Philip Morris : PMI Integrated Report 2022

INTEGRATED REPORT 2022

we were

we are transforming for good

we will be

2022 SUSTAINABILITY PROGRESS

02	Philip Morris International - Integrated Report 2022

Overview	Strategy	Governance	Product impact	Operational impact	Fundamentals	Reporting and performance	03

About PMI

Philip Morris International (PMI) is a leading international tobacco company working to deliver a smoke-free future and evolving its portfolio for the long term to include products outside of the tobacco and nicotine sector.

The company's current product portfolio primarily consists of cigarettes and smoke-free products. Since 2008, PMI has invested more than USD 10.5 billion 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 sale of cigarettes. This includes the building of world-class scientific assessment capabilities, notably in the areas of pre-clinical systems toxicology, clinical and behavioral research, as well as post-market studies. In November 2022, PMI acquired Swedish Match -

a leader in oral nicotine delivery - creating a global

smoke-free champion led by the companies' IQOS and ZYN brands. The U.S. Food and Drug Administration (FDA) has authorized versions of PMI's IQOS Platform 1 devices and consumables and Swedish Match's General snus as Modified Risk Tobacco Products (MRTPs). As of December 31, 2022, PMI's smoke-free products were available for sale in 73 markets, and PMI estimates that approximately 17.8 million adults around the world had already switched to IQOS and stopped smoking. Smoke- free products accounted for approximately 32% of PMI's total full-year 2022 net revenues. With a strong foundation and significant expertise in life sciences, PMI announced in February 2021 its ambition to expand into wellness and healthcare areas and, through its Vectura Fertin Pharma subsidiary, aims to enhance life through the delivery of seamless health experiences.

a For more information, please visit www.pmi.comand www.pmiscience.com

Contents

Overview

2022 highlights	04
PMI's Statement of Purpose	05
Message from our Chief Executive Officer	06
Our global footprint	08
Message from our Chief Financial Officer	10
Megatrends	12
Industry trends	14
Stakeholder engagement	18
Strategy
Value creation	22
Transforming for good	24
Business Transformation Metrics	26
Anchoring sustainability at the core of our strategy	28
Our 2025 Roadmap	30
PMI Sustainability Index	31

P R O D U C T

I M P A C T

Maximize the benefits of smoke-free products	52
Purposefully phase out cigarettes	70
Seek net positive impact in wellness and healthcare	74
Reduce post-consumer waste	78

O P E R AT I O N A L

I M P A C T

About this report at a glance

We are pleased to present PMI's Integrated Report 2022, which aims to provide an objective description of our business model, strategy, performance, and prospects in relation to our priority economic, environmental, social, and governance topics. Contents of 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 2022 or reflect the status as of December

31, 2022. Where not specified, data comes from PMI financials, nonfinancials, or estimates.

Unless explicitly stated, the data, information, and aspirations in this report do not incorporate PMI's Vectura Fertin Pharma business (consolidating the 2021 acquisitions

of wellness and healthcare companies Fertin Pharma A/S, Vectura Group plc., and OtiTopic, Inc.), nor the late 2022 acquisition of Swedish Match AB. As we evolve and continue to integrate these business acquisitions, we will, where material and feasible, include them into our ESG reporting in future reporting periods.

This report is accompanied by a set of publications available for download on PMI.com or planned to be issued shortly after this report publication:

• Reporting indicesmapping content of this report against the Universal Standards of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB)
• Performance dataavailable in one place for download
• ESG Highlightssummarizing the content of this report
• Country-levelcase studies and market storiesshedding light on our work in various sustainability areas
• ESG KPI Protocol 2022, providing details on calculation methods, definitions, and the scope of key sustainability performance indicators
• PMI's Task Force on Climate-related Financial Disclosures (TCFD) Report 2022

a Read more about this report here

Governance and management
Board of Directors and Company Management	36
Message from our Chief Sustainability Officer	38
Sustainability governance and management	40
Risk management	46
Fundamentals
Conduct R&D responsibly and transparently	166
Sustain product reliability	168
Nicotine science	170
Uphold business ethics and integrity	173
Respect human rights	176
Manage our supply chain sustainably	179
Safeguard privacy and protect data	184
Apply fair fiscal practices	185

Foster an empowered and inclusive workplace	98
Improve the quality of life of people
in our supply chain	118
Tackle climate change	134
Preserve nature	150

Reporting and performance

About this report	188
Performance in ESG ratings, rankings, and indices	189
Performance metrics	190
Independent assurance report	202
Glossary of terms and acronyms	205
Forward-looking and cautionary statements	210
Notes	211
War in Ukraine	211

©2023 Philip Morris International, Inc. All rights reserved.

