ALLIANCE FOR WATER STEWARDSHIP (AWS) AUDIT REPORT Based on AWS Standard Version 1.0

JSC Philip Morris Volkhonskoe shosse, 7, Kvartal 2, Industrial zone Gorelovo, Lomonosovsky district, Leningrad area, RF, 198323

Report Date: 28-08-19 Report Version: 03.3 Prepared by: Mr. Aleksandr Kamzolov Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 JSC Philip Morris Izhora AWS Audit Report

Contents 1. General Information ...... 3 1.1. Client Details ...... 3 1.2. Certification Details ...... 3 2. Executive Summary ...... 4 3. Scope of Assessment ...... 5 4. Description of the Catchment ...... 5 5. Summary on Stakeholder and shared Water Challenges ...... 7 6. Summary of the Assessment ...... 7 6.1. Major Non-conformities ...... 7 6.2. Minor Non-conformities ...... 7 6.3. Observations ...... 7 7. Schedule for Surveillance Audit ...... 8 8. Conclusion and Recommendation ...... 8 9. Audit Checklist ...... 10

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 2 of 26 JSC Philip Morris Izhora AWS Audit Report

1. General Information

1.1. Client Details

Company Name JSC Philip Morris Izhora Business address: - Volkhonskoe shosse, 7, Kvartal 2, Industrial zone Gorelovo, Auditing Site Address: Lomonosovsky district, Leningrad area, RF, 198323 Activities / Processes: Manufacturing of tobacco heatsticks and cigarettes Principle contact person: Kovalchenko M.S. Office telephone: +7 (812) 718 45 45 Fax: +7 (812) 718 45 45 E-mail: [email protected] Web site: www.pmi.com

1.2. Certification Details

Audit Date(s): 26-06-19 and 27-06-19 Auditor Team: Mr. Aleksandr Kamzolov Certification Date: 06-08-19 Proposed date for next audit: 26-06-19 (surveillance audit) Audit Report completed by: Mr. Aleksandr Kamzolov

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 3 of 26 JSC Philip Morris Izhora AWS Audit Report

2. Executive Summary Philip Morris International Inc. (PMI) is an American multinational cigarette and tobacco manufacturing company, with products sold in over 180 countries outside the United States. The most recognized and bestselling product of the company is Marlboro. Group is committed towards its environmental and social responsibilities and hence decided to go from AWS certification as one of their steps towards their sustainable goals. As part of their commitments, CU was appointed to conduct AWS audit and certification for JSC Philip Morris Izhora site in . JSC Philip Morris Izhora produces cigarette products and tobacco sticks. This production facility is divided into several blocks namely tobacco production, cigarette production, production of sticks, storage of finished products, water treatment, fire hydrant, treatment facilities for surface water, parking area, chemical storage area and admin area. In overall facility water is used for washing equipment and humidification of tobacco. Total water consumption by facility is around 170,633 m3 per year. The certification audit announcement was published 30 days before the audit, as required by AWS standard, in the following media; Control Union website, AWS website and local media. The audit was conducted for 2 days i.e. on 26th and 27th Jun 2019. The team was comprised of following personnel; Name Role in Audit Mr. Aleksandr Kamzolov Auditor Mr. Bunny Azmi Certifier The audit findings showed that the site meet up with all the core level criteria. All the Non-Conformities identified were at the level of advance requirements of the standard. Since the advance requirements are not mandatory requirements this time, therefore there was no any timeline for closing of the Non- Conformities. The site meets up with all the requirements and criteria for Core level certification. Therefore, it is recommended to be awarded Core Level of AWS certificate.

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 4 of 26 JSC Philip Morris Izhora AWS Audit Report

3. Scope of Assessment

Audit Standard Alliance for Water Stewardship V1.0 Initial Audit Yes / No Surveillance Audit Yes / No Single Site Multi-site Group Type of Certification X Industrial zone Gorelovo, Lomonosovsky district, Location of Audit Leningrad area, RF, 198323 The plant water catchment which is & River, the relevant stakeholders in the catchment area, Scope of Certification all the production lines and other related areas utilizing water on the site Document review, management of interview, employee Assessment on-site activities includes interview, onsite implementation review

4. Description of the Catchment The water source for PMI Izhora and region around is from nearby two catchments i.e. Neva River and Okhta River. 98% of the surface water comes from the Neva River. GUP Vodokanal extracts less than 1% of the Neva River flow rate (@2,500 m³/s) and make it available for community and industries. There are no limitations in additional water extraction if needed. Surface water management is organized by the state river basin institutions under Federal Agency of Water Resources. The SPB one is called Neva and Ladoga Basin Water Authority. Neva River local catchment No. 28 as per SKIOVO identification (Neva River without Okhta River) having an area of 220 km2. PM Izhora is located at the border of two basins and belongs to Luga basin. Neva and Ladoga Basin Water Authority developed so called Schemes of the Comprehensive Use and Protection of Water Bodies in River Basins (SKIOVO). This scheme has united Dudergofka with Ligovsky which has facilitate to enlarge catchment area at length of 21 km and catchment area at 120 km2. Unitary enterprise GUP Vodakanal is also owner of municipal waste water treatment system. Water sources situation in the catchment(s):

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 5 of 26 JSC Philip Morris Izhora AWS Audit Report

The map shows location of the plant in relation to Neva basin (Neva with its tributaries).

