three types of tobacco: Burley, Oriental, andVirginia. While Burley and Oriental tobaccos, once harvested,
are air- and sun-cured to dry out the leaves, Virginia tobacco
which represents approximately half of our purchased volume
is generally cured using an external heat source—a process
called “flue-curing.” Curing barns can be heated with diesel,
natural gas, coal, LPG, firewood, or biofuels containing
agricultural or wood-sawing by-products.

Product impact

Tackle climate change

Beyond our SBTi-validated target on the percentage ofsupply spend covered by suppliers with their own sciencebased targets, we incorporated additional sustainability
criteria (such as carbon emissions) into selected tender
processes related to our direct materials sourcing, steeringbusiness decisions in line with our ambitions (learn more
about how we help accelerate the sustainability journey ofour suppliers, including in the area of climate action, here).

As we progress with the identification of opportunities related
to synergies in Swedish Match’s tobacco supply chain, we aim
to progressively apply PMI’s best practices and sustainability
programs to enable further carbon emission reduction.

GovernanceImprove the quality of lifeof people in our supply chain

The more we know about the drivers of our emissions,as well as the emissions and profiles of our suppliers,
the more effective our activities and projects can be
designed to achieve our targeted reductions. In 2023, we
continued our efforts to expand and enhance our primarydata collection from suppliers in multiple categories,
including tobacco and direct materials. We also engaged
with suppliers across our logistics categories to collectprimary data, making our methodology more robust andenabling us to shift from spend base to primary data.

We are relentlessly working to achieve an absolute
reduction in carbon emissions in PMI’s tobacco supply chainof 35 percent by 2025 and 50 percent by 2030 versus our2019 baseline.

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Our broader supply chain
A significant portion of our emissions arises from ourupstream nontobacco supply chain: this segment accounted
for 72.8 percent of our total value chain emissions in 2023.
Engaging with our broader supply chain to contribute tosuppliers’ transition toward a net zero economy is, therefore,
at the heart of our approach.

Another way the direct materials used in our products cannegatively impact our carbon footprint is through association
with commodity-driven deforestation (read more here).
As part of our science-based approach to climate action,
we continue to engage with our critical suppliers to adopt
science-based targets. PMI has already achieved its 2025
target of having 15 percent of suppliers by spend (coveringpurchased goods and services) to have science-based targets.

35%

2022

35%
10

20

30

40

Operational impact Fundamentals

Reporting and performance

Scott Couts
Senior Vice President,
Operations

50*Note: Excluding Swedish Match.

In March 2024, PMI was included in CDP’s Supplier
Engagement Leaderboard for the seventh consecutive year,
distinguishing us as a global leader for engaging with supplierson climate change and recognizing the effort we have put
toward bringing our suppliers along our decarbonization
journey, a key component in achieving our scope 3 ambitions.
In 2023, an internal multistakeholder team continued
developing the strategy for our nontobacco supply chain
carbon footprint reduction, including an additional focus
on transportation, warehousing, and indirect materials andservices categories. As we progress, we are looking into how
to collaborate with our tier 1 suppliers in our electronics
supply chain. We expanded our engagement with suppliers
to collect primary data, identified opportunities for reduction,and explored environmental partnerships initiatives.

Pedro Braga
Vice President, Global
Technical Operations

The aim is to increase primary data to improve our carbon
accounting accuracy, visibility around opportunities, andtraceability of sustainability initiatives.
For example, in our direct material category, we achieved 83
percent coverage of primary data collection in 2023. We haveinitiated engagement with our logistics suppliers and strive toachieve similar results, moving from spend-based to primarydata. To date, our logistics team mapped out the percentageof emissions from transportation categories aiming to replace
80 percent of this data with primary data from suppliers by
2025. Similar efforts were undertaken in other segments ofour procurement functions.

Hafed Balhadj
Chief Procurement Officer“We plan to focus 2024 on furthering Swedish Match’s integration into our lowcarbon transition plan, leveraging on PMI’s well established carbon emission
reduction strategies in line with our net-zero journey, as well as re-validating our
SBTi commitments. Furthermore, reducing our scope 3 industrial emissions willcontinue to be a priority. Our efforts will continue to focus on reducing GHG
emissions from those categories with the higher contributions to our footprint,
looking into de-risking our glide path towards our 2030 ambitions. Beyond our
reduction strategies, during 2024 we will work on revising our Environmental
Commitment, to strengthen governance, as well as setting stricter criteria
linked to our compensation strategy that can also improve our transparency.
Noting rising regulatory requirements linked to tackling climate change andenvironmental transparency, we will work on setting up internal processes to
respond more efficiently and respond to mandatory non-financial disclosures.”“Global Technical Operations (GTO), as a function that oversees a significant portionof our value chain from tobacco sourcing to manufacturing of our consumables, is amajor contributor to our scope 1, 2, and 3 emissions reduction. In 2024 we will focus
our efforts on advancing GTO’s contribution to PMI’s scope 1+2 related ambitions,with a strong focus on technological advancements to decarbonize PMI factories
and reduce GHG emissions in PMI’s offices, warehouses and fleet, as well as drive
reductions across our tobacco sector to deliver on PMI’s recently approved FLAG
emission reduction targets. Through close collaboration with our tobacco suppliers,
we aim to work on innovative, effective, and cost-efficient solutions to reduce
emission from fertilizer, increasing efficiency in fuel usage, and maintaining theachievement in shifting to sustainable curing fuel.”“We will maintain efforts in place to reduce our scope 3 emissions, with a focus oncontinuing to deploy our zero deforestation program, which significantly contributes
to our broader initiatives to tackle climate change. In addition, we plan to expand theSustainability Accelerator program we piloted with six selected suppliers in 2023 to
the broader supply chain. We will include direct and indirect materials and services
suppliers and support them in delivering decarbonization projects.
Additionally, we believe that standardizing methodologies and tools can accelerate
decarbonization and we will continue encouraging our suppliers to disclose theiremissions and associated reduction initiatives through common platforms such as
CDP, EcoVadis, and RBA.
We are exploring the possibility of incorporating a carbon shadow price in suppliertendering process for direct materials, as we think it will allow us to make balanced
choices that contribute to decarbonization of our scope 3 and support our businessstrategy.”

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141

Preserve nature

During the year, we further increased our visibility on supply
chain spend covered by suppliers that are either committed
to science-based targets or have in place targets validated by
SBTi. In 2023, this represented 35 percent of our total supply
chain spend. We will continue engaging with suppliers andmonitoring this figure, considering a fast-evolving external
environment and expected changes in our supplier mix in linewith our expanding product portfolio.

15%

2023

0

Product impact

Tackle climate change

Supplier engagement is key in driving reductions of our Scope
3 emissions. We connect with our partners through dedicatedwebinars, and we have incorporated sustainability criteria in
our ways of working with them.

A SPI R AT ION

GovernanceLooking ahead

Proportion of suppliers by spend coveringpurchased goods and services with
science-based GHG reduction targets*
2025

Strategy

Improve the quality of lifeof people in our supply chain

Beyond tobacco, our most carbon-intensive supplies(representing 36 percent of our total carbon footprint in 2023)
are the direct materials used in the manufacturing of our
products, such as pulp and paper, cellulose acetate tow, andour smoke-free electronic devices.

Overview

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TA C K L E C L I M AT E C H A N G E

140

142

Overview

Strategy

Governance

Product impact

Operational impact Fundamentals

Reporting and performance143

O P E R AT I O N A L I M PA C T

Natural capital is a wealth we all share and depend on. There is broad scientific consensus on theurgent need to protect ecosystems’ biodiversity and halt and reverse nature loss, aligned with theKunming-Montreal Agreement.
OUT WA RD IMPAC T

The business case

The right thing to do

Our business activities rely on natural resources and healthy
ecosystems. The degradation and loss of natural capital cancause disruptions and increase production costs. The raw
materials used in our products rely on fertile soil, strong
biodiversity, stable climate conditions, and access to water.

Our value chain involves a significant agricultural supply
chain, that can have far-reaching effects on the environment,
impacting various natural ecosystems.

Promoting the efficient use of natural resources and taking
steps to protect, preserve, and improve them help manage
risks and prepare us to respond to regulation that will norm ourperformance and disclosures related to ecosystem degradationand the cost of biodiversity loss.
Further, we understand the importance of working to halt
the destruction of natural habitats, including avoiding andcompensating for losses, in order to guard against potential
financial and reputational risk.

In this section

Efforts to reduce our footprint on nature and operate within theboundaries of our planet’s ecological limits can also contributeto tackling environmental inequality, as the negative impactsof changes in climate, biodiversity, and ecosystem functions
often disproportionately affect the world’s most impoverishedcommunities.

More specifically, aligning with Goal A of the KunmingMontreal Global Biodiversity Framework, we aim to support
the integrity, connectivity, and resilience of ecosystems andwe have set an ambition to achieve no net loss of ecosystems
connected to PMI’s value chain by 2033. In alignment withtarget 1 of the framework, we work in our supply chain to halt
deforestation, focusing on achieving zero net deforestationof managed natural forests and no conversion of primaryand protected forests and natural ecosystems in both ourtobacco supply chain (by 2025) and our paper and pulp-based
products supply chain (by 2030).
Our work to act as a steward for water is based on a bold
ambition: by 2033, we aim to scale solutions toward a positive
impact on stressed water resources and, by 2050, we aim tocontribute toward a positive impact on water resources.

Protecting biodiversity

145

Halting deforestation

148

Managing water responsibly

152

Reducing waste

157

This long-term ambition is accompanied by intermediate
aspirations. Notably, we aim to certify all our priority factories
to the Alliance for Water Stewardship (AWS) standard.1 We
also aim to improve irrigation water use and restore water
volumes in our tobacco supply chain with an aspiration to
optimize water through dedicated interventions to aggregate
at least 25 million cubic meters of water by 2033—thereby
helping address shared water challenges in the watersheds
where we operate.
1 Priority factories consist of all PMI manufacturing sites except those located inlow–medium water risk areas (all together representing less than 2.5% of PMI’s
manufacturing water footprint).

Philip Morris International Integrated Report 2023

We routinely conduct global and local risk assessments toevaluate our impacts on biodiversity, forests, and water, andwe prioritize and adjust our actions accordingly.
Protecting nature is a collective responsibility requiring bothglobal ambitions and local interventions tailored to diverse
contexts. We leverage the work of the Science Based Targets
Network and collaborate with and participate in several
platforms and organizations, such as the World BusinessCouncil for Sustainable Development (WBCSD), the Taskforce
on Nature-related Financial Disclosures (TNFD), CSR
Europe, The Biodiversity Consultancy, World Sustainability
Organization (WSO), Value Impact, and the AWS.
In 2022, we published a dedicated report describing ourambition to contribute toward a net positive impact on nature,
and announcing related new aspirations that will guide ourwork to protect biodiversity and steward water in the decades
to come (read more here).
Management
Our efforts to protect natural capital are overseen by our
Senior Vice President, Operations, a member of Company
Management. Under his leadership, the Operations team is
responsible for developing and implementing strategies toachieve our biodiversity, forests, water, and waste ambitions.

PMI’s policies and standards
Environmental Commitment
Responsible Sourcing Principles
Good Agricultural Practices
Zero Deforestation Manifesto
Water Stewardship Policy

Preserve nature

As a business with an agricultural supply chain, it is paramountthat we contribute to protecting and preserving nature andthe ecosystems where we operate. Even small changes tothe balance of the natural environment can damage crop
productivity, increase production costs linked to remediation
and adaptation measures, and negatively impact farmers’
livelihoods, as well as those of communities living in the area.

Deploying practices to halt deforestation, protect biodiversity,and manage water sustainably can contribute to thepreservation of fundamental ecosystem services we collectively
depend on, including soil fertility, clean air and water, protection
from natural disasters, and recreational and cultural inspiration,and the potential subsequent loss of economic value. Moreover,a healthy natural ecosystem plays a vital role in tackling climatechange, with land and oceans absorbing and storing carbon
from the atmosphere.

We deploy initiatives tied to various aspects of natural capital,
with a particular focus on the highest-risk segments of ourvalue chain. We integrate biodiversity risk assessments into
multi-disciplinary company-wide risk management processes
to manage them in line with our climate change-related risks(read more about risk management here). We have targets andmeasurements in place to help us evaluate the effectivenessof our actions.

Importantly, in 2023, we advanced our data verification
process to allow for the timely publication of relevant
sustainability metrics, including those related to our actions
to preserve nature. Consequently, some data points in thisreport are based on actual data from 2023 (typically fromJanuary to September, or for some to August) and estimatesfor remaining months.This data will be restated with full-year
actual figures and made available on our website during 2024.

Tackle climate change

INWA RD IMPAC T

Our long-term ambition is to contribute toward a positive
impact on nature by 2050. To deliver on this ambition, we
seek to tackle pressures on nature holistically, building on
interlinks between programs and activities.

Additionally, our efforts focus on minimizing the amount ofwaste generated at every stage of the products’ life cycles,
applying the principles of the circular economy to the materials
we use in our operations, and disposing of the remaining
waste safely and effectively.

Improve the quality of lifeof people in our supply chain

Preserve nature

We are committed to the responsible andsustainable management of natural resources.
We understand that biodiversity protection,
forestry management, water stewardship, andwaste reduction are deeply intertwined. Moreover,healthy ecosystems play an important role incombating climate change. By capturing and storingcarbon from the atmosphere, they can act as abuffer against climate change.

Foster an empowered
and inclusive workplace

Management approach

Overview

Progress in 2023

• CDP acknowledged our efforts to preserve nature
again this year, awarding us an A rating for our work
advancing water security and forest protection.

• Nature-based strategies leverage interlinks between
intervention areas (e.g., water, forest, soil, biodiversity,and communities) but rarely investigate trade-offs.
We need to strengthen our analysis capabilities
to better understand and consider the potential
negative externalities of our interventions (e.g., anafforestation project on water-stressed areas or largescale projects impacting indigenous communities).
• The growth of smoke-free products as a proportionof our production mix comes with impacts onnatural capital, notably due to the more energyand water-intensive manufacturing process,which we continuously seek to improve.
• Unlike climate action, which has global impacts, biodiversity
activities need to generate positive outcomes at the
local level, which requires traceability of all relevantmaterials we source. Traceability for some materials is achallenge due to the low maturity of some sectors andthe relatively small influence PMI may have in certain
supply chains, especially the long and complex ones.

A glance at our path to integrate Swedish Match

Our preliminary assessment showcases that our footprint with regard to biodiversity, forest, water, and waste is largely
uniform. One exception pertains to the ownership and direct management by Swedish Match of forestry plantationsin Brazil. Swedish Match operates a total of around 3,400 hectares of pine stand. The plantations in Brazil are part ofa pine wood production located in the south of the Paraná state. As part of efforts to implement sustainable forestry
management practices, Swedish Match replants more than it harvests every year.
Our plan is to integrate nature-related strategies, programs, and data within the course of the upcoming three years,
starting first with our respective direct operations before expanding to the supply chain.

Philip Morris International Integrated Report 2023

We also participate in the TNFD member forum recognizing
the importance of corporate reporting on nature-related
financial risks and opportunities to support the shift inmindset and behavior to address the global nature crisis. Ourcommitment to the TNFD continues with PMI joining theearly adopter companies that intend to publish TNFD-aligned
disclosures within the next two years. We are currently
working, in alignment with global policy goals and targets
such as the Global Biodiversity Framework Target 15, todisclose our risks and opportunities related to nature throughthe indicators that have been created by the collective work
resulting in TNFD Recommended disclosures.

Our holistic biodiversity strategy
We understand that building a meaningful and global
approach to biodiversity requires the conscious crosspollination of various strategies and interventions. To
respond appropriately to the biodiversity crisis we face,
we must account for the synergies and interdependencies
of environmental impacts along our value chain and put
biodiversity protection at the nexus of our climate, forest, andwater strategies.
In 2023, we continued developing our biodiversity strategy
in line with the SBTN approach, focusing on the definitionof metrics and the design of implementation strategies forthe areas of our business for which action on preserving
biodiversity is most material. We have further refined our
impacts and dependencies estimation by improving data
quality on agriculture and forestry and starting to include raw
materials from the mining sector which are part of our smokefree product devices.

Reporting and performance145

Our biodiversity ambition
Inspired by and aligned with the Global Biodiversity
Framework, our long-term aspirations guide our efforts toprotect biodiversity in the years to come.
We aim to protect ecosystems across our value chain andachieve no net biodiversity loss by 2033. We continuously
monitor progress through internal geospatial intelligence
to classify land use in relation to ecosystem integrity andthe activities related to PMI value chain. We use indicators
tailored to the needs of our implementing business functions
to measure the extent of ecosystem area that is preserved,
restored, or transformed within the physical boundaries ofour supply chains and operations. Further, to contributetoward a positive impact on nature by 2050, we will continue
implementing initiatives and deploying new actions that aim toaddress the relevant pressures on nature we have identified.
To achieve these ambitions, we are—and will continue working
on—avoiding and reducing negative impacts on biodiversity inthe following areas:• Sustainable management of tobacco working lands with afocus on regenerative practices• Restoration of affected biodiversity in ecosystems
connected to our value chain• Transformative actions beyond our industry through theapplication of landscape approaches
Understanding our impacts and dependencies
Having a clear understanding of our impacts anddependencies on nature strengthens PMI’s nature-related risk
management approach in line with sustainability standards.
It also equips us to prepare for mandatory and voluntary
environmental sustainability disclosures, including TNFD.
Our 2023 impacts and interdependencies evaluation
confirmed the findings of our 2022 biodiversity footprint
assessments, and highlights that the vast majority of ourimpacts arise from our supply chain. Our tobacco supply chainaccounts for approximately 61 percent, and our paper andpulp-based supply chain for almost 39 percent. Our direct
operations, including manufacturing sites, account for theremaining part.
We are aware of the critical role that natural assets andecosystem services play in our value chain and we work
to improve our understanding of the role of nature for ourbusiness. In 2023, we conducted more granular naturedependencies assessments to estimate how much we leveragenatural assets and the value of the ecosystem services that
support our business.

Preserve nature

Our nature-related information and data are not currently integrated with Swedish Match.

We understand the role companies can play intackling biodiversity loss and seek to align ourefforts with global initiatives. We participate ininternational forums such as Business for Natureand WBCSD’s working groups on nature andforests, and we leverage the work of the Science
Based Targets Network.

Operational impact Fundamentals

Tackle climate change• As one of the leading companies equipped to workon setting science-based targets on nature, wewere invited by the WBCSD to participate in their
Science Based Target for Nature preparer group.

Product impact

Improve the quality of lifeof people in our supply chain

Challenges• We have signed up to become a TNFD Early Adopter.
As such, we are committed to advancing the adoptionof the TNFD recommendations and intend to publish
our first TNFD-aligned report for financial year 2025.

GovernanceProtecting biodiversity

Highlights• We are well on track to achieve a deforestation-free supply
chain. During the year, a third party audited our primary
paper and pulp-based direct materials suppliers, confirmingthat all those in low- and medium-risk countries were fullycompliant with our Zero Deforestation Manifesto (ZDM).

Strategy

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P R E S E R V E N AT U R E

144

To do this, we used tools such as ENCORE, a free online tool
helping organizations explore their exposure to nature-relatedrisks and exposure, to identify and locate where dependencies
are located across our value chain.1 Consolidating the results
into a dashboard allowed us to estimate the dollar value of
ecosystems services we use (e.g., fertility of the soil needed
to grow tobacco). The results of our analysis show that thenatural assets we are most dependent on are water, soil,
and minerals, and that the ecosystem services that are mostcritical to us are water and climate regulation, as well as
erosion control.

2. In our nontobacco supply chain: Our considerations
concentrate on the deforestation risks linked to thesourcing of paper and pulp-based materials.
3. In our direct operations: Our attention is on the proximity
our manufacturing sites may have to protected key
biodiversity areas, and on the implementation of soundenvironmental practices at our manufacturing sites
including waste management in relation to any kind ofpollution of surrounding areas.
4. Downstream in our value chain: Our focus is on avoiding
pollution of natural ecosystems. We should concentrateon minimizing post-consumer waste and preventing thelittering caused by the use of our products.
Mitigation hierarchy for our biodiversity ambition
Our theory of change is centered on limiting andcounterbalancing negative impacts on biodiversity resulting
from PMI activities across the value chain to contribute tonature positive in the long term. Each action we take (ordo not take) poses unique challenges and offers different
stepwise solutions.
We embrace guidance from the SBTN on the mitigation
hierarchy following the AR3T framework, which consists ofa series of sequential steps designed to guide the actionsof companies in line with best available environmental
practices. AR3T builds on the mitigation hierarchy set out in
the International Financial Corporation’s (IFC) PerformanceStandard 6 and involves a sequence of five key actions:• Avoid and reduce pressures and negative impacts on nature,
which would otherwise continue to grow
• Regenerate basic ecological functions and services(e.g., by planting trees to stabilize bare soil) and restore theoriginal state of nature that was present before impacts(i.e., the extent and integrity of ecosystems) where possible• Transform underlying systems, at multiple levels, to address
the drivers of nature loss beyond our value chain (e.g.,through landscape planning)This serves as a blueprint for action in engaging key
stakeholders, including our business partners andother stakeholder groups, to promote landscape andjurisdictional approaches.

1 ENCORE Partners (Global Canopy, UNEP FI, and UNEP-WCMC). ENCORE:
Exploring Natural Capital Opportunities, Risks and Exposure. On-line, accessedin January 2024, Cambridge, UK: the ENCORE Partners. Available at:https://encorenature.org. DOI: https://doi.org/10.34892/dz3x-y059.

Philip Morris International Integrated Report 2023

Product impact

We are already taking action to address the different stepsof the mitigation hierarchy, going beyond biodiversity to also
generate positive outcomes on water and social aspects.
Examples include:
Avoid: PMI’s forest positive program aims to address all
potential drivers of deforestation in our tobacco and paper
and pulp-based materials supply chains to prevent andminimize natural forest loss and conversion while protecting
natural capital in a multistakeholder approach leveraging on
all the interactions PMI can generate at different levels of its
supply chain (e.g., biomass producers, retailers, farmers).
Reduce: The application of our Good Agricultural Processes(GAP) in our tobacco supply chain helps to manage chemicalpressures on natural habitats. Through our integrated pest
management program, we minimize the application of crop
protection agents and use them only whenever needed andlocalize them based on plant pathogen presence.
Restore and regenerate: If deforestation risk is detected
through our periodic land use change risk assessment andexternally validated, a systemic approach to compensating
an equivalent area or biomass volume with reforestation
activities is then requested. In our tobacco supply chain,
restoration projects are active in Indonesia and Pakistan,and planned for Argentina, Malawi, Mozambique, and thePhilippines.
Transform: Along with other water stewardship bestpractices, we actively engage at watershed level with
relevant stakeholder groups to work closely on shared water
challenges. In our direct operations, this has already resulted in
AWS certification for 24 of PMI’s manufacturing facilities.

Operational impact Fundamentals

147

Reporting and performance

Integrated pest management programin our tobacco supply chain
Our GAP and Integrated Pest Management (IPM) programs
aim to protect both the environment and farmers’ healthand safety. In 2023, we continued to confirm that residues
attributable to the use of highly hazardous pesticides were
not detected in any of the tobacco we purchased.

Proportion of tobacco purchased without
detection of residues attributable to theuse of highly hazardous pesticides
Maintain

A SPI R AT ION

100%

2023

100%

2022

100%

2021

100%
0

20

40

60

80

100

With our programs, we seek to promote crop productivity
and safeguard biodiversity on farms and in surrounding areas.
Implementing cultivation practices can in turn free up land forother purposes, such as food crops, other income-generating
activities and—potentially—biodiversity conservation habitats.

Preserving the integrityof tobacco seed varieties
Variety selection is the foundation for achieving
desired tobacco leaf quality and subjective
characteristics as well as for optimizing farmer yield.
To promote varietal integrity, PMI has establisheda tobacco identity preservation program tosystematically test the tobacco seed and certain
green and processed leaf tobaccos to guard against
the inadvertent introduction of genetically modified
tobacco into its commercial tobacco products.

Preserve nature

These indicators are quantitative (e.g., amount of ecosystemarea conserved for its integrity, or volume of freshwater
consumed in water stress watersheds) and are deployed
to track progress made towards our no net loss aspirations
via different initiatives. Structuring indicators by topic but
focusing on a common goal creates potential synergies
between various nature-related initiatives, allowing us to havea better measurement of nature-related risks, and leveraging
results in an integrated approach. For instance, watershedprojects to tackle shared water challenges can have a positive
outcome on restoring native vegetation, in turn increasing
the biological diversity of an ecosystem and reducing land usechange pressure.

1. In our tobacco supply chain: Our focus is on the tobacco
cultivation process, including the curing stage for fluecured tobacco when wood-based fuels are used. Risks
relate to degradation of the natural environment linked
to the loss of ecosystem areas, chemical pollution, andinvasive species.

GovernanceTackle climate change

Prioritizing and tracking progress
through response indicators
Impacts on biodiversity can be monitored through a wide
range of pressure-specific indicators, often very technical andbuilt for a pool of science expert users. PMI developed a setof response indicators, largely derived from existing sectoral
programs already in place, that can be easily measured andhandled by relevant internal teams.

To develop pressure response indicators, we identified thefollowing priority areas of action along our value chain:

Strategy

Improve the quality of lifeof people in our supply chain

In 2023, we also performed a natural resource use andimpact pilot with 22 suppliers of direct material belonging to
the most relevant paper and pulp-based product categories.
Starting from their corporate reporting, we collected valuable
information at the supplier plant or product line levels
regarding the consumption of natural resources including
end of life practices (i.e., wood feedstock, energy sources,
waste, and water). All participating suppliers received
constructive feedback to have benchmark references about
their performance on sustainability. Outcomes are supporting
PMI in building knowledge of our natural resources footprint,
fostering awareness of the topic among our key vendors, andpaving the way for further supplier engagement programs.

Overview

Foster an empowered
and inclusive workplace

P R E S E R V E N AT U R E

146Halting deforestation
We are committed to achieving deforestation-free
supply chains for our tobacco and paper and pulpbased materials.
These supply chains represent the vast majority of PMI’s land
use and provide the materials most often linked to the risk of
deforestation and the conversion of natural ecosystems, as
highlighted in our annual global forest risk assessments.

Protecting forests in our tobacco supply chain
We work with our tobacco suppliers and farmers to fosterand implement our net zero deforestation requirements,
including by establishing traceability to the point of harvestand documenting our sustainable forestry practices.

A SPI R AT ION

100%

2023

100%

2022

100%

2021

100%
0

20

40

60

80

100

Note: For deﬁnitions, please see PMI’s Zero Deforestation Manifesto.

SI

Proportion of tobacco purchased at no riskof net deforestation of managed natural forests
and no conversion of natural ecosystems
2025

A SPI R AT ION

94%

2022

55%

2021

37%
20

40

60

80

100

Note: For deﬁnitions, please see PMI’s Zero Deforestation Manifesto and
PMI’s Sustainability KPI Protocol 2023.