04	Philip Morris International - Integrated Report 2022

2022 highlights

PRO D U C T I M PAC T

24.9 m

32.1%

73

Overview	Strategy	Governance	Product impact	Operational impact	Fundamentals	Reporting and performance	05

PMI's Statement of Purpose

PMI aims to completely replace cigarettes as
soon as possible with smoke-free products that	Message from PMI's
are scientifically substantiated to be less harmful	Executive Chairman
than smoking and to evolve in the longer term
into a broader lifestyle, consumer wellness,
and healthcare company.

	Estimated total adult users of	Of net revenues derived from	Markets where PMI smoke-free products
	PMI's smoke-free products	smoke-free products	are available for sale, of which 42% in
SOCIAL	(2021: 21.7 m)1	(2021: 29.5%)2	low- and middle-income countries
		(2021: 71, 42%)3

USD 10.7 bn	91%	USD 0.3 bn
Cumulative investment behind	Of total shipment volume covered by	Annual net revenue from wellness
smoke-free products since 2008	youth access prevention programs	and healthcare products
(2021: USD 9.2 bn)4	in indirect retail channels	(2021: USD 0.1 bn)
	(2021: 91%)5

ENVIRONMENT	86%	68%	8.5%
(2021: 86%)6
	Recycling rate of IQOS devices	Of shipment volume covered by	Of shipment volume covered
	returned to our centralized recycling	markets with anti-littering programs	by markets with smoke-free
	hubs (weighted-average percentage	in place for combustible cigarettes	consumables take-back programs7
	of each device that is recycled)

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

SOCIAL	40.7%	7
exceeding our 2022 target of 40%	since 2018 in highest-risk countries
	Of management positions held by women,	Human rights impact assessments conducted
	(2021: 39.7%)	(2021: 5)
ENVIRONMENT	55%	Triple A
	Proportion of tobacco purchased at no risk of net deforestation	Score from CDP for climate,
	of managed natural forest and no conversion of natural ecosystems	forest, and water security for
	(2021: 37%)	the third consecutive year

Our company's purpose is clearly articulated in PMI's Statement of Purpose, a declaration issued by our Board of Directors. The Statement of Purpose also recognizes those stakeholders most critical

to long-term value creation and sustainability. Excerpts from PMI's Statement of Purpose:

"The Company is actively accelerating the decline of cigarette smoking beyond what traditional tobacco control measures can achieve alone."

"PMI remains committed to accelerating the end of smoking and laying the foundations of a strong business in areas of wellness and healthcare as we strive to develop commercially successful products that have a net positive impact on society."

"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 ways by PMI's transformation."

"PMI believes that with the right regulatory encouragement and support from civil society, cigarette sales can end within

10 to 15 years in many countries."

About PMI's Statement of Purpose

André Calantzopoulos

Executive Chairman

PMI announced a bold change of vision in 2016: to base its future success on smoke-free products, with the aim for these products to completely replace cigarettes as soon as possible for those who continue to use nicotine. The company has been disrupting itself from the inside out since then, focusing its resources on the development, the scientific substantiation, and the commercialization of smoke-free products that are less harmful than smoking. In the process, it has accumulated learnings and broadened its capabilities. This

has allowed us to expand our purpose beyond the sole goal of phasing out cigarettes, with an intent to evolve into a broader lifestyle, consumer wellness, and healthcare company commercializing products that go beyond tobacco and nicotine.

PMI's purpose is grounded in science, technology, and sustainability, and sets PMI's long-term horizon. Clarity of purpose is fundamental to guide our efforts and resource allocation. It enables the company to maintain consistency and coherence as it transforms rapidly in order to leave cigarettes behind and ventures into areas that represent new avenues of growth.

aRead PMI's full Statement of Purpose

1 Figures pertain to total IQOS users. See Glossary.

• For definition of net revenues related to smoke-free products, see Glossary. 2022 figure includes Swedish Match net revenues from November 11, 2022 (acquisition date) to December 31, 2022. 2021 data exclude the impact related to the Saudi Arabia customs assessments.

• Including Swedish Match and excluding PMI Duty Free. Classification of low- and middle-income countries is based on World Bank report issued in July 2022.
  4 Investments reflect research, product and commercial development, production capacity, scientific substantiation, and studies on adult smoker understanding.
  5 Total shipment volume includes cigarettes, other tobacco products (OTPs), and smoke-free product consumables, See PMI's ESG KPI Protocol 2022for further details.
  6 Recycling rate: percentage of the weight of each device that is recycled, weighted-average depending on device type and processing facility (includes 80% recycling and 6% energy recovery). 2022 data cover CIRCLE hubs in Hungary and Japan.

