Noting the importance of our suppliers in helping us achieve our scope 3 targets, we will continue to engage with our suppliers and partners, share learnings and best practices, and encourage them to set their own science-based targets in line with our SBTi-validated target. To achieve this, we aim to significantly increase the coverage of primary data collection from our suppliers to bring further transparency and robustness to our carbon accounting and set a base for monitoring reduction progress and effectiveness of projects with suppliers. Within our tobacco supply chain, we will continue our efforts to further improve curing efficiency and drive other agricultural practices to reduce carbon emissions of the flue-cured tobacco we source, in line with our 2025 aspiration. We also plan to begin the implementation of our insetting project in Argentina and look for further insetting project opportunities elsewhere that can generate co-benefits between climate, nature, and society.

Hafed Belhadj, Chief Procurement Officer

In 2023, we will work to mitigate any potential spillover effects on scope 3 emissions from business continuity efforts introduced in 2022. This will require low-carbon strategies for freight transportation, materials purchasing, strengthened emission data collection from our primary distribution partners, and an efficient management of stock at all nodes of the supply chain. Moving forward, we will seek to optimize our emissions in the secondary distribution network, optimize energy and water consumption across our warehousing footprint, and keep looking for alternative transportation modes, route-to-market and reverse logistics flow. Furthermore, in collaboration with our carriers and logistic service providers, we will explore green fuels and electric fleets. We aim to continue furthering the integration of sustainability considerations in our work while appropriately managing supply, financial, and quality considerations.

Luca Nanni, Vice President, Global Supply Chain

In 2023, we plan to begin deploying zero-carbon technologies in our factories and consider analyzing additional potential solutions in facilities across the world. We anticipate these technologies will help drive progress toward our aspiration of having 100 percent of renewable electricity sourced in our factories globally and increasing self-generation of our electricity needs. In addition, we will continue to invest in sustainable powertrains and deploy eco-driving training to our drivers to further decrease emissions in our fleet. These initiatives will enable us to build on the success of our internal carbon neutrality certification pilot in Mexico by rolling out the process to a broader range of markets. We look forward to utilizing our Voluntary Emission Reduction Purchase Agreement (VERPA) to guide future investments in projects from our Portfolio of Climate Investments. As in the past, we will seek to limit the use of market-based approaches to emissions compensation activities (offsetting) in the short term and prioritize direct investment in our supply chain in the medium and long term (insetting).

Mimi Kurniawan, Vice President, Operations Sustainability