Progress made in 2023 was mainly driven by enhanced
traceability and visibility into potential risks. It was supported
by our geospatial analysis, continued efforts to promote theswitch to sustainable fuels for the flue-cured tobacco wesource, and continued support for the expansion of live barns
for tobacco curing in Malawi and Mozambique. In parallel, oursuppliers in these countries also promoted, where feasible,
the switch to brick barns, which have a lower impact on forest
resources compared with wooden structures.
Additionally, also contributing to our net zero and forest
positive aspirations, we continued our reforestation andafforestation efforts in line with the mitigation hierarchy.

Perfect Forest™: PMI’s nature-based
solutions concept to preserve forest
resources
The Perfect Forest™ concept will aim to sequester
carbon while enhancing the forestry systems’potential to deliver sustainable forest products andsocietal benefits (read more here).

Philip Morris International Integrated Report 2023

Assessing deforestation risks in our tobacco supply chain
We are using geospatial analysis covering all tobacco types
and all suppliers from which we source across over 40 TGAs
in 23 countries. Beyond monitoring tobacco cultivation areas,
our spatial assessments allow us to account for the potential
impact of indirect land use change by applying a buffer aroundeach farming area.
Globally, we monitor deforestation risks on around 75 million
hectares of land (a surface roughly equivalent to the size ofFrance). We then focus our on-site activities and audits on
those areas where potential deforestation risks are detected.
Our 2023 annual risk assessment showed a continued needto prioritize the use of sustainable firewood to cure Virginia
tobacco and switch to sustainable material sources to build
barns for the air-curing of Burley tobacco in Malawi andMozambique. We continued to refine our geospatial mappingand characterization of forest districts from which thefirewood used for curing originates, paying particular attention
to land attributes and the characterization of polygons basedon land use classes.

100%

2023

0

Product impact

Electrifying barns in China
In China, our supply chain partners piloted electricalenergy curing barn centers that perform tobacco
curing with an innovative technology using heatpumps to generate the thermal power needed tocure tobacco. This is a new partnership model with
the national grid. By selling low carbon electricity
generated by solar panels installed at curing barnfacilities, it brings economic and environmental
benefits to local communities. Heat pumps are thenused to absorb heat from the air and exchange it witha condenser to heat up the air inside the curing barn
through a high-temperature air-cooling cycle. This,
matched with air ventilation generates a constantflue to cure tobacco leaves inside the barn in aprocess controlled by a smart curing module operated
remotely through a digital control device. The system,
in its pilot phase, is proving to be more reliable than
traditional curing process heat sources, also allowing
for a better control of output quality of the leaves
throughout the curing process.

Operational impact Fundamentals

Reporting and performance

149

Land use change
We estimate that approximately 259,000 hectares of land
are used to grow the tobacco we source. Land use increased
versus the previous year (2022: 233,000 hectares) due tovolume mix and strategic purchases. The 2023 surface forest
areas producing wood fuel for tobacco curing represent, by
our best estimate, around 53,000 hectares. This is an increaseof 37 percent compared with the previous year (2022: around39,000 hectares) driven by the use of a different curing fuelmix in certain markets and increased overall volume purchases.
Risks associated with land use change resulting from tobacco
farming are not considered significant because tobacco isa crop that does not report notable expansion figures inagriculture statistics, with low turnover of farmers that growit. To assess risks related to the management of the TGAs fromwhich we source, we conduct an annual ecosystem conversion
assessment. In line with the European Space Agency land
use classification system, we assess developments in a global
dataset of 11 land use classes. This allows us to have a moredetailed and effective interpretation of vegetation cover types
to inform our nature resource management.
Using more productive non-GMO tobacco seed varieties andimplementing practices in line with PMI’s GAP principles andstandards help maximize yield per hectare, improve farmer
income, and thus reduce pressure to expand crops into
surrounding natural ecosystems. In light of these trends andthe expected medium-term global contraction of the amountof land needed to fulfill our tobacco crop requirements, ouranalysis shows no direct deforestation risk associated with ourtobacco sourcing.
Promoting the switch to sustainable
fuels to cure Virginia tobacco
The curing process for Virginia tobacco takes place in barns
heated by a variety of fuel sources, including firewood andwoody biomass (such as pellets or wood chips). To mitigate
the risk of firewood collection contributing to deforestation,
we focus on increasing the efficiency of curing barns(thereby minimizing fuel use) and deploying our Monitoring,
Verification, and Reporting (MVR) Framework for Sustainable
Curing Fuels. This framework requires the traceability offirewood to ensure it originates from sustainable sources.
Moreover, we encourage the use of agriculture-derived
fuels where they do not compete with food production or
negatively affect food security.

Preserve nature

In 2023, the annual external audit carried out on our tobacco
supply chain confirmed that, for the fourth consecutive year,
100 percent of our flue-cured tobacco was purchased atzero risk of gross deforestation. Further, the audit confirmedthat 94 percent of our purchased tobacco did not pose a riskof deforestation of managed natural forest or conversionof natural ecosystems (2022: 55 percent). The natural
ecosystems monitored from the wood-biomass sourcing areas
for flue-cured tobacco include primary and protected areas.
We use conservative impact buffers around wood sourcing
areas, leading us to monitor a total of around 3.9 million
hectares of protected areas and 955,000 hectares of primary
forest globally.

Maintain

GovernanceTackle climate change

In 2023, CDP acknowledged our efforts in this area, awarding
us an A rating in Forests for the third consecutive year for ourwork advancing forest protection.

Proportion of tobacco purchased at norisk of gross deforestation of primary andprotected forests

Strategy

Improve the quality of lifeof people in our supply chain

Our forestry management efforts are governed by our Zero
Deforestation Manifesto (ZDM), designed to move us toward
becoming forest positive. We monitor compliance with the
ZDM by considering farm boundaries and natural forest
cover changes in areas of interest we call tobacco-growing
areas (TGAs). These areas include a surface buffer to mitigate
potential indirect impacts on natural ecosystems beyond farmlevel activities. We monitor TGAs by integrating geospatial
analysis with wood-based material traceability data collectedon the ground. As needed, we develop forest risk mitigationplans to ensure our tobacco sourcing does not contribute to
deforestation.

Overview

Foster an empowered
and inclusive workplace

P R E S E R V E N AT U R E

148

Overview

Proportion of ﬂue-cured tobacco purchasedthat is cured with renewable fuel sources(self-suﬃcient ﬁrewood or biomass)
Maintain

A SPI R AT ION

>70%

2022

74%

2021

75%
40

60

80

Since 2019, we have restored 205 hectares of forest tocompensate for the detected risk of potentially unsustainablesourcing of firewood used for curing tobacco leaf (2022: 199
hectares), thereby contributing to our net zero deforestation
aspiration.
In the Philippines, we completed feasibility assessments andensured local community support through several rounds ofstakeholder consultation to contribute to the reforestation ofcritical natural forest supporting a rural mountain community.
We plan to execute these and more projects on the road toforest positivity for our tobacco supply chain, which is set tobe reached in 2025.
We are on track to bring to zero net deforestation all tobacco
markets where risk has been detected by our external
assurance process. Eleven out of 12 wood-based curing fuelmarkets are already compliant with the zero net deforestation
criteria. Four of them are considered high risk. The remaining
market that is not yet compliant was a new market in 2023
and tobacco suppliers there have already been engaged to
become fully compliant moving forward.

Philip Morris International Integrated Report 2023

Additionally, in line with the criteria of our forest positive
program, we are developing interventions to increase thehectares of forest restoration and ecosystem improvements.
This goes beyond our zero net deforestation commitments
and is reported against our 2025 forest positive aspiration.
Since 2019, in line with our forest positive ambition, we havesupported the establishment of 198 additional hectares offorest within our tobacco supply chain.

Protecting forests in our paper
and pulp-based supply chain
In our paper and pulp-based materials supply chain, we
continued to strengthen our line of sight into potential
deforestation risks, leveraging experience and tools, andreplicating the assurance systems applied in our tobacco
supply chain.
During 2023, we continued to gather feedstock origin
locations from the suppliers of direct materials used in
our products and packaging. Combining this information
with satellite monitoring and applying relevant criteria of
the National Risk Assessment framework of the Forest
Stewardship Council (FSC) allowed us to better understandthe level of risk our suppliers are facing. More specifically, itenabled us to categorize each of them as low, medium, or highrisk.
In 2023, we re-verified all suppliers in the low-risk categorythat source supply feedstock material to PMI. Our thoroughprocess included collecting relevant documentation througha dedicated web platform and reviewing publicly available
data such as FSC chain of custody certificates. All our lowrisk suppliers achieved full compliance against the verification
framework of our ZDM. We expanded our efforts to mediumrisk origin suppliers, with 17 out of 20 in total achieving
compliance with our ZDM.
We continued evaluating high-risk feedstock origin suppliers
to improve our understanding of current conditions andlead time to address corrective action plans. During 2023,
we addressed non-conformities—mostly pertaining to theprovision of GIS-related information for high-risk countries—
with the 10 high-risk origin suppliers that had undergone
on-site audits in 2022. They all successfully demonstrated
they had implemented solutions necessary to ensure theappropriate level of traceability, achieving full complianceagainst our ZDM in 2023.

Operational impact Fundamentals

Reporting and performance151

During the year, we also ran an extensive on-site audit of ourpaper and pulp-based product supply chain in China, which
resulted in full compliance with our protocol. At a global level,
28 out of 31 high-risk suppliers audited up until the endof 2023 were compliant with our forest positive program
requirements.
In 2023, we also extended these efforts to our suppliers of
secondary paper and pulp-based products, focusing on lowand medium-risk origin. Simultaneously, we started to workon other categories that use paper and pulp as a base. We
engaged first with critical suppliers of printed point of sales
materials, which is part of our indirect materials and services
supply chain. Critical suppliers signed a commitment letter thatoutlined our goals and aspirations to remove deforestationfrom our value chain.
Through several capability building engagements weestablished a common understanding of the best way totackle this complex segment of our supply chain, which will
incentivize local stakeholders and small suppliers to progresson their zero deforestation journeys. Our strategy is toensure compliance by working with suppliers who can deliver
conformant materials in line with our commitment to avoid any
deforestation caused by our supply chain.
We work closely with suppliers building their capability
and collaborating through engagement sessions, providing
options that would respond to our requirements. For example,
materials supplied should be either certified or have chain ofcustody by the forest management standards approved by
PMI (FSC, PEFC, SFI) and verified by a third party mandated torun assurance on our forest positive program.

Preserve nature

76%

20

Enhancing natural capital throughreforestation and afforestation
As part of our efforts to halt deforestation and enhancenatural habitats, we require that our suppliers and farmers
be self-sufficient in sustainably supplying wood for curing
and barn construction. By 2025, we aim for them to growmore trees than they cut as a balance in their woodlots. Treegrowing requires careful management and is limited to lands
where the carbon stock and existing biodiversity assets,
including soil, can be enhanced.
We also proactively seek opportunities to respond andsupport after large ecological disturbances. Learn more about
our reforestation work in Greece in response to wildfires here.

2023

0

During the year, in addition to the regular audit
process, we continued our collaboration with theWorld Sustainability Organization (WSO) to make our
MVR Framework available to a larger farmer base.
This pilot is intended to further test the sustainabletobacco curing fuel standard jointly created with
Friends of the Earth (a WSO standard body)—readmore here.

Product impact

Tackle climate change

In 2023, 76 percent of the flue-cured tobacco we purchased
was cured using renewable and traceable fuels (2022: 74
percent). Of this, 36 percent was cured with biomass and40 percent used self-sufficient sustainably sourced firewood(i.e., the amount of wood harvested per year ensures theresource will be available in future years). Globally, between
2019 and 2023, the average amount of wood used for curing
tobacco decreased from 3.99 kilograms to 3.06 kilograms per
kilogram of flue-cured tobacco (a reduction of 23 percent).
This resulted from changes in sourced volumes (more volumes
from lower-emission origins) and the increased efficiency of
curing barns used by the farmers from whom we source.

Building the foundation for a newsustainable tobacco leaf curingcertification

GovernanceImprove the quality of lifeof people in our supply chain

Data gathered through our MVR are verified by a third
party. In 2023, all our suppliers of flue-cured tobacco wereaudited via desktop or on-site assessments. During 2023, 29
suppliers were audited, with desktop audits conducted with
23 suppliers and virtual or physical on-site visits conductedwith six suppliers in various flue-cured Virginia markets. This
enabled us to have deeper insights into our suppliers’ practices
and to be able to implement continuous improvements intheir current processes. As a result of the 2023 third-party
audit, 27 out of 29 suppliers were compliant with the MVR
requirements. The remaining two suppliers were new andalready engaged in the process of aligning their practices with
the MVR requirements.

Strategy

Foster an empowered
and inclusive workplace

P R E S E R V E N AT U R E

150

Overview

In March 2023, we organized two webinars with recently
introduced suppliers not yet onboarded in the zero deforestation
journey to raise their awareness, secure their commitment toour forest ambitions, and obtain their agreement to undergo
a compliance assessment during the year.
Our journey in 2023 started with 64 percent compliance andincreased to 95 percent at the end of the year.

2025

A SPI R AT ION

100%

2023

95%

2022

64%
0

20

40

60

80

100

Water is a renewable yet finite resource sharedby all. Water stewardship means reducing water
use through efficiency measures, promoting water
recycling, protecting watersheds, preventing waterpollution, enhancing recharge, and promoting
sustainable water management in collaboration
with relevant stakeholders.
Our approach to water stewardship aims to build the resilienceof watersheds, covering our tobacco and other raw materials
supply chains and our own operations. We believe that
achieving a meaningful impact requires a deep understandingof water-related risks and informed actions to address them.
Critically, we must engage with stakeholders to scale solutions
and leverage a science-based approach supported by robust
methodologies and implementation tools.

100%
Aspiration
Proportion of paper and pulp-basedmaterials purchased at no risk of
net deforestation of managed naturalforest and no conversion of natural
ecosystems by 2025

We continue advancing toward our long-term aspiration tocontribute to a positive impact on water resources by 2050.
PMI’s interim water stewardship aspirations are centered on
our tobacco supply chain and direct operations. We expect toexpand these aspirations to also encompass our nontobacco
materials supply chain (read more about the setup of our longterm ambition on water in a dedicated report available on
PMI.com).

We routinely assess water-related risks to inform and prioritize our activities.
A Global Risk Assessment (GRA)—covering our tobacco supply chain, key procurement categories, and direct operations—is a desktop study completed using publicly available, global water risk data across drivers in physical quantity and quality.
The GRA works as a high-level snapshot of water risk and the indicators include water stress, seasonal variability, flood
occurrence, drought severity and the trend of groundwater resources. For this reason, the GRA works as a first stepprioritization tool that informs us on which physical risks are apparent where, and how severe they might be.
A Local Water Risk Assessment (LWRA) follows the GRA and reinforces risk profiles with its inclusion of reported local
data, stakeholder interviews, and a focus on key water basins that farmers draw water from and discharge it to. The local
data are used to calibrate the data from the GRA, and the resulting scores are used to inform water use and project
implementation to address shared water challenges in affected watersheds. The purpose of the LWRA is to support local
suppliers’ teams and farmers in understanding water risks in a specific growing area, combining locally available data andbuilding on the experience of the suppliers. Moreover, it guides organizations, in partnership with their local partners andsuppliers, to undertake mitigating actions to protect growing areas from water risks.

Philip Morris International Integrated Report 2023

Understanding our water footprint
and related risks
Our internal studies indicate that our nontobacco materials
supply chain, tobacco agricultural supply chain, andmanufacturing represent 33 percent, 66 percent, and 1
percent of our fresh withdrawal water footprint, respectively.
As a result, we prioritize collecting primary data on water
withdrawals related to irrigated tobacco farms in our TGAs.
In 2023, these farms accounted for a collective withdrawalof approximately 109 million cubic meters. The figure for
manufacturing (3.2 million cubic meters in 2023) confirms that
sector’s relatively small influence on our overall water use.
In our tobacco supply chain, we conduct an annual global
water risk assessment using tools such as the World Resources
Institute’s Aqueduct Water Risk mapping. Our 2023 global
assessment continued to reveal that most (80 percent) of our
TGAs representing approximately 86 percent of our 2023
purchased tobacco volumes show a “medium to high,” “high,”or “extremely high” level of exposure to physical risk.
To better understand the water-related risks in our TGAs, we
also conduct periodic local water risk assessments (LWRAs)
on the ground, leveraging primary data sources and interviews
with stakeholders to gauge both external and internal waterrelated risks.
In 2023, we completed LWRAs in Argentina, Greece,Indonesia, Italy, Malawi, Mexico, Mozambique, Switzerland,
and Turkey. These assessments confirmed that water scarcity
and competing demands for limited water supplies remains
a pervasive challenge. Other challenges identified include alack of water legislation implementation in Mozambique andincreased drought risk in Argentina’s Juramento basin.
We have conducted 49 LWRAs since 2018, covering 95
percent of our TGAs, including multiple watersheds withinsome of these areas.

Operational impact Fundamentals

153

Reporting and performance

Proportion of tobacco-growing areas
covered by local water risk assessments(cumulative since 2018)
2025

A SPI R AT ION

100%

2023

95%

2022

81%

2021

66%
0

20

40

60

80

100

In our direct operations, we regularly assess factory water
withdrawals and consumption, exposure to water risks, andproduct type—specific attributes to improve interactions
with watershed stakeholders. These assessments help us
identify and prioritize actions where we can make a difference
and create shared value. Our 2023 assessment showedthat approximately 64 percent of water withdrawals in ourfactories originated from water-stressed areas. We used thisand additional information to expand the action plan for ourwater stewardship strategy, which includes tailored actionsat our manufacturing plants and looks at managing risk while
generating contributions at watershed level beyond theboundaries of our factories.
In 2023, we extended the application of risk assessment
tools to the sourcing of nontobacco materials to cover ourelectronics supply chain and our paper and pulp-based
products supply chain with a water Global Risk Assessment(GRA). The results of the GRA will allow us to prioritize action
on focus areas and strengthen engagement with priority
suppliers to investigate solutions to address risk and sharedwater challenges.

Preserve nature

Our approach to assessing water-related risks

Product impact

Tackle climate change

In 2023, CDP acknowledged our efforts in this area, awarding
us an A rating for the fourth consecutive year for our work inwater stewardship.

Note: For deﬁnitions, please see PMI’s Zero Deforestation Manifesto.

GovernanceImprove the quality of lifeof people in our supply chain

Proportion of paper and pulp-based materials
purchased at no risk of gross deforestationof primary and protected forests

Managing water responsibly

Strategy

Foster an empowered
and inclusive workplace

P R E S E R V E N AT U R E

152Water stewardship in our tobacco supply chain
The quantity, quality, and timing of water availability all impact
the growth of tobacco plants.
Water use
For about 67 percent of the farmland in our tobacco supply
chain, the growing cycle is synced to the rainy season,
enabling crops to be rain-fed during the open field stage.
Where we use irrigation, we are mindful of the risk of baselinewater stress when conducting local water risk assessments.

Water optimization
After consistently exceeding our internal yearly targets, wehave increased our aspiration to optimize at least 25 million
cubic meters of water (cumulative since 2019) in our TGAs
by 2033 (up from our original aspiration of 10 million cubic
meters). We aim to achieve this through dedicated projects
that address shared water challenges in the watersheds
where we operate, in line with our biodiversity and water
stewardship ambitions.
In pursuing this aspiration, and to account for volumes ofwater optimized, we aim to mitigate water-related risks andhelp address shared water challenges at the catchment level.
The volume that can be accounted as optimized is the onethat results from projects that make more water available forstakeholders that share the same challenges in a common
watershed.

Since we started measuring water use (collecting primary datafrom our suppliers and farmers through yearly surveys), ouraverage water withdrawal (cubic meters of water withdrawn
versus total packed tobacco) related to our purchased tobacco
volume has gradually decreased.

In 2023, we expanded the outreach of water positive
programs by issuing the tobacco sector’s first Brazilian
Green Rural Product Note (known locally as “Green CPR”).
Accordingly, our local affiliate, PM Brazil, provides additional
payments to the contracted tobacco farmers who candemonstrate that they have adopted sustainable practices topreserve forests or strengthen ecosystem resilience against
water cycle fluctuations. The payment is based on a thirdparty verification of the ecosystem benefits generated andis corresponded by PMI independently from the commercial
contract with the tobacco producer. This approach increases
the resilience of the farmers both in economic terms and forthe integrity of ecosystem services (e.g., water flow regulation,
forest conservation) provided within their farm.

Climate change is expected to affect rainfall patterns and has
already had a visible impact at regional and local levels. This
could be a primary factor in the year-on-year fluctuation inwater use we record among our farmers. We continue toclosely monitor water withdrawal figures in our TGAs and wecompare them with water risk figures from our analysis tobetter inform our tobacco sourcing strategy and watershed
response actions. This supports our efforts to mitigate risk
and optimize resource use in line with the recommendationsof TNFD to locate, evaluate, and assess the risk on nature tobetter prepare to mitigate it.

We also continued the expansion of our irrigation pond
project in India, which now includes check dams, a percolation
tank, and desilting tanks. This increases water supply for farms
and community members and recharges the groundwatertable in the project areas.
Learn more about how we expanded the use of laser leveler
technology in Pakistan here and how we contributed tosupport a micro-enterprise project for female farmers thatprovided elevated drip irrigation kits in Malawi here.

Product impact

Designing impactful water
stewardship initiatives
Our process for selecting and validating water
stewardship projects focuses primarily on identifying
and evidencing shared water challenges (or water
risks) to develop activities that mitigate their root
cause. We then work with local partners to ensure
we design the most impactful projects, and calculate
the volumetric water benefits based on the VWBA
(Volumetric Water Benefit Accounting) methodology.
We prioritize projects that have additional benefits
beyond water stewardship to enhance social
return on investment, such as reduced fertilizers
and crop protection agents, increased vegetation
and biodiversity, or improved farmer incomes or
livelihoods.
PMI developed and continues to improve an internal
Water Stewardship Accounting Tool based on the
VWBA methodology (WRI 2019).
In essence, the tool is a fit-for-purpose means ofapplying a scientifically sound and standardized
methodology to projects with tangible environmental
and social impacts in a company’s water stewardshipjourney. It is used to calculate the water benefits ofwatershed-focused projects implemented to protect
water quality and quantity. It incorporates the resultsof the LWRAs conducted by PMI, providing a stepby-step guide for designing projects based on theirimpact on shared water challenges and defining themetrics needed for each type of project.
The tool enables the adoption of the conceptof responsible water stewardship and provides
a standard method for assessing challenges,
collaborating with stakeholders across the watershed,and quantifying the benefits of water projects in areal, measurable, and verifiable way.
Results are validated externally by PMI’s technicalpartner Blue Risk that runs a due diligence on how
the methodology is being applied and on data quality
based on the Water Volumetric Benefit Standard
from the World Resource Institute.

Operational impact Fundamentals

155

Reporting and performance

To date, we have implemented water stewardship initiatives
in eight countries: Argentina, Brazil, India, Italy, Malawi,
Mozambique, Pakistan, and Turkey. Combined, these efforts
have contributed to optimizing a total of 8.1 million cubic
meters of water in our TGAs since 2019, putting us wellon track to achieving our aspiration to optimize 25 million
cubic meters of water by 2033. This is a significant increase
compared with 2022 (2022: 4.9 million cubic meters), driven
mainly by the widespread implementation of volumetric water
benefit generation guidelines, the progressive capabilities built
in cooperation with our suppliers, and the increased numberof farmers involved in these activities.

Cubic meters of water optimized
in our TGAs (cumulative, since 2019)
2030

A SPI R AT ION

25 m

2023

8.14 m2022

4.94 m2021

0.44 m
0

5

10

15

20

25

Note: Indicator is based on the World Resources Institute’s volumetric beneﬁt
accounting methodology and is veriﬁed by an external third party.

With our 2033 aspiration on water we aim to continue
optimizing irrigation and restore water volumes to address
water risks at the watershed level by scaling solutions
contributing to a positive impact on water resources. Inalignment with our holistic approach to environmental
sustainability, we aim for all of our water stewardshipprojects to have multiple benefits (i.e., biodiversity, carbon
sequestration, waste management, and social impacts byimproving community well-being).
Water quality
When misused, CPAs and fertilizers can pollute the local
environment. While CPAs protect crops and fertilizers improve
crop yield, these chemicals can infiltrate groundwater or run
off into surface watercourses, impacting aquifers and aquatic
ecosystems.
We maintain a global integrated pest management program
to reduce the unnecessary use of pesticides, promote lesshazardous alternatives, and manage both appropriately (readmore here).
Further, to minimize their negative impact, we promote
more efficient ways to apply fertilizers, such as through drip
irrigation systems that distribute them in smaller quantities
and directly to the plants’ root systems.

Philip Morris International Integrated Report 2023

Preserve nature

We implement a variety of projects to address shared water
challenges, with a strong emphasis on community-based
initiatives. For example, learn more about how we havesupported farmer communities in Brazil since 2018 in fencing
and protecting areas around water sources here.

GovernanceTackle climate change

Volume changes in the sourcing strategy and climatic trends
contribute to our improved performance. The applicationof better water management practices, including providing
suppliers with specific technical guidance on how to monitor
and report irrigation water volumes, also played a role.

Strategy

Improve the quality of lifeof people in our supply chain

In addition, we collect data annually on irrigation water used
to grow tobacco. According to the latest estimates, in 2023
we used approximately 245 cubic meters per ton of tobacco
produced (rain-fed or irrigated)—approximately 7 percent lessthan in 2022 (2022: 263 cubic meters per ton of tobacco
produced).

Overview

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Overview

Water stewardship in our operations
We have a long-standing approach to driving water
stewardship in our direct operations, especially in our
manufacturing sites.

C A S E S TUDY

We seek to promote water circularity in our factories,
increasing water use efficiency and maximizing the beneficial
use of water discharged.

Water ratio in our manufacturing facilities(water withdrawn in cubic meters per million
cigarettes equivalent)
Maintain

A SPI R AT ION

≤3.1

2023

2.4

2022

2.5

2021

2.6
0

0.5

1.0

1.5

2.0

2.5

Note: In 2021, we updated our methodology to account for theconversion factor of heated tobacco units to conventional cigarettesof 5:1 and have restated historical data accordingly.

Philip Morris International Integrated Report 2023

3.0

3.5

Read the case study here

We continuously work to improve our processes, focusing
on applying a zero-loss mindset and investing in a variety
of projects that aim to optimize our consumption and raiseawareness among our employees.
Water circularity approach
At PMI, our comprehensive approach to water stewardshipincludes initiatives within and beyond our manufacturing
sites to establish a circular model in the way we manage
and interact with water as a resource. We are not new tothinking circular in the watershed where our manufacturing
facilities are located as this aligns with the AWS certificationof our priority manufacturing plants. The approach focuseson efficient water use at the manufacturing facility to thenpromote watershed activities such as water replenishment
projects to address water consumption for priority watersheds
where we operate.
Water and wastewater quality
At our factories, water is used in manufacturing (includingin the preparation of flavors and liquid products and the
production of HTUs) as well as for sanitation and hygiene.
To reduce our water withdrawals in the long term, we arerecycling and reusing water at our manufacturing facilities.
These reductions are achieved, alongside other initiatives,with technologies such as reverse osmosis and electrolytic
process, which aim to foster the re-utilization of water in othersub-processes while ensuring the qualitative requirements forthe different use purposes.

