Holmen and its World SUSTAINABILITY REPORT

Transcription

1 Holmen and its World SUSTAINABILITY REPORT

2 Financial development Social responsibility Concern for the environment This report describes the Group in terms of its sustainability. The emphasis is on the three aspects: financial development, concern for the environment and social responsibility.

3 Holmen and its World Contents 2 3 Holmen and its world 4 5 Magnus Hall Sustainability a firm foundation 6 17 This is holmen Holmen in the society Raw materials Climate and sustainability Financial development Concern for the environment Social responsibility facts Glossary, Subject Index HOLMEN and GRI Addresses Highlights of 2007 Financial development Holmen s net turnover amounted to MSEK (18 592). Profit for the year amounted to MSEK (1 459). Decision was made to build a sawmill at Braviken. Concern for the environment Holmen s use of oil declined by more than 15 per cent. Targets were formulated for climate and energy efficiency activities. Extensive training was provided in Holmen s new Guidelines for Sustainable Forestry. Social responsibility Further improvement in values in employee survey. Number of accidents at work declined but still too high. Project launched to improve women s development prospects in the company. Financial facts Net turnover, MSEK Profit for the year, MSEK Earnings per share, SEK Capital expenditure, MSEK Average number of employees

4 Holmen and its World Reporting principles Holmen and its World 2007 describes Holmen from the perspective of sustainable enterprise with emphasis on concern for the environment, social responsibility and financial development. Holmen and its World describes the Holmen Group with a broad brush. It describes all its forestry and production activities, as well as social issues, in 2007, and gives an account of forward-looking measures in response to growing demands for sustainable development. Holmen and its World is published annually. Last year s edition was distributed in March Stakeholders and audiences. Employees and customers, shareholders, business partners, leaders of opinion, official bodies, analysts, the general public, people living near the mills, and schoolteachers and pupils. The facts presented are those reported to official bodies and those that have been obtained specifically for this report. Holmen and its World 2007 has not been examined by an external auditor. Holmen considers that the authorities demands and their access to information concerning Holmen are an adequate guarantee that the information provided is correct. Harmonisation with GRI and un s global compact. The object of the Global Reporting Initiative (GRI) is to induce companies and organisations to voluntarily describe their business activities from a financial, environmental and social perspective. Holmen s way of providing detailed financial, environmental and social information is harmonised with GRI requirements and UN Global Compacts ten principles. Holmen s complete GRI report consists of Holmen and its World 2007, the section on Corporate Governance in the Holmen Annual Report 2007, and comments in the GRI Register that can be accessed via Holmen s website. a general scrutiny. At the beginning of 2008 the KPMG audit company performed a general scrutiny of the contents of Holmen and its World KPMG considers that the report satisfies the standards for GRI s Reporting Level A, which is the highest level. Comments. The new paper machine that was brought into production at the Group s mill in Madrid at around the end of 2005 more than doubled the mill s output. For this reason, many of the 2005 figures for raw material consumption, energy and emissions differ from later years. In 2007 Strömsbruk was integrated into Iggesunds Bruk. The environmental reporting for 2007 is merged. The financial and market information in Holmen and its World 2007 is relatively concise. Holmen Annual Report 2007 provides complete information on these two topics. Corporate governance. Holmen Annual Report 2007 provides the Corporate governance report as well as detailed information on the Board, Senior management, auditors and the Annual General Meeting. Internal production. Holmen and its World is compiled and produced within the Group. Holmen sees internal production as a means of developing the sustainability process in the areas concerned. A special project group with members from Group Technology (environment), Group Human Resources, Group Legal Affairs, Group Finance, and Group Public Relations has responsibility for coordinating sustainability issues. One responsibility of this group, which is appointed by the CEO, is to publish Holmen and its World each year. Contact for Holmen and its World 2007: Lars Strömberg Director of Sustainable and Environmental Affairs +46 (0) lars.stromberg@holmen.com

5 Acknowledgements and Assessments Holmen has been recognised for its approach to sustainable development and its shares are now in several banks environmental funds. The company is also included in several international company indices. Holmen views active sustainability measures and clear communication on this subject as a means of strengthening its brand name and creating goodwill. It has also positive internal effects by raising the employees competence and their commitment to sustainability. Holmen regards the values of its stakeholders with regard to sustainability work as important for identifying strengths and weaknesses. Dialogue with its stakeholders is important for constantly improving sustainability activities. Holmen s sustainability activities over the past ten years have been assessed by several banks environmental funds as well as by international investors. International company indices make it easier for investors to identify companies that have a sound approach to sustainability. Being included on an index confirms that a company adopts a responsible approach to financial, environmental and social aspects. Company Indices Environmental Funds Membership FTSE4GOOD Index. Companies in this indice are distinguished by having a well-developed environmental policy, good relationship with stakeholders and paying regard to human rights. SWEDBANK ROBUR S ETHICAL FUND. In the sustainability analysis carried out in 2007 Holmen was once again recognised for inclusion in this fund. Holmen belongs to the Good Example category. Holmen is a member of the UN s Global Compact. The Group thus supports the UN s ten principles for human rights, environment and corruption. Storebrand SRI. The companies that are world leaders within the areas of environmental and social responsibility qualify for Storebrand s Best in Class list. Banco. Holmen is in several of Banco s ethical and environmentally-focused funds. ICC. Holmen has been affiliated to the International Chamber of Commerce s Business Commission on Sustainable Development for more than 10 years. This sets up 16 principles for environmentallyaware leadership. Assessments Carbon Disclosure Project (CDP) is a non-profit organisation that aims to promote a better dialogue between the parties whose common denominator is their impact on the climate. In the 2007 assessment of Nordic companies Holmen was judged the fifth best company. In the insurance company Folksam s assessment, which is based on CDP s data, Holmen was placed second within the forest industry and ranked 16 out of 70 assessed companies. enterprise.com ( e.com ) is a company that primarily assesses annual reports and for several years now also sustainability reports. Holmen and its World 2006 was judged to be one of the four best sustainability reports. Deloitte has judged Swedish companies information about the environment and ethical and social responsibility since Holmen was ranked as one of the six best companies in the group best auditing practice in Globe Forum Business Network awards the Globe Award to companies and organisations that are good at integrating consideration for social and environmental issues into their operations. Holmen was nominated at the beginning of 2008 as one of the best nine listed companies in Sweden. The final results will be presented in May h o l m e n a n d i t s w o r l d

6 Magnus Hall, President and CEO: Sustainability a firm foundation Holmen has worked successfully with environmental issues for four decades. We have also developed our social responsibility. This has been possible because we have regularly earned a healthy profit. We are facing new challenges now that the climate is, in principle, going to affect every aspect of society s developments. The sustainability that now characterises Holmen is a sound foundation from which to face the future. I would dare to claim that Holmen is well placed to satisfy today s - and tomorrow s increasingly accentuated demands for sustainability. We produce products and bioenergy from wood, which is a renewable raw material. We are engaged in sustainable forestry, with not only growth but also the total volume of standing timber rising every year. Our forests fix carbon dioxide, which is good for the climate; and we have ambitious targets for the development of nature conservation methods in our forests. We are taking radical action to minimise our own use of oil. The impact of our mill processes on the environment is now low and the environmental awareness of our personnel is high. The latter situation is probably largely due to our personnel policy, which focuses very closely on encouraging learning, taking responsibility and being something of a self-starter. This is confirmed, not least, by the regular employee surveys that we carry out. The latest was carried out in 2007 and it shows that the positive trends of the past several years have continued. Holmen ranks well above the average for the industry on more or less all criteria. Naturally, behind these good records is the fact that over the years Holmen has earned a high enough return to enable it to finance investments in the environment and social responsibility. I recall a quote from somewhere that sums up neatly what I want to say: A sustainable society is necessary for successful businesses and successful businesses are necessary for a sustainable society. Holmen s profitability is based on our manufacturing products that are in demand in society. Printing paper, paperboard and sawn timber are basic products in people s everyday lives. In densely forested Sweden, as well as in Great Britain, conditions are particularly suitable for the manufacture of virgin fibre-based products. Elsewhere in the densely populated regions of Europe, as in Spain, where we manufacture newsprint, recovered paper is a natural raw material. Sweden s energy prices used to be comparatively low, which has been another important factor behind Holmen s strategic focus. However, some of these conditions are now changing. The cost of energy has increased dramatically in recent years. The growing competition from the biofuel sector and Russia s threat to dramatically raise its export duties on wood are pushing up the price of wood. Growing volumes of recovered paper are finding their way out of Europe into Asia, mainly China, which is having an effect on both the supply and the price of recovered paper. Furthermore the consumption patterns for paper are changing in the world. In the USA daily newspapers have been fighting against the wind for years and the consumption of newsprint is decreasing. Here in Europe we have not yet the same situation, but here too printed media are coming up against increasing competition from electronic media. Holmen is addressing these new conditions in several ways. We are responding to the stiffer competition and rising prices on the wood market by increasing growth in our own forests so that they will eventually be able to yield more wood and bioenergy. We are looking for growth of some 25 per cent in 30 years. In order to restore the profitability of our printing paper business area we are stepping up the pace of our efficiency programme. We are also reducing Holmen s newsprint capacity by 15 per cent, mainly by ceasing production on the oldest paper machine at Hallsta. Unfortunately, this

7 will have serious and unwelcome consequences for the many employees who are affected and, not least, for Hallstavik and its citizens. However it is an essential measure to ensure the mill s survival. Unfortunately we cannot see any significant increase in consumption within this product segment in the foreseeable future. A further step towards restoring healthy profitability is the investment in a sawmill at Braviken, which will strengthen the Group s third product leg: sawn timber. In the past this has been a small product area in Holmen by comparison with printing paper and paperboard, but it has valuable potential for the future. Market growth is driven by growing prosperity around the world as well as by the climate and sustainability aspects, which are becoming increasingly important. Sawn timber in all its forms, not least for housebuilding, has a future thanks to its ability to store carbon for long periods of time and function as a substitute for other building materials that do have an impact on the climate. The Braviken sawmill will also be important as a source of wood and energy for the adjacent paper mill. There are large and fairly obvious synergies between both these two units. Furthermore it will create an interesting development, namely to install a new biofuel boiler that will also be able to supply bioheating to Norrköping s district heating network. At a later stage, it could well be feasible as we are now planning at Iggesund to build a pellet facility and move onto the market as a supplier of biofuel pellets. Wind power has long been something that people have looked down on in Sweden. However with more efficient wind mills and rising energy prices, the situation has changed. As a major user of electricity and a large landowner (1.3 million hectares) Holmen believes wind power offers great potential. We are exploring how to make best use of the land assets we own in this area. The most serious global issue at present is the impact on the climate of carbon dioxide emissions. It is now quite obvious that mankind must make more efficient use of energy and make much greater use of renewable energy sources. The forest products industry has long been a pioneer in this area and is already a major user of bioenergy. At Holmen we are now taking steps to improve our energy efficiency and reduce our oil consumption. Our target is to have reduced consumption of fossil fuels at our Swedish mills by as much as 90 per cent by 2020 at the latest, which is equivalent to around tonnes of carbon dioxide emissions. In this context, I would also like to emphasise the important role of nuclear power as a carbon dioxide free source of energy. Holmen would welcome expansions to capacity and we have expressed interest in becoming involved in such projects. Finally, I would like to say a few words about our sustainability report Holmen and its World. This has aroused an encouragingly large, and positive response from far outside our own industry. In particular it has been analysed by numerous so called corporate indices that assess companies in terms of sustainability, and Holmen has been named as a good example by several of them. The Group is also included in several of the environmental funds that invest their capital in sustainable companies. Not only do I regard it as an honour for Holmen to earn recognition in these areas but I also think that it is good for business. It is also very gratifying that Holmen now satisfies the requirements for the highest reporting level in GRI (Global Reporting Initiative). Awareness of the individual consumer s influence over crucial issues such as climate change and the use of resources is growing all over the world. I am convinced that what we are now seeing is merely the beginning of a trend that will become increasingly accentuated. Given the sustainability that is already characteristic of our products and our business, Holmen is well placed to face the future in this regard. Stockholm in March 2008 Magnus Hall President and CEO Comments on result for 2007 The past year was notably influenced by the continued strong economic conditions that have for several years kept the wheels turning fast in Europe. Demand for paperboard and sawn timber was firm and prices were increased. Our sawn timber business reported its best result ever. By contrast, Holmen Paper, which is our largest business area, had a difficult year. With an increase of 4 5 per cent in the price of newsprint for the third consecutive year we thought we could look forward to higher margins. However, cost escalation and production stops as a result of weak market conditions dashed these hopes. The market for newsprint was also affected by a decline in consumption in the USA. This, together with a weak US dollar, was one of the reasons why exports of North American newsprint to Europe almost doubled. To this, we may add that the high cost of wood, energy and recovered paper puts pressure on Holmen s operating margins. However, this effect was moderated by the healthy results reported by Holmen Skog, Holmen Energi and Holmen Timber. To restore Holmen s profitability to a reasonable level we need, above all else, an increase in the price of newsprint. In view of the harsh cost situation, Holmen is also planning several measures to improve the result. You can read more about the market, economic conditions and Holmen s result in the annual report for h o l m e n a n d i t s w o r l d