Source: SKIOVO for the Neva River Basin, Vol. 1 (http://www.nord-west- water.ru/upload/information_system_18/3/2/8/item_32845/information_items_property_7374.pdf)

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 6 of 26 JSC Philip Morris Izhora AWS Audit Report

5. Summary on Stakeholder and shared Water Challenges

The list of water related stakeholders for PMI Izhora plant includes host communities; Rosprirodnadzor, Rospotrebnadzor, natural resources Committee, Nevsko-Ladoga basin water management, Vodokanal, JJJ "Jacobs Dau Egberts Rus", MM Packaging, Keramin, Tractor manufacturer - Kirovsky plant, Coca-Cola Hellenic, water related NGOs. There are no water problems at the enterprise and the company provides assistance to the state in terms of cleaning the shores of lakes and , . At the time of the audit, the reports of meetings with Stakeholders were checked, in the past the company had some problems with water quality (excess iron), but the company successfully coped with this, conducts regular water quality analyses at the site. A program has been developed to assess possible problems that may arise in the territory with solutions. Consensus was reached with JJJ "Jacobs Dau Egberts Rus" on further cooperation on AWS, discussion of emerging issues and what joint actions will be taken to remedy the situation. The company participates in forums, Federal and local meetings, and promotes AWS philosophy and practices

6. Summary of the Assessment

6.1. Major Non-conformities

Sr. AWS Response from Client Description of NC Closure No. Criteria (explanation & documents) Nil

6.2. Minor Non-conformities

Sr. AWS Response from Client Description of NC Closure No. Criteria (explanation & documents) Nil

6.3. Observations

Sr. AWS Response from Client Description of NC Closure No. Criteria (explanation & documents) 1 4.6 PMI has listed their [23-07-2019] PMI Izhora has submitted [23-07-2019] suppliers and engaging relevant evidences for the point. Response with them over water accepted use issues. All these relevant document pages are shared as snap and auditor has verified all this on site. Request PMI to share few snap as evidences of their engagement with supplier over indirect water use. 2 5.5 PMI is requested to [02-08-2019] PMI Izhora has submitted [02-08-2019] share evidences that a link (https://ecology.expoforum.ru/ Response not facility has conducted delovaya-programma?date=21.03.19& accepted, hence reviews over their water

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 7 of 26 JSC Philip Morris Izhora AWS Audit Report

Sr. AWS Response from Client Description of NC Closure No. Criteria (explanation & documents) stewardship efforts by eventId=5c0a37dd1c5da1e70a99e701) criteria not their top management against response to this observation. scored. like executive team (CEO/CFO or [14-08-2019] PMI shared two minutes [14-08-2019] equivalent) or board (or of meetings held on 20-12-2018 and Response not equivalent). 22-04-2019 with Jacobs industries one accepted, hence of the identified stakeholders. criteria not scored. (for explanation please refer to section 9 of this report)

7. Schedule for Surveillance Audit As this initial audit is conducted on 26.06.2019, as per the requirement of standard surveillance audit must be scheduled within 13 months. Hence, next surveillance audit must be conducted on or before 26.07.2020. This date even includes any request for re-assessment for certification level upgradation.

8. Conclusion and Recommendation JSC Philip Morris Izhora has implemented the AWS standard on its facility and is actively promoting the requirements of this standard on the territory of its water use and working with water users & government authorities, as evidenced by observations and documents. This summary is for the certification review done on the audit findings under AWS standard.

Observations / Feedbacks:

1. PMI has involved many stakeholders in their conduct for water stewardship - employees, consultant, government agencies, suppliers, educational institute 2. PMI has done a great work on formalizing its' policy, if company could also formalize its commitment with time-bound and social benefits then this would further reflect it's stewardship efforts. Towards criteria 1.1, PMI could develop a separate commitment either site specific or at group level as per AWS Standard Version 1.0 (page 49) 3. PMI need to describe their sphere of influence more clearly 4. PMI needs to work more towards indirect water consumptions and relevant planning to reduce their impact. Engaging more with stakeholders like suppliers, external processing agents, etc. will contribute positively into this part 5. Towards criteria 2.12, PMI has demonstrated that company is cleaning storm water channels but do not suffice the purpose of understanding groundwater status or environmental flows and the site’s potential contributions 6. PMI needs to engage with more stakeholders who are sharing the same water-related challenges, share their plan, take their consensus and work on water governance 7. Though the document referred in criteria 3.3 has water-related incident / emergency response plan but it is suggested that more water specific aspects & impacts should be considered so that this plan could be upgraded for better resilience