Operational impact Fundamentals

Reporting and performance157

At our Italian manufacturing site, for instance, wastewater
undergoes a series of processes, including reverse osmosis,
in an on-site treatment plant and is reused for utilities (e.g.,
for boilers and cooling towers). The current overall recycling
efficiency rate is around 28 percent of total water demandof the plant. In 2023, we finalized the implementation ofelectrodialysis reversal equipment that aims at recycling
the treated wastewater for process cleaning at an overall
efficiency of more than 95 percent.

Reducing waste

Monitoring wastewater quality is standard procedure at
our manufacturing sites, where our certified environmental
management systems help us remain in compliance withcurrent and future statutory and regulatory requirements
associated with water discharge.

Managing the waste generated by our operations
We manage all waste from our production sites with theobjective of reducing it and identifying and applying the mostsustainable waste treatment options available. We pay special
attention to our most valuable waste streams, such as tobacco,
paper, card, and cellulose acetate tow, and to hazardous waste.

Fostering best practices in water management
Certifying our manufacturing sites to the Alliance for Water
Stewardship (AWS) standard is a critical component of ourapproach to water management. The AWS standard is a
globally applicable framework that enables organizations
to understand their water use and impacts and work
collaboratively and transparently with external stakeholders inthe same catchment area to achieve sustainable management
within the wider water context.
Our goal is to certify all our priority factories to the AWS
standard by 2025, and we are making good progress. Since
2018, we have certified a total of 24 of our factories.

Proportion of PMI factories certiﬁed
to AWS standard
2025

A SPI R AT ION

100%

2023

83%

2022

51%

2021

43%
0

20

40

60

80

100

Note: Aspiration pertains to priority manufacturing facilities identiﬁed based on site
overall risk in relation to the watershed, water withdrawal, water consumption, productportfolio, and other strategic considerations. PMI sites that are in low- to medium waterrisk areas and below 2.5% of PMI manufacturing water footprint are excluded.

We follow the waste hierarchy, whereby we aim firstto reduce the waste we generate, promote its reuse
and recycle whenever possible, incinerate it when
it is the best option available, and, to the extent
possible, avoid any disposal to landfill.

• Avoid and reduce: We aim to reduce the amount of waste
we generate by converting raw materials into products
as efficiently as possible. In 2023, we generated a total of
127,493 tons of waste, of which 2 percent was hazardous(2022: 119,192, 1 percent). The increase in the total waste
generation is mainly due to the increased volume of HTUs
that have on average a higher industrial waste rate comparedwith cigarettes given the higher complexity of production.
• Reuse and recycle: Beyond optimizing our processes to
cut waste, we strive to responsibly manage the waste we
generate. We first seek to reuse materials or make themavailable to others. For instance, we have programs inplace to promote the reuse of cardboard boxes to handle
tobacco in our factories. Another path is recycling, whichcurrently represents most (85 percent) of our waste
disposal. However, the growing proportion of smoke-freeconsumables in our production mix and the expansion of ourportfolio to include new products are lowering our recycling
rate. We seek to mitigate this trend by implementing
appropriate technology to help us better reuse and recycle
waste from these products.
• Recover: When recycling is not possible, we seek to recoverwaste materials and use them to generate energy. In 2023,
13 percent of the waste generated was incinerated withenergy recovery, and 0.8 percent was incinerated without
energy recovery or disposed of in a landfill (2022: 12
percent, <1 percent).

Preserve nature

The production of HTUs is around five times more waterintensive than the manufacturing of cigarettes. While thepublic health benefits of smoke-free products justify thetrade-off, we are accelerating efforts to mitigate the increased
water demand through enhanced efficiency. In 2023, we
continued to reduce water intensity, achieving a reduction of
5 percent versus 2022 (49 percent reduction versus 2018)
and a ratio of 2.4 cubic meters per million cigarettes equivalent(down from 2.5 in 2022).

With a significant footprint in Italy, fromtobacco fields to factory production, we seek
to work closely with stakeholders to promotesustainable water management in the country.

Product impact

Tackle climate change

Accelerating water efficiency efforts
The manufacture of our products resulted in a withdrawal ofaround 3.2 million cubic meters of water in 2023 (2022: 3.1
million cubic meters). Between 2018 and 2023, we reduced
water consumption at our manufacturing sites by 19 percent
in absolute terms, mainly through water efficiency initiatives
that offset the unfavorable impact of the significant increase in
the production volumes of heated tobacco units (HTUs).

PMI’s holistic approach towater stewardship in Italy

GovernanceImprove the quality of lifeof people in our supply chain

We have created a tool that helps us assess the value ofwater for PMI by incorporating externalities such as physical,
regulatory, and reputational water risk. We are piloting it at
our manufacturing sites to further support decisions related
to water investments by establishing a virtual monetary value
for water through an analysis of physical and transition risks.
Understanding the value of water is essential to justifying
investments in water solutions and effectively prioritizingthem for sound positive impact.

Strategy

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and inclusive workplace

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Overview

Aiming for virtually zero waste to landfill in our factories
We apply a “zero waste” philosophy, but we acknowledge
that even the most efficient systems inevitably involve asmall amount of waste diverted to landfill. This includes, forinstance, waste-to-energy ash residue, waste legally mandated
for landfill, and gray water sludge.

A SPI R AT ION

Maintain

>99%

2023

99.9%

2022

99.9%

2021

99.7%
0

20

40

60

80

Scott Couts
Senior Vice President,
Operations

100

Oleksiy Lomeyko
Director, Sustainability
AcademyPhilip Morris International Integrated Report 2023

“We aim to complete the design of our biodiversity strategy in 2024, cascading
the learnings and experience that we are building through our participation in
the Science Based Targets Network preparer group. During the year, we plan tofurther strengthen our biodiversity footprint assessment. The objective will be toincrease our visibility of impacts along our value chain. Importantly, as our company
continues to transform, we will also account for changes related to the acquisition of
Swedish Match, as well as the increasing shift into electronics supply chain—posing a
new set of biodiversity challenges and opportunities. These efforts will help informthe design of impactful interventions moving forward and support our work towards
establishing science-based targets for nature.

“We will continue to thoroughly address nature-related risks connected to
our value chain in order to minimize adverse impacts and protect natural
ecosystems. The TNFD disclosure recommendations and guidance to report andact on evolving nature-related dependencies, impacts, risks, and opportunities,
will help PMI strengthen its work and approach to preserve nature—aiming
to achieve its 2033 and 2050 aspirations. As an early adopter of the TNFD
framework, and building on our recent TCFD disclosures, we plan for TNFDaligned disclosures for the 2025 financial year. To prepare for this, we will
update our public commitment on water while developing and publishing a
new one focused on biodiversity. These will be the backbone of our revamped
Environmental Commitment, which we plan to publish before the end of 2024.
We are committed to continue strengthening our efforts to preserve
nature by protecting biodiversity, halting deforestation, managing water
responsibly, and reducing waste. We will continue to integrate learnings andprogress of our water stewardship program, our forest positive programand our tobacco-focused good agriculture program under one approach,in line with our ambition to achieve no net loss on ecosystems connected
to our supply chain by 2033, and, by 2050, to contribute toward a net
positive impact on nature and a positive impact on water resources.”

159

Preserve nature

Read the case study here

Reporting and performance

Tackle climate change

We also expect our tobacco suppliers to dispose of empty
agrochemical containers safely and appropriately. In somecountries, we provide additional support to ensure thecollection and proper disposal of containers that held
pesticides or crop protection agents, including guidance on
triple rinsing and punching best practices.

The Indonesian waste bankand plastic recycling projectis a PMI-funded, communitydriven solution designed
to address the effect ofplastic waste while positively
impacting local communities.

Operational impact Fundamentals

Building on our robust performance and transparency regarding how we manage
natural capital—notably recognized by CDP, we welcome regulations such as the
new European Union Deforestation Regulation (EUDR) that raise the bar on avoiding
forest conversion and that further encourage companies to contribute to nature
protection. We closely follow the development of such regulation and prepare
for its application, particularly with suppliers and third-party partners in our
supply chain. In this context, we will also seek to identify new meaningful
opportunities to expand our Perfect Forest™ concept, a nature-based solution
concept to preserve forest resources.”

Fostering responsible waste practices in our supply chain
We seek to foster a positive impact on waste practices in our
tobacco supply chain where our GAP require that suppliers
have appropriate waste management plans in place.

Applying impact
valuation and Social
Return On Investment(SROI) methodologies
to PMI’s waste bankand plastic recycling
project in Indonesia

Product impact

Looking ahead

Note: Virtually zero waste to landﬁll is achieved when the landﬁll diversion rateis equivalent to 99 percent or greater. Our calculation of zero waste to landﬁll
does not include canteen and sanitary waste, which do not relate to our production
processes. It also excludes the mandated waste, generally tobacco, that we are
obliged to landﬁll to respect local regulations.

C A S E S TUDY

GovernanceImprove the quality of lifeof people in our supply chain

Our ongoing ambition is for our manufacturing operations
globally to achieve virtually zero waste to landfill, which means
achieving a landfill diversion rate of 99 percent or greater.
We are proud that, globally in 2023, 99.9 percent of ourmanufacturing operations achieved virtually zero waste tolandfill. Only 0.10 percent of our operational waste went tolandfill (equivalent to 130 tons of waste) while complying withall relevant waste regulations and standards.

Percentage of waste diverted from landﬁll in
manufacturing operations

Strategy

Foster an empowered
and inclusive workplace

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160

Overview

Fundamentals
Nicotine science

p162

Respect human rights

p171

Conduct R&D responsibly
and transparently

p165

Manage our supply chain
sustainably

p174

Sustain product reliability

p167

Safeguard privacy andprotect data

p182

Uphold business ethics
and integrity

p169

Apply fair fiscal practices

p183

Philip Morris International Integrated Report 2023

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance161

F U N D A M E N TA L S

162Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

Nicotine science
What is nicotine?
Nicotine occurs naturally in tobacco and, in someplants from the Solanaceae family, at much lower
levels. It is possible to extract nicotine from tobacco
for use in nicotine replacement therapy (NRT)
products, the liquids used for e-cigarettes, and othernontobacco nicotine products. It is also possible toproduce synthetic nicotine. While this process isrelatively costly, an increasing number of products on
the market (e-liquids and nicotine pouches) containsynthetic nicotine.
Nicotine binds to the nicotinic acetylcholine receptor
to elicit a variety of physiological responses (e.g., atransient increased heart rate and blood pressure).
These effects can be influenced by the route ofadministration (e.g., via lungs, mouth, or skin) that
affects the rate and amount of nicotine uptake into
the body.
Nicotine is addictive and not risk-free, but it is not the
primary cause of smoking related diseases.
Learn more about nicotine on PMIscience.com.

Nicotine is present in many products including
combustible tobacco products (e.g., cigarettes
and cigars) and smoke-free products that provide
nicotine without combustion (e.g., snus, nicotine
pouches, e-cigarettes, and heated tobacco
products).
Since smoking has been the most prevalent form of nicotine
uptake for millennia, nicotine, smoking and tobacco use
can be difficult to separate in people’s minds. However,
the effects from exposure to nicotine-containing products,
which can vary by delivery method and the substrate used,
are distinct and separate from the effects of nicotine itself.
External independent surveys reveal common misperceptions
about the effects of nicotine among people who smoke andhealthcare professionals.
National Data from the United States show that nicotine
misperceptions are common among U.S. adults who smoke
and, similarly, data from the Office for Health Improvement
and Disparities in the UK have also demonstrated that alarge portion of the population incorrectly believe that
nicotine itself causes smoking-related cancers.1 Nicotine
misperceptions also exist among healthcare professionals,
where many wrongly believe that nicotine itself causes
smoking-related diseases.2,3
Although cancer is a complex and multifactorial process
and there is ongoing research into the relationship between
nicotine and cancer development, what is known is that
nicotine is not classified as a carcinogen by numerous publichealth bodies including the International Agency for Research
on Cancer and the U.S. FDA.4, 5
Nicotine is addictive and not risk-free, but it is the chronic
exposure to the products of combustion that are generated athigh levels when a cigarette is lit which is the primary cause ofsmoking-related diseases such as cancer, respiratory illnesses,
and cardiovascular diseases.
The unfortunate outcome of these misperceptions for adults
who smoke is that they tend to perceive nicotine to be as
harmful to health as cigarette smoking and therefore may be
dissuaded from switching to nicotine-containing products that
do not require combustion.6

1 “Four in 10 smokers incorrectly think nicotine causes cancer.” Press Release, Public Health
England, March 14, 2018.
2 Steinberg MB, Bover Manderski MT, Wackowski OA, Singh B, Strasser AA, Delnevo CD.
Nicotine Risk Misperception Among US Physicians. doi: 10.1007/s11606-020-06172-8.
September 1, 2020.
3 Bover Manderski MT, Steinberg MB, Wackowski OA, Singh B, Young WJ, Delnevo CD.
Persistent Misperceptions about Nicotine among US Physicians: Results from a Randomized
Survey Experiment – PubMed (nih.gov), DOI: 10.3390/ijerph18147713, 2021.
4 https://www.govinfo.gov/content/pkg/FR-2012-04-03/pdf/2012-7727.pdf
5 https://monographs.iarc.who.int/wp-content/uploads/2018/06/mono100E-6.pdf
6 Snell LM, Colby SM, DeAtley T, Cassidy R, and Tidey JW. Associations Between Nicotine
Knowledge and Smoking Cessation Behaviors Among US Adults Who Smoke. doi: 10.1093/
ntr/ntab246 2022.

Philip Morris International Integrated Report 2023

Importance and risks of nicotine
The presence of nicotine in smoke-free products is an
important factor among others, including ritual, sensory
and taste, to successfully move adults away from cigarettes
through the adoption of smoke-free products.7
Many people who smoke cigarettes indicate that they do sofor the perceived benefits, which include enjoyment, stressmanagement, and relaxation. Additionally, some studies reportthat nicotine can enhance cognitive processes like improving
attention, memory, and fine motor function.
As an agonist of nicotinic acetylcholine receptors, nicotine
elicits a variety of transient cardiovascular effects such asincreased heart rate and blood pressure.
Sustained nicotine use can induce changes in the brain’s
reward and stress systems, leading to withdrawal symptoms,
although the effects are transitory and reversible once people
quit and successfully abstain from using tobacco and nicotine
products.
It is well understood that nicotine is addictive and not riskfree. However, while it can be difficult for some, anyone
can quit tobacco and nicotine altogether with sufficientmotivation.
Some studies have found that nicotine may have adverse
effects on fetal development such as low birth weight.
For all these reasons, some populations should avoid nicotinecontaining products, such as minors, and women who are
pregnant or breastfeeding, as well as people with pre-existing
conditions including heart disease, high blood pressure,diabetes, or epilepsy.
Achieving the goal of phasing out cigarettes will require adebate informed by facts and science on the health effectsof smoke-free products and nicotine itself. As of today, muchof our understanding of the importance and risks of nicotine
is confounded with smoking. Therefore, as more and more
new products emerge that separate nicotine from some or allof the aspects of the smoking ritual, much more research isneeded to fully understand these new products as well as therole of nicotine itself.

Furthermore, the misperceptions in healthcare professionals
around the health effects of nicotine may discourage themfrom improving their knowledge or being able to differentiate
the health effects of smoking from nicotine itself.

7 (DOI: 10.1056/NEJMp1707409).

Nicotine and smoke-free products
It is important to remember that for smoke-free
products to benefit public health, existing adultsmokers have to be willing to switch to them. Nicotine
is one of several product characteristics, along withtaste, sensory experience, nicotine-delivery profile,and ritual characteristics, that adult smokers arelooking for in alternative products.
Independent studies demonstrate the importanceof making scientifically substantiated smoke-free
products accessible to those adults who would
otherwise continue to smoke (read more here).8,9This means offering a range of noncombusted
nicotine-containing products with substantially lower
levels of harmful and potentially harmful constituents(HPHCs) than cigarettes, that are acceptable to adults
who would otherwise continue to smoke, so theyabandon cigarettes completely.
Public health institutions, individuals andorganizations have also noted the important role
nicotine can play in helping adult smokers transition
away from cigarettes.
For example, the U.K.’s Royal College of Physiciansstated that nicotine is not “in itself a highly hazardous
drug,” and, “It is inherently unlikely that nicotine
inhalation itself contributes significantly to themortality or morbidity caused by smoking. The main
culprit is smoke and, if nicotine could be delivered
effectively and acceptably to smokers without smoke,
most if not all of the harm of smoking could probably
be avoided.”10
Learn more about nicotine on PMIscience.com.
8 Aryal UR and Bhatta DN. Perceived benefits and health risks of cigarettesmoking among young adults: insights from a cross-sectional study. Tobacco
Induced Diseases volume 13, Article number: 22 (2015) DOI 10.1186/
s12971-015-0044-9).
9 Valentine G, Sofuoglu M. Cognitive Effects of Nicotine: Recent Progress.
Curr Neuropharmacol. 2018;16(4):403-414.
10 https://www.rcplondon.ac.uk/file/3563/download

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164Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

165

Conduct R&D responsibly and transparently
Therapeutic delivery of nicotine

Future of nicotine

The scientific community continues to explore ways in which
nicotine and other alkaloids present in the tobacco plant canbe isolated and potentially used as therapeutic compounds.1
For instance, scientists are studying nicotine as a possible
active ingredient in pharmaceutical applications for treating
schizophrenia, depression, and other anxiety disorders.2
Scientists are also examining the potential effects of nicotine
on treating conditions such as Tourette’s, Alzheimer’s,
Parkinson’s, attention deficit hyperactivity disorder (ADHD),
and other diseases.3 Cellular, animal, and human studies
yielded some promising results, yet existing data are still notconclusive, and nicotine’s addictiveness could be a limiting
adverse effect for its development as a therapeutic compoundfor human use.4 In 2015, the U.S. National Institutes of Healthfunded a multi-center study designed to explore whether
nicotine patches (used traditionally as NRT, to aid cessation)
improve memory and functioning in patients with mild
cognitive impairment, compared to placebo in 380 subjects
exposed for two years.5

A better understanding of the health impacts of nicotine
separate from the method of delivery is needed. We know
a lot about nicotine, but much of it is confounded with theeffects of tobacco smoke. People have a lot of questions
about nicotine, including its long-term effects, separate fromthe effects of smoking and the addiction potential of different
types of products.

1 www.health.harvard.edu/newsletter_article/Nicotine_It_may_have_a_good_side.
2 Smith RC, Warner-Cohen J, Matute M, et al. Effects of nicotine nasal spray on cognitive
function in schizophrenia. Neuropsychopharmacology 2006: 31:637-43.
Barr RS, Culhave MA, Jubelt LE, et al. The effects of transdermal nicotine on cognition in
nonsmokers with schizophrenia and nonpsychiatric controls. Neuropsychopharmacology
2008: 33:480-90.
Featherstone RE, Siegel SJ. The Role of Nicotine in Schizophrenia. Int Rev Neurobiol.
2015;124:23-78. doi: 10.1016/bs.irn.2015.07.002.
3 Terry AV Jr, Jones K, Bertrand D. Nicotinic acetylcholine receptors in neurological andpsychiatric diseases. Pharmacol Res. 2023 May;191:106764. doi: 10.1016/j.
phrs.2023.106764. Epub 2023 Apr 10. PMID: 37044234.
4 Newhouse PA, Sunderland T, Tariot PN, Blumhardt CL, Weingartner H, Mellow A, Murphy
DL. Intravenous nicotine in Alzheimer’s disease: a pilot study. Psychopharmacology (Berl).
1988;95(2):171-5. doi: 10.1007/BF00174504.
Jones G, Sahakian B, Levy R, Warburton DM, Gray J. Effects of acute subcutaneous nicotine
on attention, information processing and short-term memory in Alzheimer’s disease.
Psychopharmacology 1992: 108: 485-94.
Wilson AL, Langley LK, Monley J, Bauer T, Rottunda S, McFalls E, Kovera C, McCarten JR.
Nicotine patches in Alzheimer's disease: pilot study on learning, memory, and safety.
Pharmacol Biochem Behav. 1995 Jun-Jul;51(2-3):509-14. doi: 10.1016/00913057(95)00043-v.
White HK, Levin ED. Four-week nicotine skin patch treatment effects on cognitive
performance in Alzheimer’s disease. Psychopharmacology 1999: 143: 158-65.
5 https://mindstudy.org/.

Philip Morris International Integrated Report 2023

Steps should be taken by academic and industrial institutions
alike to fully understand the short and long-term impacts of
nicotine use. We plan to contribute to this understanding byconducting and publishing dedicated research focusing onunderstanding the effects of nicotine. We will communicate
more about this in our next report.

Scientific research and development powers
PMI’s delivery of a smoke-free future.
At PMI, research and development (R&D) catalyzes ourbusiness transformation. The rigor with which we conduct
research—and the openness with which we share ourmethodologies and results—builds confidence in ourscience among the scientific community, regulators, and ourconsumers, protects our company from reputational risk, and,most importantly, allows us to commercialize our smoke-free
products around the world.
Conducting R&D responsibly and openly is of utmost
importance. Transparency, when coupled with scientificintegrity and rigor, alleviates skepticism and mistrust, fosteringa fertile environment for collaboration and partnership.
Evidence and results from our robust scientific assessments
advance the debate on public health and tobacco harm
reduction to the benefit of adult smokers.
Our R&D work is focused on developing and scientifically
substantiating smoke-free alternatives to cigarettes for
adults who would otherwise continue to smoke. An essential
part of our work is demonstrating that we have eliminatedcombustion when it comes to our smoke-free alternatives.
Eliminating combustion significantly reduces levels of
exposure to harmful and potentially harmful chemicals
compared with smoking. And it is these chemicals that are
the root cause of smoking-related diseases.
Management
We review and update our strategy and longrange planning on an annual basis. Projects createdbased on this planning are governed by designatedcommittees at product innovation, development
and assessment, Company Management, and Board
levels. Among other responsibilities, the Board’s
Science and Technology Committee monitors theCompany’s internal scientific research, including
efforts to establish and substantiate the health-harm
reduction potential of our smoke-free products.

We continuously strengthen our quality assurance andinternal governance processes to ensure a robust internal,
cross-functional scientific peer-review process that leverages
external experts and key opinion leaders. Furthermore,
we prioritize targeted investments in a digital strategy that
protects data integrity and scientific credibility, and leverages
artificial intelligence to optimize resources and accelerate
the delivery of robust, credible science substantiating new
and innovative smoke-free alternatives to cigarettes and thehealth-harm reduction potential of these products.
We regularly interact with an extensive network of
stakeholders, including research partners, contract researchorganizations, universities, and individual key opinion leaders
as well as production site personnel, suppliers, consumers,
and regulators.
We adhere to high scientific standards, and our R&D is alignedwith the U.S. Food and Drug Administration’s draft guidanceon modified risk tobacco products (2012).
In conducting our studies, we also aim to align with available
international standards, such as applicable ISO standards,
Organisation for Economic Co-operation and Development(OECD) Principles of Good Laboratory Practice, and Good
Epidemiological Practices. Importantly, all our clinical studies
are conducted in accordance with the Declaration of Helsinki
and the principles of Good Clinical Practice. These standards
aim to ensure the quality and integrity of our science.

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Sustain product reliability
Sharing our methods and results

Animal testing

Regardless of industry, scientific research from a corporation
may be met with skepticism. The best way to addressskepticism and build trust is through transparency. Hence,
we share our science and listen carefully to feedback. This is
critical to encouraging debate with experts and the broader
public. We publish our findings in peer-reviewed journals,
conference presentations, and on PMIscience.com. We also
produce a regular briefing through our Scientific Update
publication which complements what we share throughout
the year. Since 2008, we have published 531 papers on
smoke-free products and related science in peer-reviewed
publications.

Regulators continue to require animal studies to confirm invivo what pharmacology and toxicology studies show in vitro.
Toxicology standards accept the use of rodents in scientificresearch. Nevertheless, to the extent possible, we are working
to replace animal testing with other approaches. We apply the“3R” guidelines: replacement, reduction, and refinement (seeour Standards for Animal Testing).

In 2023, we continued our Open Science conference series,
hosting webinars and in-person events and making therecordings available on PMIscience.com. In addition, ourscientists regularly present their results at external scientificconferences and virtual events in the fields of aerosol
chemistry, toxicology, clinical and real-world evidence studies,
as well as consumer research and product standards and oral
and respiratory drug delivery.
By sharing our scientific data and papers, we allow the
research community and broader public to gain an in-depth
understanding of PMI’s research methodologies and findings.
We welcome objective studies by external parties seeking tocontribute to a science-based debate on the critical societal
question of tobacco harm reduction and nicotine science.
Read about how we engage with our stakeholders, including
the public health community, here.
In 2018, we launched INTERVALS, a mechanism throughwhich to share tobacco harm reduction science. INTERVALS
was designed for hosting and sharing raw data anddescriptions of PMI preclinical studies to facilitate independent
verification of our results by the scientific community. The
choice of public data repositories accepting multiple data
modalities has greatly increased over the years, allowing
PMI to now share its own data on independent public
repositories, which will be more effective in achieving our datatransparency goals. Accordingly, we plan to decommission the
INTERVALS platform in 2024.

Philip Morris International Integrated Report 2023

In time, we hope to replace most, if not all, animal testingwith alternative methods. Our in vivo facility is accredited by
AAALAC International, which sets the gold standard for thehumane use of animals in scientific research.

Our ambition to accelerate the end of cigarettesmoking rests on rigorous scientific assessment,
highly reliable products, and strict regulatorycompliance.
Cigarette smoking causes serious disease and is addictive.
For adult smokers who switch to products that do not
combust tobacco, it is of paramount importance that thesealternatives are scientifically substantiated to present less riskof harm than continued smoking, and that they are developed,
tested, and manufactured according to applicable regulations
and standards to ensure consistent product integrity andquality.
Developing and commercializing products that meet stringent
scientific requirements and technical design criteria are criticalto a smoke-free future. By maintaining and continuously
improving the reliability of our products while complying withregulations, we reduce waste, protect our reputation, andbuild brand equity.
Robust quality management systems (QMS) are deployed tocover, control, and improve the entire product development
and deployment life cycle. Governance and accountability forconsistent product integrity, quality, and reliability sit at thehighest senior management levels under the leadership of the
Chief Product Officer at PMI, and are guided by our QMS,
as well as by other internal and external standards. Work on
product integrity and reliability is mainly carried out by teams
in our product development, procurement, manufacturing
operations, and quality organization departments. Theircollective efforts ensure that we preserve quality, from raw
material to the retail shelf.
Our approach to product reliability begins during productdesign inception and continues through manufacturing andfinal delivery to the end customer. We work with internal andexternal partners to ensure product quality and reliability.
Working with our contracted and qualified suppliers, wesecure high-quality raw materials and components, applyrobust procurement processes, detailed auditing, and rigorous
quality assurance procedures.
We conduct in-depth inspections at every stage ofdevelopment and production. This rigorous testing regimen
guarantees the reliability of our products. Our factories aredesigned to manufacture our products to the highest quality
standards, following the ISO 9001 certification principles. This
includes, for example, the careful selection of materials thatcome into contact with semifinished and finished products
during manufacturing and the appropriate trainingof operators.