8 This is Holmen The Group Holmen is a forest products group that produces printing paper, paperboard and sawn timber. Some 90 per cent of the output is sold within Europe. Holmen s production is based on renewable raw materials from sustainable forestry. The Group owns approximately 1.3 million hectares of land, of which one million hectares are used for forestry. Harvesting in company forests corresponds to around 60 per cent of the wood required by the Swedish mills. Most of the remaining quantities are purchased from private forest-owners in Sweden. Small amounts are imported, mainly from Estonia. The Group s electricity requirements are met by wholly and partly owned hydro power stations, back-pressure power turbines at the mills and by purchase. The forests and hydro power assets are located in Sweden as are the majority of the production units. The Group also has production facilities in Spain and England. A long history. The company can celebrate its 400th anniversary in It can trace its origins back to 1609 when an arms factory was set up on an island (holme) in the River Motala in the heart of Norrköping. The paper was manufactured by hand for some years in the middle of the 17th century. During the following century Holmen was mainly a brass foundry. Production of paper began again on an industrial scale in Iggesund also has its origins in a paper mill from the middle of the 17th century. Holmen now concentrates on printing paper, paperboard, sawn timber, forestry and energy. A decision was made in 2007 to build a sawmill at Braviken, with a view eventually to more than tripling the Group s production of sawn timber. Holmen s forest holdings are of great strategic importance in pace with the growing demand for renewable, climate-neutral raw materials. Europe dominates. Together with Sweden, Great Britain, Germany and Spain are Holmen s largest markets. The greater part of the printing paper is sold to newspaper and magazine publishers in these four countries, while most of the paperboard sales go to German, British and French customers. The main markets for sawn timber are Great Britain and the Scandinavian countries. Holmen AB s series of shares are listed on OMX Nordic Exchange Stockholm, Large Cap. Over the past decade, Holmen s shares have on average earned a total return of 12 per cent per year, including reinvested dividends. IMPORTANT RAW MATERIALS Wood PRODUCTS Printing paper CUSTOMERS Publishers and printers Recovered paper Paperboard Packaging companies Sawn timber Joinery industry and furniture industry etc. Electricity Wood Other forest products companies Branches and tree-tops Biofuel Thermal power stations Holmen s raw materials, products and customers. Wood and recovered paper are converted into printing paper, paperboard and sawn timber. Most of Holmen s customers are in Europe. Wood is sold not only to the company s own mills but also to other companies. Biofuel is becoming a product of growing importance that is supplied to the company s own mills and to outside customers.

9 Strategy Holmen s strategic direction is characterised by a holistic approach and sustainability. Financial, social and environmental aspects are handled sustainably and responsibly. Holmen s business is based on natural and renewable raw materials that come from the forest. Much of the energy that is required by the mills comes from sustainable sources such as hydro power and bioenergy. Holmen s products paper, paperboard and sawn timber can be recovered, as material and as energy. Sustainability activities are grounded on the Group s responsibility to its stakeholders and the environmental aspects that must be observed. Holmen considers that the sustainability targets that have been decided on will strengthen its brand name and help to strengthen its competitive edge. Holmen is particularly well placed to play an important role in the increasingly sustainable society that is now the goal. Sustainable production of products based on natural raw materials will, with regard to resources and climate, become a necessity in the future. Business concept Business areas Holmen s business is conducted through three product-oriented business areas Holmen Paper Printing paper Iggesund Paperboard Paperboard Holmen Timber Sawn timber two raw material-oriented business areas Holmen Skog Forest and wood Holmen Energi Electric power and energy Growth Holmen shall develop the business areas via organic growth and selective acquisitions through Attractive products Active marketing Market-driven product development Higher production at mills, in forests and energy Committed employees. Production Holmen shall have high quality and low production costs by means of Large-scale production Rational processes Active purchasing Integrated procurement of raw materials wood, energy and recovered paper High competence and efficient organisation. Sustainability goals Financial responsibility Holmen s financial targets in terms of healthy profitability and a strong financial position, will provide the conditions for sustainable development for business partners, employees, shareholders, and society at large. Profitability. Holmen s profitability and return shall consistently exceed the market cost of capital. Capital structure. Holmen s financial position shall be strong with a debt/equity ratio of Dividend. The ordinary dividend paid each year shall correspond to 5 7% of the company s equity. Social responsibility Holmen shall respect ethical and social norms and be a good business partner and member of the society. Holmen shall offer stimulating tasks and a sound work environment. The company shall attract capable employees and provide ample opportunities for development. Holmen is a member of the UN s Global Compact. Several targets have been set up in the area of social responsibility, some of which are listed below. The targets are monitored regularly in the recurrent employee surveys. The targets below are for See page 48 for explanations. Social targets The human capital index shall be at least 635. The leadership index shall be at least 60. The proportion of managerial positions held by women shall be at least 13 per cent. Environmental responsibility Holmen s business shall be characterised by a holistic approach that involves protection of the environment and lean use of raw materials and energy. Holmen shall satisfy the authorities demands and further demands stipulated in the certified environmental and energy management systems, as well as the demands in the PEFC and FSC forestry standards. In the areas of greatest current interest, viz. energy and the climate, Holmen has groupwide, long-term goals, as well as local goals as specified in the management systems. Climate and energy targets The Swedish units shall have reduced their use of fossil fuels by 90 per cent by 2020, which corresponds to tonnes of carbon dioxide emissions. The Group s energy efficiency shall have improved by 15 per cent by The growth in Holmen s forests shall increase by 25 per cent within 30 years, and naturally occurring plant and animal life shall be provided with the habitats they need for long-term survival in the forest environment. Harvesting of biofuel in Holmen s forests shall be increased by equivalent to 1 TWh between now and h o l m e n a n d i t s w o r l d

10 t h i s i s h o l m e n Business areas Holmen Paper Products Newsprint, white and coloured Telephone directory paper MF Magazine SC paper Coated printing paper Brand names Holmen News, Holmen Coloured News, Holmen Plus, Holmen Plus Gravure, Holmen XLNT, Holmen Book, Holmen Guide, Holmen Bravo, Holmen Premium, Holmen Ideal. Markets Holmen Paper s main market is Europe. It has a strong position on the markets for MF Magazine, newsprint and telephone directory paper. Holmen Paper is one of the main suppliers to many of the major daily newspaper and magazine publishers in Sweden, Spain, Great Britain and Germany. Production facilities Hallsta, Hallstavik Braviken, Norrköping Madrid, Spain Wargön, Vargön. Share of Group, % (external share) Net sales Operating profit 1) Employees 1) Excl. items affecting comparability. Iggesund Paperboard Products Solid bleached board, SBB Folding box board, FBB Plastic coated and laminated paperboard Brand names Invercote, Incada Markets Iggesund Paperboard s main markets are in Europe, primarily Great Britain, Germany and France. Substantial volumes are also exported to South East Asia and the USA. In all, the company sells paperboard to more than 100 countries. Iggesund Paperboard is market leader in Europe within the highest quality segment of the paperboard market. The products are used for packaging for foods, cosmetics, cigarettes, and chocolates and confectionery, as well as for graphic products such as book covers, greeting cards, and CD and DVD sleeves. Production facilities Iggesunds Bruk, Iggesund Workington, England Paperboard is coated with plastic and laminated in Strömsbruk. Sheeting units in the Netherlands and France. Share of Group, % (external share) Net sales Operating profit Employees h o l m e n a n d i t s w o r l d

11 Holmen Timber Products Redwood sawn timber for use in the manufacture of flooring, panels and furniture. Brand names Monolit, Quatrolit, Relax. Share of Group, % (external share) Markets Holmen Timber s main market is Europe, mainly Scandinavia and Great Britain. The customers consist primarily of furniture and floor manufacturers, the joinery industry, and building merchants. Production facility Iggesund Sawmill, Iggesund. Net sales Operating profit 1) Employees 1) Excl. item affecting comparability. Holmen Skog Holmen Skog procures wood for Holmen s Swedish mills and manages the Group s forests, which extend over a million hectares of productive forestland. Some 60 per cent of the Group s wood requirements in Sweden are met from harvesting in company forests. Forest regions. Örnsköldsvik, Iggesund, Norrköping. Purchasing company. Holmen Mets, Tallinn, Estonia. Share of Group, % (external share) Net sales Operating profit 1) Employees 1) Excl. item affecting comparability. Holmen Energi Holmen Energi has responsibility for supplying Holmen s Swedish mills with electricity and for the Group s 23 wholly and partly owned hydro power stations. Holmen s electricity requirements are met from purchased electricity, production at the Group s hydro power stations and from back-pressure power turbines at the mills. Holmen Energi also has responsibility for coordinating energy issues for the Group. Wholly and partly owned hydro power stations in: Umeälven, Faxälven, Gideälven, Iggesundsån, Ljusnan and Motala Ström. Share of Group, % (external share) ,2 Net sales Operating profit Employees Recovered paper More than half of the recovered paper used by Holmen s Hallsta and Braviken mills is obtained in Sweden, while the remainder is imported from England, Norway, Germany and Denmark. Recovered paper is collected by PÅAB, an associate company. The recovered paper used at the mill in Madrid is mostly procured in Spain. The bulk of it is obtained from wholly and partly owned paper collection companies, mainly from wholly-owned CARPA. Recovered paper is also imported from Portugal, the south of France and the UK to the Madrid mill. h o l m e n a n d i t s w o r l d

12 t h i s i s h o l m e n Holmen s products are made here Holmen has production facilities in Sweden, England and Spain. Some further processing takes place in the Netherlands and France. The Group s forests and hydro power stations are located in Sweden. Harvesting in Holmen s forests accounts for around 60 per cent of the wood requirements of the Group s Swedish mills. The remainder is purchased from private forest-owners, obtained by means of exchanges with other forest companies, or imported. Imported wood accounts for less than 10 per cent. The mill at Workington is supplied with wood that is purchased in Great Britain. The Braviken and Hallsta mills use recovered paper. The mill in Madrid uses only recovered paper. All of Holmen s mills, and its forestry, conduct their activities in accordance with the international ISO environmental management system. Holmen s forestry is certified in accordance with the international PEFC and FSC forestry standards. Hallsta Holmen Paper Raw materials: Sprucewood, recovered paper Process: TMP, DIP and groundwood pulp Products: Newsprint, MF Magazine, SC paper and book paper Production capacity: tonnes/year Average No. of employees: 941 Braviken Holmen Paper Raw materials: Sprucewood, recovered paper Process: TMP and DIP Products: Newsprint, coloured newsprint, telephone directory paper Production capacity: tonnes/year Average No. of employees: 695 Iggesunds Bruk Iggesund Paperboard Raw materials: Softwood and hardwood pulpwood Process: Sulphate pulp Product: Solid bleached board Production capacity: tonnes/year of which some quantities are plastic coated in Strömsbruk (incl. delivieries from Workington). Capacity: tonnes/year. Average No. of employees: 905 (incl. Strömsbruk) Workington Iggesund Paperboard Raw materials: Sprucewood and purchased sulphate pulp Process: RMP Product: Folding box board Production capacity: tonnes/year Average No. of employees: 487 Head office Production sites Forest regions, hydro power stations Group forest Holmen Paper Iggesund Paperboard Holmen Timber Holmen Skog Holmen Energi* * Holmen has interests in 23 wholly or partly owned hydro power stations located on the marked rivers. Madrid Holmen Paper Raw material: Recovered paper Process: DIP Products: Newsprint, MF Magazine and LWC Recycled Production capacity: tonnes/year Average No. of employees: 358 Wargön Holmen Paper Raw material: Sprucewood Process: Groundwood pulp, purchased sulphate pulp Product: Coated printing paper (MWC-paper) Production capacity: tonnes/year Average No. of employees: 318 Iggesund Sawmill Holmen Timber Raw material: Pine saw logs Process: Sawmilling Product: Redwood sawn timber Production capacity: m 3 /year Average No. of employees: 94 Carpa Wholly owned Spanish company that 2007 collected tonnes of recovered paper Average No. of employees: 169 Sheeting units Paperboard from Iggesunds Bruk is cut to specific sizes for customers at two facilities, one in Utrecht, the Netherlands, and the other in Valence, France Capacity: tonnes/year Average No. of employees: 58 Skärnäs Terminal AB Terminal in Iggesund that handles one million tonnes of forest products per year. 450 calls per year Average No. of employees: h o l m e n a n d i t s w o r l d

