Our approach to sustainability

Understanding sustainability as a driver of long-term value creation

We view value creation through six interconnected capitals—financial, manufactured, intellectual, human, social and relationship, and natural. Sustainability guides how we steward and grow these capitals over time, ensuring today’s value strengthens the resources we all depend on tomorrow.

We maintain rigorous standards of accountability and transparency that enable us to navigate evolving regulations efficiently. By identifying environmental and social risks early, we build resilience and protect our operations and reputation from unforeseen disruption.

We drive operational excellence by continuously improving how we use resources and deliver projects. We pursue innovations that generate environmental and social benefits alongside commercial returns, strengthening our brand and contributing to positive industry-wide change.

Sustainability becomes a true competitive advantage when paired with innovation and sustained investment across all forms of capital—not as a parallel agenda, but as the foundation of long-term business value. By investing in natural, human, social, intellectual, and manufactured capital, we strengthen the foundations our business relies on and position ourselves to capture future opportunities. This means we are not only managing risks or meeting compliance requirements—we are building capabilities that drive differentiation and growth.

From understanding to action

Our approach embeds this mindset into decision-making across the company. Through our Sustainability Materiality Assessment (SMA), we identify where our actions most strongly intersect with business priorities and where we can create the greatest impact. This clarity guides resources toward initiatives that deliver measurable outcomes: Reducing the harm caused by smoking, respecting environmental boundaries, strengthening supply chain resilience, and maintaining the trust that enables us to operate and grow. By ensuring environmental, social, and financial considerations that shape investment, planning, and performance, we advance in our near-term results while reinforcing long-term resilience.

This is what we mean by sustainable business value: Outcomes that endure precisely because they preserve—rather than deplete—the foundations on which our business and society depend.

Defining our priorities

We rely on a comprehensive, double‑materiality approach that evaluates topics through both impact and financial perspectives. This ensures a balanced understanding of how sustainability issues affect our business and society.

Because these topics evolve, we update our SMA every year, using in-depth evaluations to capture any significant changes. This cyclical process enables continuous improvement and agility.

Our latest assessment, completed in 2024 and updated in 2025, reflects ongoing improvement and robust governance. It aligns with the European Sustainability Reporting Standards (ESRS) and applies PMI’s Enterprise Risk Rating Methodology to ensure consistency across our broader risk‑management system.

The results provide the foundation for our strategic priorities, which group our material sustainability matters into six priorities that guide our agenda:

• Consumers
• Circularity
• Our workforce
• Workers in our value chain
• Climate
• Nature

A full overview of the results can be found on page 141 of the Value Report. Each priority also has a dedicated chapter in the 2025 Value Report with insights from the SMA for its respective priority. Further details are also available in our Sustainability Materiality Report 2025.

Our strategic framework

We organize our six strategic priorities by their connection to our products (WHAT we produce) or our operations (HOW we produce them) and by whether they are social or environmental in essence.

This distinction has shaped our strategy for several years. Product impact considers the consequences of our offerings across their lifecycle on people and the planet. Operational impact covers the broader environmental and social effects of our business practices and activities across the value chain.

This dual categorization forms our updated framework and reflects the priorities of our Value Plan 2030+.

Connectivity and trade‑offs

These six strategic priorities are deeply interconnected. As we design and implement programs, we look for holistic solutions that serve multiple priorities at once. We also recognize that trade‑offs are inevitable, making informed decisions about resource allocation essential. Further details on connectivity and trade‑offs can be found at the end of each strategic priority section in the Value Report.

Reporting transparently

Our annual Value Report and additional sustainability disclosures offer a clear, transparent overview of our approach, performance, and outlook.

Our sustainability reporting process is developed and reviewed in collaboration with internal risk teams to address key risks such as errors, data inaccuracies, and subjective statements. All content undergoes multiple levels of review by PMI employees, including by PMI’s Sustainability Committee, which is composed by members of Company Management.

As sustainability disclosure shifts toward mandatory frameworks, we support standard harmonization to build market confidence and enable meaningful comparison. Our Sustainability Team works closely with Finance, Legal, and Risk Management functions to ensure our reporting meets current requirements and anticipates future changes—continuously enhancing the accuracy and reliability of our disclosures.

Setting aspirations and targets

Our aspirations, outlined in our Value Plan 2030+, define what we aim to achieve across our strategic priorities over the medium to long term. To measure progress, we set clear targets and performance indicators, aligning with recognized external reporting standards wherever possible.

We set ambitious yet feasible targets based on available resources, our maturity on sustainability topics, industry benchmarks, and our sphere of influence. This includes distinguishing what we can directly control from what requires collaboration. By doing so, we derisk our strategy by being transparent about the pace and scope of change we can deliver directly versus what depends on systemic shifts.

A comprehensive outline of our strategic priority targets through 2030 can be found in the Value Plan 2030+

Integrating sustainable value creation into governance and management

Our governance and management structure (see page 20 of the Value Report 2025) ensures accountability and effective execution at every level of the organization, including the Board of Directors, company management, and operational management and program delivery.

Linking key value drivers to executive compensation—PMI VALUE Index

Developed in 2021, PMI’s VALUE Index—formerly the Sustainability Index—consists of a set of Key Performance Indicators (KPIs) designed to link executive compensation to performance across our strategic priorities and incentivize progress. Since 2022, the Index is linked to 30 percent of our performance‑based long‑term equity awards, demonstrating its continued strategic importance.