Our manufacturing quality management systems are subject
to inspection by authorities and certified bodies. Globally,
teams of product quality associates ensure that all incoming
materials, semifinished components, and finished products
across our global footprint meet our quality assurance andquality control standards.
Our quality professionals continuously revise and update
our standards to ensure new technologies and innovations
are reflected in our QMS processes. We supplement thesemeasures with dedicated third-party quality management
programs.
Our product standards apply to all of our products as wellas the packaging, storage, and transport of finished goods
to ensure that they reach the consumer in proper condition.
Packaging has a crucial role to play in this regard and helps
ensure the traceability and identification of our products
so we can act promptly should issues arise. Packaging isimprinted with unique identifiers that allow us to trace
the supply chain journey, from factory to market, enabling
backward traceability. If a product quality issue should arise,
we can leverage this traceability to investigate problems andundertake any necessary containment actions in an efficientand targeted manner.
We focus on design for sustainability and longevity of our
products by embedding eco-design principles across theportfolio. Additionally, we are implementing end-of-life takeback programs and product refurbishment (read more here).

Smoke-free products
Our smoke-free products are subject to strict design controls.
Our process ensures that each product is developed according
to predefined and controlled criteria and demonstrates
reduced toxicity compared with cigarette smoking. Anyalterations to the product are made under a change
management process that assesses the impact of the changeon the product’s quality, safety, performance, and regulatorycompliance. In addition, as part of product development, weapply use-hazard analysis. We assess the risks associated withthe product’s intended use and any foreseeable misuse, andwe implement appropriate mitigation measures.
Our products are manufactured using ingredients compliant
with applicable regulatory requirements and with industry
and PMI standards. The tobacco used in our heated tobacco
products is tested for the presence of crop protection agent
residues to ensure it does not exceed permissible levels
per industry guidelines. Nicotine and nicotine salts usedin e-liquids must satisfy U.S. or European pharmacopoeia
specifications. Other ingredients (apart from flavoring
extracts from tobacco) are either food grade or satisfy U.S.
or European pharmacopoeia specifications.

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Uphold business ethics and integrity
We do not add ingredients classified as carcinogens,mutagens, or reproductive toxicants. Ingredients—andalso non-substrate material such as the plastic and othercomponents of cartridges that house the e-liquid andthe paper and other components that house the tobacco
mixture—are subject to rigorous toxicological risk assessment.

The design and packaging aim to preserve product quality andsafety in the various conditions to which the product may besubjected (read more on PMIScience.com).

Disclosure of ingredients in our smoke-free products isavailable in EU member state public health websites, as
required under the Tobacco Products Directive.

E-vapor products
Our non-disposable e-vapor devices use a cartridge, ortank, with nicotine-containing e-liquid. We recognize a
trade-off between misuse prevention and recyclability andchoose to use closed-tank systems in the development andcommercialization of our e-vapor products to prevent misuse.
We also test our packaging to ensure compliance with local
regulations, including the EU Tobacco Products Directive, and
we engage external agencies that test the integrity and safetyof our e-liquid packaging.

Heat-not-burn devices
The electronic devices for our heat-not-burn products are
manufactured according to internal standards and ISO 9001
principles and are certified according to applicable regulations
and standards. The suppliers of the devices’ electronic partsand components, including batteries, must also operate underthese quality standards. Each finished device is subject torigorous controls before shipment. PMI has established athorough monitoring process to enable early detection of
consumer pain points. We use these insights to improve our
products and components.
Heated tobacco units
Heated tobacco units (HTUs) are inserted into the device
holder by the consumer. HTUs are composed of a tobacco
plug (TEREA consumables also contain a metal susceptor), a
hollow acetate tube, a polymer-film filter, a cellulose acetate
mouthpiece filter, and filter papers. The uniquely processed
tobacco plug is made of a cast leaf blend of high-quality
tobacco leaves. Newly introduced LEVIA HTUs substitutetobacco for a nicotine-containing substrate.
The manufacturing of HTUs demands high levelsof precision and consistency. We test them forstability, using standard protocols covering avariety of temperature and humidity ranges.

We disclose the ingredients of our heated tobacco units on
our website.

Combustible tobacco products
Our combustible tobacco products are also subject tostringent product development controls. We strictly adhere
to product specifications and regulations for cigarettes andapply additional internal requirements to ensure the highest
quality products. Our ingredients undergo toxicologicalassessment to ensure their use does not increase the inherent
toxicity of cigarette smoke. We disclose the ingredients usedin our cigarettes on PMI.com. We keep abreast of changes
in regulation and perform further assessments to ensure fullcompliance with applicable regulations. For more information
on ingredients in our combustible tobacco products, please
review EU member state public health websites which arerequired under the Tobacco Products Directive, to disclose
the ingredients. Nontobacco materials used in our products—
e.g., cigarette paper, filters, and packaging materials—also
undergo toxicological assessment. In assessing packaging
materials, we adhere to the main requirements for foodcontact materials.

Swedish Match’s quality standard
GOTHIATEK® has been Swedish Match’s quality standard for the Company’s snus products since year 2000. The
uncompromising requirements of this standard are based on decades of research and development, with product safety
and consumer protection as the key targets. In cooperation with SIS (Swedish Standards Institute), Swedish Match has
refined the standard over the years in terms of structure, scope, limitations, and formulations.

We conduct business ethically and with integrity.
Our core ethical values—honesty, respect, andfairness—are at the heart of how we operate.
We clearly define the ethical and compliance expectations towhich we hold ourselves and the third parties with whom wework, and we back up these expectations with governanceand management systems to ensure we deliver on them.
Our Compliance program is led by our Vice President,
Associate General Counsel & Chief Compliance Officer, whoreports to PMI’s Senior Vice President & General Counsel and,periodically, to the Audit Committee of the Board of Directors.
PMI’s Code of Conduct sets clear standards and expectations
and is closely aligned with our business transformation
strategy and industry best practices. Its mandatory provisions
apply to all PMI employees, officers, and directors. Key
risk areas addressed in this document include, but are notlimited to, anti-bribery and anti-corruption, anti-competitive
practices, conflicts of interest, information protection security
and data privacy, responsible marketing and sales, scientificintegrity, supply chain responsibility, and workplace integrity,
among others. Internal PMI policies provide more specificguidance on these and other topics.
The PMI Code of Conduct is reviewed and updated annually.

A glance at our path to integrate
Swedish Match

Employee communication and training
At PMI, we use training and communication to help
employees understand the compliance-related standards
and rules that are relevant to their roles and how to apply
them in their daily work.
In 2023, we continued implementing our global Code of
Conduct annual certification process. To date, 95 percent ofeligible employees, including 100 percent of senior leaders,have completed the 2023 PMI Code of Conduct certification.1
In addition to the PMI Code of Conduct certification, theCompliance team launched a series of six e-learning courses(available in 31 languages) in 2023. Approximately 40,000
employees received training in the following key compliancerisk areas: anti-harassment/sexual harassment (which is anannual requirement), Code of Conduct (which is an annual
requirement), competition, and know your customer/antidiversion. A targeted subset of this population also received
training on intellectual property and PMI’s Marketing Codes.
Regional and local compliance officers supplemented thesee-learning courses with in-person training sessions to addresscompliance risk topics specific to their respective region(s) andmarket(s). Overall, employees and third parties completed a
total of over 500,000 Compliance training courses in 2023
(2022: over 350,000).
Also, in 2023, we continued to enhance and regularly update
our Compliance intranet site, including publishing information
on relevant compliance topics for our employees.

Evaluating our compliance culture
In 2023, PMI began its Legal & Complianceintegration efforts with Swedish Match to ensurethat PMI’s standards and requirements are also
applied across Swedish Match entities. Highlightsfrom these efforts in 2023 include the launchof the PMI Code of Conduct to Swedish Match
employees globally, implementation of PMI’s
Whistleblower/Speaking Up Program (including
the third-party-operated PMI Compliance HelpLine), and the launch of key Compliance policies,
including PMI’s Marketing Codes and Data Privacy
Policy, among others. Integration efforts are
ongoing and will continue throughout 2024.

We evaluate our compliance culture periodically, including, forexample, via a global online survey to understand employee
experiences and attitudes related to ethical business conduct.
For the past 15 years, PMI has conducted this type of global
employee survey every two to three years.
In addition, from time to time, we work with external advisersand consultants to assess elements of our compliance program.

In 2023, PMI began transferring the small portion of oral products PMI produced separate from Swedish Match to the
GOTHIATEK® quality management system. This transfer will conclude in the first quarter of 2024, ensuring all oral
products follow a consistent, high-quality standard.
1 For the purposes of the 2023 PMI Code of Conduct Annual Certification, “senior leaders”
are defined as employees at a salary grade of 17 and above.

Philip Morris International Integrated Report 2023

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Respect human rights
Speaking up
At PMI, individuals may ask questions, raise concerns, orreport instances of observed or suspected misconduct bycontacting any of the following:• The individual’s supervisor, department head, or affiliate orfunction leadership• Compliance key contacts (e.g., Regional and Local
Compliance Officers)• PMI Global Compliance confidential email address• PMI Compliance Help Line (online or by telephone), which isa third-party-operated reporting channel available 24 hours
a day, seven days a week, in all languages spoken at PMI.
Individuals may use the Compliance Help Line anonymously,
subject to local laws and regulations
PMI has also implemented a Global Speaking Up Policy,
the principles of which are reinforced by the PMI Code of
Conduct and all PMI compliance policies.
There is a robust speaking-up culture at PMI, with mostemployees communicating directly with the Compliancedepartment and voluntarily disclosing their identity when
doing so. Specifically, in 2023, only 19 percent of the reports
received by Compliance were submitted anonymously (2022:
16 percent).
The Compliance team regularly communicates to employees
about PMI’s speaking-up program. For example, theCompliance team publishes quarterly statistics about
speaking-up reports, compliance violations, and disciplinary
actions, and shares with employees anonymized real-life
examples of misconduct and advisory guidance.

Compliance investigations
At PMI, we take all reports received through our speakingup channels seriously and are committed to following
up objectively and in a timely manner. We investigate allreports that raise compliance concerns, and we involve otherfunctions or line management as warranted. We implement
corrective measures to address investigation findings andcalibrate disciplinary actions against past outcomes to keep
the process fair. When investigating suspected complianceviolations, trained personnel adhere to PMI Investigations
Standards, which are designed to ensure an equitable andrespectful process. We run a post-investigation quality
assurance program to get feedback on how well we met
these standards. We have also implemented a Retaliation
Check program to detect, remedy, and prevent retaliation
against people who speak up, as well as those involved ininvestigations.
Philip Morris International Integrated Report 2023

We received 1,258 reports through Compliance Speak Upchannels in 2023 (2022: 990). Around 53 percent of thematters that were closed in 2023 did not involve a complianceallegation and were resolved through Compliance advisory
services or referred to line management or appropriate
departments, such as our People & Culture teams, for further
action.
In 2023, we investigated and closed 591 reports thatinvolved at least one compliance-related allegation (2022:
429). At least one violation was substantiated in 55 percentof these cases (2022: 52 percent), with “workplace integrity”
accounting for 32 percent of substantiated violations (2022:
33 percent); “theft and fraud” accounting for 18 percent of
substantiated violations (2022: 28 percent); and substantiatedviolations related to speaking up (such as failure to speak up or
obstructing an investigation) accounting for 18 percent (2022:
10 percent).
The appropriate parties implemented corrective measuresand disciplinary sanctions following these investigations.
Specifically, in 2023, termination of employment accounted
for 31 percent of the disciplinary actions arising from thesecases, while suspension accounted for 7 percent, written
warnings for 25 percent, and verbal warnings or counseling forthe remaining 37 percent.

Preventing bribery and corruption
Our standard is clear: We do not bribe anyone, anywhere, for
any reason. We recognize that our refusal to participate incorrupt activities may make conducting business more difficult
in some markets, but bribery is unacceptable at PMI.
In 2023, we published our Global Anti-Corruption Policy on
our external-facing website, PMI.com. This policy, together
with additional Anti-Corruption Standards, regulates ourinteractions with government officials and government
entities, as well as with private individuals, both directly
and through third parties. PMI’s policy prohibits all forms ofbribery and facilitation payments. Our Standards set specificrules and review-and-approval procedures for giving andreceiving gifts, travel and hospitality, providing contributions,engaging business intermediaries, hiring government officials,
and conducting due diligence in M&A transactions.
We publicly disclose on PMI.com the very limited politicalcontributions we make, and we adhere to lobbying regulations.

Human rights are inherent to the dignity of humanlife and a prerequisite for society to prosper. As a
global company, we work to uphold human rights
within our organization and across our value chain.
At PMI, promoting, protecting, and continuously working
to embed human rights considerations into our company’s
strategy, policies, and business practices is not just the rightthing to do; it also helps anticipate current and emerging
legal requirements and minimizes our financial exposureand the risk of supply chain disruptions. It creates the basic
environment and conditions in which our business can thriveand create value, by recognizing, respecting, and protecting
our right holders, including our employees and workers acrossour value chain.

Our approach
Across our value chain, we aim to minimize our adverse
impacts and maximize opportunities to drive positive change.
Establishing a strong foundation of respect and integrating
into our organization mechanisms that promote and protect
human rights are essential components of our approach tobusiness. While maintaining these high standards can bechallenging given the breadth of our operations and thescope and complexity of the issues we encounter, we believe
safeguarding human rights is an absolute and universal
requirement—which we are committed to upholding.
We seek to place rights-holders—those individuals andcommunities whose rights could be impacted by ouroperations or business relationships—at the center of all we
do. We work to continuously improve our due diligence withrespect to identifying and addressing current or potential
risks and impacts across our value chain and ensuring the
responsible procurement of materials and services. To
succeed in this endeavor, we expect our suppliers to commit
to respecting human rights within their businesses and weseek to collaborate with them, either individually or throughmultistakeholder initiatives.

Our efforts to respect, promote, and protect human rights
underlie many of the activities and programs describedthroughout this report. A dedicated cross-functional teamat our central operations coordinates our approach, whichis grounded in the United Nations Guiding Principles on
Business and Human Rights (UNGPs) and centered on fourpillars:• A sound policy framework: Our work is governed by PMI’s
Human Rights Commitment, which is complemented byother PMI policy instruments such as our Code of Conduct,
Responsible Sourcing Principles, Marketing Codes, and Good
Agricultural Practices. Awareness-raising and training help
us embed those instruments and an ethos of respect forhuman rights within our corporate culture.
• Rigorous due diligence: We have robust programs andprocesses in place to identify our adverse impacts across ourvalue chain; these include our enterprise-wide assessment,
human rights saliency mappings, and human rights impact
assessments (HRIAs), in addition to targeted due diligenceprograms focused on specific areas of potential risk such as
our tobacco and electronics supply chains. We complement
these programs with external assessments and verifications.
• Remediation: We implement measures to address adverse
impacts and maximize opportunities to drive positive change
for people across our value chain. We seek to collaborate
with civil society organizations, governments, and theprivate sector to design and deploy impactful solutions.
Wherever adverse impacts occur, we strive to ensure
affected individuals have access to grievance mechanisms
and effective remedies in line with the UNGPs.
• Transparency: A complex and international value chain
carries the potential for human rights risks that we need tounderstand, manage, and continuously address. Reportingtransparently on our progress and the challenges we facethrough our annual reporting and targeted communications
is vital to our approach.

PMI’s Human Rights Report
In 2023, we published our inaugural Human Rights Report, detailing our strategy to respect, promote, and protect humanrights and our progress to date in implementing our Human Rights Commitment, first published in 2017. This report
incorporates a preliminary analysis of disclosures on our work on human rights and considerations of the UN Guiding
Principles Reporting Framework (UNGPRF), which enables companies to report meaningfully on their human rights
performance.

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Reinforcing our Human Rights Commitment
We uphold our Human Rights Commitment, which articulates
our pledge to respect human rights in all our operations andbusiness relationships.
To ensure knowledge and implementation of our Human
Rights Commitment, we have included it in our companywide Business and Human Rights e-learning which is available
in multiple languages including Bahasa, English, German,
Japanese, Polish, Portuguese, Russian, and Spanish. These
represent the most widely spoken languages by
our workforce.
In 2023, we held an internal event dedicated to raisingawareness on human rights topics across our organization.
The event offered an overview of our human rights strategy,
and shared two market case studies stemming from ourhuman rights impact assessments: one focusing on ethicalrecruitment in our electronics supply chain in Malaysia andthe other one addressing overtime issues in primary andsecondary distribution in Mexico. Beyond educational, the aimof the event was to encourage an open conversation on therole employees can play in such an important area.

Advancing human rights throughmultistakeholder partnership
In line with PMI’s Human Rights Commitment andResponsible Sourcing Principles, the Security &Market Safety team was invited to collaborate with
the International Code of Conduct Association(ICoCA). This non-profit organization governs
human rights standards in the private sector security
industry.
Our engagement focused on ensuring all PMI Security& Market Safety personnel are trained on the humanrights components applicable to security, specifically
prevent misuse of force and ensure appropriate
working conditions for all third-party security
personnel deployed at PMI sites; and codifying theserequirements as contractual obligations for key
suppliers delivering security services.

Philip Morris International Integrated Report 2023

Assessing human rights impacts
across our markets
To strengthen our due diligence framework, proactively
identify risks, and mitigate potential adverse impacts along
our operations and value chain, we have set an ambition to
conduct human rights impact assessments (HRIAs) by 2025 in
the 10 highest-risk countries in which we operate. Our HRIAs
are carried out by independent expert organizations andfollow a formal process aligned with the UNGPs. They resultin tailored action plans, which we implement, monitor, andreport on.
SI

Cumulative number of human rights
impact assessments conductedsince 2018, with ﬁndings addressed
2025

10

2023

8

2022

7

2021

5
2

4

6

8

Governance

Product impact

In addition, in late 2023, we initiated a follow-up assessment
from the HRIA conducted in 2020 in Mozambique. This
assessment, to be completed in 2024, will include extensive
engagement with our local supplier to assess initiatives andsystems in place to manage risks, as well as field visits tovalidate progress since the previous assessment throughparticipatory techniques with farmers. A particular focus will
be given to priority risk areas such as child labor, treatment of
women, migrant workers, climate change, the impact of thepandemic, and grievance mechanisms.
Regarding past HRIAs, action plans have been fully
implemented in Mexico, the Philippines, and Russia. We
also continued monitoring the implementation of actions
recommended by previous HRIAs in Mozambique, Turkey,
Brazil, and Malaysia.

Human rights impact self-assessments

A SPI R AT ION

0Strategy10Note: Our assessments prioritize countries which are assessed as highest risks
from a human rights standpoint. They are determined based on key parameterssuch as PMI’s footprint and the country’s human rights risk proﬁle, as determinedby internationally recognized organizations. For further details please see
PMI’s Sustainability KPI Protocol 2023.

In 2023, we conducted an HRIA in Pakistan, one of PMI’s
highest-risk markets. This marks our eighth assessment since
2018 (read more here).
An innovative feature of this HRIA was the incorporationof a gender lens into the assessment. Conducting a gendersensitive HRIA recognizes that human rights risks canaffect groups of people in unique and intersecting ways
and considers the impact of particular risks facing people ofdifferent genders. For example, people who identify as femaleor as part of a gender minority often experience discriminationin the workplace and are also more likely to work in lesssecure positions. With a gender inclusive approach, theassessment considers human rights risk management from agender perspective. Moreover, it enables the developmentof recommendations to address particular risks, and provides
support to ensure women’s rights can be consistently
respected in the company’s operations and supply chain.

In addition to conducting HRIAs in PMI’s highest-riskcountries, we introduced a self-assessment tool in 2021,
which we piloted in 2022. The tool is intended to help lowand medium-risk markets identify salient human rights risks
within their organizations, and develop action plans toaddress them.
Leveraging the learnings from these pilots, we further
developed our self-assessment model in 2023, accounting
for the inputs of our network of sustainability experts acrossour markets and our human rights consultant Article One.
Streamlining the toolkit was welcomed by those who use
it, and the revised version is less complex to use while also
including practical supports to aid successfully conducting
UNGP aligned self-assessments in low- to medium-risk
markets.
Our revamped self-assessment is based on pre-populated
templates that guide users through a step-by-step process,spanning from project planning right through to integrationof results (including, for example, guidance on prioritizing
potential salient risks to human rights, illustrative examples
to assess risks, and supports for internal engagement).
Upon completion of the self-assessment, markets in scope
will work with the country management team to integrate
learnings and develop an action plan, when needed. During
the year, we organized dedicated training sessions with over
60 sustainability coordinators across our markets to foster
understanding and usability of the toolkit, and tobuild capabilities.
The toolkit was tested in Germany in late 2023, and, while thework is still ongoing, initial feedback was very positive on theusability and the guidance provided.

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Continuous reinforcement of ourhuman rights framework
We conducted a gap analysis in 2023 with the support ofour human rights consultant, Article One. With this project,
we assessed PMI’s human rights related policies, procedures,and due diligence process against an agreed selection of
upcoming and emerging regulatory standards. This in-depth
gap assessment has enabled us to evaluate how PMI’s current
framework aligns with the higher requirements in such
instruments and to surface potential gaps and opportunities
for further improvements. In 2024, we will reflect on thisextensive work, which will guide the refinement of our global
strategy on human rights and processes to progressively alignwith applicable due diligence and related reporting standards.

Strengthening human rights due
diligence in our supply chain
We continue strengthening all our due diligence programs(through our ALP program in our agricultural supply chain,and through RBA in our electronics supply chain) to ensurethat we identify potential and actual human rights impacts
and build and deploy corrective action plans to address them(read more in the Managing our supply chain sustainably
section of this report).

Grievance mechanisms
Providing access to remedy to potentially impacted
stakeholders relies on the provision of an effective grievancemechanism both for our operations and across our supply
chain. This is a core element of our human rights due diligenceapproach, aligned with the UNGPs. At PMI, we maintain clear
policies, run regular training, and work to ensure that robust
processes are in place to encourage individuals to speak up
if they become aware of any suspected potential or actual
violations of law, our Code of Conduct, or any of our policies.
As an example, in 2023, we trained over 10,000 employeeson PMI’s new Responsible Sourcing Principles, reinforcing theimportance of speaking up in our organization.
For more information on the grievance mechanisms weoffer at PMI to encourage individuals to ask questions, raise
concerns, or report instances of observed or suspected
misconduct, see the Uphold business ethics and integrity
section of this report.

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Manage our supply chain sustainably
Our supply chain accounts for a significant portionof potential social and environmental risks andopportunities. We are committed to collaboratingwith our value chain partners in identifying andmanaging these risks and opportunities responsibly.
Our approach
Our operations rely on securing high-quality, cost-effective,
and fit-for-use materials and services from suppliers, whoare expected to adhere to PMI’s sustainability-related
requirements that form a basis for collaboration with PMI
set out in our Responsible Sourcing Principles (RSP). To
achieve tangible environmental and social improvements, we
identify and address current and potential risks while seizing
opportunities to create a positive impact in the communities inwhich we and our suppliers operate.
As part of our procurement practices we identify and screen
suppliers for business relevance and potential sustainabilityrelated risks before engaging with them. Our screening
methodology includes country-specific, sector-specific, andcommodity-specific risks to determine a list of significant
suppliers through a sustainability lens. In 2023, we had over
1,000 significant suppliers.
We then evaluate spend segmentation and the nature ofcomponents suppliers provide us with as well as supply
flexibility to determine a list of critical suppliers. In 2023, we
had 202 critical suppliers.

In addition to classifying suppliers as significant or critical, ourapproach to sustainable supply chain management is built on
the following core principles:• We leverage the reach and understanding we have of
our supply base to proactively engage our suppliers to
implement impactful programs that can help us makeprogress in our sustainability strategies, such as tacklingclimate change, preserving nature, and improving the qualityof life of people in our supply chain.
• We perform supplier due diligence, assess their sustainability
performance, and support them in driving continuous
improvement toward compliance requirements.
• We invest in enhancing supplier capabilities by engaging
with them directly through dedicated training run bysustainability experts (read more about our Sustainability
Accelerator here).
• We embed sustainability criteria in our strategic sourcing
decisions and supplier selection process.
Our supply chain sustainability due diligence is guided by our
RSP, which align with the UN Guiding Principles on Businessand Human Rights (UNGPs), the 10 principles of the UN
Global Compact, and the International Labour Organization(ILO) Conventions. It also helps us build preparedness for
anticipated and pending legislation such as the European
Corporate Sustainability Due Diligence Directive Proposal.
The RSP details our expectations and sets process andperformance requirements for our suppliers. We expect
all our suppliers to adhere to the mandatory section of our
RSP requirements and close identified gaps to continuously
improve their sustainability performance.

Management
The sustainable sourcing of goods and services involves
broad cross-functional collaboration within PMI. Thisis executed by our Procurement and Global Leaf andProduct Development teams with the strategic support ofOperations Sustainability. It is overseen by our Senior Vice
President, Operations.

Philip Morris International Integrated Report 2023

To monitor RSP adherence, we apply tailored due diligencemechanisms within specific segments of our supply chain. In
our tobacco supply chain, our work is governed by our Good
Agricultural Practices (GAP) and Agricultural Labor Practices(ALP) Code, which are operationalized at the farm level by fieldtechnicians working year-round with the farmers contracted
by PMI and our suppliers. In our electronics supply chain, weleverage the work of the Responsible Business Alliance (RBA).
For direct and indirect materials and services suppliers wecollaborate through our preferred partner, EcoVadis.
Adherence to our RSP—and to GAP for our tobacco
supply chain—is being built into our contractual
agreements with suppliers. We use a suite of tools,
including third-party assessments, on-site audits,and field visits to monitor performance.

Fostering collaboration with
our network of suppliers
We engage and partner with our suppliers—companies withdiverse strategies, priorities, and cultures—to jointly progresson our sustainability journey. To achieve our sustainabilityrelated aspirations, we work on common projects to drive
improvements in our operations and beyond. We do so invarious ways, including virtual events, webcasts, training
sessions, and surveys.

PMI’s Sustainability Accelerator
In 2023, PMI initiated the Sustainability Accelerator
program to leverage our learnings and accelerate
the sustainability journey of our suppliers. Fostering
an integrated approach, the program covers
sustainability-related matters from a performanceand reporting standpoint. Five companies of different
industry sectors, geographies, and sizes were enrolled
in the initial pilot.
The primary focus of this program is to accelerate thedelivery of sustainability programs agreed to between
PMI and suppliers. The learnings and insights can beused to improve the program and optimize it for our
diverse value chain.
The pilot was focused on climate change andsustainability fundamentals (covering, for example,
strategy development and deployment systems).
A team of experts collaborated with each supplier
team individually to build capability and share PMI’s
progress, learnings, and methodologies to help
accelerate our supplier’s progress.