13 and this is how they are used Daily newspapers Numerous daily newspapers, mainly in Europe but also in other parts of the world, are printed on newsprint from Holmen. Magazines, weekly magazines and specialist magazines The market for specialist magazines is expanding with support from the Internet, which inspires people to read more. Catalogues A new market is emerging for product catalogues whose functionality and low price matter more than exclusiveness. Brochures and supplements MF Magazine looks like newsprint but has more bulk. This type of paper has been used for years in newspaper supplements and is now being used to a growing extent for other printed matter. Packaging for foods, medicines, cosmetics, chocolates and cigarettes With these products the cleanness, printability and runnability of the paperboard are at a premium. It is also important that the packaging can convey the right impression about its often exclusive contents. Cover of printed matter Paperboard is often used as a cover for printed matter of various types. Just look at the cover of this report, for example. Wooden fittings and furniture Holmen s sawn timber is used as visible wood in the home environment. When the new sawmill in Braviken is in production Holmen will also be able to produce structural timber. Operations in different countries 2007 Net turnover by market, % Rest of the world, 11 Rest of Europe, 19 The Netherlands, 4 France, 4 Italy, 5 Spain, 9 Sweden, 23* Great Britain, 12 Germany, 13 Europe, 89 *Of which forest and power, 16 Average number of employees Sweden Spain 540 England 521 the Netherlands 122 France 30 Estonia 22 Rest of Europe 45 Rest of the world 23 Head office Production sites Sheeting units/distribution Sales, forest regions and purchasing company Holmen Paper Iggesund Paperboard Holmen Timber Holmen Skog Holmen Energi Operations outside Europe Australia Hong Kong Japan Singapore USA USA

14 t h i s i s h o l m e n Customer focused R&D Functionality and more efficient use of raw materials and energy are key principles underlying Holmen s R&D activities. With the decision to build a new sawmill at Braviken Holmen is taking an important step into a market with exciting potential. Holmen s R&D activities are decentralised to the individual mills in order to maintain proximity to production and the market. In addition, there are two development centres, one at Holmen Paper and one at Iggesund Paperboard, which engage in joint research in closely related fields. In coordination with the development departments Group Technology is taking action to improve the external research contacts and influence the focus of the research. Holmen is also involved in joint research together with numerous outside research and development institutes, including STFI-Packforsk, MoRe Research, the Royal Institute of Technology, Mid Sweden University, Karlstad University, the Swedish University of Agricultural Sciences, YKI, Skogforsk, Värmeforsk and Elforsk in Sweden. Holmen cooperates with CTP in France, with Universidad Complutence in Madrid, Spain, with the University of Manchester and Pira International in England, and mainly with Åbo Akademi in Finland. In all Holmen invests some MSEK 100 annually in R&D, of which about a quarter consists of external costs. The EU s 7th General programme opens up new opportunities for the financing of applied research in the Swedish forest products industry. The research projects include product development and energy efficiency. Printing paper Printing paper is used for daily and weekly newspapers, catalogues and directories, brochures and other printed matter. Printing paper is produced from virgin fibre as well as recovered fibre, and often a blend of these two types to achieve the best possible characteristics. Holmen Paper has accumulated significant competence in the areas of thermo-mechanical and de-inked pulp, not only at the mills but also at a special development centre, Holmen Paper Development centre (HPD). Good printability is an important means of competition for Holmen Paper s customers. The company therefore concentrates on developing new and improved paper products. Lower energy consumption. The amount of energy required to produce thermo-mechanical pulp (TMP) at Holmen Paper s mills has been radically reduced since the 1970s. In a new pulp line is being constructed for energy efficient production of thermo-mechanical pulp at Braviken. The total investment cost amounts to MSEK 475, of which MSEK 40 will be a grant from the Swedish Energy Agency. It is estimated that the new line will use more than 20 per cent less energy. Stronger and lighter newsprint. During the past thirty years, paper strength has increased and opacity improved by making greater use of filler. This means that both runnability in the printing press and printability have been improved, while the amount of fibre used per printed surface has been almost halved. Today s newsprint is therefore better and thinner than it used to be. This in turn leads to fewer paper reels, lower distribution and handling costs, and less need for transportation. Improved recycled fibre-based printing paper. An R&D project is underway with the object of further improving the recycled fibre-based printing paper. Steps are also being taken to raise the yield from the DIP process. Reduced water consumption. An extensive water-saving project is underway at the Madrid mill. Fruitful exchange of know how. The cooperation with Universidad Complutence in Madrid has continued. A shared paper laboratory enables Holmen to apply the expertise of university scientists in processfocused projects. Paperboard Paperboard is mainly used for packaging where the primary requirement is to protect the product. However, paperboard must also satisfy rigorous demands in terms of hygiene, runnability and printability. The paperboard is produced exclusively from virgin fibre. Iggesund Paperboard. At the Paperboard Development Centre (PDC) activities are mainly focused on surface treatment, the physical properties of the board and fibre modification. Surface treatment. The paperboard is coated with fine-grained clay material to even out the microscopic irregularities between the fibres. The coating improves the paperboard s ability to take advanced print. The experience in coating possessed by Iggesund Paperboard will also benefit Holmen Paper. Physical properties of paperboard. PDC has also developed considerable expertise in paper physics. This has resulted in the paperboard acquiring properties that enable it to be folded, stamped and embossed using extremely advanced means. Knowledge of the physical properties of paperboard is especially important for runnability, i.e. how fast and safely it can be printed on and formed into packaging. Fibre modification is a new R&D area, which involves chemically or mechanically increasing the stiffness and bulk characteristics of the cellulose fibres. Some of this research is carried out jointly with Holmen Paper. Lower grammage paperboard. At Workington the development activities are focused on reducing the grammage of the board whilst retaining its strength and stiffness and further improving its surface properties. New generation of paperboard. At the beginning of 2006 a project was launched at Iggesunds Bruk to develop the next generation of graphic and packaging board. As one aspect of this, one of the board machines was rebuilt in Improved optical properties. Development activities at PDC are focused on improving the optical properties of the paperboard and the surface layer. 1 2 h o l m e n a n d i t s w o r l d

15 Anna Mårtensson works in Iggesund Bruks analytical service unit, which is part of the mill s development department. Sawn timber Holmen s sawn timber is mainly used as visible wood in the home environment. With the decision to build a large, new sawmill at Braviken Holmen is taking an important step into the fast-growing market for structural timber, which will require focused R&D. At present Holmen s development projects are directed towards: The drying of sawn timber. Customers are more and more demanding products having a specified dryness. In recent years significant advances have been made in increasing the product yield, not only for customers but also for Holmen Timber. A key factor behind this is the university level training provided for all drying machine operators. Finger jointing of wood for joinery. Until quite recently window manufacturers have handled this process stage themselves. Holmen Timber has now developed a method for carrying out finger jointing on own account. The product will be launched on a larger scale in Pattern fitting. Holmen Timber is developing its product portfolio with the object of obtaining the highest possible value from the timber. Pattern fitting is an important part of this process. It involves optimising the positioning of the saw blade and minimising the amount of waste. Forestry Increased forest growth. The target of Holmens s new silvicultural programme is to increase growth in company forests by around 25 per cent over the next 30 years. Improved nature conservation methods. In order to create better conditions for biodiversity Holmen Skog is taking measures to raise the biological quality of both managed and protected forests. One underlying idea is that not only should the forest be cultivated but also that the conditions for biodiversity should be developed. More efficient silviculture. Holmen Skog is working together with external researchers to develop more efficient silvicultural methods. Lean-energy transportation. Holmen has participated in the evaluation of the El-Forest el-hybrid forwarder, which uses per cent less fossil fuel than conventional forwarders. Three forwarders will be manufactured in a first series, of which Holmen has purchased one for delivery in The company also supports the En trave till (One more stack) industrywide project whose purpose is to reduce the energy requirements of timber-carrying lorries. External contacts R&D and the environment are also handled by trade associations, such as the Swedish Forest Industries Federation, the Paper Federation of Great Britain and the UK Forest Products Association in Great Britain, and the Association of Spanish Pulp and Paper Manufacturers (Aspapel). The same applies to activities provided by Cepi, the European trade association, and in groups that deal specifically with packaging board and printing paper. Holmen contributes to developments in the environmental field, partly through its own research, and partly by participating in the industry-wide research that has been taking place since These joint research projects take place at colleges, universities and research institutes. Holmen R&D Local development units at each mill R&D projects are handled in close contact with production and customers. Typical tasks include product development and improving production efficiency. Holmen Paper Development centre (HPD) This centre focuses mainly on printability and on reducing the consumption of fibre and energy in the production of printing paper. Paperboard Development Centre (PDC) Development activities focus mainly on the surface treatment of paperboard, paperboard physics and fibre modification. Group-wide working group Holmen s R&D activities are coordinated within a joint action group whose members are drawn from each business area s development departments. h o l m e n a n d i t s w o r l d

16 t h i s i s h o l m e n Organisation and joint action Holmen s business is highly decentralised to business areas, mills and forest regions. The organisation includes a number of networks and various specialist expertise. Board and Senior management Holmen s Board has nine members who are elected by the Annual General Meeting, and three employee representatives and three deputies who are appointed by the union organisations. The Board held nine meetings in The company s auditors report their observations to the Board, CEO and the AGM. Board Fredrik Lundberg, Chairman Carl Kempe, deputy Chairman Steewe Björklundh, employee representative Lilian Fossum Magnus Hall, President and CEO Torgny Hammar, employee representative Kenneth Johansson, employee representative Kurt Källströmer Hans Larsson Ulf Lundahl Göran Lundin Bengt Pettersson Deputy members Christer Alenius, employee representative Stig Jacobsson, employee representative Karin Norin, employee representative Organisation and joint action Holmen s Senior management consists of the CEO and the heads of the five business areas and the five Group staffs. The Senior management held eleven meetings in 2007, which dealt with such matters as the progress and result of the business, reports before and after Board meetings, business plans, budgets, capital expenditure, personnel, and the environment. Senior management Magnus Hall, President and CEO Anders Almgren, CFO, Group Finance Lars Ericson, Group Legal Affairs Thommy Haglund, Group Human Resources Christer Lewell, Group Public Relations (Ingela Carlsson, as of 9 May 2008) Sven Wird, Group Technology Brynolf Alexandersson, Holmen Energi Björn Andrén, Holmen Skog Björn Kvick, Iggesund Paperboard Håkan Lindh, Holmen Timber Arne Wallin, Holmen Paper The Group s Board, CEO and Group staff presidents, the presidents of the five business areas and mill and forest managers are responsible for their organisational level. Management groups. Functional management groups deal with policies and strategies, as well as exchanging experiences. Joint action groups. In areas where more detailed work is important, joint action groups that include specialists have been set up. These groups are involved in competence development and the transfer of expertise and experience in their respective subject fields. Board President and CEO Business area president Group staff president Mill manager Forest manager MANAGEMENT GROUPS Finance Personnel/HR Environment Energy and climate R&D Information Purchasing JOINT ACTION GROUPS Work environment, health and safety Management systems Information systems Risk management Union relations Transportation Water treatment Chemicals Waste processing Information Financial information. Holmen publishes an annual report that is audited by the company s external auditors. The company also publishes Holmen Business Report four times a year, which includes the Group s year-end and interim reports. Financial information is also published on Holmen s website. Product and industry information. Holmen Paper, Iggesund Paperboard and Holmen Skog publish their own magazines for customers, forest owners and politicians at both national and local level. Personnel information. Holmen Insikt, Holmen s personnel magazine, is published five times a year. The magazine reflects the Group s activities from the perspective of its employees. The contents of the magazine are decided on by an editorial board upon which the company and the unions are represented. Local information sheets are available at most of the units. The Intranet Holmen Online offers both local and Group information. Its direction is decided upon by a Web Council upon which the business areas are represented. Sustainability. Holmen publishes its annual sustainability report Holmen and its World. This is complemented by more detailed environmental information on the Group s website. Purchasing Holmen has been running a Groupwide purchasing project since 2005 with the object of reducing the total cost of goods and services. This involves cooperation on a day-to-day basis between the mills as well as external cooperation with selected suppliers. Coordination of the purchasing function also improves the scope for making unambiguous quality and environmental demands on suppliers. 1 4 h o l m e n a n d i t s w o r l d