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 8 of 26 JSC Philip Morris Izhora AWS Audit Report

8. For public disclosures PMI must also include platforms like annual reports, integrated reports, sustainability reporting, social reporting, etc. These disclosures should not only have list of compliances and achievement over action plans but also any violation and measures taken to rectify issue 9. Towards criteria 5.3, PMI need to show utilization of the commentary / feedback that is received during stakeholder consultation for future planning 10. PMI needs to formalize plan to increase site level awareness on water stewardship as well as for stakeholders with same water-related challenges

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 9 of 26 JSC Philip Morris Izhora AWS Audit Report

9. Audit Checklist

Step 1: COMMIT – Commit to being a responsible water steward AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 1.1 Establish 1.1.1 Signed Core Management commitments are spelled [19 Jul 2019] PMI has AWS commitment signed by a leadership and publicly out in the AWS policy, the policy is company's General Director on 27th Mar 2019. Photo commitment disclosed signed by the company's CEO (senior of the commitment is shared. on water statement that management), posted on the company's https://www.pmi.com/resources/docs/default- stewardship explicitly covers website, at the entrance and on the source/russia-market/news/aws-commitment_29- all requirements information stands inside the plant. 03r.pdf?sfvrsn=5ac692b5_2

1.2 Develop a 1.2.1 Publicly Core Management commitments are spelled [19 Jul 2019] PMI has AWS commitment signed by water available policy out in the AWS policy, the policy is company's General Director on 27th Mar 2019. Also, stewardship that meets all signed by the company's CEO (senior it is publicly available on PMI's website. Please refer policy requirements management), posted on the company's link below website, at the entrance and on the https://www.pmi.com/ resources/docs/default- information stands inside the plant. source/russia-market /news/aws-commitment_ 29- 03r.pdf?sfvrsn=5ac692b5_2 This commitment is also displayed on company's entry area for stakeholders to refer it. Photos shared. 1.3 Further 1.3.1 Official Advance AWS-010-INT-CAB-00-03-00017-0090 [19 Jul 2019] Findings accepted the Alliance registration with for Water AWS Stewardship 1.4 Commit 1.4.1 Formal Advance The company has implemented the [19 Jul 2019] Auditor has referred to the to other commitment to environmental standard ISO 14001- commitments on PM website initiatives that qualifying 2015, OHSAS 18001-2007, and there (https://www.pmi.com/markets/russia/ru/sustainability) advance initiative(s), are several internal environmental and this is being found relevant. However, time- effective including a programs for environmental protection bound target and additional social & environmental water timeline for including water resources ("green game" benefits (apart from AWS requirement) could not be stewardship completion - shoreline cleanup) demonstrated. Findings accepted 1.5 Secure a 1.5.1 Advance the policy is signed by the company's [19 Jul 2019] Findings accepted water Appropriately CEO (senior management) stewardship signed and commitment publicly from the available

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 10 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response organization’s statement that senior-most explicitly covers executive or all requirements the organization’s governance body 1.6 Commit 1.6.1 Signed Advance Statement available to the public is at [19 Jul 2019] As part of global policy PMI has a policy to directly and publicly the checkpoint No.1 to help community on their water need specified in assisting with disclosed "Responsible Water Use". And it is available on community statement that entrance of the company. It also specifies use of 20 water needs explicitly covers liters water per person on emergency. in times of all requirements stress

Step 2: GATHER & UNDERSTAND – Gather data to understand shared water challenges and water-related risks, impacts and opportunities AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 2.1 Define the 2.1.1 Documentation or Core "Scope: production of cigarettes, [19 Jul 2019] All required documents physical scope map of the site’s tobacco, sticks". Map of the site are available and relevant snaps are boundaries available with cold water supply, storm shared and auditor has verified all this 2.1.2 Names and water, sanatorium water, produce on site. location of water water; Maps of the river basin, and Findings accepted. sources, including both more details on the website. The plot water service provider (if will produce 100% with municipal water. applicable) and ultimate (contract with water supplier available); source water Maps and report on the status of the 2.1.3 Names and water basin location of effluent discharge points, including both water service provider (if applicable) and ultimate receiving water body 2.1.4 Geographical description or map of the catchment(s)