A glance at our path to integrate
Swedish Match
We are working to integrate our respective supply
chains, mindful of their complexity. Such integration
is a significant endeavor, requiring us to harmonize
the procedures, systems, and performance indicators
we have in place. As we do so, we also expect tofind synergies and harness the expertise and bestpractices of each company. We provide further
details on our efforts in the Improve the quality of lifeof people in our supply chain, Tackle climate change,
and Preserve nature sections of this report.

175

F U N D A M E N TA L S

176

Overview

Overview of our supply chain in 2023
With over 26,000 tier 1 suppliers globally, our supply chain
spend amounted to approximately USD 14.0 billion in 2023.
Our global supply chain is organized into two main streams:
direct spend (focused on materials used to manufacture ourfinished products), and indirect spend (focused on goods andservices necessary to operate our business).
Currently, our global supply chain supports our two main
finished product categories: smoke-free products that are
increasing in resource allocation in line with our growthstrategy, and combustible cigarettes.
The majority of our supply chain spend for smoke-free
products derives from our direct spend on electronics.
During 2023, as we purchased more tobacco than in past
years to replenish inventory, the overall proportion of supply
chain spend attributable to electronics dropped relative to
our overall spend on tobacco. As a result, smoke-free productsupply chain spend decreased slightly to 41 percent (2022:
43 percent).

The supply chain categories exposed to the highest
sustainability risks identified to date pertain to our directspend and include:• Tobacco production, with the main risks associated withworking conditions, child labor, climate change, accessto water, and the socioeconomic well-being of farming
communities.
• Paper and pulp-based materials, with the main risks linked todeforestation, biodiversity loss, and climate change.
• Electronics manufacturing, with the main risks relating
to potential social issues on ethical recruitment, working
conditions of migrant workers, and working time.

DIRECT SPEND

D

i re c t s p e n d

ire c t s p

end

55%

Philip Morris International Integrated Report 2023

45%

Tobacco leaf

12%

Direct materials
used to produce and package our products(e.g., cellulose acetate tow, paperboard,and nontobacco agricultural products, etc.)

22%Electronic devices
and accessories for smoke-free products

10%

Advanced procurement

1%

INDIRECT SPEND

In dGovernance

Product impact

55%

Technical procurement
to source the manufacturing
equipment used in our factories

6%

R&D expenditure
enabling us to conduct advanced research

2%

Indirect materials and services
necessary to run our business, such as IT,
office equipment, and consulting services

47%

Operational impact

Fundamentals

Reporting and performance

177

Responsible Sourcing Principles

Sustainability performance in our supply chain

In 2023, we released the updated version of our Responsible
Sourcing Principles (RSP) and related implementation guidance
documents.

Proactively managing the sustainability performance of our
suppliers is paramount to our ability to identify, prevent, andmitigate sustainability-related risks. By doing so, we ensure
PMI’s preparedness for existing and anticipated regulations.
By endorsing robust governance, we seek to secure our
success in achieving our environmental aspirations andimproving the livelihoods of people in our supply chain.

In the updated version, we broadened its scope to incorporate
more relevant topics including environmental stewardship,
forest, and biodiversity; enhanced sections on responsible
sourcing of minerals; and added some sector-specific clauses
on illicit trade, product scientific integrity, and scientificengagement that will drive improvements in the sustainability
performance of our suppliers.
These additions allowed us to ensure further alignment with
PMI’s Code of Conduct and account for current and emerging
regulatory requirements. The updated document is composedof two parts: the first part contains mandatory requirementsthat all our suppliers must agree to implement; the second
part provides guidance and implementation tips to suppliers
that want to go beyond minimum requirements.
To deploy our updated RSP we developed a robust roll-out
plan focused on raising awareness and building capabilities
with relevant internal and external stakeholders.

Breakdown of our 2023 supply chain spend

4 5%

Strategy

All PMI employees have the ability to complete dedicated
RSP fundamentals training, which is mandatory for relevant
functions of the Company that have regular interaction with
suppliers. Additional advanced RSP training was developed
and launched at the end of 2023 for PMI employees to deep
dive on key principles, case studies, roles and responsibilities,
and the six steps due diligence framework.

Our supply chains are long and complex. Our procurement
team therefore engages with significant suppliers to drive
impact (read more about how we determine significance here).
We use preferred platforms such as EcoVadis and RBA
to perform desk-based assessments and on-site audits todrive performance improvements. On a regular basis we run
supplier performance reviews in which we coach suppliers andprovide guidance on the closure of previously identified gaps.
It is suppliers’ responsibility to put in place a corrective action
plan (CAP) and drive improvements in their supply chain.
These CAPs are reviewed by PMI’s procurement function
and sustainability experts, who also offer ongoing guidance.
We assessed our two largest leaf suppliers in 2023 as pilots,with the intention of expanding to additional suppliers as
we and the suppliers learn what the requirements for theassessments are.
We aspire that 100 percent of spend with critical suppliers
from whom PMI sources be done so sustainably by 2025.
In 2023, we made continued progress, reaching 91 percent(2022: 93 percent).

Rollout and implementation of updated
RSP in our supply chain
To ensure all PMI suppliers comply with our RSP wedeveloped a strategic framework which used a two-step
approach, addressing significant suppliers through direct
engagement and seeking their commitment to implement
mandatory requirements of the RSP.
We communicated with all suppliers and provided them theopportunity to contact PMI directly for further support, whenrequired. We ran two remote training sessions on RSP inviting
over 3,000 suppliers. While the sessions were recorded over
600 suppliers attended these live sessions.
The RSP will be translated into over 30 languages to facilitate
supplier understanding and its deployment. All contractual
commitments will include an RSP adherence requirement
by 2025.

Inaugural Electronics Suppliers
Sustainability Day
We are committed to supplier engagement andcapability building.
Read more about our first Electronics Suppliers
Sustainability Day held in Hong Kong in 2023 here.

F U N D A M E N TA L S

178

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

179

Direct materials supply chain

Electronics supply chain

Conflict minerals

Tobacco supply chain

We leverage our partnership with EcoVadis—the leading global
service provider of online sustainability supplier assessments—
to monitor and assess the sustainability performance of
our suppliers of direct materials.1 The EcoVadis assessment
consists of a desktop assessment questionnaire that is largely
aligned with PMI’s RSP.

As our Company transforms, we are increasingly focused on
the sustainability of our expanding electronics manufacturing
supply base. This supply chain is complex and dynamic, andcarries inherent risks and challenges, including the potential
presence of conflict minerals.

We are committed to operating with integrity and toresponsibly source 3TG (tin, tantalum, tungsten, and gold),which are potentially used in our products.

We define sustainable tobacco production as the efficientand competitive production of quality tobacco in conditions
that limit as much as possible the impact on the naturalenvironment and improve the socioeconomic circumstancesof the people and communities involved.

During 2023, 120 suppliers representing 95 percent of
our total direct material spend were assessed. Of these, 91
percent were determined to be sourced sustainably by PMI,
based on the score provided by the assessment platform, andonly 9 percent were below the minimum threshold required.
Suppliers with a low score are mandated to drive improvement
through dedicated CAPs.
CAPs are segmented by theme, indicator, and priority.
Depending on priority, suppliers of direct materials arerequested to close identified gaps in an agreed timeframe,
and to conduct a reassessment to ensure compliance. In
2023, we actively supported supplier CAP reviews with
underperforming suppliers. Overall, 13 suppliers (representing
approximately 10 percent of our critical DIM suppliers) that reassessed in 2023 as part of current and previous CAP review
cycles improved their scorecards. The average score increase
was 10 points versus the previous assessment in EcoVadis.

PMI is a member of RBA, the world’s largest industry coalition
for sustainable supply chains that is widely used by theelectronics industry. In 2023, we increased our participation
as members in the alliance by expanding use of its various
capability building programs with suppliers.
We continued to participate in RBA’s Validated Assessment
Program (VAP)—the standard for on-site complianceverification and effective, shareable audits. Under the
program, independent external auditors review our electronics
suppliers’ sustainability performance against the RBA Codeof Conduct, aligned with PMI’s RSP. To gather additional
audit data, we leveraged customer managed audits (CMAs),
a comparable audit standard recognized by RBA.
In 2023, 91 percent of our spend with critical electronics
suppliers were covered by VAP or CMA audits. The average
RBA score of our suppliers was 170 (out of a maximum of200), compared with an RBA average of 173 in 2022. Audit
reports revealed several common issues across suppliers in theareas of working time, emergency preparedness, and wages
and benefits.
To drive improvement in these areas, we leveraged two key
RBA programs: the Responsible Factory Initiative (RFI) and the
Responsible Labor Initiative (RLI). The RFI focuses on building
capability of suppliers’ factories to help them prepare for RBA
audits. The RLI provides a set of tools to address potential
forced labor issues associated with migrant workers (readmore in the Improve the quality of life of people in our supply
chain section of this report).

Simplified overview of our electronics supply chain

TIER 3+

Trading, refining, smelting,and processing

Mining andextraction

TIER 2TIER 1

Component
manufacturing

Electronics manufacturing(EMS)

1 Excluding farmers and electronics suppliers, for which we use tailored due diligence tools, as described in this section.

Philip Morris International Integrated Report 2023

Our 2023 conflict minerals submission to the U.S. Securities
and Exchange Commission (SEC) covering the year ended
December 31, 2022 showed that approximately 72 percent of
the smelters or refiners (SORs) in our conflict mineral supply
chain were confirmed to be Responsible Minerals Initiative
Audit Program (RMAP)-Compliant or RMAP-Active. With
respect to the remaining 28 percent, we conducted due
diligence measures to verify whether they sourced 3TGs
from the Covered Countries (as defined by the U.S. SEC)
during 2022.
We conducted a gap assessment and benchmark of ourconflict minerals due diligence practices to identify leading
practices and enhance our conflict minerals due diligenceapproach. The benchmark was performed in collaboration
with human rights consultants Article One and PMI’s
Procurement function.
Based on the benchmark study and industry insights collected,
PMI launched a pilot with two electronics suppliers toincrease the frequency of data collection and better anticipate
potential risks. We will assess the pilot’s learnings and sharethem in our next report.
Another mineral, cobalt, is also linked to unethical mining
practices. This critical raw material is used in the batteries thatpower our smoke-free devices. While the quantities requiredfor our products are minor relative to the global market size,
we are deploying a due diligence program based on the RMI
approach along with tools to identify and address potential
human rights risks in our supply chains.
In 2023, all our battery suppliers responded to a PMI request.
Subsequent due diligence indicated that, as of December
31, 2023, each of the 18 smelters from which PMI battery
suppliers source cobalt were either on RMI’s conformant
list (17 smelters) or under initial screening (one smelter).
We continue to engage with our suppliers to improvevisibility into this complex supply chain and enhance our due
diligence framework.

Our Good Agricultural Practices (GAP) define the principles
and measurable standards to be met by all those who growand supply tobacco to PMI. These standards focus onfour areas: governance, crop, environment, and people.
The latter is governed by a dedicated Agricultural Labor
Practices (ALP) Code.
GAP principles are mandatory for all suppliers of tobacco to
PMI and are reflected in supply contracts.
To ensure a consistent level of due diligence across ourtobacco supply chain, we began onboarding our two majorleaf suppliers to EcoVadis. Additional suppliers will be
onboarded to EcoVadis in 2024.

F U N D A M E N TA L S

180

Overview

Strategy

Governance

Product impact

Overview of tobacco sourcing under PMI’s integrated production system (IPS)

Maintaining full traceability and monitoringin our tobacco supply chain

As a consequence of our smoke-free transition, the shareof our purchased volume of tobacco directed to the
manufacture of combustible cigarettes is steadily declining
while the proportion dedicated to the production of
consumables for heated tobacco products is increasing.
Over time, we are seeing a gradual decrease in total
volumes sourced, as smoke-free products use at most half
the amount of tobacco required for combustible cigarettes.

To a large extent, responsible sourcing stems from strong
relationships on the ground. PMI’s IPS connects leaf
suppliers and farmers beyond the customary boundaries of acommercial relationship and enables direct technical support,
agronomic advice, financial loans, and various other services.
Our IPS covered 94 percent of our tobacco purchases in 2023.
The excluded amounts originated from Argentina, Indonesia,
India, and Thailand.

Despite these dynamics, the volume of tobacco purchased
in 2023 increased from approximately 281,000 tons in
2022 to approximately 308,000 tons to replenish inventory
stock. During 2023, we sourced tobacco grown across 23
countries, with most of our volume coming from Argentina,
Brazil, China, India, and Indonesia.

PMI
GAP

GAP

5 PMI leaf operations

19 third-party leaf suppliers

17% of volume purchased

83% of volume purchased

3,121
GAP

Field technicians supporting andmonitoring GAP and ALP implementation

GAP

10,804

305,756

294,952

Contracted farmers
supplying tobacco to PMI

Note: In 2022 we evolved our strategy to introduce the implementationof our STSC framework (read more here).

Philip Morris International Integrated Report 2023

Contracted farmers supplying
tobacco to PMIContracted farmers
supplying tobacco to PMIThe IPS is vital to providing traceability and visibility in our
supply base; it enables the deployment of our GAP and ALP
monitoring and remediation system down to the farm level.
At the center of this system are field technicians, employed by
PMI or our third-party suppliers. These technicians visit eachfarm at least five times during the crop season on averageand monitor how well sustainability requirements are appliedand commercial processes are working. They also provide
agronomic assistance, deliver training to farmers, identify
and address labor issues, and ensure the implementation of
improvement plans are implemented.
In 2023, field technicians enabled us to monitor compliancewith GAP by all farmers supplying tobacco to PMI under the
IPS.
Third parties, such as specialized NGOs, can also monitor
GAP implementation. This is an approach we have taken in
Brazil since 2020 in collaboration with Produzindo Certo, a
specialist company helping farmers operate more efficiently
and sustainably. During 2023, almost all (over 99 percent)contracted farmers agreed to be part of this voluntary
program.

Operational impact

Fundamentals

Reporting and performance

181

Indirect materials and services supply chain
2023 was a stepping stone for PMI in embedding
sustainability in our indirect materials and services (IM&S)
sourcing activities and supplier management activities.
IM&S suppliers were segmented to determine significant
suppliers that are in scope for deployment of sustainability
programs. Over 700 suppliers were included in scope in 2023.
IM&S spend is complex and involves a large number of small
suppliers that serve the specific needs of different markets.
It requires a large effort to engage suppliers and ensure they
perform due diligence on their supply chains. To support our
suppliers on this journey we organized an event during 2023,
during which we shared our sustainability aspirations andproposed a plan to collaborate to drive impact and progress
toward our net zero ambition together.
In addition, training sessions were conducted for markets
and suppliers to explain the relevance and importance of
onboarding on EcoVadis. Over 56 percent of IM&S suppliers
disclosed their sustainability efforts through EcoVadis andover 78 percent reached PMI’s minimum performancerequirements.
Low performing suppliers were supported through capability
building sessions with procurement and sustainability experts.
In 2023, we continued to participate in multi-stakeholder
working groups organized by the Indirect Spend Alliance,
sharing best practices and learning from peer companies.

F U N D A M E N TA L S

182

Overview

Strategy

Governance

Product impact

Safeguard privacy and protect data

Apply fair fiscal practices

In today’s data-driven world, data protection
and cybersecurity are essential.

To achieve the common goal of a safe, functional
and prosperous society, governments worldwide
must have the financial resources to fund public
goods, services, and infrastructure.

At PMI, we use an array of expert-supported, state-of-theart security solutions to help prevent, detect, and respond toevents.
Together with our Code of Conduct, internal policies andguidelines govern our activities and ensure our everyday
work is conducted in a manner consistent with our values. In
particular, PMI’s global policy on data privacy sets a standard
for privacy governance and accountability.
PMI’s Global Privacy Program (GPP) sets data privacy
standards across markets and functions. It governs thecollection, processing, and sharing of personal data by PMI
affiliates. Our privacy team publishes privacy awarenessmaterials and guidance for employees and contractors
and regularly reports to PMI’s Corporate Risk GovernanceCommittee on the business’ adherence to the GPP.
We use information systems to help manage businessprocesses and collect and interpret data. We also use thesesystems to communicate internally and externally with
employees, suppliers, consumers, and customers. Specialist
third-party service providers manage some of our information
systems, and we work with internal specialists to protect
systems and data from unauthorized access.

Employees and contractors play a fundamental role inprotecting data. By being aware of potential threats andreacting to them appropriately, our community can help keep
PMI secure. In 2023, we continued to train our workforce
in data protection principles and information security. We
complement our training with regular awareness campaigns
and simulated phishing campaigns addressed to our entire
workforce to help everyone practice recognizing andreporting phishing attempts and to identify weaknesses inadvance of any real attempts the business might face.
We also maintain a hub of resources on information security
awareness, accessible to all employees and contractors. In
addition to detailing good security practices to protect user
accounts and data from cyber risk, these resources help ourteam remain vigilant to the indirect risks that can arise from
activities such as online shopping or connecting to wirelessnetworks.
We invest in administrative, technical, and physical safeguards,
including continuity planning to increase the resilience of ourcore processes and maintain information security protections
in line with industry standards. We evaluate the adequacyof these preventative actions annually. In addition, PMI has
an integrated program to manage cyber risks, protect PMI’sdata, and safeguard the privacy of consumers and customers,
including conducting third-party cyber risk assessments.
Management
The Chief Information Security Officer (CISO) is
responsible for information security governance andreports to the Chief Digital & Information Officer, amember of Company Management. The Assistant GeneralCounsel responsible for data privacy governance reports
to the VP Regulatory Law and then into the GeneralCounsel, a member of Company Management. Our Audit
and Risk Committee is responsible for the review of,among other topics, the risk management of cybersecurity
and data privacy risks, as well as data governance.

Philip Morris International Integrated Report 2023

Fundamentals

Reporting and performance183

Our tax strategy

Corporate income tax and other taxes can generate necessary
revenues and prevent passing the bill for funding today’ssociety to future generations. Excise tax can also ensurethat societal costs are reflected in a product’s price, thereby
encouraging consumers and producers of these products toshift to less harmful options.
PMI is a good corporate citizen everywhere we operate.
Paying taxes commensurate with our economic activities is
not only our duty but the responsible thing to do and a key
component of our social contract in every country in which
we do business.
In addition to the taxes reported by PMI legal entities,
third-party importers and distributors in many countries are
responsible for paying import duties and excise taxes on our
products. Though such payments may not appear in PMI’s
financial statements, they represent a portion of the producttaxes paid by our consumers worldwide and so are included in
the table below.

2023 Taxes
Total(USD billion)

Corporate income tax

2.3

Total excise taxes on all products

73.9

•

Excise taxes on PMI products
reported by PMI affiliates

49.4

•

Excise taxes reported by ourimporters and distributors

24.5

VAT and sales tax

Operational impact

9.3

Legal obligations and societal expectations require that ourtransactions are based on sound tax strategies and that we
act in good faith in all interactions with tax authorities andother stakeholders. In this regard, PMI has developed the PMI
Global Tax Documents, including all global and affiliate tax
policies, standards, and guidelines.
PMI’s tax strategy is to maintain a comprehensive, effective,
and practical risk management program, shared best practices,a structured and documented control framework, proper
planning, and coordinated decision-making. These measures
ensure that tax positions taken are appropriate and tax
compliance and reporting mechanisms are robust.
Moreover, PMI considers it important to have in place tax
principles and practices that allow us to pay our taxes in asustainable manner by balancing the interests of our various
stakeholders, including our consumers, our investors, and thecountries where we do business.
PMI’s consolidated reporting of income taxes follows
U.S. Generally Accepted Accounting Principles (GAAP)
and Securities and Exchange Commission (SEC) rules andregulations.
Management
PMI’s tax strategy and its implementation are theresponsibility of the PMI Tax Department, a centralized,
fit-for-purpose global organization led by Vice President
Tax who reports to PMI’s Chief Financial Officer.
PMI Global Tax Documents are standardized andapplied consistently.

F U N D A M E N TA L S

184Overview

Strategy

Governance

Product impact

Principles of tax governanceBusiness and economic substanceTax risk management strategy

PMI has implemented governance arrangements that set clear
accountabilities for the management of tax compliance and tax
planning.

As of December 31, 2023, PMI products are sold in more than
175 markets worldwide. The company has over 160 affiliatesthat operate in more than 90 countries and 50 manufacturing
facilities. Our business structures have commercial substanceand purpose.

PMI conducts all intercompany transactions on an arm’slength basis in accordance with current OECD principles.

The PMI Global Tax Documents are designed to ensure clarity
regarding:• Roles and responsibilities: PMI Global Tax Documents
clearly define roles and responsibilities with respect to tax
matters.
• Involvement of the PMI Tax Department: PMI colleagues
consult with the PMI Tax Department on all importanttransactions, whether recurring or new, as well as on
business structures and operations involving other PMI
affiliates or unrelated parties. The PMI Tax Department
determines positions, exposures, and actions regarding
material, non-routine tax or customs matters. Where there
is sufficient uncertainty over the appropriate tax treatmentof a particular transaction or a potentially significant impact,
PMI obtains external advice.
• Tax reporting and procedures: PMI has designed its
Global Tax Documents to have effective and predictable
tax compliance and control measures in place. All tax filingobligations (internal and external) must be accurately
completed on a timely basis in accordance with applicablelaws and regulations. In particular, the PMI Tax Compliance
Program establishes an overarching framework for the
management of global tax compliance and risk across thecompany. This program includes guidance on defining roles
and responsibilities, personnel training and development,
involvement of tax advisers, master data management,
contract management, interacting with tax authorities, andpreparing for audits. It also provides guidelines for specifictax areas, including indirect taxes and customs topics,
corporate income tax, withholding taxes, and transfer
pricing.
• Documentation and tax records: The PMI Tax Department
is part of the team responsible for the appropriate creation,
retention, and/or oversight of all relevant local tax records ineach affiliate.
• Support and review of business activities: The PMI Tax
Department reviews business structures and transactions
to identify potential tax risks. For new business activities,
the PMI Tax Department is involved in every step of theprocess, from the setup of business models and agreements
to discussions with tax authorities.

Philip Morris International Integrated Report 2023

PMI supports the work of the Organization for Economic
Co-operation and Development (OECD) and Group of
Twenty (G20) to prevent tax-base erosion and profit shifting.
Our policies and practices ensure that PMI pays taxes
commensurate with our economic activities and substance ineach country in which we operate.
PMI complies with local country transfer pricing legislationand the OECD’s transfer pricing guidelines, including theBase Erosion and Profit Shifting (BEPS) project, which entails
the preparation of a Country-by-Country Report (CbCR).
This report includes quantitative and qualitative data andcontributes to a better understanding of our economic and tax
responsibilities in each country where we operate.
We do not engage in aggressive tax planning, abuse tax
havens, or have in place any contrived tax structures. We also
do not operate “letterbox” companies.

In line with the recommended best practices issued by theOECD within BEPS, PMI seeks to increase its tax certainty
by entering into Advance Pricing Agreements (APAs). An APA
is an agreement entered into between a taxpayer and thetax authorities of one (unilateral APA) or more (bilateral or
multilateral APA) jurisdictions. It confirms the selection andapplication of the transfer pricing method used to set up theprices in intercompany transactions.
PMI currently has a portfolio of at least 20 active APAs, both
unilateral and bilateral. These APAs are a key part of ourstrategy to obtain tax certainty.
Apart from APAs, PMI uses other mechanisms to manage its
tax positions. When relevant and feasible, we have upfront
conversations with tax authorities in the countries where
we operate. In certain instances, we obtain tax rulings toprovide a higher level of certainty for both PMI and the tax
authorities. Such rulings are not the only means of securingtransparency and certainty, as we also have joined monitoring
programs with tax authorities in several countries, with theaim of establishing PMI as a low-risk taxpayer in the relevant
jurisdiction. These programs promote ongoing and transparent
relations between taxpayers and tax authorities.
Where available, PMI adheres to and promotes participationin cooperative compliance programs in countries inwhich PMI operates. For example, PMI participates in the“Adempimento Collaborativo” program in Italy and the“Program Wspoldzialania” in Poland. Such programs establish arelationship of trust between the tax authorities and taxpayer
and increase certainty on relevant tax issues.

Relationships with tax authorities
As is the case with other multinational companies, PMI’s tax
returns are regularly audited by tax authorities. PMI responds
to tax audit requests in a timely manner while ensuring fulltransparency regarding our business operations. Our working
relationships with governments and fiscal authorities are
conducted in a professional and collaborative manner.

Operational impact

Fundamentals

Reporting and performance

185

186

Overview

Reporting and performance
Performance in ESG ratings,
rankings, and indices

p188

Glossary of terms and acronyms

p208

Performance metrics

p189

About this reportp213

Independent assurance reportp203

Forward-looking andcautionary statements

p214

Reconciliation of
Non-GAAP Measures

p206

Notesp215

Philip Morris International Integrated Report 2023

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance187

Overview

Performance in ESG ratings, rankings, and indices
We prioritize our participation in ESG ratings that are mostuseful to us and our stakeholders, based on:

Emmanuel Babeau, Chief Financial Officer• The organization’s openness to dialogue, allowing us tounderstand expectations and results, share knowledge,
correct factual inaccuracies, and provide input on ratingsenhancements• Resources required, which should not undermine ourCompany’s focus on performance improvement

The following table provides an overview of certain ratings
that evaluate PMI’s performance but is not intended torepresent all ratings PMI is featured in.

85/100C+

CDP Climate, Forest,
Water Security

PMI was awarded a Triple A score for the fourth consecutive year inrecognition of its efforts to combat climate change, protect forests, andpromote water security.

AAA

CDP Supplier
Engagement

PMI earned a place on CDP’s Supplier Engagement Leaderboard for theseventh consecutive year.

Bloomberg GenderEquality Index

Leaderboard

PMI was included for the third consecutive year in the Bloomberg
Gender-Equality Index (GEI) for its transparency in gender reporting andadvancing women’s equity (announcement on January 31, 2023).

Index member

Sustainalytics

PMI maintained its “Medium ESG Risk” classification scoring 27.7 (score asof December 28, 2023).

Medium risk

MSCI

PMI maintained a rating of BBB in the MSCI ESG Rating assessment (score
as of October 13, 2023).

BBB

PMI ranked second out of 15 tobacco companies assessed, leading
TobaccoTransformation Index the industry in the “Strategy and Management,” “Capital Allocation &Expenditure,” and “Marketing Policy & Compliance” categories (score as of
September 2022).

3.69/5

State Street R-Factor

Achieved Leader (Universe level) and Outperformer (Industry level) rating(score as of February 1, 2024).