7 Shipment volume includes heated tobacco units, e-vapor cartridges, and e-vapor disposables. See PMI's ESG KPI Protocol 2022for further details.

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

06	Philip Morris International - Integrated Report 2022

Message from our Chief Executive Officer

Overview	Strategy	Governance	Product impact	Operational impact	Fundamentals	Reporting and performance	07

"Our company continued to transform at a pace and scale unprecedented compared to analogous transitions."

Despite its many tests, 2022 was a remarkable year that brought our employees closer and saw us make measurable strides toward achieving our purpose.

As I look back, I see not so much the challenges as everything that we were able to accomplish together. Our company continued to transform at a pace and scale unprecedented compared to analogous transitions. Almost seven years since we announced our vision

of a smoke-free future, the volume of combustible tobacco products made and sold by our company has decreased by 27 percent. This past year, we kept our relentless focus on that ambition, dedicating 99 percent of our research and development and 74 percent of our commercial expenditure to smoke-free products. I can proudly report that, in 2022, smoke-free products represented 32.1 percent of our net revenues, and we estimate that, by year-end, almost 25 million adults were using our main smoke-free product, IQOS.

To further accelerate progress, we achieved two critical milestones in 2022: our acquisition of Swedish Match and the agreement to take full control of IQOS in the U.S. as of April 30, 2024. With over 30 million adult smokers, the U.S. represents an immense opportunity to strengthen our smoke-free position and achieve a future without cigarettes. Swedish Match will also be a crucial component of our growth. Like us, they are committed to a smoke- free future. Bringing together our two companies has expanded our portfolio and geographic footprint, placing a future free from cigarettes more firmly in our grasp. This Integrated Report does not comprehensively account for the impact of this acquisition due to its recent nature, but we look forward to sharing the progress achieved through the integration of our two businesses in our next report.

Our sustainability strategies continue apace as we seek to tackle the impacts of both our products (what we produce) and our operations (how we produce).

Managing the social impacts of our products by ensuring that they do not reach unintended audiences is a priority, and we continue to put in place youth access prevention safeguards in our direct and indirect retail channels. Mindful of the importance of reducing post- consumer waste, we made progress in implementing take-back programs for our smoke-free devices and consumables. We increased our repair capabilities, piloted IQOS ILUMA Refresh in Japan, and are on

track to reach a cumulative one million smoke-free electronic devices refreshed or repaired by 2025.

On the social side of our operations, we expanded access to structured lifelong learning offers to an estimated 80 percent of PMI employees. To accelerate our progress on human rights, we published a strengthened Human Rights Commitment and completed our sixth and seventh human rights impact assessments, in Brazil and Malaysia. In our tobacco supply chain, we are on track to reduce the prevalence of child labor among the farms from which PMI buys tobacco and to increase the proportion of contracted farmers supplying tobacco to PMI who make a living income.

On the environmental side, CDP recognized our leadership with a Triple A score for the third consecutive year. We continued decarbonizing our direct operations and saw 13 PMI factories certified as carbon neutral. Moreover, the Science Based Targets initiative has validated our 2040 net-zeroscience-based target (scope 1+2+3). We are progressing well toward our target to purchase tobacco at no risk of deforestation of managed natural forests and no conversion of natural ecosystems. In conjunction with the UN Biodiversity Conference (COP 15) in December, we announced new long-term biodiversity and water ambitions and strategies, aligned with the post-2020 biodiversity framework adopted by parties to the convention.

To further substantiate our commitment to sustainability, we introduced PMI's bespoke Sustainability Index, representing 30 percent of our long-term performance- based equity executive compensation.

While we progressed well on our work to address our priority ESG issues, we know that we must accelerate efforts in some areas.

Climate change, rising levels of natural resource scarcity, and an increasingly fragmented and too often disrupted global supply chain-coupled with unforeseen events such as the war in Ukraine and its far-reachingimpacts-have hampered our ability to reduce our scope 3 emissions as quickly as we planned to. Nevertheless, we continue working towards reaching our goals

and focus on crafting and implementing innovative solutions to drive better sourcing and supply chain management that promotes resilience in the short term and allows us to achieve our decarbonization ambitions for scope 1, 2 and 3 in the long term.

We continue to work towards improving our gender balance in senior roles. We remain committed to achieving a more diverse, equitable, and inclusive workplace, including increased female representation in leadership positions. We are cognizant that a diverse workplace can increase innovation and foster better solutions, and will help our business grow.