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 11 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 2.2 Identify 2.2.1 List of Core List of stakeholders, meeting minutes, [19 Jul 2019] PMI has identified the stakeholders, their stakeholders, Description of the site’s sphere of stakeholders and doing engagement water-related descriptions of prior influence and the rationale for including with them and had also identified water challenges and the engagements and issues on the site related challenges. All these relevant site’s sphere of summaries of their documents are shared as snap and influence water-related challenges auditor has verified all this on site. 2.2.2 Description of the site’s sphere of influence 2.3 Gather water- 2.3.1 List of relevant Core List of stakeholders, meeting minutes, [19 Jul 2019] A report prepared by related data for the aspects of catchment Description of the site’s sphere of Vodokanal (govt. agency) and global catchment: Gather plan(s), significant influence and the rationale for including team of PMI covers all these gathered credible and publicly led initiatives issues on the site; SanPiN 2.1.4.1074- data for Izhora site. All these relevant temporally relevant and/or relevant water 01 (state standard for drinking water document pages are shared as snap data on the site’s related public policy maintained on Register of regulatory and auditor has verified all this on site. catchment: goals for the site requirements at site) Findings accepted. x Water 2.3.2 List, and Presentation of the water utility on the governance description of relevance, situation in the water basin [14 Aug 2019] PMI has shared x Water balance of all applicable water- Protocols of laboratory control of additional refer for "Register of x Water quality related legal and incoming water and effluents (made regulatory requirements" maintained by x Important Water- regulatory requirements, monthly) Report on the General them which is also a part of gathering Related Areas including legally defined infrastructure, water basin, the study water-related data. x Infrastructure’s and customary water was conducted by the state authorities current status rights and water-use in terms of the installation of new water rights treatment systems, but not to predict 2.3.3 Catchment water the situation balance by temporally relevant time unit and commentary on future supply and demand trends 2.3.4 Appropriate and credibly measured data to represent the physical, chemical and biological status of the site’s water source(s) by temporally relevant time unit, and commentary on

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 12 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response any anticipated future changes in water quality 2.3.5 Documentation identifying Important Water Related Areas, including a description of their current status and commentary on future trends 2.3.6 Existing, publicly available reports or plans that assess water- related infrastructure, preferably with content exploring current and projected sufficiency to meet the needs of water uses in the catchment, and exposure to extreme events 2.4 Gather water- 2.4.1 Copies of existing Core Emergency action plan, SanPiN [19 Jul 2019] PMI has gathered all the related data for the water stewardship and 2.1.4.1074-01 (state standard for site relevant water data and maintaining site: Gather incident response plans drinking water). Presentation of the the records. All these relevant credible and 2.4.2 Site water balance water utility on the situation in the water document pages are shared as snap temporally relevant (in Mm3 or m3) by basin Protocols of laboratory control of and auditor has verified all this on site. data on the site’s: temporally relevant time incoming water and effluents (made Findings accepted. x Governance unit and water-use monthly) Report on the General x Water balance intensity metric (Mm3 or infrastructure, water basin, the study x Water quality m3 per unit of was conducted by the state authorities x Important Water- production or service) in terms of the installation of new water Related Areas 2.4.3 Appropriate and treatment systems, but not to predict x Water-related credibly measured data the situation costs to represent the physical, chemical and biological status of the site’s direct and outsourced water effluent by temporally relevant time unit, and

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 13 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response possible pollution sources (if noted) 2.4.4 Inventory of all material water-related chemicals used or stored on-site that are possible causes of water pollution 2.4.5 Documentation identifying existing, or historic, onsite Important Water-Related Areas, including a description of their status 2.4.6 List of annual water-related costs, revenues and description/quantification of social, environmental or economic value generated by the site to the catchment 2.5 Improve the 2.5.1 List of primary Core Report on the catchment area from a [19 Jul 2019] PMI has gathered all the site’s inputs with their third party, taking into account the site relevant indirect water use data. understanding of its associated embedded amount of water on the site and Some relevant data in form of indirect water use annual (or better) water possible problems. presentation shared and auditor has use and (where known) The list of water consumers, including verified all this on site. their country/region/or consumers of water, projected water Findings accepted. catchment of origin with consumption for outsourcing. its level of water stress 2.5.2 List of outsourced services that consume water or affect water quality and both (A) estimated annual (or better) water withdrawals listed by outsourced services (Mm3 or m3) and (B)

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 14 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response appropriate and credibly measured data to represent the physical, chemical and biological status of the outsourced annual (or better) water effluent 2.6 Understand 2.6.1 Prioritized and Core Compiled list of water problems from [19 Jul 2019] PMI has gathered water shared water- justified list of shared 22.01.19, with planned actions to related challenges data at Catchment related challenges water challenges that address these problems level (record name - Shared water in the catchment also considers drivers challenges in the catchment of PM and notes related to Izhora) and accordingly they have public-sector agency prepared their plan. Some relevant data efforts in form of snap shared and auditor has verified all this on site. Findings accepted. 2.7 Understand 2.7.1 Prioritized list of Core Compiled list of water problems from [19 Jul 2019] PMI has gathered water and prioritize the water risks facing the 22.01.19, with planned actions to related risk & opportunity (record name site’s water risks site, noting severity of address these problems, calculation of - PM Izhora water risks and and opportunities impact and likelihood water resources saving taking into opportunities) and accordingly they within a given time account the implementation of have prepared their plan. Some frame production practices relevant data in form of snap shared 2.7.2 Prioritized list of and auditor has verified all this on site. water-related Findings accepted. opportunities for the site 2.7.3 Estimate of potential savings/value creation 2.8 Support and 2.8.1 Evidence of water- Advance The data were collected together with [19 Jul 2019] A report prepared jointly undertake joint related data that was the contractor (report on the water area) by Vodokanal (govt. agency) and global water-related data jointly gathered and together with the state authorities team of PMI covers all these gathered collection (report of the water utility) data for Izhora site. All these relevant document pages are shared as snap and auditor has verified all this on site. Findings accepted. 2.9 Gather 2.9.1 Water-related data Advance PMI is working towards these [19 Jul 2019] Findings accepted. additional, detailed sets that go beyond core requirements water-related data requirements – See Guidance for details