2023
MemberBroadening access to smoke-free products• Its value as a learning opportunity, including a sufficient
feedback loop to allow us to improve over time

PMI achieved industry leadership, improving to a rating of “C+” andgaining “Prime” status for the first time, only one in the sector (score as ofNovember 21, 2023).

Fundamentals

Reporting and performance2015
baseline

2021

2022

2023

0.2

21.7

24.9

28.6

0.1

15.3

17.8

20.8

7

71

73

84

17%

42%

42%

47%

2.4

9.2

10.7

12.5

Operational impact

Total number of users of PMI smoke-free products(in millions)1*
Estimated number of users who have switched to PMI
smoke-free products and stopped smoking (in millions)1*
Number of markets where smoke-free products are available
for sale2*
Proportion of markets where smoke-free products areavailable for sale that are low- and middle-income markets3*
Cumulative investment behind smoke-free products(since 2008, in billions USD)4
Number of factories producing smoke-free products outof total number of factories5*
Commercial (marketing) expenditure ratio(smoke-free/total)*
Supply chain direct spend expenditure (smoke-free/total)6

73%

74%

74%

n/a

35%

43%

41%

Adjusted R&D expenditure (in millions USD)7
Adjusted R&D expenditure ratio (smoke-free/total)7*
Adjusted R&D as % of net revenue7
Number of R&D positions (FTEs)8
Patents granted in IP5 jurisdictions relating to smoke-free
products (cumulative, since 2015)9
Number of studies completed by PMI on smoke-free
products (cumulative, since 2015•
Toxicological assessment•
Clinical assessment
Perception and behavior (premarket and post-market)

423
70%
1.6%
n/a
n/a

566
99%
1.8%
984
1,770

642
99%
2.0%
1,516
2,500

709
99%
2.0%
1,586
3,720

203
251
24
26
44 (25 + 19) 58 (38 + 20)287
29
69 (48+21)

Total number of people (PMI employees and third parties)
who participated in at least one Marketing Codes-related
training session10•
Number of PMI employees•
Number of third parties
Number of violations of the Marketing Codes resulting insubstantiated cases of misconduct
Percentage of PMI’s total shipment volume coveredby youth access prevention programs in indirect retailchannels11

n/a

70,01175,83467,014n/an/a
12

22,77447,237
13

24,03051,80414

27,46539,549
28

n/a

91%

91%

98%

The 2023 metrics marked with an asterisk (*) are subject to PwC’s Limited Assurance Report.
Notes: Unless otherwise stated, all applicable business transformation metrics include Swedish
Match related data as of November 11, 2022 (acquisition date), as well as Vectura Fertin Pharma.
In 2023, we evaluated and republished a new set of aspirations for 2030 to ensure they remain
ambitious, reasonable, and achievable in the context of a dynamic and evolving smoke-freeindustry, and impacts of our recent acquisitions.

n/a
n/a
n/a

Key

Improved

Maintained

SI Indicators included in PMI Sustainability Index

Aspirations
SI

100 by2025>50% by
2025

SI
SI

maintain>90%

SI

6 Direct spend focuses on materials used in the manufacture of our products; it includes tobacco
leaf, direct materials, and electronic devices and accessories. Data excludes Swedish Match and
Vectura Fertin Pharma.
7 Adjusted R&D expenditure excludes asset acquisition cost related to OtiTopic, Inc. in 2021.
Total reported R&D expenditure in 2021 including these items amounted to USD 617 million.
8 R&D positions include scientists, engineers, technicians, and support staff. Comparable datafor years prior to 2018 are not available as the scope of R&D positions changed following
Company organizational changes.
9 IP5 jurisdictions are Europe (patents granted by the European Patent Office), China, South
Korea, Japan, and the U.S.
10 Indicator introduced in 2021, replacing the indicator “number of compliance training sessions
conducted on PMI’s Marketing Code,” following the release of new Marketing Codes. Data
excludes Swedish Match and Vectura Fertin Pharma.
11 Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free
product consumables, See PMI’s Sustainability KPI Protocol 2023 for further details. Data
excludes Swedish Match and Vectura Fertin Pharma.

Aspirations tracker
Philip Morris International Integrated Report 2023

189

9 out of 38 14 out of 49 16 out of 50

8%

1 Figures pertain to total IQOS users. See Glossary.
2 For definition of available for sale, see Glossary.
3 Excluding PMI Duty Free. World Bank report issued in 2023 is used on a comparative basis forincome level classification. For definition of low- and middle-income markets, see Glossary.
4 Investments reflect research, product and commercial development, production capacity,
scientific substantiation, and studies on adult smoker understanding. Figures do not include
Swedish Match and Vectura Fertin Pharma.
5 Data reflect the number of factories operated and owned by PMI at the end of the respective
year. As of 2023 “Smoke-free products factories” is defined as manufacturing facilities
producing heated tobacco units and oral nicotine products. Additionally, in 2023, PMI evolved
its approach to report the number of factories based on location instead of based on plant. If a
facility is one location, but has several physical areas (plants) the facility is counted as one. To
provide comparability, 2022 data has been restated on the same basis.

Outperformer

3 out of 48

Developing science-based better
alternatives to cigarette smoking• Recognition of the rating among the investor community, as
well as participation by our competitors and peers2023 score(and year-on-year
trend

ISS ESG

Product impact

Maximize the benefitsof smoke-free products• The credibility of the methodology and our ability tointerpret and use the results

S&P Global Corporate PMI was included for the first time in the Dow Jones Sustainability World
Index, and for the fourth consecutive year in the Dow Jones Sustainability
Sustainability
North America Composite Index (score as of November 24, 2023, Indices
Assessment
effective as of December 18, 2023).

Governance

Performance metrics“Investors and other financial stakeholders
place increasing value on reliable, robust,and timely measures of sustainability
performance. Through our annual Integrated
Report, and the ever-strengthening processes
and initiatives that underpin it, we aim toprovide a holistic and extensive view ofour performance across the most material
sustainability issues for our business.”
At PMI, we understand the value of participating in ESG
ratings: it helps us assess our sustainability performance,
benchmark ourselves against our peers, and, most importantly,
identify areas for improvement on which we act when they
can meaningfully contribute to improving our Company’s
performance in line with our sustainability strategy.

StrategyMarketing and selling our
products responsibly

REPORTING AND PERFORMANCE

188

Achieved

Not achievedFundamentals

Reporting and performance

2021

2022

2023

Aspirations

Proportion of shipment volumes covered by markets with anti-littering
program in place1

n/a

68%

76%

≥80% by2025

Proportion of shipment volume covered by markets with end-of-life takeback programs in place for smoke-free consumables2
Proportion of HTU shipment volume covered by markets with take-backprograms in place2
Proportion of e-vapor shipment volume covered by markets with take-backprograms in place2

n/a

8.5%

17.6%

n/a

8.5%

17.2%

n/a

50.7%

87.1%

Proportion of smoke-free electronic devices introduced on the market asof the end of 2025 that have eco-design certification3
Cumulative number of smoke-free electronic devices refreshed or repaired
since 2021 (in thousands)4
Volume of shredded materials coming from dismantled devices in the
CIRCLE hubs (in tons)
Effective recycling rate of smoke-free devices5

n/a

n/a

n/a

62

157

178

112

100% byend of 2025
320
≥1 million
by 2025
315

53%

53%

73%

Proportion of smoke-free electronic device sales volume covered by the
CIRCLE program6
Recycling rate of smoke-free electronic devices at the CIRCLE hubs
(weighted average)7

63%

61%

82%

86%

86%

89%

Proportion of packaging formats that are designed for recyclability8

98%

98%

98%

Proportion of packaging materials coming from renewable sources

90%

90%

91%

427,597(89.7%/
10.3%)
9%452,211(90.1%/
9.9%)
11%

416,930(90.9%/
9.1%)
13%

8%

10%

13%

Overview

Number of markets where adjusted net revenues from smoke-free
products exceed 50% of adjusted total net revenues*
Number of markets where adjusted net revenues from smoke-free
products exceed 75% of adjusted total net revenues*

2021

2022

2023

0.6%

13.3%

15.3%

18.6%

0

95

109

125

0
877
n/a

1
645
(26.4)%

42642(26.8)%

421
633(27.9)%

0.7%

29.5%

32.1%

36.4%

0

10

17

25

0

0

0

3

SI

>2/3 by2030~60 by2030~40 by2030

SI

The 2023 metrics marked with an asterisk (*) are subject to PwC’s Limited Assurance Report.
Notes: Unless otherwise stated, all applicable business transformation metrics include Swedish Match related data as of November 11, 2022 (acquisition date), as well as Vectura Fertin Pharma.
In 2023, we evaluated and republished a new set of aspirations for 2030 to ensure they remain ambitious, reasonable, and achievable in the context of a dynamic and evolving smoke-free industry, andimpacts of our recent acquisitions.
1 These indicators are calculated based on millions of units. For definition of smoke-free products, heated tobacco units, and combustible tobacco products, see Glossary. Smoke-free products
shipment volume includes volume of smoke-free products that can be converted into cigarette equivalent units, such as heat-not-burn, e-vapor, and oral nicotine. Total shipment volume includes thelisted smoke-free products as well as combustible tobacco products: cigarettes and other tobacco products expressed in cigarette equivalent units. Data does not include wellness and healthcare
products.
2 For definition of net revenues related to smoke-free products, see Glossary. Data exclude the impact related to termination of distribution arrangement in the Middle East in 2023 and the impact
related to the Saudi Arabia customs assessments in 2021.

Seek net positive impact
in wellness and healthcare
Annual net revenue from wellness and healthcare products(in billion USD)1*

Governance

2021

2022

2023

0.1

0.3

0.3

SI

The 2023 metrics marked with an asterisk (*) are subject to PwC’s Limited Assurance Report.
1 For definition of net revenues related to wellness and healthcare, see Glossary. 2021 figure includes portion of net revenues reported after acquisition of Fertin Pharma A/S, Vectura Group plc. andOtiTopic, Inc. that took place in the third quarter of 2021.

Operational impact

Total weight or volume of materials that are used to package PMI’s primary
products in tons (percent renewable/percent non-renewable)
Average packaging weight reduction for combustible tobacco products
versus 2018 baseline
Average packaging weight reduction for heat-not-burn products versus
2018 baseline

191≥80% by
2025

SI

SI

SI
SI

70% by2023
90% by2025
maintain
80%
100% by2025
95% by2025

15% by2025
15% by2025

1 For further details on the criteria used to determine if a market has a anti-littering program in place, please see PMI’s Sustainability KPI Protocol 2023.
2 Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free product consumables, see PMI’s Sustainability KPI Protocol 2023 for further details. Data excludes
Swedish Match and Vectura Fertin Pharma.
3 For further details please see PMI’s Sustainability KPI Protocol 2023. In 2023, 100 % of product project briefs in scope had eco-design certification requirements included.
4 For the definition of refreshed or repaired devices, please refer to PMI’s Sustainability KPI Protocol 2023.
5 The effective recycling rate is calculated based on the proportion of device sales volume covered by the CIRCLE program multiplied by the actual recycling rate of devices recycled within the scopeof the CIRCLE program (weighted average) excluding energy recovery. Excludes disposable products and non-PMI designed devices.
6 Excludes disposable products and non-PMI-designed devices. We recalibrated our 2025 aspiration to 90% during 2023 to account for regulatory and market developments. Collected devices are
considered covered by the CIRCLE program if they are either processed at our centralized CIRCLE hubs or by validated local recycling partners.
7 Recycling rate: percentage of the weight of each device that is recycled, weighted-average depending on device type and processing facility. Reporting in 2023 includes CIRCLE hubs (Hungary andJapan) and validated local recycling vendors that started recycling activities, namely South Korea and Egypt.
8 Prior years' data have been restated for alignment with the principles of design for recyclability by format, as well as expanding coverage of the portfolio.

Aspirations tracker
Achieved

Philip Morris International Integrated Report 2023

Product impact

2030
Aspirations
Cigarette
butt littering

Smoke-free product shipment volume—heated tobacco units(billion units)1*
Shipment volume­—nicotine pouch (million cans)*
Combustible tobacco product shipment volume (billion units)1*
Change in combustible tobacco product shipment volume(billion units) vs. 2015 baseline1*
Adjusted net revenues ratio (smoke-free/total)2*

2015
baseline

Smoke-freeconsumables

Smoke-free product shipment ratio (smoke-free/total)1*

Strategy

Reduce post-consumer waste

Smoke-free devices

Purposefully phaseout cigarettes

Packaging

PRO D U C T I M PAC T

190

Not achieved

SI Indicators included in PMI Sustainability Index

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

193

Employee overall turnover rate
Women employee overall turnover rate
Employee voluntary turnover rate
Proportion of open positions filled in with internal candidates
Number of new hired employees
Spend for learning per FTE (in USD) total
Average hours of training per FTE:
•
Men †
•
Women †
Proportion of PMI employees who have access to structured lifelong
learning offers2
Proportion of employees covered by performance review3
Employee Net Promoter Score4
Lost time incident (LTI) rate per 200,000 hours worked—PMI employees,
contracted employees, and contractors5◊
LTI rate per 200,000 hours worked—PMI employees and contracted
employees◊
LTI rate per 200,000 hours worked—contractors◊
Total recordable incidents rate (TRIR) per 200,000 hours worked—PMI
employees, contracted employees, and contractors◊
TRIR per 200,000 hours worked—PMI employees and contracted
employees◊
TRIR per 200,000 hours worked—contractors◊†
Number of fatalities—PMI employees, contracted employees, andcontractors◊
Number of fatalities—members of the public◊
Occupational illness frequency rate (OIFR) per 200,000 hours
worked—PMI and contracted employees◊
Employee self-assessment psychological well-being measure6
Collision rate within PMI’s fleet of vehicles per year (collisions per million
km driven)◊
Proportion of PMI fleet equipped with telematics7
Proportion of manufacturing facilities with ISO 45001 certification8

2022

2023

68,547
67,291
61.1%
34
100%

71,07070,966
60.7%
35
100%

73,704
72,826
63.0%
35
100%

12.0%
9.4%
4.7%
18%
8,381
506
17
n/a
n/a
n/a

9.3%
8.2%
4.6%
24%
12,457
498
21
23
18
80%

10.3%
8.9%
4.4%
23%
12,130
519
19
18
23
77%

92%
35

90%
56

86%
51

0.05

0.07

0.08

0.06

0.06

0.05

0.05
0.09

0.09
0.12

0.17
0.11

0.10

0.10

0.08

0.11
1

0.14
3

0.20
0

2
0.001

9
0.000

3
0.000

61%

74%

72%

0.44

0.44

0.40

47%
100%

65%
98%

85%
100%

Aspirations

Gender diversity:
Proportion of female employees
Proportion of non-management positions held by women
Proportion of management positions held by women9
Proportion of female employees at different managerial levels9,10:•
Managers•
Directors•
Senior leaders
Proportion of women in senior roles9

maintain
100%>70% by2025
maintain≥30

maintain<0.3

SI

Fostering diversity and inclusion

Fair working conditions
Talent attraction, retention, and employability

Number of PMI employees1
Number of PMI full-time equivalent (FTE) positions
Proportion of employees covered by Collective Labor Agreements
Total number of countries with Collective Labor Agreements
Percent of employees earning at least a living wage

2021

Proportion of new hires who are women
Proportion of women on PMI’s Company Management11
Proportion of women on PMI’s Board of Directors12
Mean gender pay gap13
Proportion of women in STEM-related positions9,14
Proportion of women in management positions in revenue-generating
functions9,15
Percentage of women attrition
Percentage of women total promotions
Age, nationality, ethnic diversity
Proportion of employees at different age groups:•
Below 30•
Between 30 and 50•
Above 50
Number of nationalities among PMI’s employees
Proportion of Asian talent in senior roles globally9,16
Proportion of markets with at least 60% local talent in the executive
management teams9,17Note: Selected 2023 occupational health and safety (OHS) metrics are subject to externalverification by SGS see the External Verification Statement here.
As of 2023, PMI has advanced its data verification process to allow for timely publication of
relevant sustainability metrics, including those related to OHS KPIs. With this advancement,
metrics marked with (◊) are based on actual data from 2023 (usually from January to
September—some to August) and estimates for remaining months. This data will be restatedwith full-year actual figures and made available on our website during 2024.
Our diversity and inclusion data covers around 80% of PMI’s total workforce.

70% by2025
maintain<0.65† Previous years’ values for metrics with marked (†) were reviewed.
1 Incorporating Vectura Fertin Pharma, as well as the 2022 acquisition of Swedish Match, PMI
employed approximately 82,700 people worldwide at year-end 2023.
2 For further details on how we measure progress on this KPI, please see PMI’s Sustainability KPIProtocol 2023.
3 The calculation data based on a total of 56,527 employees maintained in PMI’s central HR
system for a key date of November 1, 2023.
4 We measure the engagement of our workforce using the employee Net Promoter Score (eNPS),
following a methodology similar to that which we use to measure consumer engagement. The
score can range from -100 to +100. 2023 and 2022 findings exclude Russia (2021 data
excluding Russia is 34).
5 For definition of contracted employee and contractor, see Glossary.
6 The indicator represents the percentage of employees who responded “good” or “very good” tothe question “How would you rate your current psychological or emotional well-being atpresent?” in our regular employee listening survey.
7 Scope covers PMI’s working-tool cars (representing 75% of PMI’s total fleet).
8 Scope covers manufacturing facilities producing more than three billion cigarette equivalents
annually. 2023 excludes Russia, due to sanctions applied to the country.

Aspirations tracker
Achieved

Philip Morris International Integrated Report 2023

Not achieved

SI Indicators included in PMI Sustainability Index

2021

2022

2023

Aspirations

42.2%
42.7%
39.7%

42.1%
42.7%
40.7%

42.9%
43.5%
41.8%

maintain ≥40%

41.4%
32.0%
25.3%
31.1%

42.6%
31.1%
26.7%
30.5%

43.6%
32.6%
27.9%
32.0%

41.3%
16.7%
23.1%
33.5%
37.0%
35.7%

36.9%
16.0%
25.0%
30.0%
36.6%
37.6%

46.5 %
18.5%
30.8%
29.1%
38.3%
39.0%

36.9%
35.9%

37.1%
35.9%

37.0%
38.0%

18.7%
69.7%
11.6%
133
16.3%
n/a

15.3%
71.7%
13.0%
133
17.1%
58%

16.4%
71.1%
12.6%
139
17.2%
60%

32% by 2023
35% by 2025

SI

≥20% by 2025
≥60% in ≥80%of our markets
by 2025

9 For further details on how we measure progress on this KPI, please see PMI’s Sustainability KPIProtocol 2023.
10 For definitions of management positions, managers, directors, senior roles, and senior leaders
see Glossary.
11 Data as of March 11, 2024 (27 Company Management members, of whom five were women).
See PMI Annual Report 2023 for further details.
12 Data as of March 11, 2024 (13 members of PMI’s Board of Directors, of whom four were
women). See PMI 2024 Proxy Statement for further details.
13 The mean gender pay gap is calculated as the percentage difference between the sum ofannual base salary, bonus, and stock awards.
14 This figure is an estimate based on the total headcount within functions where the primary
skills required for employees in their daily responsibilities related to science, technology,
engineering, or mathematics (STEM). Historical data have been re-stated to remove fixed-term
employees and those on salary continuation, aligned to other diversity and inclusion metrics.
15 Employees holding management roles in revenue-generating functions (i.e., functions
responsible for core business objectives or profit and loss).
16 For the purposes of measuring progress against this indicator, PMI uses the nationality data of
employees recorded in our HR systems. The determination of Asian nationalities is based on
the regional groupings as listed by the United Nations and we consider the following regions:
Central and Southern Asia, Eastern and South-Eastern Asia.
17 Considers Managing Directors and their direct reports within PMI markets and clusters who
have local nationality registered in PMI HR systems. Excludes countries where employee
nationality is not collected in PMI HR systems.

O P E R AT I O N A L I M P A C T

Overview

Foster an empowered
and inclusive workplace

Protect the health and safety of our employees

PRO D U C T I M PAC T

192

Overview

Foster an empowered andinclusive workplace continued

22,9752,252
35,910
714
3,744
219
7,314
576
31,025594
41,804281

Alleviating poverty

30,1591,460
39,784
2,301

Eliminating child labor

2023

Agricultural Labor
Practices (ALP)

PMI’s workforce at year-end 2023
Number of employees by employment contract (permanent and temporary), by gender
Women employed on a permanent contract
Women employed on a temporary contract
Men employed on a permanent contract
Men employed on a temporary contract
Number of employees by employment contract (permanent and temporary), by region
Employees on a permanent contract in Europe region
Employees on a temporary contract in Europe region
Employees on a permanent contract in SSEA, CIS and MEA region
Employees on a temporary contract in SSEA, CIS and MEA region
Employees on a permanent contract in East Asia & Australia region, including PMI Duty Free
Employees on a temporary contract in East Asia & Australia region, including PMI Duty Free
Employees on a permanent contract in Americas (including the U.S.)
Employees on a temporary contract in Americas (including the U.S.)
Number of employees by employment type (full-time and part-time), by gender
Women employed on a full-time contract
Women employed on a part-time contract
Men employed on a full-time contract
Men employed on a part-time contract

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

195

Improve the quality of lifeof people in our supply chain

Enhancing the quality of lives oftobacco-farming communitiesO P E R AT I O N A L I M P A C T

194

2022

2023

Aspirations

maintain>90%

Proportion of purchased tobacco volume for which labor practices and adherence
to our Agricultural Labor Practices Code are systematically monitored
Total number of prompt actions recorded by field technicians:•
Proportion due to safe working environment•
Proportion due to hazardous work performed by children•
Proportion due to income and working hours•
Proportion due to otherTotal number of ALP prompt actions resolved

95%

91%

6,101
90%
3%
7%
0%
5,107

7,301
88%
3%
7%
2%
6,867

Proportion of contracted farmers supplying tobacco to PMI who make a living income1

73%

96%

Proportion of contracted farmers supplying tobacco to PMI paying their workers at least
the minimum legal wage or agricultural benchmark
Number of ALP prompt actions recorded by field technicians relating to non-payment ofminimum wage to farmworkers

99.9%

99.8%

436

523

Prevalence of child labor among contracted farms supplying tobacco to PMI2

0.1%

0.1%

Number of ALP prompt actions recorded by field technicians relating to child labor:•
Hazardous tasks3•
Under 13 working4•
Under 15 hired
Proportion of ALP prompt actions recorded by field technicians relating to child labor thatwere resolved

175
155
6
14
95%

217
207
7
3
97%

Proportion of contracted farmers supplying tobacco to PMI who have access to water5

75%

80%

Proportion of tobacco farmworkers provided with safe and adequate accommodation6

100%

100%

Proportion of contracted tobacco farmers and farmworkers supplying tobacco to PMI
who have access to personal protective equipment for the application of crop protection
agents and prevention of green tobacco sickness7

n/a

100%

100% by2025
maintain100%

Zero by
2025

SI

SI

100% by2025
maintain100%
maintain100%

Note: In 2022, we strengthened our approach to monitoring the quality of life of people in our tobacco supply chain by introducing the Sustainable Tobacco Supply Chain (STSC) framework (read morein the Improve the quality of life of people in our supply chain section). Although it is still a requirement to monitor performance against our ALP Code for all contracted farms, we decided to shift from
reporting sustainability progress on all farmers contracted by PMI’s suppliers or PMI leaf operations to farmers whose tobacco volumes are purchased by PMI and used in our products. Our 2023
farm-level ALP monitoring data cover 21 out of the 23 countries from which we sourced in 2023 as Tanzania and Uganda were not included in this data set.
1 Excludes China and Switzerland due to restrictions on farmer income data as well as benchmark development in China. In 2023, we applied new methodology which requires updated family size
definitions for our farm profile data, and a resulting detailed and robust set of family size data for each farmer’s family. Considering this preparatory work, we were only able to implement thissecondary layer of modeling for Indonesia in 2023. As of 2024, household dependency modeling will be applied for all markets/farmer segments below living income. See PMI’s Sustainability KPIProtocol 2023 for further details on methodology.
2 For further details on how we calculate the prevalence of child labor in PMI’s tobacco supply chain please see PMI’s Sustainability KPI Protocol 2023.
3 Includes children of any age found to be involved in hazardous work.
4 Includes light work only.
5 Estimated based on surveys that indicate whether the farmer has an improved drinking water source within 1 km or 30 minutes round trip. Excludes China.
6 Scope is limited to farmers who provide accommodation to workers (approximately 4 percent of the total farmer base in 2023).
7 Less than 0.01% of farmer with unresolved PA related to Personal protective equipment access.