17 Jennica Fröjd, Jenny Andersson, Birgitta Bjurström, Maria Rylander and Åsa Andersson work in production and sales at Holmen Timber. Finance Financial activities at Holmen are decentralised to business area, mill and forest region level. Group Finance has functional responsibility for financing, accounting and reporting, taxes and insurance. The financial activities are planned and coordinated by a group consisting of the Group s Chief Financial Officer, the finance managers of each business area and specialists at Group level. One key task is to develop the internal control system. Sustainability A separate project group with representatives from Group staffs Technology (environment/sustainability), Human Resources, Legal Affairs, Finance and Public Relations deals with sustainability issues. Holmen and its World, the Group s sustainability report, is one of the group s responsibilities. Holmen s Director of Sustainable Affairs chairs this group. International initiatives and guidelines Global Reporting Initiative (GRI ). Holmen is successively adapting its procedures and reports to satisfy GRI requirements of relevance to the Group. carbon disclosure PROJECT (CDP). Holmen is participating in this international project by replying to a questionnaire on its use of energy and carbon dioxide emissions. un s Global Compact. Holmen is a member of the UN s Global Compact. Insurance A groupwide group administers insurance issues. It carries out extensive risk analyses that then serve as a basis for loss prevention measures and the procurement of insurance. The aim is that Holmen s major facilities be classified as having the best possible fire safety. Holmen takes out insurance cover for property damage and sequential loss. The Group s forests are not insured as they are dispersed over large areas of the country, which reduces the risk of simultaneous damage. Social responsibility Personnel activities at Holmen are carried out in accordance with the Group s personnel policy. They are coordinated by a management group for Human Resources (HR), which consists of the personnel managers from business areas and is chaired by the Group s HR director. Working groups are set up on which the unions are also represented for specific HR issues. Personnel activities within the business areas are coordinated by HR councils. Large units have HR managers and HR specialists. Environmental responsibility Environmental activities are carried on in accordance with Holmen s environmental policy. Environmental responsibility. The Board and the CEO and the presidents Surveys Customer and supplier surveys. Holmen carries out regular surveys and interviews to find out what customers and wood suppliers think about the company. The replies are converted into action plans. Human Resource activities are based on strategic goals for the work climate, leadership, performance reviews, the number of accidents and the number of female managers. In addition to these goals, the Group uses key ratios and goals that are generated by the results of employee surveys. Union relations. The union organisations meet regularly in the Holmen European Works Council and in consultation groups at each unit. of the business areas have overall responsibility for the environment. Operative responsibility for the environment rests on the mill and forest managers. The Group s head of sustainability chairs Holmen s environmental council, coordinates environmental measures, monitors developments relating to the environmental goals and sets up and runs Group-wide joint action groups. Environmental Management System. All units and Holmen s forestry are certified in accordance with the ISO environmental management system and audited regularly by certified external auditors. Forestry certification. Holmen s forestry is certified in accordance with the PEFC and FSC international forest standards. Environmental and ethical surveys. Holmen takes part in environmental and ethical surveys and regards them as valuable means of identifying strengths and weaknesses. h o l m e n a n d i t s w o r l d

18 t h i s i s h o l m e n Policies and guidelines The Group s policies and guidelines many of them focusing on sustainable development together with the laws in each country, provide the framework within which Holmen and its employees are to act. Holmen s production takes place in the EU, where the bulk of its output is sold. There are also some sales to the USA and countries in Asia. In all countries, Holmen operates in accordance with local laws and agreements, and observes sound business practice. Holmen also endeavours to keep itself aware of how the Group s stakeholders deal with issues relating to the environment and personnel. Sustainable development is an overriding goal at Holmen. According to the Group s strategy, the business shall be characterised by a holistic approach, concern for the environment, lean use of raw materials and energy, and respect for ethical and social norms. The Group s policies and guidelines are regularly reviewed with the object of improving its sustainability activities. A policy concerning bribery and corruption will be introduced in The Environmental policy contains general principles for the Group s environmental activities. It covers the environmental aspects to which Holmen and its stakeholders give priority. Specific environmental goals are drawn up locally and followed up in the environmental management system at each mill and in the Group s forestry activities. The Environmental policy will be reviewed in See also Environmental Responsibility on page 38. Holmen s Personnel policy reflects the Group s stance on what is sound human resources management and has been developed in association with the Group s union organisations. The policy highlights the joint responsibility of managers and subordinates for maintaining a sound work and development climate at each work place. The policy also explains what is expected of a good manager. See also Social Responsibility on page 48. The Equal Opportunities policy makes clear the Group s position on the conditions for its male and female employees. It stipulates that each work place shall be equally suitable for men and women and Holmen s employees base their work on the company s policies and guidelines. Sven-Olof Larsson is a machine operator and Niklas Ek is production supervisor at Iggesunds Bruk. that Holmen regards it as natural to combine parenthood and work. The policy reflects the Group s aim of promoting a better balanced gender distribution within the Group and an increase in the number of women in managerial positions. Holmen s Information policy regulates how the company is to handle, distribute and comment on internal and external information. It complies with the Stockholm Stock Exchange s recommendations. Purchasing policy. Holmen shall apply and maintain sound business ethics and conduct its business in a professional manner. The laws and rules that apply to the purchase of goods and services shall be followed and environmental issues shall be taken into consideration in accordance with the environmental policy. Guidelines for purchasing wood. Holmen requires the wood the company procures to be harvested in accordance with relevant laws and to satisfy specific environmental demands. Guidelines for sustainable forestry stipulates how the forests are to be managed in both production and environmental perspectives. The requirements stipulated in the forestry standards PEFC and FSC are incorporated into the guidelines. Local policies have been adopted in several areas to meet the specific circumstances at each unit. Union agreement. Relations between management and the union organisations are based on an agreement that focuses on health, equality of opportunity and competence development. Bribery and corruption. The policy makes it clear that in their contacts with customers and suppliers, where any form of favour is offered, employees give careful consideration to its implications and purpose. This policy will be introduced in More info on policies and guidelines: h o l m e n a n d i t s w o r l d

19 Human rights Holmen is a member of the UN s Global Compact. The Group has thus taken a clear stance on issues that affect human rights, social relations, the environment, and union rights. Holmen has been a member of both the Swedish and the international chapters of the Global Compact since April The Group thus supports the ten principles, which are listed below. Holmen has examined its activities to determine if there is anything that could conflict with the UN s Declaration on Human Rights. However, there is little risk since all production takes place in the EU, where such issues are closely regulated. In 2006 Holmen investigated whether any of its major suppliers or customers in risk countries are not living up to the requirements of the Global Compact. No suspect cases have been identified. UN Global Compact s ten principles Human rights Companies shall: 1. Support and respect protection of internationally proclaimed human rights in the sphere that the company is able to influence. 2. Make sure that they are not complicit in human rights abuses. 3. Uphold the freedom of association and recognise the right to collective bargaining. 4. Eliminate all forms of forced labour. 5. Eliminate child labour. Principles 1 5: Holmen only has production in the EU where these issues are regulated by the EU s rules. Major customers and suppliers outside the EU have been surveyed and no suspect cases have been identified. Regarding principle 3, in addition to EU legislation, freedom of association is also regulated by union agreements. 6. Eliminate discrimination in respect of employment and occupation. Holmen applies the EU s anti-discrimination laws and by means of regular employee surveys discovers whether any form of discrimination has arisen in the Group. Zero tolerance applies. Action plans are drawn up in those cases where discrimination comes to light. Brand X Pictures Global Compact The Global Compact is based on: The UN Declaration on International Human Rights The OECD (Organisation for Economic Cooperation and Development) draws up principles and standards, which governments apply to multinational enterprises to enable them to engage in business on a responsible and sustainable basis The International Labour Organisation s (ILO) declaration on the Fundamental Principles and Rights at Work The Rio Declaration on the Environment and Development. Environment Anticorruption 7. Support a precautionary approach to environmental challenges. Holmen s business requires environmental permits from the authorities. The terms are approved following detailed negotiations and assessments of the environmental impact that is acceptable, thereby meeting the demands for a precautionary approach. 8. Undertake initiatives to promote greater environmental responsibility. EU legislation is the cornerstone for the authorities environmental conditions. Regular reviews of environmental permits allow the relevant environmental measures to be taken. In addition, the environmental activities comply with certified environmental management systems at the mills and in the forest operations. The forests are also certified and managed in accordance with the PEFC and FSC forestry standards. Energy management systems are being introduced at all units. 9. Encourage the development and diffusion of environmentallyfriendly technologies. Environmental activities and technical development in the environmental area are mainly carried out in association with other companies in the sector. In most cases the results are published in reports and at seminars. Holmen is open to the exchange of information and diffusion of knowledge regarding environmental issues. 10. Combat all forms of corruption, including extortion and bribery. Holmen s new policy relating to outside contacts that will be introduced in 2008 draw attention to the strictness of the legislation against bribery and corruption. The guidelines make it clear that employees must consider very carefully the meaning and purpose of any favours offered in their contacts with customers and suppliers. h o l m e n a n d i t s w o r l d

20 Holmen in the society Stakeholders Holmen engages in a continual dialogue with its stakeholders. In recent years the number of questions addressed to the company has increased, and they have become more complex. More and more of them concern sustainable development, energy and the climate. The number of surveys on Holmen s business is increasing especially from customers, an important category of stakeholder. Parallel to this international company indices are evaluating the Group s sustainability activities. The object of these surveys and indices is to make it easier for investors to identify companies with a sound approach to sustainability. The focus on sustainability and the climate that is now so typical of developments around the world is in its turn prompting further questions from the stakeholders. Holmen views with favour this dialogue with stakeholders and considers that it helps to make clear Holmen s strong position to benefit from and create an increasingly sustainable society. The sections below describe the most important sets of stakeholders, the main characteristics of Holmen s relations with them, and some of the topics of greatest current interest. Customers and business partners Holmen s customers place demands on the company with regard to products and services, sound business practice and the company s stance on important environmental issues. Holmen makes the same demands on its suppliers of goods and services. Holmen s aim is to develop long-term and mutually beneficial relationships with its business partners. The most important channel for this exchange is the continuous dialogue. Holmen also uses surveys to determine what perception its partners have of the company. Current issues. In recent years Holmen s customers have had questions in these areas in particular: The traceability of the wood, especially imported wood, used as a raw material for the products. Holmen has developed traceability systems and can trace all its wood back to its origin. How Holmen handles questions relating to biodiversity in its forests. Holmen satisfies the demands of the PEFC and FSC forestry standards, and is taking measures to develop forestry practices in its forests. How Holmen tackles the impact of its activities on the climate in the form of carbon dioxide emissions from production. Holmen is taking steps to raise the proportion of biofuel in production. Targets have been established for reductions in the use of fossil fuels and energy. The role of forests as a carbon dioxide source and sink. For the first time ever, Holmen is now able to provide information on a carbon analysis for the Group s forests. See page 32. Shareholders Holmen s shareholders expect the company to make effective use of the assets and to earn a healthy return. Holmen is taking action to develop all aspects of the business in terms of sustainability, and to increase its value. Holmen s sustainability and financial information is intended to give shareholders a true and fair picture of the company and its business. Shareholders have an opportunity to put questions to the Board and Senior management at the Annual General Meeting. Employees Employees, trade unions, and prospective employees expect the company to have a well thought out, appropriate personnel policy and to apply it, to provide a sound work environment and have the clear intention to constantly improve working conditions. Holmen aims to be an attractive employer, offering interesting jobs that provide opportunities to develop. The company uses a variety of means for employees to keep themselves informed about its progress.

21 Holmen s stakeholders include its employees. Mats Stensson, Per Calner, Peter Jensen, David Alexandersson, Johan Bergholm and Johan Bjärbom all work at Braviken. Holmen carries out employee surveys every other year, and uses their results for making improvements. Current issues. The result of the latest employee survey indicated that a further survey among the company s managers was necessary with a view to determining the reasons why so many managers feel uncertain about what is required of them in their role as managers. The EU s REACH regulatory system for chemicals, which came into effect in 2007, also regulates some aspects of the work environment. Holmen is well placed to satisfy the new requirements. Analysts and opinion makers Analysts, the media, environmental and other lobby groups are constantly probing Holmen and its business from various angles. It is therefore important for Holmen to keep these groups regularly informed about its business. The Group regards it as natural to be probed on issues relating to financial, environment and social issues. Holmen has an ongoing dialogue with financial and sustainability analysts. The Group participates in surveys within these areas and regards them as valuable means of identifying strengths and weaknesses. Current issues. Ethical and environmental funds are making increasingly explicit demands on companies before they invest in them. The traceability of wood, and the use of energy, are two topics of great interest in discussions with analysts. In 2007, Holmen was given a high ranking by several independent analysts for the quality of its sustainability reporting in Holmen and its World. Official bodies Official bodies expect to receive correct and regular information about the company. Holmen aims to keep government authorities informed about the company s progress and submits annual environmental reports. Current issues. Ground contamination has been discovered at the sites of some of the Group s discontinued operations. Ground tests and measures have been carried out in consultation with the environmental authorities. Detailed discussions with several government authorities are in progress in connection with the permit audit for Holmen s new sawmill at Braviken, just outside Norrköping. Society at large Holmen s forestry activities are land intensive and thus impact on other groups in the society. In several cases, Holmen s production facilities are located close to built-up areas; this involves special demands regarding noise and emissions into air. Holmen aims to keep the public at large and other outside interests informed about its business. This involves a pro-active approach to the publication of articles on forestry and forests in the media. All the questions asked by teachers and pupils are answered and Holmen plays an active role in the programmes arranged under the aegis of the Forest in School project. The company also responds correctly and factually to letters and articles in the media that relate to Holmen. Holmen engages in a continual dialogue with the sami villages whose traditional winter feeding grounds for their reindeer are located within the bounds of Holmen s forestlands. Holmen has a deep understanding of the needs of reindeer breeders and aims to manage its forests in such a way as to prevent conflicts from occurring. Some of Holmen s mills are located in the vicinity of residential areas. In such places, Holmen consults the local residents in connection with major rebuilding projects, and also sends Holmen and its World to them each year. The Group maintains close contacts with universities and colleges for purposes of research and recruitment. Holmen, in the form of local involvement and sponsoring, makes contributions to community service, education and the quality of life in general. Current issues. Discussions in the media on forests and forestry were very lively throughout 2007 in view of the coming forest policy bill, which the government will table in March Biological diversity and the climate came to be contradictory phenomena. Holmen s position in these discussions was to provide factual information about the company s efforts to increase wood production in its forests, while also developing its nature conservation methods. In connection with the permit audit for the new sawmill at Braviken Holmen held consultations with local residents. The issue of human rights shifted into focus in discussion within industry. Holmen has been a member since April 2007 of the UN s Global Compact, which also includes environmental and social aspects as well as the right to start a union. h o l m e n a n d i t s w o r l d