Our geographic expansion to make our smoke-free products available in more markets was slower than previous years, partly as a consequence of supply chain disruption linked to the war in Ukraine. We will continue our focus on the rollout of IQOS ILUMA and to work on obtaining appropriate regulatory and fiscal frameworks in markets in order to further our successful geographic expansion.

Our ability to respond and adapt to change and sudden disruptions will continue to be tested over time, and I am confident that the resilience of our people and the strength of our purpose will allow our organization to prosper. Our Integrated Report 2022 provides visibility into not only how we are performing today but how we are building preparedness to succeed in coming years. It is my hope that this report will spark dialogue and that our stakeholders will accept our invitation to judge us not for the company we were but for the company we are today (including the tangible progress we have made thus far) and, importantly, the one that we are working hard to become. It is through constructive engagement that we will accelerate the pace of meaningful and impactful change and complete our transformation, for good.

Jacek Olczak

Chief Executive Officer

"Our ability to respond and adapt to change and sudden disruptions will continue to be tested over time, and I am confident that the resilience of our people and the strength of our purpose will allow our organization to prosper."

08	Philip Morris International - Integrated Report 2022

Our global footprint

Overview	Strategy	Governance	Product impact	Operational impact	Fundamentals	Reporting and performance	09

2022 overview by PMI segment

Our product portfolio

Smoke-free products

32.1%

Smoke-free products

Our smoke-free product portfolio is composed of three main product categories: heated tobacco, e-vapor, and oral nicotine. Our leading smoke-free product is a heated tobacco product (also referred to as heat-not-burn product) commercialized under

Proportion of PMI's total

2022 net revenues generated by each segment

Proportion of 2022 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

						South &				Americas				Wellness
European		Eastern		Middle East		Southeast		East Asia &		(incl. the		Swedish		and
Union		Europe		& Africa		Asia		Australia		U.S.)		Match		Healthcare
38%	12%	12%	14%	16%	6%	1%	1%
40%	35%	9%	1%	58%	5%	78%	100%
28%	8%	4%	35%	5%	10%	9%	2%
13	3	4	10	2	6	14	1

the IQOS brand that uses sophisticated electronics to heat tobacco in a controlled manner to release flavors and nicotine without combustion. Our e-vapor products, commercialized in 2022 under

Notes:

Figures in the above table are rounded. For definition of net revenues derived from smoke-free products, see Glossary.

As of December 31, 2022, we managed our business in six geographical segments, a Swedish Match segment (reflecting operating results from November 11, 2022 (acquisition date) to December 31, 2022) and a Wellness and Healthcare segment (which includes the operating results of our new Wellness and Healthcare business, Vectura Fertin Pharma). See Glossary.

PMI's net

revenues in

20221

the IQOS VEEV and VEEBA brands, generate an aerosol by heating an e-liquid formulation. We are also present in oral nicotine products, including in nicotine pouches with the brand SHIRO, as well as with the leading brand ZYN following the acquisition of Swedish Match in November 2022.

71,070

Employees worldwide 1

73

Markets where PMI smoke-free products are available for sale 2

	Operations Center:
	Lausanne, Switzerland
Headquarters:	European	South &
Stamford, CT, USA
Southeast Asia
	Union
	Eastern
	Europe

Combustible tobacco products

67.9%

Combustible tobacco products

We seek to maintain our competitive position in the cigarette market while we transition away from combustible tobacco products. This helps to finance our R&D into smoke-free alternatives, their manufacturing and commercialization, and to accelerate our transformation, while opening the way for the industry to follow our lead. In addition, it gives us faster and direct access to trade and adult smokers. Our cigarette brands are sold in around 175 markets, in many of which they hold the number one or number two market share position. Our portfolio includes a wide range of premium, mid-price, and lower-price brands, including Marlboro, L&M, Chesterfield, Philip Morris, and Parliament, which are among the 15 most popular brands in the international cigarette

223,299

Contracted farmers supplying us with tobacco, located in 20 countries

24.9 m

Estimated users of PMI smoke-free products3

Middle East	East Asia
& Africa	& Australia
Americas
(incl. the U.S.)

market (which excludes China and the U.S.).

PMI-owned	Third-party	Third-party operators
manufacturing facilities 4	manufacturers	(in Indonesia)	1 Incorporating Vectura Fertin Pharma, as well as the
53	31	38	2022 acquisition of Swedish Match, PMI employed
approximately 79,800 people worldwide at year-end 2022.

• For definition of net revenues related to smoke-free products and combustible tobacco products, see Glossary. Including Swedish Match net revenues from November 11, 2022 (acquisition date) to December 31, 2022.

2	Including Swedish Match.
3	Figures pertain to total IQOS users. See Glossary.
4	Including Swedish Match and Vectura Fertin Pharma.