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 15 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 2.10 Review a 2.10.1 Copy of a study Advance PMI is working towards these [19 Jul 2019] Findings accepted. formal study on that details projected requirements future water future state conditions resources relative to current scenarios quantity and quality parameters and a comment on potential impacts upon the site’s growth strategy 2.11 Conduct a 2.11.1 Detailed Advance There is list of suppliers, but no analysis [19 Jul 2019] Findings accepted. detailed, indirect description of the site’s for water use. water use water-related supply evaluation chain with indirect water use amounts (for water quantity and quality) and the site’s engagement efforts to date for each 2.12 Understand 2.12.1 Conclusions Advance Company at its own expense annually [19 Jul 2019] PMI is deploying their groundwater status about the site’s potential cleans the drainage channel outside its manpower for cleaning of storm water or environmental contributions to territory, which is responsible for the channels (both natural and man-made) flows and the site’s groundwater recharge or flow of rainwater into the riverbed at least once is a year. Enough potential environmental flows evidences could not be shared by PMI. contributions restoration Findings accepted. 2.13 Complete a 2.13.1 Social impact Advance PMI is working towards these [19 Jul 2019] Findings accepted. voluntary Social assessment report requirements Impact Assessment

Step 3: PLAN – Develop a water stewardship plan AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 3.1 Develop a 3.1.1 Documented Core The system is described in the policy of [19 Jul 2019] PMI has taken all the steps system that description of system, the company, in the news (on the to develop the system for legal promotes and including the processes website) on the sustainable compliance. Third party conducts annual evaluates water- to evaluate compliance development of the enterprise, created ISO and OHSAS audits on legal related legal and the names of those orders with the appointment of compliance. At plant level, there is a compliance responsible and responsible legal register which is being regularly accountable for legal checked and updated by the compliance environmental engineer. Auditor has verified all these on site. Findings accepted.

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 16 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 3.2 Create a site 3.2.1 Available water Core The company has created a long-term [19 Jul 2019] Based on gathered data water stewardship stewardship strategy development plan for the company for catchment and site PMI has strategy and plan: 3.2.2 Available plan that (partially completed, partially developed relevant strategies and action Develop an meets all component implemented in the future), takes into plans. All these relevant document internally available requirements and account the objectives, annual actions pages are shared as snap and auditor water stewardship addresses site risks, with deadlines, the budget for each has verified all this on site. strategy and plan opportunities and category, designated responsible for Findings accepted. for the site that stakeholder shared implementation and control, note how addresses its water challenges this action will have a positive impact on shared water the ecology of the region including challenges, risks water. and opportunities identified in Step 2 3.3 Demonstrate 3.3.1 A description of Core Emergency plan of interaction with [19 Jul 2019] PMI has developed (along responsiveness and the site’s efforts to be internal services and external users, with key stakeholders) incidence resilience to water- responsive and resilient including government agencies, has response plan on the name of related risks into the to water-related issues been created "Management of Water Resources PMZ- site’s incident and/or risks in an ENV-03" and "plan of measures for response plan appropriate plan localization and elimination of consequences of accidents at a hazardous facility" and "plan to connect and consultation with stakeholder". All these relevant document pages are shared as snap and auditor has verified all this on site. Findings accepted. 3.4 Notify the 3.4.1 Documented Core There are minutes of meetings with the [19 Jul 2019] PMI has shared document relevant evidence of main water users and government named "Meeting of Stakeholders and (catchment) communicating the agencies (presented protocols, letters, Agenda" and also communicated to authority of the site’s plan to the presentations) nearby company (stakeholder) named site’s water relevant catchment Jacobs Coffee which demonstrate that stewardship plans authority/agency they have communicated their water stewardship plan to stakeholder. All these relevant document pages are shared as snap and auditor has verified all this on site. Findings accepted.

