2011 Annual Report

in the fields from which we source our tobacco leaf. In 2011 we purchased approximately 440 million kilograms of packed tobacco leaf. Our largest sources of supply are: Brazil and the United States for Virginia and Burley tobaccos; Indonesia, mostly for use in our local kretek brands; Argentina and Malawi for Burley; and Turkey and Greece for Oriental tobacco.

While we do not grow tobacco ourselves, we do directly contract farmers for
32% - 36% of our worldwide tobacco needs depending on the pattern of our leaf purchases. This vertical integration represents the foundation of the quality and efficiency of our agricultural processes, as well as the sustainability of our Good Agricultural Practices (GAP). Implementation of our GAP guidelines is compulsory for all our tobacco suppliers and includes labor policies preventing child labor or forced labor. In addition, we are funding programs around the globe, in cooperation with governments, non-governmental organizations, and other stakeholders, to eradicate child labor in tobacco-growing communities. Our programs focus on eliminating the root causes of child labor by improving the quality and accessibility of education for children of tobacco farmers, as well as living conditions in tobacco-growing communities. To this end, in 2011 we initiated the roll out of our Agricultural Labor Practices code to improve conditions for workers on farms where tobacco is purchased for PMI products. The code was developed in association with Verité, a non-profit organization that promotes fair labor practices. We have begun to implement the code’s principal provisions in several selected countries on a project-by-project basis and, together with our leaf suppliers, plan to reach an estimated 500,000 farmers in 2012.