22 H O L M E N I N T H E s o c i e t y Local importance and involvement Holmen s business generates numerous jobs in those communities where the company is active. By getting involved in the local community and sponsoring, the Group also contributes to public services, education and the quality of life. For some years, Holmen has been measuring the company s effects on local employment. Holmen Skog s role as a creator of jobs in local communities is also measured. On top of this, the income earned by forest-owners on their sales of wood to Holmen is also converted into jobs. Holmen has a total of around employees in Sweden. However, the total number of jobs generated by the Group is far higher than that. Like ripples on the water, more jobs are created at suppliers and through the purchasing power that creates jobs elsewhere in the business community and in public services. The average Holmen employee generates a further 3.5 jobs elsewhere in the community, which means that in total the Group generates a further jobs in the country. Holmen s activities generate more than half of the jobs in Hallstavik. The planned closure of a paper machine will have consequences for the entire community. Cuts at Hallsta have major impact on the community In December 2007, Holmen announced plans to cease production on the oldest of the paper machines at Hallsta, and reducing the Group s newsprint capacity by 15 per cent. The reason behind this decision is the sharp increase in the cost of energy and wood, in combination with stiff competition from North American producers and sluggish market trends. Productivity improvements and the closure of the paper machine are expected to lead to the loss of around 300 jobs at Hallsta. The consequences will be felt throughout Hallstavik as Holmen is the local community s largest employer. However, the restructuring of the mill is essential to ensure its survival. Holmen is taking action to arrive at the best solution for those employees who will have to leave the company. The final decision on the cutbacks will be made during the spring of Local involvement Norrköping. Holmen is a shareholder in Norrköping s marketing company Nya Norrköping. The company is also represented on various research councils at the University of Linköping s Norrköping Campus; it also awards scholarships to deserving students. Holmen has a seat on the boards of Business & Society Educational Association in Östergötland and the Eastern Sweden Chamber of Commerce. Hudiksvall. Iggesund Paperboard works with the municipality and other companies to develop local industry in Hudiksvall. Surplus steam from Iggesunds Bruk is delivered to Iggesund s district heating system. Ash, sludge and gravel from the wood handling unit at the mill is used to municipal landfills. Hallstavik. Holmen is a major property owner and landlord in the town. The company also manages the Port of Hallstavik and takes an active interest in most local issues of importance. Holmen delivers surplus steam to Hallstavik s district heating system. Holmen creates numerous jobs in the community No. of annual job opportunities 2007 Holmen Skog Norrköping Hudiksvall Hallstavik Workington 1) 2) 3) 4) Direct jobs Indirect jobs and forest owners Total direct and indirect jobs Jobs in trade and services Total including trade and services Municipal and county council jobs Public sector employees share of service industries Public sector employees direct/indirect share of own sector Total Share of all annual jobs in each town, % ) Norrköpings, Söderköpings and Finspångs municipalities 2) Hudiksvalls, Delsbo and Nordanstigs municipalities 3) Häverö-Singö, Edebo and Ununge parishes 4) District of Allerdale and Copeland The total figure for Norrkoping includes 122 jobs at Holmen Skog, that for Hudiksvall includes 700, and that for Hallstavik includes h o l m e n a n d i t s w o r l d

23 Incinerator ash from the mill is used as construction material on forest roads in the county. Holmen is one of the principals behind the Processum Technology Park, where process industries, the municipality and local universities are jointly engaged in R&D relating to renewable raw materials. Holmen is also represented on the Central Sweden Chamber of Commerce. Holmen s activities are like ripples on the water. The Group has around employees in Sweden but the total number of jobs Holmen generates in Sweden is around Örnsköldsvik. 1 Direct jobs Holmen s employees 2 Indirect jobs Suppliers and contractors As a large local employer, Iggesund Paperboard supports a variety of organisations and companies involved in business development. The company also supports GenII Engineering Training Co, which has so far trained more than 500 apprentices. 3 4 Forest owners Wood suppliers whose income is converted into job-years 5 Jobs in trade and services Direct and indirect jobs as share of total service sector Municipal and county council jobs Public sector employees direct and indirect share of own sector Workington. Holmen s social impact surveys are performed by Incedo AB, Örnsköldsvik, in close cooperation with Holmen and the respective municipality. Detailed descriptions of Holmen s social impact surveys are available on: Other contacts with the community Consultation with the sami people. Much of Holmen s forestland is located in northern Sweden in areas where sami villages have winter feeding grounds for their reindeer. Holmen has regular consultations with the sami villages with a view to arriving at solutions that best satisfy both parties needs for land. Humane Sponsoring. Holmen supports such organisations as SOS Children s Villages, the Child Diabetes Foundation and the Swedish Brain Foundation. Cultur al sponsoring. Holmen supports the Norrköping Symphony Orchestra and the Royal Swedish Horse Guard in Stockholm. Sports sponsoring. Norrköping Campus. It will receive funding of MSEK 1 per year for 15 years from the Karl Erik Önnesjö Foundation. Kempe Foundations. The main role of these foundations is to support research and education in the natural sciences in the north part of Sweden. In 2007, the Foundations donated MSEK 84, most of it to Umeå University, the Luleå Institute of Technology, the National University of Agricultural Sciences in Umeå, and the University of Mid Sweden and related research in Örnsköldsvik. The Group has sponsored a number of sports clubs for many years, among them MODO Hockey, Örnsköldsvik, the IFK Norrköping football team, and two speedway teams: Rospiggarna in Hallstavik and Vargarna in Norrköping. Holmen also sponsors biathlon athlete Anna Carin Olofsson and disabled athlete Jonas Jacobsson. Holmen also sponsors a number of local sports associations on a smaller scale. Forests possess significant social values, which numerous people enjoy in their leisure time. All of Sweden s forests are open to everyone through the Swedish system of legal right of access. In the late summer and autumn they are filled with people picking all the berries and mushrooms they can carry home with them. Other Sponsoring. Hunting Holmen supports the Swedish Young Shareholders Association. Foundations associated with Holmen K arl Erik Önnesjö Foundation. In 2005 a professorship in paper electronics was instituted at the University of Linköping s Social values of the forest is to all intents and purposes a popular movement in season, some people go out hunting in Sweden, of them are registered to hunt on Holmen s land. Each year they fell moose that provide 500 tonnes of meat when slaughtered and have a utility value of MSEK 25, at a low estimate. takes place in lakes and rivers on the Group s land. Nobody knows how many people go fishing, but they outnumber hunters by a wide margin. One in four Swedes claims to go fishing at least once a year. Fishing Recent research demonstrates beyond any doubt that forests have a beneficial effect on health and well-being. Consequently, many municipalities are taking steps to make nearby forests more accessible to the public. Well-being. is a growing sector in Sweden, one that attracts many visitors from the densely populated urban regions on the Continent. Holmen has laid out an extensive network of roads in its forests, which are also open to the general public. Eco-tourism Wetl ands. Holmen has been working with the Swedish Wetlands Fund since the end of 1990s to restore wetlands. To date, thirty or so of Holmen s wetland areas have been restored. The primary purpose is to benefit the birds that depend on wetlands for breeding. But wetlands also fulfill a social function for birdwatchers, and Holmen has laid out tracks, built lookout towers and set up signboards on many of them. h o lmen and i ts w o r ld

24 Raw materials Company forests a strategic resource Holmen sees its forest holdings as a strategically important resource. It will be possible to increase forest growth and harvesting of wood by around 25 per cent during the next 30 years. The return from company forests is stable and growth in the forests exceeds annual harvesting by a wide margin. This means that the stock of wood is growing steadily, which in turn means that annual harvesting levels can also be raised. The extensive study presented in 2006 shows that wood production in Holmen s forests could be increased by around 25 per cent over the coming 30 years. A warmer climate will further stimulate growth in the forests. However there are also negative aspects. Scientists judge that there will be a greater risk of storm-fellings and insect attacks. However, at present it is impossible to judge the extent of the threat and the opportunities. Forestry activities are affected only to a limited extent by the economic fluctuations that are typical of the market for forest products. The income from Holmen s forests varies only moderately over time, regardless of whether there is a boom or a recession. This means that the company forests have a stabilising effect on the Holmen Group s result. Forestry also requires relatively modest investments. finite resources will strengthen the position of the forest products. Stiffer competition for wood. The need for forest raw materials is growing in Sweden as a result of the rapidly rising demand for biofuel. As a result of political decisions and control instruments biofuel installations have a very high earning potential. This means that industrial wood, which could be processed into paper and wood products, is instead used as biofuel. This situation was brought to a head by a decision to protect more forestlands in Sweden for nature conservation purposes. Over and above the areas that were protected in 1998, a further hectares are to be protected by 2010 in order to reach the environmental target set out in parliament s decision on Living Forests. Given the growing competition for wood and the scarcity that is foreseen, Holmen s forests will become an increasingly valuable resource in the future. Stable base for wood procurement. Holmen is around 60 per cent self-sufficient in wood. Even though most of the Group s forestlands are located in northern Sweden, far from its own mills, the company forests are a strategic resource that can be used, for example, to exchange wood with other forest companies. If shortages of wood occur, it is possible to transport wood by rail or sea from northern Sweden to Holmen s mills in central and southern Sweden. Biological production. Forests are a biological production apparatus that can produce valuable wood and energy with the aid of solar energy, carbon dioxide, nourishment and water forever. Forests and their products thus have a guaranteed place in tomorrow s sustainable society. Awareness of this and the growing scarcity of Jenny Johansson worked as a summer temp planting out seedlings at Holmen Skog in Delsbo.

25 Holmen s forests are producing more In 2007, Holmen Skog carried out its largest training project ever. No fewer than people, employees and contractors, were trained in the use of the new version of Guidelines for Sustainable Forestry. The new guidelines will enable growth in Holmen s forests to be increased, while nature conservation methods will become more effective. The first edition of Holmen s Guidelines for Sustainable Forestry was published in 1997 at a time when nature conservation was the chief focus of debate in the forestry. As eco-friendly methods were still a novelty, Holmen s Guidelines were received with great interest far beyond the company s limits. For example, it came to serve as inspiration for the emerging nature conservations goals in the Baltic forestries. The first two editions were printed in more than copies in Swedish, English, Estonian, Latvian and Lithuanian. Since then much has changed in forestry. Production has become increasingly important in line with the growing demands made on forests as a source of energy and in terms of the climate. In response to these demands, Holmen decided in 2006 to introduce a new silviculture programme that will enable forest production to be increased by 25 per cent within 30 years. Parallel to this, the target has been raised for nature conservation. The increasingly intensive forestry also requires nature conservation methods to be improved. The new version of Guidelines is the most important tool for implementing the modified methods in practical forestry. Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning 2007 Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Guidelines for Sustainable Forestry Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring More efficient nature conservation Ecological analyses show that in Swedish forests there is a scarcity of old trees, dying trees and dead wood. Holmen is therefore taking steps in association with nature conservation scientists to develop nature conservation strategies in the forests. Holmen sets aside some five per cent of its productive forestland for nature conservation purposes. An equally large acreage in the form of border zones and small biotopes is to be left untouched when the forests are harvested. On top of this there is another ten per cent or so of low-productive forests that are not cultivated. All in all, therefore, some 20 per cent of Holmen s forested land is excluded from forestry activities. Tomorrow s forestry with its more intensive silviculture, shorter life-cycles and more fertilization is expected to put pressure on species that have their habitat in the forest. Holmen therefore aims to modify and develop by various means its nature conservation methods on the company land. The principle is to raise the conservation values in protected areas and turning them into important conservation sites in the forest landscape. Natural values are largely associated with dead and dying trees. By actively accelerating the decomposition process in set aside forests it is possible to increase their natural value. For example, it is possible to damage selected trees and lower their vitality. The point of this is to imitate what happens in a virgin forest where these processes take far longer. Holmen has initiated several large-scale trials to test these principles. They are being watched with great interest by nature conservation scientists. Holmen tests methods for improving natural values in the forest at Skogsberget in Västerbotten. Linnea Forsmark, Holmen Skog, together with nature conservation researcher Joakim Hjeltén of the Swedish University of Agricultural Sciences. h o l m e n a n d i t s w o r l d