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 17 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 3.5 Gain 3.5.1 A list that Advance The Protocol of interaction with Jacobs [19 Jul 2019] PMI has taken consensus stakeholder indicates which targets on interaction on goals for the future is from only one stakeholder. They need to consensus on the achieved consensus presented. improve their practices and involve more site’s water along with a list of stakeholder. All these relevant document stewardship targets stakeholders involved pages are shared as snap and auditor has verified all this on site. Findings accepted. 3.6 Develop a 3.6.1 A set of plans that Advance PMI is working towards these [19 Jul 2019] Findings accepted. formal plan for speak to the site’s risk requirements climate change mitigation with respect adaptation to projected climate change impacts including for shared water infrastructure

Step 4: IMPLEMENT – Implement the site’s stewardship plan and improve impacts AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 4.1 Comply with 4.1.1 Documentation Core In the territory of the enterprise all [19 Jul 2019] PMI has taken all the steps water-related legal demonstrating employees have free access to drinking to develop the system for legal and regulatory compliance water and in addition tea and coffee, in compliance. Auditor has verified all requirements and 4.1.2 (Catchments with the territory of the Russian Federation these on site. respect water rights stakeholders who have all water supplied by a water utility is Findings accepted. an unmet human right drinking. Protocol on water quality to safe drinking water available. and sanitation) Documentation of efforts to work with relevant public sector agencies to fulfil human right to safe drinking water and sanitation. 4.2 Maintain or 4.2.1 Measurement- Core The goals set for 2018 - 2019 have [19 Jul 2019] Based on gathered data improve site water based evidence been achieved, as there is a mark in the for site PMI has developed relevant balance showing that targets plans (the site is not experiencing action plans for water reduction and have been met problems with water shortages) implemented it. All these relevant 4.2.2 (Water scarce document pages are shared as snap catchments only) and auditor has verified all this on site. Evidence of continual Findings accepted.

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 18 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response decrease or best practice 4.2.3 (Sites wishing to increase withdrawals in water scarce catchments only) Evidence of no net increase in water scarcity 4.3 Maintain or 4.3.1 Measurement- Core The site has no problems with the [19 Jul 2019] PMI had some issue on improve site water based evidence amount of water, but there were water quality for process water quality showing that targets problems with the iron content in the pertaining to Iron %. But they have have been met water, after the installation of filters improved the quality with introduction of 4.3.2 (Water quality- (according to the plan) the problem was new filters and regular monitoring stressed catchments solved - there are protocols of through reputed laboratories. All these only) Evidence of laboratory control relevant document pages are shared as continual improvement snap and auditor has verified all this on or best practice site. 4.3.3 (Sites wishing to Findings accepted. increase effluent levels of water quality parameters of concern in water quality-stressed catchments only) Evidence of no net degradation in water quality in the catchment 4.4 Maintain or 4.4.1 Documented Core According to research by third-party [19 Jul 2019] Findings accepted. improve the status evidence showing that organizations and government bodies of the site’s targets have been met on the catchment area the company Important Water- 4.4.2 (Degraded has no areas with degraded or lost Related Areas Important Water- areas, but nevertheless the company is Related Area engaged in the cleaning of shorelines catchments only) channels along with Neva River. Evidence of continual improvement or best practice 4.5 Participate 4.5.1 Documented Core The Protocol of interaction with Jacobs [19 Jul 2019] PMI along with one of the positively in evidence of the site’s on interaction on goals (dated 20-12- stakeholders that is Jacobs is working

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 19 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response catchment ongoing efforts to 2018 and 22-04-2019) for the future is on improving catchment for their shared governance contribute to good presented. water challenges. But they need to catchment governance engage with other stakeholders too and 4.5.2 (Weak water bring in further improvement. All these governance catchments relevant document pages are shared as only) Evidence of snap and auditor has verified all this on continual improvement site. or best practice Findings accepted. 4.6 Maintain or 4.6.1 List of suppliers Core On the territory of the Russian [19 Jul 2019] PMI has listed their improve indirect and service providers, Federation, the water supplier must suppliers and engaging with them over water use within the along with the actions comply with SanPiN 1074 (state water use issue. All these relevant catchment they have taken as a standard for drinking water). In case of document pages are shared as snap result of the site’s detection of problems of the enterprise and auditor has verified all this on site. engagement relating to shall inform the government (the Findings accepted. indirect water use supplier of water) Request PMI to share few snap as evidences of their engagement with supplier over indirect water use.

[23 Jul 2019] PMI has shared the required evidences, hence findings accepted. 4.7 Provide access 4.7.1 List of actions Core In the territory of the enterprise all [19 Jul 2019] Audit has verified all the to safe drinking taken to provide employees have free access to drinking requirement for WASH and relevant water, adequate workers access to safe water and in addition tea and coffee, in snaps are shared as reference. Findings sanitation and water, effective the territory of the Russian Federation accepted. hygiene awareness sanitation and all water supplied by a water utility is (WASH) for workers protective hygiene drinking. Protocol on water quality on-site (WASH) on-site available 4.8 Notify the 4.8.1 List of individuals Core minutes of the meeting with state [19 Jul 2019] Audit has verified at site owners of shared contacted and key bodies, water users through interviews that currently they water-related messages relayed have only storm water drain as shared infrastructure of any water-related infrastructure and there concerns are no concerns over this with any stakeholders. Findings accepted. 4.9 Achieve best 4.9.1 Quantified Advance PMI is working towards these [19 Jul 2019] Findings accepted. practice results on improvement in water requirements site water balance balance from site-set baseline date