Aspirations tracker
Achieved

Philip Morris International Integrated Report 2023

Not achieved

SI Indicators included in PMI Sustainability Index

Overview

Strategy

Governance

Product impact

Operational impact

Reporting and performance

Fundamentals

197

Absolute CO2e scope 1 (metric tons)3◊
Absolute CO2e scope 2 (metric tons)2,3◊
Absolute CO2e scope 1+2 (metric tons)3◊•
Absolute reduction versus 2019 baseline◊
Carbon offsetting certificates (metric tons)4,9◊
Net CO2e scope 1+2 (metric tons)3,5◊

Scope 1+2
Manufacturing

CO2e scope 1+2 intensity (tons per net revenues million
USD)1◊

2022

2023

9,987,169

8,281,834

8,368,407

8,733,393

27%

33%

36%

37%

n/a
5,970,547
292,238
1,006,246
623,940n/a
4,712,161
292,427
915,502674,903n/a
4,682,466
267,162
944,365
727,283248
4,910,506
272,403
971,647
789,480

406,660
180,347
587,008
n/a
1,242
585,766

319,372
87,768407,140
31%
16,128391,011

310,028
62,327372,35437%
42,848329,506

316,652
56,582373,234
36%
71,256
301,978
10.6

Aspirations

50% by 2030
(SBT)
Carbonneutrality by
2025

n/a

n/a

n/a

Absolute CO2e scope 1+2 (metric tons) from manufacturing9◊
Proportion of electricity used and purchased that is fromrenewable sources9◊
Proportion of carbon-neutral factories9◊394,44772%

267,78381%

242,39287%

238,358
92% 100% by 2025

3%

13%

35%

43% 100% by 2025

Absolute CO2e scope 1 from fleet (metric tons)9◊•
Absolute reduction versus 2019 baseline9◊CO2e emissions from fleet (g CO2e per km driven)9◊
Proportion of hybrid or electrical vehicles in our fleet9◊

111,400
n/a
222—%

78,01830%200
10%79,54329%191
19%

80,69928%
177
27%

Absolute CO2e scope 3 (’000 metric tons)6◊•
Absolute reduction versus 2019 baseline7
Absolute CO2e scope 3 FLAG (’000 metric tons)6◊•
Absolute FLAG reduction versus 2019 baseline◊
Scope 3
Total

2021

SI

Scope 3
Tobacco supply chain

Total energy consumption in PMI factories, offices and fleet(gigajoules)◊Proportion of total energy consumed that is from renewablesources◊
Energy intensity (gigajoules per net revenues million USD)1◊
Fuel consumption from nonrenewable sources (gigajoules)◊Fuel consumption from renewable sources (gigajoules)◊Total electricity consumed (MWh)2◊
Total electricity consumed that is from renewable sources(MWh)2,9◊

2019

Total
PMI value chain

Total GHG emissions
Scope 1+2

Energy consumption in
PMI direct operations

Tackle climate change

Scope 1+2
PMI FleetO P E R AT I O N A L I M P A C T

196

2019

2021

2022

2023

4,830
n/a
1,540
n/a

3,953
18%
1,079
30%

4,446
8%
1,136
26%

4,328
10%
1,170
24%

AspirationsSI

18% by 2025
(SBT), 33.3%
by 2030 (SBT),
72% by 2040
(SBT)

Absolute CO2e scope 3 industrial (’000 metric tons)6◊•
Absolute industrial reduction versus 2019 baseline◊

3,291
n/a

2,874
13%

3,310
(1)%

3,157
4%

CO2e scope 3 biogenic emissions (’000 metric tons)9◊
Proportion of suppliers by spend covering purchased goods
and services with science-based GHG reduction targets9

2,585
n/a

2,379
n/a

2,317
35%

2,333
35%

Absolute CO2e scope 3 (’000 metric tons) from tobacco
supply chain9◊•
Absolute reduction versus 2019 baseline9◊

1,264

804

886

860

n/a

36%

30%

32%

35% by 2025,
50% by 2030

CO2e intensity reduction in tobacco curing versus 2019baseline8,9◊Proportion of Virginia tobacco purchased cured with coal9

n/a

64%

57%

51%

75% by 2025

16%

3%

6%

0%

Maintain zero

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

5,417

4,360

4,818

4,701

Absolute reduction versus 2019 baseline ◊

n/a

20%

11%

13%

Net zero by
2040
90% by 2040

n/a

n/a

n/a

133

A

A

A

A

•

CO2e scope 1+2+3 intensity (tons per net revenues million
USD)1◊CDP Climate Change rating9SI

27.5% by
2030 (SBT)
15% by 2025

Note: Our inventory of GHG emissions (scope 1, 2, and 3) in 2023 is subject to external verification by SGS (see the External Verification Statement for scope 1+2 here,for scope 3 here, and for a list of
the individual metrics assured here).
In 2023, we successfully integrated the greenhouse gas (GHG) inventory of Swedish Match, acquired in 2022, in PMI’s value chain carbon accounting. Metrics' values include Swedish Match, unlessotherwise specified, prior years’ data have been recalculated to reflect the Swedish Match incorporation.
As of 2023, PMI has advanced its data verification process to allow for timely publication of relevant sustainability metrics, including those related to our GHG inventory. With this advancement, metrics
marked with (◊) are based on actual data from 2023 (usually from January to September—some to August) and estimates for remaining months. This data will be restated with full-year actual figures andmade available on our website during 2024.
For more information on PMI’s approach to GHG calculations and materiality thresholds, please refer to PMI’s Sustainability KPI Protocol 2023 and carbon footprint methodology here.
1 Intensity is measured per million Net revenues in USD (data are based on latest estimates used to run carbon footprint exercise). KPI values are provided as of 2023 to ensure comparability as prioryears Net revenues figure does not fully include Swedish Match.
2 Excludes electricity consumption from fleet.
3 Emissions from PMI-operated IQOS stores are partially excluded from scope 1+2 emissions, as de minimis. As of 2022 a portion of PMI’s retail stores (representing approx. 10% of total retail surfacearea) have been included in the scope 1+2 emissions.
4 Our 2023 figure includes carbon credit certificates retired in the name of our factories in Argentina, Brazil, Czech Republic, Greece, Indonesia, Jordan, Lithuania, Pakistan, Portugal, Romania, Senegal,
Serbia, and Switzerland—in total 18 production centers—as well as our Operations Center in Switzerland and our markets in Australia, Costa Rica, Denmark, Finland, Greece, Mexico, New Zealand,
Norway, Portugal, Sweden and Turkey.
5 The Net CO2e scope 1+2 emissions excluding Swedish Match were equal to 265,518 metric tons in 2023 and 297,236 in 2022.
6 For further details on scope 3 calculation please refer to the PMI Value Chain Methodology. In 2023, we further improved our carbon footprint model and data accuracy; improvements relate to, forexample, update of our representative products and improvements/updates on emission factors in several scope 3 categories. This led to previous years being restated accordingly.
7 The absolute CO2e scope 3 reduction vs. 2019 excluding Swedish Match was equal to 11% in 2023, 8% in 2022 and 19% in 2021.
8 Intensity is measured in CO2e per million shipped cigarette equivalent.
9 Excludes Swedish Match.

Aspirations tracker
Achieved

Philip Morris International Integrated Report 2023

Not achieved

SI Indicators included in PMI Sustainability Index

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

199

Preserve nature

Water

Proportion of tobacco purchased at no risk of grossdeforestation of primary and protected forests1
Proportion of tobacco purchased at no risk of net
deforestation of managed natural forest and no conversionof natural ecosystems1
Total hectares of forest grown:•
Due to restoration of at risk forest•
Contribution to forest positive
Proportion of flue-cured tobacco purchased that is cured
with renewable fuel sources (self-sufficient firewood andbiomass adoption)
Approximate total number of curing barns upgraded since2014 (cumulative)
CDP Forest rating

2021

2022

2023

Aspirations

100%

100%

100%

37%

55%

94%

maintain
100%
100% by
2025

355
165
190
75%

389
199
190
74%

403
205
198
76%

93,700102,806

116,703

A

A

A

Proportion of paper, board, and pulp-based productpurchased at no risk of gross deforestation of primary andprotected forests1

n/a

64%

95%

Cubic meters of water optimized in our tobacco-growing
areas (cumulative since 2019)(million m3)2

0.44

4.94

Proportion of tobacco growing areas which are covered by
PMI tobacco
Local Water Risk Assessments (cumulative, since 2018)supply chain
Quantity of blue water used per ton of tobacco produced3
Total amount of water used (’000 m3)
Total amount of water consumed (withdrawn minus
discharged) (’000 m3)
Total amount of water withdrawn (’000 m3)
Total amount of freshwater withdrawn (’000 m3)4
Water ratio (water withdrawn in m3 per million units of
PMI factories
cigarettes sold)5
Proportion of PMI factories certified to AWS standard6

66%

81%

339
133,674
1,481

263
107,720
1,547

3,120
2,088
2.6

3,089
2,137
2.5

3,194
2,196
2.4

43%

51%

83%

A

A

A

100%

100%

100%

maintain
100%

100%

100%

100%

maintain100%

CDP Water rating
Proportion of tobacco purchased without detectionof residues attributable to the use of highly hazardous
pesticides (HHPs), as defined by FAO and WHO guidelines
in 2016
Proportion of tobacco purchased without detection ofresidues attributable to the use of WHO TOX1 group ofcrop protection agents

PMI valuechain

PMI valuechain

PMI tobacco
supply chain

Percentage of waste diverted from landfill in manufacturing
operations7
Total amount of waste generated (in metric tons)•
RecycledSI

maintain>70%•
Incinerated with energy recovery•
Incinerated without energy recovery•
Disposed to landfill8
Amount of hazardous waste generated (in metric tons)•
Incinerated with energy recovery•
Recycled•
Incinerated without energy recovery•
Disposed to landfill

100% by2025

Proportion of manufacturing facilities certified to
ISO 140019
Number of environmental fines(and approximate amount in USD)10

Waste

PMI tobacco
supply chain

Scope

8.14

≥25 million
cubic metersby 2033
95%
100% by
2025
245
108,714
1,534

maintain<3.1
100% by2025

Environmental
management

ForestScope

Biodiversity

O P E R AT I O N A L I M P A C T

198

PMI
factories

2022

2023

Aspirations

99.7%

99.9%

99.9%

maintain>99%

114,043
87.3%

119,192
86.9%

127,493
84.9%

11.4%
0.3%
1.1%
1,057
57.3%
20.9%
13.5%
8.2%

12.0%
0.3%
0.8%
1,698
67.4%
16.7%
13.4%
2.5%

13.3%
0.8%
1.0%
2,228
49.9%
19.1%
29.5%
1.5%

100%

100%

100%

2
(48,000)

00

maintain85%

maintain100%

Note: Select 2023 metrics related to PMI's Monitoring, Verification and Reporting Framework for Leaf Curing Fuel and the Zero Deforestation Manifesto are subject to a third-party limited assurance(read more here).
1
2
3
4
5

For definitions, please see PMI’s Zero Deforestation Manifesto and PMI’s Sustainability KPI Protocol 2023.
Indicator is based on the World Resources Institute’s volumetric benefit accounting methodology and is verified by an external third party.
Blue water refers to water used for irrigation, excluding rainfall.
Refers to amount of freshwater withdrawn from municipal sources.
Water intensity is measured in cubic meters per million cigarettes produced equivalent. In 2021, we updated our methodology to account for the conversion factor of heated tobacco units toconventional cigarettes of 5:1 and have restated historical data accordingly.
6 Aspiration pertains to priority manufacturing facilities identified based on site overall risk in relation to the watershed, water withdrawal, water consumption, product portfolio, and other strategic
considerations. PMI sites that are in low- to medium water risk areas and below 2.5% of PMI manufacturing water footprint are excluded.
7 We aspire to have virtually zero waste to landfill in manufacturing operations. This is achieved when the landfill diversion rate is equivalent to 99 percent or greater. Our calculation of zero waste tolandfill does not include canteen and sanitary waste, which do not relate to our production processes. It also excludes the mandated waste, generally tobacco, that we are obliged to landfill to respect
local regulations.
8 Disposal to landfill includes sanitary waste, canteen waste, and waste mandated by authorities to be disposed of in landfill. The number is 0.97%.
9 Scope: Manufacturing facilities producing more than three billion cigarette equivalents annually. 2023 excludes Russia, due to sanctions applied to the country.
10 Fines above USD 10,000 (or equivalent in converted currency).

Aspirations tracker
Achieved

Philip Morris International Integrated Report 2023

PMI
factories2021

Not achieved

SI Indicators included in PMI Sustainability Index

Overview

Fundamentals

Proportion of current employees who participated in training sessions pertaining to PMI’s Codeof Conduct
Total number of compliance training sessions completed by employees and third parties:•
Employees1•
Third parties
Total number of reports received through Ethics & Compliance Speak Up channels
Total number of closed reports:•
Number of closed reports involving at least one complianceallegation (unsubstantiated cases/substantiated cases)•
Number of closed reports not involving compliance allegations
Disciplinary actions, by type:•
Suspension•
Contract termination•
Written warning•
Verbal warning or counseling

2021

2022

2023

71.3%

81.0%

86.4%

261,890
150,270
111,620929
891
508(272/236)
383

352,796
268,411
66,385990
923
429(206/223)
494

517,937
443,40274,535
1,258
1,245
591
(267/324)
654

5%
26%
32%
37%

3%
48%
20%
29%

7%
31%
25%
37%

Total

Business integrity

1 The number of trainings for year 2022 updated.

Respect for human rights
Cumulative number of human rights impact assessments conducted since 2018,with findings addressed1

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

201

Managing our supply chain sustainably

2021

2022

2023

Aspirations

5

7

8

10 highestrisk
countries
by 2025

1 Our assessments prioritize countries which are assessed as highest risks from a human rights standpoint. They are determined based on key parameters such as PMI’s footprint and the country’s
human rights risk profile, as determined by internationally recognized organizations. For further details please see PMI’s Sustainability KPI Protocol 2023.

SI

Nontobacco supply chain

REPORTING AND PERFORMANCE

200

Total number of suppliers1
Total supply chain spend (in billions USD)2
Number of critical suppliers3
Critical suppliers, expressed as a proportion of total supply chain spend
Percentage of spend with critical suppliers from whom PMI sources
sustainably4
Total procurement spend5
Direct materials
Number of critical suppliers assessed with EcoVadis
Percentage of critical direct spend assessed with EcoVadis
Number of critical suppliers identified as having significant actual or potential
negative social impacts6
Number of critical suppliers identified as having significant actual or potential
negative environmental impacts6
Number of critical suppliers with an agreed corrective action plan in place(EcoVadis)
Number of suppliers supported in corrective action plan implementation
Proportion of suppliers assessed with substantial actual or potential negative
impacts supported in corrective action plan implementation
Average total EcoVadis score for critical suppliers of direct materials6•
Average Environmental score•
Average Ethics score•
Average Social score•
Average Sustainable Procurement score
Electronics
Number of critical suppliers (parent companies) assessed with Responsible
Business Alliance (RBA)
Number of critical supplier sites assessed with RBA
Number of site level RBA audits completed7•
Tier 1 suppliers•
Tier 2 and tier N suppliers•
Average RBA score achieved by suppliers during site level audits•
Percentage of electronics supply chain spend covered by these audits
Number of suppliers with an agreed corrective action plan in place (RBA)
Number of RBA non-conformances:•
Priority•
Other
Closure rate of corrective actions for non-conformances:
•
Other

2021

2022

2023

>29,000
11.1
162
37%
83%

>30,000
12.6
174
37%
93%

26,000
14.0
202
40%
91%

9.8

11.3

12.4

87
90%
15

116
97%
16

120
95%
10

16

21

12

n/a

13

13

n/a
n/a

13
100%

13
38%

56.5
60.5
54.2
55.8
50.8

58.1
62.2
54.2
58.0
51.6

60.6
65.1
55.8
60.5
54.5

23

28

30

47
31
4
27
160
69%
1

44
42
10
32
173
67%
2

48
47
9
38
170
91%
30

n/a
n/a

3
173

3
227

n/a

67%

50%

Aspirations

100% by2025

1 Suppliers refer to tier 1 suppliers, for definitions see Glossary.
2 Total supply chain spend includes procurement spend and tobacco leaf sourcing spend.
3 Suppliers’ criticality is evaluated considering spend segmentation and nature of component, as well as supply flexibility (single-source/not easily substitutable) as relevant. 2023 figure includes tier 1
suppliers of direct materials and electronics, tier 2 directly managed electronics suppliers, and tobacco leaf suppliers.
4 Sustainable sourcing is determined based on a minimum threshold score of 45 out of 100 in EcoVadis (direct materials) or 125 out of 200 in RBA with no open priority issues (electronics). All tobaccopurchased by contracted farmers, thereby covered by PMI’s integrated production system, is considered sustainable.
5 Procurement spend excludes tobacco leaf sourcing.
6 EcoVadis score ranges from 0 to 100, with a minimum threshold score of 45 demonstrating satisfactory sustainability performance.
7 This figure includes 47 out of 48 of our electronics critical suppliers’ sites.

Aspirations tracker
Achieved

Philip Morris International Integrated Report 2023

Not achieved

SI Indicators included in PMI Sustainability Index

OverviewTobacco supply chain

Managing our supply chain sustainably continued

Capability building

REPORTING AND PERFORMANCE

202

Number of tobacco farmers contracted by PMI and PMI tobacco suppliers8
Number of tobacco farmers from whom PMI purchased tobacco9
Proportion of tobacco purchased through direct contracts by PMI and PMI
tobacco suppliers
Number of third-party tobacco suppliers with whom PMI has a directcontractual relationship10
Number of PMI leaf operations that contract tobacco farmers directly
Number of countries where PMI sources tobacco fromNumber of field technicians providing support to contracted farmers andmonitoring the implementation of PMI’s Agricultural Labor Practices (ALP)
Proportion of PMI employees trained on Responsible Sourcing Principles (RSP)
Proportion of PMI employees buyers/procurement professionals trained on
specific sustainability topics
Number of suppliers in capacity building program
Proportion of critical suppliers in capacity building program

2021

2022

2023

253,813
n/a
98%

n/a
223,299
99%n/a
305,756
94%

16

15

19

5
21
n/a

5
20
3,128

5
23
3,121

n/a
n/a

n/a
n/a

93%
90%

n/a
n/a

n/a
n/a

5
1%

Aspirations

maintain>90%

8 Following the introduction in 2022 of PMI’s sustainable supply chain model, data on tobacco farmers contracted by PMI tobacco suppliers is not available.
9 Tobacco farmers whose tobacco are included in PMI packed products.
10 Data refer to parent companies.

Strategy

Governance

Product impact

Operational impact

Independent practitioner’s
limited assurance report• Total number of users of PMI smoke-free products(in millions);• Estimated number of users who have switched to PMI
smoke-free products and stopped smoking (in millions);

Lausanne• Adjusted net revenues ratio (smoke-free/total);

We have been engaged by Management to perform assurance
procedures to provide limited assurance on selected Key
Performance Indicators 2023 (the metrics marked withan asterisk (*)) in the Business Transformation Metrics
and Sustainability Index Reporting 2023 of Philip MorrisInternational Inc. and subsidiaries (‘PMI’) for the period ended
31 December 2023.

The Business Transformation Metrics as disclosed on
pages 25 and 189 to 190 of PMI’s Integrated Reportfor the year ended December 31, 2023, respectively:• Adjusted R&D expenditure ratio (smoke-free/total);• Number of factories producing smoke-free products
out of total number of factories;• Number of markets where smoke-free products areavailable for sale;• Proportion of markets where smoke-free products
are available for sale that are low- and middle-income
markets;• Commercial (marketing) expenditure ratio (smoke-free/
total);• Smoke-free product shipment volume – HeatedTobacco Units (billion units);• Combustible tobacco product shipment volume(billion units);

Philip Morris International Integrated Report 2023

Not achieved

SI Indicators included in PMI Sustainability Index

203• Shipment volume – Nicotine Pouch (Mio cans);

on selected Key Performance Indicators 2023 in the BusinessTransformation Metrics and Sustainability Index Reporting 2023
to the Board of Directors of Philip Morris International Inc.

a.

Achieved

Reporting and performance• Change in combustible tobacco product shipment
volume (billion units) vs 2015 baseline;• Number of markets where adjusted net revenues fromsmoke-free products exceed 50% of adjusted total net
revenues.
• Number of markets where adjusted net revenues fromsmoke-free products exceed 75% of adjusted total net
revenues.
b.

The selected Key Performance Indicators (“KPI”) forming
part of the Business Transformation Metrics and of the
Sustainability Index of PMI for the financial year ended
December 31, 2023 are included in the Integrated Report
2023 and comprises the following in our scope:

Aspirations tracker

Fundamentals

The Selected Sustainability Index KPIs as disclosed on
page 190 of PMI’s Integrated Report for the year ended
December 31, 2023, respectively:• Annual net revenue from wellness and healthcare
products (in billion USD);• Smoke-free product shipment ratio (smoke-free/total).

c.

The application of the PMI Business Transformation
Financing Framework for the preparation of the specified
Key Performance Indicators in Business Transformation
Metrics Report and Sustainability Index published on
pages 25, 189 to 190 and 208 to 211 (Glossary),
respectively.

We do not comment on, nor conclude on any
prospective information nor did we perform any
assurance procedures on the information other thanthose stated above for the reporting period 2023.
The Business Transformation Metrics and Sustainability
Index Reporting 2023 were prepared by Managementof PMI in line with the Business Transformation-Linked
Financing Framework (or “Business Transformation Financing
Framework” in short) and made available under https://www.pmi.com/investor-relations/overview/businesstransformation-linked-financing-framework1). Further, PMI
defines the calculation of the specified KPIs in the footnotes
on pages 25 and 189 to 190 as well as in the Glossary (208 to211) in the Business Transformation Metrics and Sustainability
Index Reporting 2023 (together the “suitable Criteria”).

REPORTING AND PERFORMANCE

204

Overview

Strategy

Governance

Product impact

Inherent limitations

Independence and quality management

We performed the following procedures, among others:

The accuracy and completeness of the BusinessTransformation Metrics and Sustainability Index Reporting
2023 KPIs are subject to inherent limitations given their natureand methods for determining, calculating and estimatingsuch data. In addition, some KPIs are derived from different
frameworks to form the Business Transformation Metrics,
thus the quantification of some self defined KPIs is subject
to inherent uncertainty because of incomplete scientificdefinition or knowledge used to determine factors related tosuch KPIs and the values needed to combine. Our assurance
report will therefore have to be read in connection with
the Business Transformation-Linked Financing Framework
prepared by PMI, its definitions and procedures in the
document “Business Transformation Financing Framework”
and the footnotes on pages 25, 189 to 190 and glossary(208 to 211) in the Business Transformation Metrics andSustainability Index Reporting 2023.

We are independent of the Philip Morris International
Inc. in accordance with the International Code of Ethics
for Professional Accountants (including International
Independence Standards) issued by the International Ethics
Standards Board for Accountants (IESBA Code). We havefulfilled our other ethical responsibilities in accordance with
the IESBA Code, which is founded on fundamental principles
of integrity, objectivity, professional competence and due care,confidentiality and professional behaviour.

• Inquiries and detailed walkthroughs with relevant
stakeholders for the selected Key Performance Indicators
2023 in the 2023 Integrated Report;

Management’s responsibility

Our responsibility is to perform an assurance limited
engagement and to express a conclusion on the selected
Key Performance Indicators 2023 in the BusinessTransformation Metrics and Sustainability Index Reporting
2023. We conducted our engagement in accordance with
the International Standard on Assurance Engagements (ISAE)
3000 (Revised) ‘Assurance engagements other than audits
or reviews of historical financial information’. That standard
requires that we plan and perform our procedures to obtain
limited assurance whether anything has come to our attention
that causes us to believe that the Key Performance Indicators
2023 (the metrics marked with an asterisk (*)) in the BusinessTransformation Metrics and Sustainability Index Reporting
2023 were not, in all material aspects, prepared in accordancewith the suitable Criteria as per 31 December 2023.

The Management of Philip Morris International Inc. is
responsible for preparing the Business Transformation Metrics
and the Sustainability Index Reporting 2023 in accordancewith the suitable Criteria. This responsibility includes thedesign, implementation and maintenance of the internal
control system related to the preparation of the BusinessTransformation Metrics and the Sustainability Index Reporting
2023 that are free from material misstatement, whether due
to fraud or error. Furthermore, the Management is responsible
for the selection and application of the chosen Criteria.

PricewaterhouseCoopers SA applies International Standard
on Quality Management 1, which requires the firm to design,
implement and operate a system of quality management
including policies or procedures regarding compliance withethical requirements, professional standards and applicablelegal and regulatory requirements.

Practitioner’s responsibility

Based on risk and materiality considerations, we performed
our procedures to obtain sufficient and appropriate assurance
evidence. The procedures selected depend on the assurance
practitioner’s judgement. A limited assurance engagement
under ISAE 3000 (Revised) is substantially less in scope than areasonable assurance engagement in relation to both the risk
assessment procedures, including an understanding of internal
control, and the procedures performed in response to theassessed risks. Consequently, the nature, timing and extent
of procedures for gathering sufficient appropriate evidence
are deliberately limited relative to a reasonable assurance
engagement and therefore less assurance is obtained with alimited assurance engagement than for a reasonable assurance
engagement.

• Interviewing PMI representatives responsible for theinternal reporting and data collection;• Test samples from PMI operations concerning thecompleteness, accuracy, consistency and classification;• Inspecting relevant documentation on a sample basis,including PMI policies, management reporting structuresand documentation;• Reviewing and assessing the management reporting
processes for Business Transformation Metrics andSustainability Index data and consolidation and theirrelated controls.
We believe that the evidence we have obtained is sufficientand appropriate to provide a basis for our conclusion.

Conclusion

Operational impact

Fundamentals

Reporting and performance205

We permit the disclosure of our report, in full only andin combination with the suitable Criteria, to enable theManagement to demonstrate that have discharged theirgovernance responsibilities by commissioning an independent
assurance report over the selected Key Performance
Indicators 2023 in Business Transformation Metrics 2023 andin Sustainability Index 2023, without assuming or accepting
any responsibility or liability to any third parties on our part.
To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Managementof Philip Morris International Inc. for our work or this report.
PricewaterhouseCoopers SA

Mary C. Clark

Reto E. Huber

Lausanne, Switzerland
25 March 2024

Based on the work we performed, nothing has come to ourattention that causes us to believe that the selected Key
Performance Indicators 2023 on the pages 25 and 189 to
190, respectively, (the metrics marked with an asterisk (*))
in the Business Transformation Metrics and Sustainability
Index Reporting 2023 of Philip Morris International Inc.
and subsidiaries for the period from January 1, 2023 to
December 31, 2023 are not, in all material respects, preparedin accordance with the Business Transformation Financing
Framework and the footnotes on pages 25, 189 to 190 as
well as in the Glossary (208 to 211).

Intended users and purpose of the report
This report is prepared for, and only for, the Board of Directorsof Philip Morris International Inc., and solely for the purpose ofreporting to them on the selected Key Performance Indicators
2023 in Business Transformation Metrics and Sustainability
Index Reporting 2023 and no other purpose. We do not, ingiving our conclusion, accept or assume responsibility (legal
or otherwise) or accept liability for, or in connection with, anyother purpose for which our report including the conclusion
may be used, or to any other person to whom our reportis shown or into whose hands it may come, and no otherpersons shall be entitled to rely on our conclusion.

1) The maintenance and integrity of Philip Morris International Inc.’s website and its content are
the responsibility of the Management; the work carried out by the assurance provider does
not involve consideration of the maintenance and integrity of the Philip Morris International
Inc.’s website, accordingly, the assurance providers accept no responsibility for any changes
that may have occurred to the reported selected Business Transformation Metrics andSustainability Index KPIs in the Integrated Report 2023 or Business Transformation-Linked
Financing Framework since they were initially presented on the website.

Philip Morris International Integrated Report 2023

REPORTING AND PERFORMANCE

206

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

207

Reconciliation of Non-GAAP Measures
PHILIP MORRIS INTERNATIONAL INC. and Subsidiaries

Schedule 3
Research & Development Expenditure by Product Category

Schedule 1
Net Revenues by Product Category

Years ended December 31,

Years ended December 31,($ in millions) / (Unaudited)

Combustible Tobacco
Smoke-free incl. Wellness and Healthcare
Total PMI

2015

2021

26,595
199
26,79422,067
9,338
31,405 1
1

2022

2023

21,572
10,19031,762

22,334
12,84035,174 2
2($ in millions) / (Unaudited)Year ended December 31, 2023

Net
Revenues

SpecialItems

AdjustedNet
Revenues

Combustible Tobacco
Europe
SSEA, CIS & MEA
EA, AU & PMI DF
AmericasSwedish Match
Total Combustible Tobacco

8,037
9,321
2,676
1,869
431
22,334–(80) 1
–
–
–
(80)

8,037
9,401
2,676
1,869
431
22,414

Smoke-free excl. Wellness and Healthcare
Europe
SSEA, CIS & MEA
EA, AU & PMI DF
AmericasSwedish Match
Total Smoke-free excl. Wellness and Healthcare

5,561
1,308
3,525
75
2,065
12,534

–
–
–
–
–
–

5,561
1,308
3,525
75
2,065
12,534

306

–

306

Smoke-free incl. Wellness and Healthcare
Total Smoke-free incl. Wellness and Healthcare

12,840–12,840PMI
Europe
SSEA, CIS & MEA
EA, AU & PMI DF
AmericasSwedish Match
Wellness and Healthcare
Total PMI

13,598
10,629
6,201
1,944
2,496
306
35,174–(80) 1
–
–
–
–
(80)

13,59810,709
6,201
1,944
2,496
306
35,254

Wellness and Healthcare
Total Wellness and Healthcare

1	Related to the termination of distribution arrangement in the Middle East.
Note: Sum of product categories or regions might not foot to Total PMI due to roundings.