26 r a w m a t e r i a l s Wood procurement Holmen owns a million hectares of productive forestland in Sweden. Harvesting in Holmen s forests corresponds to around 60 per cent of the annual wood requirements of the Group s Swedish mills. Wood procurement in Sweden Most of Holmen s forests are located in northern Sweden, while its mills are in the southern and central parts of the country. This means that the mills are largely supplied with wood that is purchased from private forest-owners in those parts of the country. The wood from the Norrland forests is sold to nearby sawmills and pulp/paper mills. Holmen s Swedish mills used 4.5 million cubic metres of wood in In total Holmen procured almost 10.6 million cubic metres, of which some 6 million cubic metres were sold to other pulp/paper mills and sawmills. The volume harvested in Holmen s forests was 2.6 million cubic metres, which Environmental certification in Holmen Skog PEFC silviculture. Holmen Skog manages company forests in accordance with the requirements of the Swedish PEFC standard. PEFC group certification. Holmen Skog is also able to PEFC certify private forest-owners and contractors. PEFC traceability. Holmen Skog has procedures for tracing all wood purchased in Sweden to its origin. FSC silviculture. Holmen Skog cultivates company forests in accordance with the requirements of the Swedish FSC standard. FSC group certification. Holmen Skog is able to FSC certifiy wood suppliers. FSC traceability. Holmen Skog has procedures for tracing Swedish and imported wood to its origin. FSC Controlled Wood also includes non-certified wood that is controlled in accordance with the FSC s rules for wood purchasing. ISO Holmen Skog carries out its environmental activities in accordance with the international ISO environmental management system. Inspections. International certification companies: DNV, Det Norske Veritas and SSC, Svensk SkogsCertifiering, which are both accredited by FSC and SWEDAC (PEFC and ISO), carry out inspections to verify that the requirements in the environmental certifications are satisfied. corresponds to more than 60 per cent of the Group s wood requirements. Environmental certification in Sweden. All the large Swedish forest companies, and some private forest owners, are certified in accordance with FSC. Holmen, Bergvik and most other private forestry are also certified in accordance with PEFC. Holmen offers its wood suppliers group certification in accordance with PEFC and FSC. Over half of Sweden s forests are now certified in accordance with FSC and/or PEFC. See also page 41. Imports In 2007 Holmen imported 0.4 million cubic metres of wood, most of which went to Iggesunds Bruk. Lesser volumes also went to Hallsta and external buyers. The greater part of Holmen s imported wood comes from Estonia, and some quantities are imported from Latvia and Russia. Wood procurement in Estonia Holmen s wholly-owned subsidiary Holmen Mets buys and ships wood to own terminals. Almost all the wood is bought from private forest-owners. Holmen Skog s guidelines for wood procurement are complied with. Holmen Mets has been certified in accordance with FSC s standard for Controlled Wood; the company has procedures and systems for tracing all the wood to its origins. The system is verified by Smartwood, an FSC-accredited quality assurance auditor, using random sampling in accordance with the FSC standard. Holmen considers that the systems for traceability now in use in Estonia satisfy stringent demands for reliability. One reason for this judgement is that the authorities ability to supervise compliance with the law has improved significantly in recent years. The return of land that was confiscated after World War II has now mostly been completed. This means that there are now fewer forests whose ownership is unclear, which has greatly strengthened the supervisory role of the authorities. Environmental certification in Estonia. State-owned forests, which account for around half the total area of forestland in Estonia, are certified in accordance with FSC. The proportion of certified, privately owned forest is small. Wood procurement in Great Britain Iggesund Forestry procures annually around cubic metres of sprucewood and sawmill chips for the board mill in Workington. Most of the wood comes from state-owned forests, mainly in south west Scotland and northern England. A small amount is sourced from private forest-owners. Holmen does not own any forests in Great Britain. Environmental certification in Great Britain. All state-owned forests and most of the privately owned ones are certified in accordance with FSC. Holmen s guidelines for wood procurement Holmen has applied guidelines for wood procurement since These guidelines define the types of wood that the Group does not purchase. Traceability (Chain of Custody) All wood for Holmen s mills is procured by Holmen Skog, whose traceability system has been certified in accordance with FSC s Controlled Wood standard and PEFC s Noncontroversial wood traceability standard. Iggesunds Bruk, Iggesund Sawmill, Hallsta and Wargön each have their own chain of custody certifications (FSC and PEFC). Braviken is preparing for one. Workington is traceability certified in accordance with FSC. 2 4 h o l m e n a n d i t s w o r l d

27 Hendrik Nömme is environmental manager at Holmen Mets in Estonia, The laws that we now have in our country means we can trace the harvested wood back to its origins with great precision, he says. The photograph showing the many different kinds of wood was taken in Estonia. All the wood used by Holmen can be traced back to its origin Traceability, Sweden All wood can be traced to the place where it was harvested. Every batch of wood is given an ID number, which accompanies it from the harvesting site until it passes into Holmen s possession. The ID number accompanies the wood even if it changes owner on the way. The system is administered by SDC, a third party organisation that administers all the wood reporting in Sweden. Traceability, Estonia The procurement of wood by Holmen Mets, Holmen Skog s subsidiary in Estonia, has been certified in respect of traceability according to FSC s standards for Controlled Wood since All wood that is harvested and transported in Estonia is accompanied by a waybill containing information on where the wood was harvested, who owns the forest it comes from and who harvested it. The authorities continually monitor the system to ensure its correct application. Holmen Mets carries out random checks on the purchased wood. Holmen s procedures are, in their turn, monitored by Smartwood, a quality assurance company that is accredited by FSC. Wood procured within the framework of this system is marked FSC Controlled Wood, which provides an assurance that the wood has not been felled illegally has not been felled in conflict with the interests of indigenous peoples has not come from controversial sources has not been genetically modified has not come from natural forests which have been converted into plantations. Traceability, Russia In Russia the authorities ability to control the origin of all wood has improved in recent years. By comparison with Estonia Holmen Skog s imports of wood from Russia are small. In recent years wood has mainly been purchased from large companies, which have had or are about to have their forestry and wood trading FSC certified. These companies have long-term contracts to harvest trees on state-owned land and do not buy wood from other forests. This means that the risk of Holmen to buy illegally harvested wood is limited. Holmen s guidelines for purchasing wood If the guidelines are not followed, if, say, the details provided on origin are incorrect this entitles Holmen to cancel a purchase without paying the vendor any compensation. Legal requirements, Sweden All harvesting of stands larger than half a hectare in area must be reported to the National Board of Forestry. The report must also specify how the land is to be re-afforested. The National Board of Forestry monitors compliance with these requirements. Legal requirements, import countries In all countries from which Holmen imports wood there are authorities, which, like the Swedish ones, monitor harvesting and re-planting. More information about forests and wood: All facts, page 59 and h o l m e n a n d i t s w o r l d

28 r a w m a t e r i a l s Recovered paper Holmen uses recovered paper in the form of collected newspapers, magazines and catalogues at its mills Braviken, Hallsta and Madrid. In 2007 total consumption amounted to tonnes. At Braviken and Hallsta recovered paper is used in the production of newsprint and telephone directory paper. The admixture rate varies between 30 and 60 per cent depending on the type of paper. In Madrid production is completely based on recovered paper. PROCUREMENT, SWEDEN. Holmen s partowned company PÅAB procures recovered paper for Holmen s Swedish mills. Just over half the volume comes from within the country and the rest is imported from England, Norway, Germany and Denmark. The shipments from England are carried on their return leg by the ships used to ship paper products to England. PROCUREMENT, SPAIN. Much of the recovered paper used at the mill in Madrid comes from CARPA, the wholly owned paper collection company and from part-owned companies. Most of it is sourced in Spain A new unit for sorting of recovered paper has been commissioned at the mill in Madrid. with some volumes also being imported from Portugal, southern France and Great Britain. Recovered paper collection In Sweden 69 per cent of all the paper and board used in the country was collected. In Spain the corresponding figure was 59 per cent and for Europe as a whole it was 63 per cent. All these figures relate to 2006, the latest year for which comprehensive statistics are available. As the supply of recovered paper in Sweden does not cover the volume required almost 0.5 million tonnes are imported. In Spain 0.7 million tonnes are imported. Cepi, the European forest industry s trade association, has set as a target for 2010 that the recovery rate, i.e. the use of recovered paper (incl. exports) in proportion to the total consumption of paper, should increase to 66 per cent. The result for 2006 was around 63 per cent. In million tonnes of recovered paper were exported from Europe, mainly to Asian countries, especially China. Producer responsibility A law on producer responsibility for recovered paper was introduced in Sweden in This act regulates the responsibility of newsprint manufacturers for collecting and dealing with recovered paper. The target is to reach a collection rate of 75 per cent. The figure for 2006 was around 83 per cent. A material company, Pressretur, has been set by the largest newsprint producers in Sweden, including Holmen, to handle the practical aspects of producer responsibility. Recovered paper Energy production Collection Collection Energy production Paper production Virgin fiber products Paper production Scandinavia is a motor driving Europe s increasingly self-sufficient fibre system. It must be continually filled with fresh fibre from the Scandinavian forests so that the quality can be maintained. Holmen s Swedish mills form part of the European flow of recovered paper as they can, in a constructive way, use their empty freight capacity for return shipments. Good for many types of paper but not all Recovered paper is a valuable resource for newsprint, printing paper, directory paper, tissue paper, corrugated board and certain types of packaging board. However, recovered paper is not suitable as a raw material for high quality paperboard or for packaging that has direct contact with foodstuffs because its cleanliness requirements are much higher. Facts about recovered paper Recovered paper collection 2006 Share of collected paper (paper/board) in relation to total consumption in the area. Share, % Million tonnes Sweden Spain Europe Use of recovered paper 2006 Share of collected paper (paper/board) in relation to total amount of paper/board produced. Share, % Million tonnes Sweden Spain Europe (Cepi) Holmen Paper (2007) Recovered paper at Holmen Use, tonnes Braviken Hallsta Madrid Holmen, total h o l m e n a n d i t s w o r l d

29 Water The volume of water used in production is being steadily reduced by the use of increasingly efficient methods and equipment. In Madrid particular attention is given the use of water owing to the mill s inland location. Holmen uses water to transport and wash fibres at the mills. Water is also used for cooling and to produce steam. The water used is almost 100 per cent surface water drawn from lakes and rivers. After being used it is treated in several stages before being discharged back into the recipient. Supply of surface water In Sweden and Great Britain there are ample supplies of surface water. Precipitation is high, which means that rivers and streams are well filled throughout the year. In the region of Madrid there are no lakes and large water courses. Despite the dry climate water is normally in ample supply and sourced via a system of surface water reservoirs that draw their water from small rivers and streams. During long, dry periods restrictions may be imposed on the use of water. Holmen accounts for 0.7 per cent of Madrid s water consumption. Use of water To process chemicals. The mills use water to prepare and dilute chemicals. As a cooling medium. Water is used to cool various parts of the plant. As a transport medium. Water is used to carry fibres through the process. When the pulp reaches the paper machine it is 99 per cent water. Most of this water is re-used. To produce steam. Steam is used to heat the process equipment, including the drying cylinders on the paper machines. Cleaning and sealing. Much of the fresh water that is required is used for cleaning and as sealing water for bearings in pumps and other apparatus. Watering timber. At Iggesund Sawmill saw logs are watered in the summer to prevent the timber from drying and being attacked by insects. Treatment and emissions Effluent from the mills is treated in several stages before it is discharged. The treatment methods are regulated in the environmental permits and vary from mill to mill, depending on the production method and conditions in the recipient. Mechanical treatment. The water is channelled into ponds where particles, mainly fibres, fall to the bottom, from where they can be removed. Biological treatment. Organic substances in the effluent are broken down with the aid of micro-organisms. The principle is the same as in nature, but the process goes much faster. Chemical treatment. Effluent is treated with the aid of chemicals that cause contaminants to precipitate, after which they can be removed mechanically. How Holmen tackles water issues Holmen monitors the status of the recipient regularly in close cooperation with the environmental authorities. Holmen s water treatment group handles issues relating to the use of water and effluent treatment. At each mill there are local environmental goals for the use of water and effluent characteristics. The conditions in the permits regarding effluent treatment are determined on the basis of unique water conditions in the vicinity of each mill. Madrid. Holmen s paper mill in Madrid differs from the Group s other mills in that it is not situated on a water course. Municipal drinking water is there therefore used in the process. Water in Surface water 92 million m 3 Water out Following a series of efficiency measures, the mill s specific water use is now among the lowest in Europe. For instance, one of the paper machines has been equipped to enable it to re-use water, which has reduced the fresh water requirement by cubic metres per day. To further reduce the need for fresh water, the company is exploring the possibility of using treated municipal effluent, which will then be further treated using advanced methods before it can be used by the mill. Pilot-scale trials have been carried out with positive results. A decision on the first stage of full-scale treatment is expected in This will reduce the mill s fresh water requirement by 30 per cent. Holmen s specific water consumption has been reduced by around 20 per cent over the past decade (m 3 of water per tonne of end product). New legislative demands The EU s Water Directive is being implemented. Its target is to bring all water in Europe up to a good status by no later than It also requires the sustainable use of water to be guaranteed. Holmen is well placed to satisfy the demands in the EU Water Directive thanks to the measures that have been taken to reduce water consumption and effluent. The Group is active in local water management associations, which are expected to play a key role when the Directive is implemented. Detailed descriptions of the aqueous environment in the vicinity of Holmen s mills are available at: Cooling water and steam 29 million m Treated process water 63 million m 3 Every year, Holmen uses large volumes of surface water at its mills. Two-thirds of it is process water that is treated in several stages before being discharged. h o l m e n a n d i t s w o r l d