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 20 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 4.9.2 Evidence showing that actions meet best practice expectations 4.10 Achieve best 4.10.1 Quantified Advance Protocol of laboratory control of water [19 Jul 2019] As per PMI vision, they practice results on improvement in water effluents (improvement of water quality wanted the effluent water quality must site water quality balance from site-set after the place of waste water discharge be better than fresh water intake quality baseline date from the enterprise, in comparison with which is better than government norms. 4.10.2 Evidence water to the place of discharge) Hence, they are trying to achieve best showing that actions (installation of treatment facilities) practice. For this they have installed meet best practice equipment and machinery which is expectations verified during audit. But they need to improve further. Findings accepted. 4.11 Achieve best 4.11.1 Evidence of Advance PMI is working towards these [19 Jul 2019] Findings accepted. practice results on completed restoration of requirements Important Water- non-functioning or Related Areas severely degraded through restoration Important Water- Related Areas 4.11.2 Evidence showing that actions meet best practice expectations 4.12 Achieve best 4.12.1 List of efforts to Advance PMI is working towards these [19 Jul 2019] Findings accepted. practice results and positively engage and requirements strengthen capacity strengthen water in water governance capacity governance from a site-set baseline date 4.12.2 Evidence showing that actions meet best practice expectations 4.13 Advance 4.13.1 List of efforts to Advance PMI is working towards these [19 Jul 2019] Findings accepted. regionally specific contribute to regionally requirements industrial water- specific benchmarking related and spread best benchmarking practices

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 21 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 4.14 Re-allocate 4.14.1 Total volume of Advance PMI is working towards these [19 Jul 2019] Findings accepted. saved water for water officially re- requirements social or allocated for social and environmental environmental needs (in needs m3 or Mm3) 4.14.2 Documentation of legal contracts for the reallocation of water to social or environmental needs 4.15 Engage in 4.15.1 List of collective Advance the law prohibits redistribution [19 Jul 2019] Findings accepted. collective action to action efforts, including address shared a description of the role water challenges played by the site 4.15.2 Quantified improvement in outcome(s) or shared water challenge(s) from site-set baseline date 4.15.3 (For extra points only) Stakeholder- based evidence recognizing that the site played a material role in the improvement 4.16 Drive reduced 4.16.1 List of suppliers Advance List of suppliers, response letters, but [19 Jul 2019] PMI has started engaging indirect water use with details on without quantitative improvement with their supply chain partners and throughout the engagement efforts need to work hard to improve supplier's site’s supply chain 4.16.2 Quantified practices on water use. Hence this and outsourced improvement by the finding is not accepted. water-related supplier as a result of service providers this engagement 4.16.3 (For extra points only) Supplier-based evidence recognizing that the site played a material role in prompting the change

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 22 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 4.17 Complete 4.17.1 Appropriate Advance Certificate of conformity [19 Jul 2019] As per section 1.4, PMI is implementation of documentation or working on their commitments and will water-related evidence of completion be completed in future and hence will be initiatives of initiative audited in future. Hence this finding is not accepted. 4.18 Provide 4.18.1 List of actions Advance PMI is working towards these [19 Jul 2019] Findings accepted. access to safe taken to provide requirements drinking water, catchment stakeholders adequate sanitation with access to off-site and hygiene access to safe drinking awareness offsite water, adequate sanitation and hygiene awareness.

Step 5: EVALUATE – Evaluate the site’s performance AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 5.1 Evaluate the 5.1.1 Post- Core data is maintained electronically, [19 Jul 2019] Auditor has verified all the site’s water implementation data records shall be maintained daily status of projects that are completed, stewardship and narrative discussion accounting of expenses is conducted to on-going and expected on site. Few performance, risks of performance and have the budget by month and annual. relevant e-document snaps are shared and benefits in the context (including water (water meters are installed (controlled as reference too. Findings accepted. catchment context risk) by state bodies)) 5.1.2 Total amount of water-related costs, cost savings and value creation for the site based upon the actions outlined in 3.2 (drawn from data gathered in 2.4.6) 5.1.3 Updated data for indicator 2.4.7 on catchment shared value creation based upon the actions outlined in 3.2 5.2 Evaluate water- 5.2.1 Documented Core Instructions for action in case of [19 Jul 2019] Auditor has verified related emergency evidence (e.g., annual emergency, corrective actions and through interview and documentation incidents and review and proposed preventive actions are prescribed with that there is no water related emergency extreme events measures) an indication of the responsible. incidence at site. Findings accepted.