Philip Morris International Integrated Report 2023

2015

2021

2022

2023

Combustible Tobacco
Smoke-free incl. Wellness and Healthcare
Total PMI

129
294
423

7
609 1
617 1

7
634
642

4
705
709

1 Includes asset acquisition cost of $51 million related to OtiTopic Inc. in August 2021. Excluding this impact total
PMI adjusted R&D expenditures are $566 million and for smoke-free incl. W&H $558 million.
Note: Sum of product categories might not foot to Total PMI due to roundings.

1 Includes a reduction in net revenues of $246 million related to the Saudi Arabia customs assessment.
Excluding this impact total PMI adjusted net revenues are $31,651 million and for combustible tobacco $22,313 million.
2 Includes a reduction in net revenues of $80 million related to the termination of distribution arrangement in the Middle East.
Excluding this impact total PMI adjusted net revenues are $35,254 million and for combustible tobacco $22,414 million.

Schedule 2
Reconciliation of Net Revenues by Product Category
to Adjusted Net Revenues by Product Category($ in millions) / (Unaudited)REPORTING AND PERFORMANCE

208

Overview

Strategy

Governance

Product impact

Operational impact

Fundamentals

Reporting and performance

209

Glossary of terms and acronyms
3TGs – Tin, tantalum, tungsten, and gold

COPD – Chronic obstructive pulmonary disease

Aerosol – Gaseous suspension of fine solid particles and/or
liquid droplets

CPA – Crop protective agent

ALP – Agricultural Labor Practices
ASI – Aluminum Stewardship Initiative
Available for sale – When PMI products are available forgeneral sale in the market, through direct retail, indirect retail,or e-commerce in either one or more key cities or nationwide.
AWS – Alliance for Water Stewardship
B2B – Business to business
B2C – Business to consumer
CA – Cellulose acetate
CAGR – Compound annual growth rate
Caregiver – A person who has responsibility for the care ofa new-born child or newly adopted child including the child’s
biological parent, the child’s adoptive parent, a person having
legal parental responsibility for the child such as the child’sguardian, a stepparent, or a child’s parent through surrogacy• Primary caregiver – The caregiver who has the primary
responsibility for the care of the new-born or newly adopted
child following the child’s arrival• Secondary caregiver – A caregiver who is not the primary
caregiver
Combustible tobacco products – The term we to refer tocigarettes and other tobacco products that are combusted
Combustion – The process of burning a substance in oxygen,producing heat and often light
Company Management – The term we use to refer to thesenior management of the company, as presented on our
www.PMI.com site (also referred to as “our leadership team”
or “senior management team”)
Contracted employee – We define a contracted employee
as an employee who is under the direct supervision of PMI
employees but employed by a temporary employment agency
Contracted farmers – Tobacco farmers supplying to PMI andcontracted either directly by PMI (through the company’s leaf
operations) or through third-party leaf suppliers
Contractor – We define a contractor as a person employed
or working on behalf of a third-party company contracted by
PMI, who remains under the direct supervision of his or her
employer rather than PMI and is often involved in projectspecific or outsourcing arrangements

Philip Morris International Integrated Report 2023

Downstream supply chain – Those stages in the supply chain
in which materials (mostly in the form of finished products)
flow away from the organization to the customers/consumers
E-liquids – A liquid solution that is used in/with e-cigarettes.
E-liquids contain different levels of nicotine in a propylene
glycol and/or vegetable glycerin-based solution with various
flavors.
E-vapor product – Electrical product that generates anaerosol by heating a nicotine or non-nicotine containing liquid,
such as electronic cigarettes (or “e-cigarettes”)

HPHCs – The harmful or potentially harmful constituents
which have been identified as likely causes of tobacco-relateddiseases by various public health institutions
Human rights impact assessment or HRIA – Assessments to
identify human rights risks and adverse impacts
Human rights salient risks – Those human rights thatstand out because they are at risk of the most severe
negative impact through a company’s activities or business
relationships (source: UN Guiding Principles)
Illicit trade – Domestic non-tax paid products
ILO – International Labour Organization

EHS – Environmental, Health, and Safety

In-market sales, or IMS – Sales to the retail channel,
depending on the market and distribution model

Employee resource groups, or ERGs – Employee-led
groups that focus on particular dimensions of diversity andare intended to provide a platform for building a sense of
belonging and sparking conversations

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

Employee Net Promoter Score or eNPS: A universal
benchmark used across industries to calculate employee
engagement calculated by disregarding neutral responses andthen calculating the difference between positive and negative
responses

IP5 – The five largest intellectual property offices in the world

EPR – Extended Producer Responsibility
ERM – Enterprise Risk Management
FAO – Food and Agriculture Organization of the United
Nations
FCTC – WHO Framework Convention on Tobacco Control
FDA – U.S. Food and Drug Administration
FSC – Forest Stewardship Council
GAP – Good Agricultural Practices
Gender pay gap – Calculated as the percentage difference
between the sum of annual base salary, bonus, and stock
awards

IPM – Integrated Pest Management
IPS – Integrated Production System
IQOS heat-not-burn devices – Precisely controlled heating
devices into which specially designed and proprietary tobacco
units are inserted and heated to generate an aerosol
KPIs – Key performance indicators
LCA – Life-cycle analysis
Low- and middle-income markets – Markets composed ofcountries classified by the World Bank as low- and middleincome economies based on Gross National Income (GNI) per
capita; or where no World Bank classification exists, thosewith GNI per capita below the World Bank LMIC threshold
LTIR – Lost Time Incident Rate
Managerial roles – The terms we use to refer to employees indifferent salary grades, regardless of their job title or function:

GHG – Greenhouse gas• Junior roles – Employees in salary grade 9 or below

GPP – Global Privacy Program• Managers – Employees in salary grade 10 to 13

Heated tobacco units, or HTUs – The term we use to refer toheated tobacco consumables, which include the Company’s
BLENDS, DELIA, HEETS, HEETS Creations, HEETS Dimensions(defined collectively as HEETS), Marlboro HeatSticks, SENTIA,TEREA, TEREA CRAFTED, and TEREA Dimensions, as well as
the KT&G-licensed brands, Fiit and Miix (outside of South
Korea). HTUs also include zero tobacco heat-not-burnconsumables (LEVIA).

• Management positions – Employees in salary grade 10 andabove• Senior roles – Employees in salary grade 14 and above• Senior leaders – Employees in senior leadership roles
including all employees in salary grade 17 and above

Market share for HTUs – The in-market sales volume for
HTUs as a percentage of the total estimated industry sales
volume for cigarettes and HTUs. For Japan, total estimatedindustry sales volume also includes cigarillos
MRTP – Modified Risk Tobacco Product
MVR – Monitoring, Verification, and Reporting Framework for
Sustainable Leaf Curing Fuels
NCGC – Nominating and Corporate Governance Committeeof PMI’s Board of Directors
Net debt – Defined as total debt, less cash and cash
equivalents
Net revenues related to combustible tobacco products –The operating revenues generated from the sale of theseproducts, including shipping and handling charges billed tocustomers, net of sales and promotion incentives, and excise
taxes. These net revenue amounts consist of the sale of ourcigarettes and other tobacco products that are combusted.
Other tobacco products primarily include roll-your-own andmake-your-own cigarettes, pipe tobacco, cigars and cigarillos
and do not include smoke-free products
Net revenues related to smoke-free products – Represent
operating revenues generated from the sale of theseproducts, including shipping and handling charges billed tocustomers, net of sales and promotion incentives, and excise
taxes, if applicable. These net revenue amounts consist of thesale of all of our products that are not combustible tobacco
products, such as heat-not-burn, e-vapor, and oral nicotine,
also including wellness and healthcare products, as well as
consumer accessories such as lighters and matches
Net revenues related to wellness and healthcare products– Represent operating revenues generated from the saleof products primarily associated with inhaled therapeutics,
and oral and intra-oral delivery systems that are included in
the operating results of PMI’s new Wellness and Healthcare
business, Vectura Fertin PharmaNGOs – Non-governmental organizations
No Net Loss – The point at which business-related impacts
on biodiversity are balanced by measures from the mitigation
hierarchy, to leave no degradation on natural ecosystems at
end balance

REPORTING AND PERFORMANCE

210

NRTs – Nicotine replacement therapies
OECD – Organisation for Economic Co-operation andDevelopment
Offsetting – The act of purchasing a carbon credit generated
outside the corporate’s sphere of influence and retiring theunit on behalf of 1 ton of carbon that has been emitted by the
corporate (source: International Carbon Reduction and Offset
Alliance)
OHS – Occupational health and safety
Other tobacco product – Primarily roll-your-own and makeyour-own cigarettes, pipe tobacco, cigars and cigarillos, anddoes not include smoke-free products
PCI – Portfolio of Climate Investments
PMI segments – To further support the growth of our smokefree business, reinforce consumer centricity, and increase thespeed of innovation and deployment, in January 2023, werearranged our operations in four geographical segments,
down from the previous six, as follows:• Europe Region is headquartered in Lausanne, Switzerland,and covers all the European Union countries, Switzerland,
the United Kingdom, and also Ukraine, Moldova, andSoutheast Europe;• South and Southeast Asia, Commonwealth of Independent
States, Middle East and Africa Region (“SSEA, CIS & MEA”)
is headquartered in Dubai, United Arab Emirates. It covers
South and Southeast Asia, the African continent, the Middle
East, and Turkey, as well as Israel, Central Asia, Caucasus andRussia;• East Asia, Australia, and PMI Duty Free Region (“EA, AU &PMI DF”) is headquartered in Hong Kong, and includes theconsolidation of our international duty free business with
East Asia & Australia; and• Americas Region is headquartered in Stamford, Connecticut,
and covers the United States, Canada and Latin America.
The operations of Swedish Match, which reflects our fourth
quarter 2022 acquisition of the company, and our Wellness
and Healthcare segment remained unchanged. The Wellness
and Healthcare (“W&H”) segment includes the operating
results of our Wellness and Healthcare business, Vectura
Fertin Pharma.
Following the combination and the progress in 2023 toward
the integration of the Swedish Match business into theexisting PMI regional segment structure, we changed oursegment reporting by including Swedish Match results in thefour existing geographical segments on February 27, 2024.
For more information, please access the corresponding 8-K
as filed with the SEC on February 27, 2024 here.

Philip Morris International Integrated Report 2023

Overview

PMI heat-not-burn products – Include licensed KT&G heatnot-burn products

Strategy

Governance

Product impact

QMS – Quality management system

Smoke-free product consumables – The term PMI uses
to refer to heated tobacco units used with heat-not-burnproducts, e-vapor disposables, cartridges containing e-liquids
that are used for e-vapor products, and oral nicotine products
including snus and nicotine pouches

R&D – Research and development

TCFD – Task Force on Climate-related Financial Disclosures

RBA – Responsible Business Alliance

TGA – Tobacco-growing area

Reduced-risk products or RRPs – The term we use to referto products that present, are likely to present, or have thepotential to present less risk of harm to smokers who switch tothese products versus continuing smoking. PMI has a range of
RRPs in various stages of development, scientific assessment
and commercialization. PMI’s RRPs are smoke-free productsthat contain and/or generate far lower quantities of harmful
and potentially harmful constituents than found in cigarette
smoke

Tier 1 suppliers – Suppliers that directly supply goods,
materials or services to PMIPMTA – Premarket Tobacco Application

Refreshed devices – Smoke-free devices resulting from thecare and maintenance refresh services (which may include
unpacking, diagnostics, cleaning, firmware update, cosmetic
parts replacement, battery charging, and repacking of devices)that meet the agreed quality requirements to allow for theirreuse as pre-owned devices
Repaired devices – Smoke-free devices resulting from thecare and maintenance repair services (which may include
unpacking, diagnostics, testing, cleaning, battery charging,firmware update, cosmetic part or battery replacement,
component harvesting, and repacking of devices) that meet
the agreed quality requirements to allow for their reuse as
pre-owned devices
RMI – Responsible Minerals Initiative
RSP – Responsible Sourcing Principles
SBT – Science-based target
SBTi – Science Based Targets initiative
SDGs – Sustainable Development Goals
Smoke – A visible suspension of solid particles, liquid droplets,and gases in air, emitted when a material burns
Smoke-free products or SFPs – The term we primarily use torefer to all of our products that are not combustible tobacco
products, such as heat-not-burn, e-vapor, and oral nicotine.
In addition, smoke-free products include wellness andhealthcare products, as well as consumer accessories suchas lighters and matches.

Tier 2 suppliers – Suppliers that provide their products andservices to the tier 1 suppliers
TNFD – Taskforce on Nature-related Financial Disclosures
Tons – “Tons” equates to “metric tons” throughout this report
Total IQOS users – The estimated number of Legal Age(minimum 18 years) users of PMI heat-not-burn products, forwhich PMI HTUs represented at least a portion of their daily
tobacco consumption over the past seven days.
The estimated number of adults who have “switched to IQOS
and stopped smoking” reflects:• For markets where there are no heat-not-burn products
other than PMI heat-not-burn products: daily individual
consumption of PMI HTUs represents the totality of their
daily tobacco consumption in the past seven days
• For markets where PMI heat-not-burn products are among
other heat-not-burn products: daily individual consumptionof HTUs represents the totality of their daily tobacco
consumption in the past seven days, of which at least 70% is
PMI HTUs
Note: The above IQOS user metrics reflect PMI estimates,
which are based on consumer claims and sample-based
statistical assessments with an average margin of error of +/5% at a 95% Confidence Interval in key volume markets. The
accuracy and reliability of IQOS user metrics may vary basedon individual market maturity and availability of information.
As of December 2020, PMI heat-not-burn products and HTUs
include licensed KT&G heat-not-burn products and HTUs,
respectively.
TRIR – Total Recordable Incident Rate
UNGPs – United Nations Guiding Principles on Business andHuman Rights
Upstream supply chain – Those operations in which thematerials flow into the organization (i.e., it mainly refers to
procurement activities and inbound logistics)

Operational impact

Fundamentals

Reporting and performance211

VAP – Validated Assessment Program of the Responsible
Business Alliance (RBA) is a leading standard for on-sitecompliance verification and effective, shareable audits
Voluntary standards and frameworks• Global Reporting Initiative (GRI)• International Integrated Reporting Council (IIRC)• Sustainability Accounting Standards Board (SASB)• Task Force on Climate-related Financial Disclosures (TCFD)• UN Global Compact (UNGC)• UN Sustainable Development Goals (SDGs)
WASH – Water access, sanitation, and hygiene
WBCSD – World Business Council for Sustainable
Development
Wellness and Healthcare products – The term we use
to primarily refer to products associated with inhaled
therapeutics and oral and intra-oral delivery systems that areincluded in the operating results of PMI’s new Wellness and
Healthcare business, Vectura Fertin Pharma
WHO – World Health Organization
YAP – Youth access prevention
ZDM – Zero Deforestation Manifesto

REPORTING AND PERFORMANCE212

Key definitions related to our work to improve
tobacco farmer livelihoods
A living income and living wage are both about achieving adecent standard of living. A living income is the net annual
income required for a household to afford a decent standardof living for all its members and applies to, for example, selfemployed farmers. A living wage is applied in the context
of hired workers (e.g., in factories or on farms) (source: The
Global Living Wage Coalition).
A minimum legal wage, as defined in PMI’s ALP Code, is a
wage for all workers (including temporary, piece-rate, seasonal,
and migrant) that meets, at a minimum, the national legal
standard or formalized agricultural benchmark standard. An
agricultural benchmark may be formalized where a minimum
legal wage is not available or applicable to a specific context.
Child labor, as defined by the ILO, is work that deprives
children of their childhood, their potential, and their dignity,
and that is harmful to physical and mental development.
Under PMI’s ALP Code, the minimum age for admission towork is not less than the age at which compulsory schoolingis completed and, in any case, is not less than 15 years or
the minimum age accepted by the country’s laws, whichever
age limit affords greater protection. No person below age 18
should be involved in any type of hazardous work. In the caseof family farms, a child may only help on the farm provided
that the work is non-hazardous, and the child is at least 13
years old or above the minimum age for such work as definedby the country’s laws, whichever affords greater protection.
Hazardous work means work that, by its nature or by virtueof when or where it is carried out, is likely to harm the health,safety, or morals of children or others. The following can,for example, be hazardous, particularly without the proper
personal protective equipment (PPE): applying crop protection
agents (CPA); stalk cutting; stringing; carrying heavy loads;
working with sharp tools; working in extreme temperatures;and working after dark.

Overview

Green tobacco sickness, or GTS, is a type of nicotine
poisoning caused by the absorption of nicotine from thesurface of wet, fresh, green tobacco leaves through the skin.
The characteristic symptoms of GTS include nausea, vomiting,weakness, dizziness, stomach cramps, difficulty breathing,excessive sweating, headache, and fluctuations in bloodpressure and heart rate. They can last from 12 to 48 hours.1
Personal protective equipment, or PPE, in tobacco farming
refers to any clothes, materials, or devices that provide
protection from exposure to CPA and GTS during specificactivities throughout the crop cycle.2
Living income benchmark studies are studies conducted in
specific regions or areas to estimate the net annual income
required for a household to afford a decent standard of living
for all members of that household.
Living Income Reference Values represent a living income
for typical families in rural (or urban) areas of low income andmiddle-income countries.3 Reference Values provide a credible
estimate of living wage or income at a country level, for ruraland urban areas. They offer an insightful reference beyond thecurrently available indicators for many countries, which aremostly limited to poverty lines and minimum wages.
Farmer income studies are conducted, through thirdparty service providers, to assess all legal income sourcesof contracted farmers within PMI’s tobacco supply chain,including tobacco, complementary crops, and off-farm income.
Sustainable Tobacco Supply Chain framework or STSC –PMI’s new approach focused on the full life cycle of tobacco
production and targets actions toward the tobacco wepurchase and use in our products.
1 Schep LJ, Slaughter RJ, Beasley DM (September–October 2009). “Nicotinic plant poisoning.”
Clinical Toxicology.
2 Adapted from the FAO/WHO (2014) International Code of Conduct on Pesticide
Management.
3 Reference values are built on data and knowledge gained from 40 complete Anker
methodology benchmark studies. Since they are based on a statistical analysis, they have amargin of error for typical rural (or urban) areas of a country, which is generally around +/–10% using a 95% confidence interval. Sources: Living Income Reference Values | living
income (living-income.com) and Anker Living Wage and Living Income Reference Values |Global Living Wage Coalition.

Strategy

Governance

Product impact

Fundamentals

Reporting and performance

213

About this report
We are pleased to share our 2023 Integrated
Report, published on March 28, 2024. This reportfollows our 2022 Integrated Report (published in
April 2023) and constitutes our ninth consecutive
annual disclosure incorporating environmental,social, and governance (ESG) content. This report
describes our Company’s progress in delivering on
its purpose.
The report content is informed by a formal sustainability
materiality assessment conducted in 2021 which follows theprinciples of double materiality by incorporating an assessmentof our Company’s impacts on society and the planet alongside
an evaluation of the potential impact of various ESG factors
on our enterprise value. It also captures the perspectivesof diverse stakeholder groups (read more here). We havestructured our ESG topics around two pillars: product impact
and operational impact. Those topics pertaining to the social
impacts of our products are considered most material. Theseand other material ESG topics form the basis of our strategy,
which is organized into eight environmental and social
priorities and nine related governance factors. This reportprovides information on context, relevance, management
approach, targets, performance, and outlook for our strategic
priorities. It is complemented by case studies, market stories,
and additional materials available on PMI.com.
Unless otherwise indicated, the data and information
contained herein cover our operations worldwide for the fullcalendar year 2023 or reflect the status as of December 31,
2023, in line with our financial reporting calendar. Unlessexplicitly stated, the data, information, and aspirations inthis report do not incorporate PMI’s Vectura Fertin Pharma
subsidiary (consolidating the 2021 acquisitions of wellness
and healthcare companies Fertin Pharma A/S, VecturaGroup plc., and OtiTopic, Inc.), nor the late 2022 acquisitionof Swedish Match AB. Where not specified, data come from
PMI financials, nonfinancials, or estimates.
PricewaterhouseCoopers SA (PwC) has provided limited
independent assurance on select Business Transformation
Metrics, available on page 25. For more details, see theindependent practitioner’s limited assurance report on
page 203. SGS has provided external verification of ourenvironmental, health, and safety data (including our 2023
greenhouse gas emissions data). The verification statements
are available on PMI.com.

Philip Morris International Integrated Report 2023

Operational impact

This report was completed with oversight from PMI’s Boardof Directors and reviewed by its Executive Chairman andall members of our Sustainability Committee—composedof Company Management members, including our Chief
Executive Officer, Chief Financial Officer, and Senior Vice
President & General Counsel. Additional information about
our sustainability work, including previous reports and policies,
is available on PMI.com.
We welcome your feedback and suggestions. Please contact
us at sustainability@pmi.com.

Aligning our disclosures with reporting
standards and frameworks
This report has been prepared with reference to the
Global Reporting Initiative (GRI) Universal Standards(2021) and relevant topic-specific standards. Our
2023 GRI Index is available on PMI.com. Whencompiling our annual integrated report, we consider
the principles and standards of the UN Global
Compact (UNGC) and map them against GRI
indicators in our GRI Index.
We take into account guidance from the International
Sustainability Standards Board (ISSB) of the IFRSFoundation, including using its SASB Standards,
Integrated Thinking Principles, and Integrated
Reporting Framework. Our SASB Index is available
on PMI.com. It maps content within this report andother available disclosures aligned with the Tobacco
Standard, as well as with aspects of the Agricultural
Products, Hardware, and Medical Equipment andSupplies standards.
We considered the UN Sustainable Development
Goals (SDGs) in preparing this report. They aremapped to our 2025 Roadmap and in PMI’s
Sustainability Materiality Assessment 2021 Report,
to showcase how our company goals seek to alignwith those SDGs we believe we can contributetoward. Our 2022 report aligned with the Task Forceon Climate-related Financial Disclosures (TCFD) isavailable on PMI.com.

REPORTING AND PERFORMANCE

214

Overview

Strategy

Governance

Product impact

Forward-looking and cautionary statements

Notes

This report and related materials contain projections of future
results and goals and other forward-looking statements,
including statements regarding expected financial or
operational performance; capital allocation plans; investment
strategies; regulatory outcomes; market expectations; andbusiness plans and strategies. Achievement of future results
is subject to risks, uncertainties and inaccurate assumptions.
In the event that risks or uncertainties, materialize, or
underlying assumptions prove inaccurate, actual results
could vary materially from those contained in such forwardlooking statements. Pursuant to the “safe harbor” provisionsof the Private Securities Litigation Reform Act of 1995, PMI
is identifying important factors that, individually or in theaggregate, could cause actual results and outcomes to differ
materially from those contained in any forward-looking
statements made by PMI.

In this report, “PMI,” “we,” “us,” and “our” refer to Philip MorrisInternational Inc. and its subsidiaries.

PMI’s business risks include: excise tax increases anddiscriminatory tax structures; increasing marketing andregulatory restrictions that could reduce our competitiveness,eliminate our ability to communicate with adult consumers,
or ban certain of our products in certain markets orcountries; health concerns relating to the use of tobaccoand other nicotine-containing products and exposure toenvironmental tobacco smoke; litigation related to tobacco
use and intellectual property; intense competition; the effects
of global and individual country economic, regulatory andpolitical developments, natural disasters and conflicts; theimpact and consequences of Russia’s invasion of Ukraine;changes in adult smoker behavior; the impact of COVID-19
on PMI’s business; lost revenues as a result of counterfeiting,contraband and cross-border purchases; governmental
investigations; unfavorable currency exchange rates andcurrency devaluations, and limitations on the ability torepatriate funds; adverse changes in applicable corporate tax
laws; adverse changes in the cost, availability, and quality of
tobacco and other agricultural products and raw materials, aswell as components and materials for our electronic devices;and the integrity of its information systems and effectivenessof its data privacy policies.

Philip Morris International Integrated Report 2023

PMI’s future profitability may also be adversely affectedshould it be unsuccessful in its attempts to produce andcommercialize reduced-risk products or if regulation or
taxation do not differentiate between such products andcigarettes; if it is unable to successfully introduce new
products, promote brand equity, enter new markets or
improve its margins through increased prices and productivity
gains; if it is unable to expand its brand portfolio internallyor through acquisitions and the development of strategic
business relationships; if it is unable to attract and retain thebest global talent, including women or diverse candidates; orif it is unable to successfully integrate and realize the expected
benefits from recent transactions and acquisitions. Future
results are also subject to the lower predictability of our
reduced-risk product category’s performance.
PMI is further subject to other risks detailed from time totime in its publicly filed documents, including PMI’s Annual
Report on Form 10-K for the fourth quarter and year ended
December 31, 2023. PMI cautions that the foregoing list ofimportant factors is not a complete discussion of all potential
risks and uncertainties. PMI does not undertake to update any
forward-looking statement that it may make from time to time,
except in the normal course of its public disclosure obligations.

In this report and in related communications, the term“materiality,” “material,” and similar terms are defined in thereferenced sustainability standards and certain regulatory
requirements, as may be applicable to us, and are not meant
to correspond to the concept of materiality under the U.S.
securities laws and/or disclosures required by the U.S.
Securities and Exchange Commission.
This report contains references and links to websites
operated by third parties. These references are provided as aconvenience to you and as an additional avenue of access tothe information contained in those sources; they should not
be viewed as an endorsement by us of the content of thesereferences and linked sites or opinions of their authors.
Unless otherwise stated, all references to IQOS are to our
IQOS heat-not-burn devices and consumables.
Trademarks and service marks in this report are the registeredproperty of, or licensed by, the subsidiaries of Philip MorrisInternational Inc., and are italicized or shown in their logo form.
This report reflects PMI’s current views and estimates
based on the data and information available at the time of
publication. Changes in circumstances or new information
may have occurred since the report’s publication, which could
impact the accuracy of certain details. This report includes
metrics that are subject to measurement uncertainties due
to inherent limitations in the nature and methods for datacollection and measurement. The precision of different
collection and measurement techniques may also vary. This
report includes data or information obtained from externalsources or third parties.
Aspirations, targets, and goals do not constitute financial
projections, and achievement of future results is subject torisks, uncertainties, and inaccurate assumptions, as outlined in
our forward-looking and cautionary statements on page 214of this report.
This integrated report should be read in conjunction with
PMI’s Sustainability KPI Protocol 2023.

Operational impact

Fundamentals

Reporting and performance215

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USA

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www.pmi.com© 2024 Philip Morris International, Inc. All rights reserved.

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