30 r a w m a t e r i a l s Energy supply Holmen is a major user of electricity. It is mainly the production of thermomechanical pulp (TMP) that is electricity intensive. Having access to electricity at competitive prices is one of the key factors affecting Holmen s development. As energy costs rise and society becomes more aware of the connection between energy and the climate, energy issues have become increasingly important in the Group. It is of the utmost importance for Holmen s long-term profitability to keep energy consumption and costs as low as possible. Company-generated electricity covers one-third of requirements Holmen owns, wholly or partly, 23 hydro power stations located on the Umeälven, Faxälven, Gideälven, Iggesundsån, Ljusnan and Motala Ström rivers which produce per cent of the Group s total electric energy requirements. Combined with the company s back-pressure power production, this means that Holmen meets approximately one-third of its electricity requirements from internal sources. In 2007, the relative output of company-generated hydro power rose to 23 (18) per cent as a result of high water levels in the rivers. the rest is purchased Most of the electricity needed at Holmen s mills is purchased externally. This makes the Group one of Sweden s largest buyers of electricity. In order to control the risks associated with being so dependent on external supplies, Holmen hedges prices by entering into long-term agreements with electricity suppliers. The prices of per cent of its purchased electricity in Sweden have been hedged up to 2012 and, for the following years up until 2015, 70 per cent has been hedged. Bioenergy covers half of thermal energy requirements Biofuel, mainly in the form of bark and wood-containing liquors from the sulphate pulp process, meets approximately half of Holmen s thermal energy requirements. Electric energy % of Holmen s total consumption One of Holmen s Purchased 23 wholly and partly Company owned 69 hydro power hydro power stations is located at Bågede Combined with the heat recovered from the thermo-mechanical Company pulp back-pressure process this means power that almost two-thirds of the thermal energy needed is produced internally. The rest of the heat is either produced by the mills using natural gas, oil, LPG, or purchased from external suppliers. Surplus heat delivered to local community Iggesunds Bruk and the Hallsta paper mill are located close to built-up communities. The surplus thermal energy at these units is delivered to the municipal district heating networks in Iggesund and Hallstavik respectively. Energy supply in Holmen 2007 Electric energy % of Holmen s total consumption Purchased 69 Company hydro power 23 Company back-pressure power Holmen owns, wholly or partly, 23 hydro power stations. Back-pressure power is produced at the mills. The electricity that is purchased in Sweden is mainly produced at hydro or nuclear power stations. Electric energy % of Holmen s total consumption Purchased electricity Company hydro power Company back-pressure power Thermal energy % of Holmen s total consumption 14 Recovered thermal energy Biofuel 46 At Iggesunds Bruk, large quantities of thermal energy are produced by the incineration of wood-containing liquors. At Hallsta and Braviken surplus heat is recovered from the thermo-mechanical pulp process. Workington and Madrid produce thermal energy using natural gas. Thermal energy % of Holmen s total consumption Biofuel Recovered thermal energy Natural gas Oil, LPG Purchased thermal energy Oil, LPG Natural gas Purchased thermal energy 2 8 h o l m e n a n d i t s w o r l d

31 Holmen s approach to energy issues More energy-efficient production In association with Vattenfall and other parties, Holmen is analysing its use of electric energy. This has resulted in a number of proposals for ways to reduce energy consumption, some of which are now being implemented. However, the potential for improving energy-efficiency with existing equipment is estimated at little more than a few per cent. Significant savings will depend on the thermo-mechanical pulp process being developed. Holmen Paper is therefore installing a new pulp line for energy-efficient production of thermo-mechanical pulp at the Braviken mill. It should be ready in the autumn of 2008, and is expected to reduce the pulp line s electricity requirements by more than 20 per cent. The total investment cost is MSEK 475, of which MSEK 40 will be covered by a grant from the Swedish Energy Agency. Electricity- and heat-saving measures were taken at Hallsta in 2007, which reduced oil consumption by 45 per cent in relation to Several measures are being taken at Iggesunds Bruk to reduce the use of thermal energy and fossil fuels, which will have their full effect in It is estimated, for example, that oil consumption will be reduced by some 75 per cent in relation to More company hydro power Holmen is building a new and more efficient hydro power station on the Iggesund river, where it will replace three old ones, when it is commissioned at the end of The Group is also exploring the possibility of making careful use of unexploited waterfall rights. Raise share of internally generated energy Holmen has an explicit goal of raising the share of internally generated energy. This involves various means of enabling it to replace fossil fuels with bioenergy and to make greater use of waste heat. Energy management systems The Group s Swedish mills have certified energy management systems. Such a system is also expected to be introduced at Workington in 2008 and thereafter in Madrid. Industry-wide measures In 2005 Holmen and some of Sweden s other electricity-intensive companies set up BasEl, which is engaged in practical projects intended to increase the supply of electricity at competitive prices. Together with the other companies in BasEl, Holmen set up a company called VindIn in Holmen s forestland was inspected in 2007 to identify suitable locations for wind power stations. VindIn has begun an in-depth investigation of three locations for a wind park, one of which is located on Holmen s land. Holmen believes it is important to be involved in the development of alternative energy sources; it also believes that this may also have a moderating effect on electricity prices. Extracting more biofuel It will be possible to more than double the production of biofuel in Sweden within some 15 years. The main challenge is to extract more in the north of Sweden, where the greatest potential exists. Holmen is successively extracting more biofuel from its own forests and becoming more active as a buyer and seller on the biofuel market throughout the country. In 2007 a project was launched to examine the possibility of building a factory to produce fuel pellets in Iggesund. Higher forest growth in Sweden Given the growing demands now being made on the forest as a source of more energy, forest growth has to be increased. In 2006 therefore Holmen adopted a new silviculture programme with the object of increasing the growth in the Group s forests by around 25 per cent over the coming 30 years, see page 22. Different paper different energy requirement The manufacture of printing paper requires considerable amounts of energy. In return, the yield from the wood is high almost 100 per cent. In the production of paperboard half of the wood is used while the rest becomes a valuable biofuel. SULPHATE PULP is produced at Iggesunds Bruk. The wood is cooked in liquor, mainly caustic soda, which dissolves it. The cellulose fibres are released whole and undamaged and with all their strength. Around half of the content in the wood is cellulose fibre, which can be turned into paper. The rest of the wood substances are collected and used as biofuel. MECHANICAL PULP is produced at Hallsta, Braviken (both TMP) and Workington (RMP). The wood is grounded mechanically in disc crushers, known as refiners. As these require a great deal of electricity, these mills use considerable amounts of electric energy. In return, the entire content of the wood can be used. The heat generated in the refiners is recovered and used elsewhere in the process. Bark and other wood residues are used as bioenergy. DIP DE-INKED PULP. De-inked recovered paper is an excellent raw material for newsprint, for instance. The process at Holmen Paper Madrid is based entirely on DIP, at Braviken recovered paper makes up 40 per cent of the raw material used and at Hallsta it is 12 per cent. In contrast to the production of TMP, no surplus heat is generated, nor is there any bark or wood residue. External energy sources are therefore necessary. h o l m e n a n d i t s w o r l d

32 Climate and Sustainability Natural and climate-neutral raw materials Holmen s business is based on wood, a natural and climate-neutral raw material that can be processed into products that can be recovered both as material and as energy. The climate has become a key issue on the global agenda. The UN s climate conference in Bali in December 2007 was a milestone where, for the first time, the world community could agree on the formulation of the problem and go on to draw up a road map for the next stage. In order to slow down the ongoing changes in the world s climate carbon dioxide emissions and other greenhouse gases must stabilise at their current level and eventually fall. The carbon cycle on the planet is complicated. If the emission and fixation of carbon dioxide to and from the atmosphere were equal there would be no impact on the climate. However, if new amounts of carbon dioxide collect in the atmosphere because of burning fossil fuels such as coal and oil the conditions change; it becomes warmer and weather patterns change. The amount of carbon dioxide in the atmosphere also increases as a result of felling trees without replacing them, or by turning forests into agricultural land. Conversely one can use the forest wisely and enable it to absorb more carbon dioxide than it would without cultivation. In this way the forest, the forest floor and forest products function as a carbon sink. Efficient forestry good for the climate. For climatic reasons it is best to cultivate the forest actively, produce plenty of wood and manufacture products that can be used instead of concrete and steel in buildings. The same applies to bioenergy, which can replace oil. This is the main message from Lustra, Sweden s state financed research programme, which after eight years was concluded in One conclusion is that the manufacture of wood products generates low carbon dioxide emissions. They differ from steel, concrete and plastic, which are materials that deplete. Their methods of production also cause significant emissions of fossil carbon dioxide. Efficient forestry also ensures that the forest absorbs more carbon dioxide, which is then stored in the trees and in the ground. For this reason it is sensible to fertilise the forest with nitrogen. This enables the trees to grow better and fixes more carbon dioxide while the nitrogen ensures that more carbon dioxide can be absorbed into the ground. Manufacturing products from natural resources and energy that do not consume finite resources or cause environmental problems is an increasingly telling environmental argument. Holmen is in a strong position with its natural and climate-neutral raw material and high use of bioenergy. Research on carbon dioxide/facts Much of the information presented on this and the following pages is taken from the Lustra research programme, which focused on the role of the forest and forest ground in the emission of greenhouse gases. Lustra, which came to a conclusion in 2007 after eight years, was a joint project involving numerous scientists and post-graduate researchers from a number of Swedish universities and colleges. Lustra was financed by the state research foundation Mistra.

33 The carbon cycle in the forest Carbon is the building brick of life and can be found in everything that is living people as well as in trees and other plants. Carbon can also be found in the air as carbon dioxide. Living trees both absorb and emit carbon dioxide. When they die some of the carbon goes back into the air. Some of it ends up in the ground. Carbon dioxide is in the air Carbon dioxide is carbon in gaseous form. At present, the air has a carbon dioxide content of per cent. In the middle of the 1900s the corresponding figure has been per cent, a level that was stable for at least the last thousand years. The increasing amount of carbon dioxide is one of the main causes of the greenhouse effect. Trees breathe in carbon dioxide During the hours of daylight trees absorb carbon dioxide from the air via their leaves and needles. Together with energy from the sun, nourishment and water they convert this into an energy-rich sugar solution. and build up biomass With help from carbon and the energy in the sugar solution and different nutrients the tree builds up its biomass trunk, branches, needles, leaves everything. Trees also breathe out carbon dioxide Trees not only breathe in but also breathe out. When they use energy they re-create carbon dioxide, which is breathed out. The amount they breathe out is less than the amount they breathe in. Consequently the trees collect carbon. Carbon dioxide is released on decomposition Dead plant parts, leaves, needles, roots, fallen branches and whole trees, are worked on by fungi and micro-organisms on and in the ground. As they are broken down carbon dioxide is released into the air. Carbon supplied to the ground Carbon from partly decomposed plant material goes with rainwater down into the ground. Some of this carbon is fixed in the ground on site. A small proportion flows away into the groundwater and watercourses and becomes part of a much longer cycle between water and air. Carbon also enters the ground from dead roots. The carbon that ends up in the ground stays there for a very long time. Twice as much carbon in the ground as in trees The decomposition of plant parts in Sweden s cold and damp climate takes place more slowly than the absorption. Since the first tree put down its roots after the Ice Age carbon has been collecting in Sweden s forestlands. Today each hectare of forestland contains around 85 tonnes of carbon, while the trees on one hectare of land contain around 45 tonnes. Two kinds of carbon dioxide Carbon dioxide is carbon dioxide but there are good reasons for making a distinction between its origins. Biogenous carbon dioxide, which is emitted when trees and plants decompose or wood or paper are burned, is already part of the atmosphere s carbon cycle. Fossil carbon dioxide, which is released when oil is burned, adds new amounts of carbon dioxide to the atmosphere. The oil has been stored in the earth s crust for millions of years. It is the fossil carbon dioxide that is the villain in the climate drama. Forests absorb more carbon dioxide than they emit When branches and harvesting remains rot after being harvested, the forest floor emits carbon dioxide. Not until the new trees reach their twenties do they begin to absorb more carbon dioxide than the ground emits. Viewed over an entire life cycle a growing forest absorbs significantly more carbon dioxide than it emits, which is good grounds for regarding the forest as a carbon sink. Carbon dioxide emissions Seedling forest Young forest Carbon dioxide absorption Mature forest Harvesting Year h o l m e n a n d i t s w o r l d