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 23 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 5.3 Consult 5.3.1 Commentary by Core Available minutes of meetings with [19 Jul 2019] Auditor has verified stakeholders on the identified comments, letters from the interested through interview and documentation water-related stakeholders parties that PMI has consulted with identified performance stakeholder. Few relevant document snaps are shared as reference too. Findings accepted. 5.4 Update water 5.4.1 Modifications to Core Primary certification [19 Jul 2019] Findings accepted. stewardship and water stewardship and incident response incident response plans plans incorporating relevant information 5.5 Conduct an 5.5.1 Agenda and Advance There is an agenda for meetings, [19 Jul 2019] Please share link or executive or minutes of executive minutes of meetings with indication of evidentiary document governance body- team or governance participants, but there is no evidence level review of body meeting noting that the actions met expectations [23 Jul 2019] PMI need to work over this water stewardship water stewardship indicator and also record relevant efforts discussion evidences.

[02 Aug 2019] https://ecology.expoforum.ru /delovaya- programma?date=21.03.19&eventId= 5c0a37dd1c5da1e70a99e701

[02 Aug 2019] Linked shared by auditor against this criterion is not relevant. PMI need to work over this indicator and record relevant evidences.

[14 Aug 2019] PMI has shared Minutes of Meetings held on 20-12-2018 and 22- 04-2019 with Jacobs Industries, one of the identified stakeholders.

[14 Aug 2019] MoMs shared by PMI against this criterion is not relevant as it does not refer about conducting reviews with PMI's top management i.e. executive team (like CEO/CFO or equivalent) or board or equivalent. PMI

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 24 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response need to work over this indicator and record relevant evidences. 5.6 Conduct a 5.6.1 Documentation of Advance Protocols with comments from [19 Jul 2019] Findings accepted. formal stakeholder formal stakeholder stakeholders, but without specifying the evaluation evaluation with contribution of the enterprise to the recommendations for solution of these problems updated Criterion 3.5

Step 6: COMMUNICATE & DISCLOSE – Communicate about water stewardship and disclose the site’s stewardship efforts AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 6.1 Disclose water- 6.1.1 Disclosed and Core On the territory of the enterprise there [19 Jul 2019] Auditor has verified all related internal publicly available are numerous stands with information evidences on site that are required. governance summary of governance indicating the responsible, the Findings accepted. at the site, including commitment is available both on the those accountable for territory of the enterprise and at the compliance with water- checkpoint (for the public) and on the related laws and company's website. responsible are regulations registered. 6.2 Disclose annual 6.2.1 Disclosed Core In the 2017-2018 annual report, there is [19 Jul 2019] Auditor has verified all site water summary of site’s water an indication of annual activities, evidences on site that are required. stewardship stewardship results including water, but there is no clear Findings accepted. performance indication of AWS (there is an indication in the implementation plans for 2019 to add to the AWS annual report). the annual report will be prepared in early 2020. 6.3 Disclose efforts 6.3.1 Disclosed and Core The problems of the enterprise and the [19 Jul 2019] Auditor has verified all to address shared publicly available water use area are covered at meetings evidences on site that are required. water challenges description of shared with other water users, as well as a list Findings accepted. challenges and of common problems at the checkpoint summary of actions No. 1 (the main entrance to the taken to engage enterprise) - available to the public. stakeholders (including public-sector agencies)

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 25 of 26 JSC Philip Morris Izhora AWS Audit Report

AWS Criteria Indicators Level Auditor’s Findings Certifier’s Response 6.4 Drive 6.4.1 Available list of Core There are rules of interaction, the state [19 Jul 2019] Auditor has verified all transparency in water-related bodies are immediately notified in case evidences on site that are required. water-related compliance violations of a problem. (there is a letter to the Findings accepted. compliance with corresponding water utility because of poor quality corrective actions water, received a response and the water quality has returned to normal) 6.5 Increase 6.5.1 Record of Core On the territory of the enterprise there [19 Jul 2019] Auditor has verified all awareness of water awareness efforts are information stands, the company evidences on site that are required. issues within the (dates and holds meetings, participates in Findings accepted. site communication) and, if seminars. Training program. possible, level of awareness 6.6 Disclose water 6.6.1 Written evidence Advance Documentary evidence - a letter in GUP [19 Jul 2019] Findings accepted. risks to owners (in of site-based material Vodokanal, the responses from the alignment with water risk information public authorities. issues discussed at recognized conveyed to owners the meetings, common problems written disclosure 6.6.2 (For extra points on the information boards, including frameworks) only) Disclosure to publicly available owners in a format that is consistent with the requirements of a recognized disclosure framework 6.7 Implement a 6.7.1 Description of Advance The company has internal training on [19 Jul 2019] Findings accepted. programme for water-related education sustainable practices, but no training for water education program the public 6.8 Discuss site- 6.8.1 Page number of Advance The annual report for 2019 is not [19 Jul 2019] Findings accepted. level water annual report containing written, the plans are to specify AWS in stewardship in the site based AWS the annual report organization’s reference annual report

Project No.: 867295AWS-2019-08 AWS Reference No.: AWS-010-INT-CAB-00-03-00017-0090 Page 26 of 26