34 c l i m a t e a n d s u s t a i n a b i l i t y Holmen s forests benefit the climate Holmen s forests absorb more carbon dioxide than they emit and thus function as a carbon sink. This is shown by an analysis of the Group s forests that was carried out in The analysis is an important aspect of the process of preparing Carbon Footprints for Holmen s products. The forest s trees absorb carbon dioxide, which they then transform into carbon in their biomass. When needles, leaves and branches that have fallen off, as well as dead roots decompose, carbon accumulates in the ground. There is about twice as much carbon in the ground in a forest as there is in the trees that stand in it. The forest s ability to absorb carbon dioxide depends on several different factors: the age of the trees, the climate, the nutritional content of the ground, the amount of precipitation and so on. The faster the trees grow the more carbon they absorb. Once the forest has been harvested the material left over after harvesting decomposes on the stand and releases carbon dioxide. Not until the new trees have been growing for twenty years do they absorb more carbon dioxide than is released from the ground. During the remainder of its life cycle the forest absorbs considerably more carbon dioxide than it emits. The role of the forest floor. Mineral soil releases relatively little carbon dioxide. This is very different from peatland (decomposing plant material), which releases greenhouse gases. Above all it is ditched peatland that releases greenhouse gases as the decomposition process accelerates because the ground water level is lowered. The connection between the absorption and emission of carbon dioxide from the forest is complex. Holmen s analysis of the role of forests and the forest floor in the carbon cycle has been carried out in association with SkogForsk and the Swedish University of Agricultural Sciences. Valuable information has also been obtained from Lustra, that after eight years was concluded in the autumn of Carbon analysis of Holmen s forest activities Analysed effects Increased stock of standing timber The annual growth in Holmen s forests exceeds harvesting. Therefore more carbon is absorbed by the forest, so it functions as a carbon sink. It is estimated that on average some 82 per cent of the growth will be harvested during the coming ten years. This means that the total stock of standing timber in the forests will increase by around cubic metres (m 3 sk) per year. The annual increase in the volume of wood, including branches, needles and leaves, in Holmen s forests absorbs tonnes of carbon dioxide in the trees. Carbon in trees and ground Holmen s forestland contains an average of some 60 tonnes of carbon per hectare. The corresponding figure for the growing trees is 33 tonnes per hectare. Absorption/Emission from the forest floor Mineral Soil. Forest-covered mineral soil in the south of Sweden contains more carbon than in the northern parts of the country. This is mainly because forests grow better in the south and therefore produce more needles and branches, which release carbon when they are broken down on the ground. Analysed effects Carbon sink in trees through growing stock of wood Solid ground, absorption/emissions of greenhouse gases 0 Peatland, emissions of greenhouse gases Effects of forest fertilisation Effects of production of fertiliser Silviculture, felling and transportation within the forest Transportation of wood Biofuel, substitute for oil Total analysed effects Conditions: the figures for growth and harvesting are stated in forest cubic metres, by which is meant the entire volume of the tree, including bark and tops. The research studies carried out in recent years indicate that no carbon is absorbed by the forest floors in northern Sweden and little in the southern parts of the country. Most of the Group s land holdings are in northern Sweden. Therefore Holmen estimates that its own land neither absorbs nor emits carbon dioxide. Peatland differs from mineral soil in that it releases greenhouse gases, mainly carbon dioxide but also dinitrogen oxide (laughing gas) and methane. This is especially the case with ditched peatland where decomposition is accelerated because the water level in the ground has been lowered. Most scientific studies on peatland have up until now been carried out in southern Sweden. There is much to suggest that emissions of greenhouse gases in the country s southern regions are higher than in the north, where most of Holmen s forests are situated. Emission levels in the north of Sweden are therefore assumed to be 60 per cent of the level in southern Sweden. Holmen estimates that emissions of greenhouse gases (converted into carbon dioxide) from the Group s peatlands amount to around tonnes per year. Carbon dioxide balance for Holmen s forest activities (tonnes of carbon dioxide, CO 2, per year) Estimated effects Spruce wood, structural wood*, substitutes for other materials with an impact on the climate Spruce wood, carbon sink Pine wood, carbon sink Total estimated effects Total analysed and estimated effects *About 80 per cent of the spruce wood is used for structural timber manufactured by external saw log customers. The calculations upon which the table above is based can be found h o l m e n a n d i t s w o r l d

35 Holmen s forests Total acreage: Annual growth: Average annual harvesting: Average annual increase in stock: hectares, mostly located in the north of Sweden m 3 sk m 3 sk (82% of the growth) m 3 sk Nitrogen fertilisation fixes more CO 2 The use of nitrogen fertiliser means that more carbon is fixed in the trees and the ground. The trees grow faster and produce more fallen needles, twigs and branches which, when they decompose, end up in the ground. The nitrogen also hinders decomposition in the ground, which means that less carbon is lost. Nitrogen thus plays a beneficial double role when it comes to the amount of carbon in the ground. In 2007 Holmen fertilised hectares of forestland. Done every year, this amount of fertilisation means that some tonnes of carbon dioxide are absorbed by Holmen s forests annually. The manufacture of this quantity of fertiliser causes emissions of tonnes of fossil carbon dioxide. Silviculture, harvesting and transport in the forests Emissions of carbon dioxide have been computed for all stages from seedling production, setting out, clearing, fertilisation, harvesting and transportation from the harvesting site to the roadside. Holmen re-afforests almost hectares of forestland and harvests on average 3.2 million cubic metres of wood each year. The machines and equipment used cause emissions of some tonnes of carbon dioxide each year. Transportation For the most part, wood from Holmen s forests is transported by truck to Holmen s mills and those of other forest companies. The transportation of wood causes emissions of some tonnes of carbon dioxide per year. Biofuel Holmen Skog produced equivalent to some MWh of biofuel in 2007, most of it in the form of harvesting waste, such as branches and tops. Holmen has also begun carrying out trial harvesting of stubs. The harvesting of all these materials is expected to increase. Biofuel is a direct substitute for oil and thus eliminates considerable emissions of fossil carbon dioxide, which has an impact on the climate. Holmen estimates that if MWh of biofuel is used instead of oil as the source of energy in a thermal power station, fossil carbon dioxide emissions will be reduced by tonnes/year. Estimated effects The effects described in this section are those that cannot be measured with any precision. They are known as substitution effects when wood is used instead of concrete and steel in buildings. According to the Lustra research programme it is precisely as a replacement for materials such as concrete and steel, that wood can play its most important role in stabilising the climate. The figures presented below are based on informed estimates and research results in this field. Saw logs, structural timber In many situations wood can be used as a substitute for other building materials. The manufacture of concrete and steel, for instance, causes high emissions of fossil carbon dioxide. The production of sawn timber, by contrast, only gives rise to very low emissions of carbon dioxide. By making relatively more use of wood in buildings, and less of concrete and steel, emissions of carbon dioxide by industry will be reduced. Moreover, the carbon is fixed for a very long period of time so long as the building is standing. In other words, a wooden building functions as a temporary carbon sink. When it is finally demolished the wood can be used as biofuel to replace oil. The combined effect of carbon fixation and substitution means that one cubic metre of wood stores 0.9 tonnes of carbon dioxide and replaces materials that emit 1.1 tonnes of carbon dioxide. Holmen estimates that the quantity of structural timber that is produced from spruce from the company s forests can reduce the society s emissions of carbon dioxide by around tonnes per year. The effect of fixing carbon in sawn timber is estimated to be equivalent to tonnes of carbon dioxide per year. Source: Frühwald, Welling, Scharai-Rad, 2003, Comparison of wood products and major substitutes with respect to environmental and energy balances. Paper and board are carbon sinks Paper and board also function as carbon sinks as long as they are in use. In the case of books this can be for a very long time, with paper and board maybe a matter of a few years. Given the difficulty in quantifying this type of carbon absorption, Holmen has decided for the time being not to include it. The carbon balance can be further improved Holmen is in a good position to further improve the carbon balance of its forestry activities. Holmen judges that it is possible, for practical reasons, but also for environmental ones, to make use of half of all the branches, tops and stubs in the forests. Holmen s target is to raise the production of bioenergy from the forests from the current level equivalent to MWh per year to 1 TWh* by As a replacement for oil, this will reduce carbon dioxide emissions by tonnes. *The figure represents a scaling down to Holmen s level of the investigation into the possibility of increasing the harvesting of biofuel in Sweden that was carried out in 2006 on behalf of the Swedish Forest Industries Federation. Biofuel is almost neutral in climatic terms Carbon dioxide is also emitted when biofuel is incinerated, but the amount is just the same as what is emitted or stored in the ground if the fuel had instead been left to decompose in the forest. The released carbon dioxide also corresponds to the quantity used to build up the same volume of biomass once again. There are therefore good grounds for seeing biofuel as neutral in its effect on the climate. However fossil fuel is used in harvesting and transporting, but the volume is relatively small. Biofuel already meets almost 30 per cent of Sweden s energy requirements. There are good reasons for increasing the volume harvested. However, this should be done taking environmental effects into account and so that the stock of nutrients in the ground is not destroyed. h o l m e n a n d i t s w o r l d

36 c l i m a t e a n d s u s t a i n a b i l i t y Means used to control the climate In order to combat climate change numerous laws have been passed and initiatives taken within EU and Sweden. The EU has proposed new climate and energy targets for Trading in emission rights As of 2005 an EU system has been in place for trading in fossil carbon dioxide emission rights. The facilities affected were allotted a specific number of emission rights for the trial period. Whoever emitted more fossil carbon dioxide than they had been allotted had to purchase emission rights on the market that had been created. The vendors are primarily companies that do not need to make full use of their allocation. The trade in emission rights is an important and cost effective way of reducing emissions of greenhouse gases. Emission rights for have been allocated. The total allocation is less than for the previous period. Holmen s facilities are included in the system of emission rights. The Group views the initiative as a positive way of overcoming climate problems. However, the company objects to the fact that the trading system does not take into consideration the indirect effects on the price of electricity. This is set according to the marginal principle, which means that the price of the most expensive electricity makes an impact on all electricity. In Scandinavia around 70 per cent of electrical energy is produced in the form of hydroelectric power and nuclear power. The rest of the production is largely based on the use of fossil fuels. The price of electricity is rising owing to the impact of the additional costs caused by the trade in emission rights on coal-fired and oil-fired power stations. Holmen therefore welcomes initiatives that help to stop the effect of the emission rights trade that pushes up the price of electricity. Energy tax directive and voluntary agreements In order to harmonise Swedish tax legislation with the EU s, a tax on electricity was introduced in Sweden in Electricity intensive companies can avoid the tax by saving energy and introducing energy management systems in accordance with the PFE law (Programme for Energy Efficiency), which was introduced in The law will remain in effect for five years and during this period concrete measures have to be taken. Similar agreements exist in other EU countries, including the CCA (Climate Change Agreement) in Great Britain, where industry is offered an 80 per cent reduction in energy tax in return for reducing energy consumption. Holmen has introduced energy management systems at all its Swedish units and is implementing energy efficiency programmes, thereby avoiding tax of around MSEK 20 per year. An energy management system is expected to become operational in Workington in 2008 and thereafter in Madrid. Electricity certificate According to a Swedish law from 2003 companies that produce renewable electricity are allocated an electricity certificate for each MWh. The electricity user is obliged to purchase a certain number of these certificates in relation to their consumption, known as a quota duty. This will be raised successively, which will lead to higher demand for renewable energy. Electricity intensive industries are exempt from the quota duty. The system has been extended until 2030 and the target levels have also been raised. Holmen is active in the trade in electricity certificates. During 2007 it sold electricity certificates for renewable energy having a value of MSEK 54 (41). EU climate package At the beginning of 2008 the EU presented a proposal for an energy and climate action programme. The EU Commission has proposed that a package of laws comes into effect in 2013 after the current Kyoto Treaty expires. The target in the proposal is that emissions of greenhouse gases are to be reduced by 20 per cent by 2020 in relation to Another important target is that 20 per cent of the energy produced should come from renewable energy sources. The EU s goal is to significantly reduce the use of oil for heating and transport. Holmen s use of biofuel from its own forests is increasing. By radically increasing growth in the forests, it will increase the supply of both industrial wood and biofuel. However, Holmen considers that from a socio-economic perspective it is most advantageous to use first-rate wood for industrial processing and branches and treetops as biofuel. Furthermore, the forest materials must be used in the right order viz. firstly they are processed into products, which, after they have been used, are recovered, either as recovered paper or as biofuel for energy production. 3 4 h o l m e n a n d i t s w o r l d

37 Products in terms of sustainability Holmen uses renewable raw materials from sustainably cultivated forests in its production of pulp, paper and sawn timber, as well as biofuel. The products play an important role in the economy. Paper and paperboard can be recovered, either as a material or in the form of climate-neutral energy. Sawn timber products later become and excellent biofuel. Raw materials Sunlight, carbon dioxide and water, together with nutrients in the ground, are the main raw materials that trees use to produce wood. Wood from company forests. Holmen uses sustainable forestry. The amount of wood harvested each year corresponds, on average, to 82 per cent of the long-term growth. Holmen s Guidelines for Sustainable Forestry imply that growth in the Group s forests should increase by around 25 per cent within 30 years. Parallel to this, nature conservation methods are being developed with the aim of preserving habitats for the forest s biologically diverse inhabitants. Purchased wood. Holmen has procedures for tracing all wood to its origins. Holmen s Guidelines for Purchasing Wood require that purchased wood shall have been harvested in accordance with applicable laws and shall satisfy Holmen s environmental standards. Products Printing paper is produced from virgin sprucewood pulp and recovered paper. The paper is mainly used for daily newspapers, weekly magazines, books and other printed matter. Paper is a flexible and, over time, stable medium for the transmission and storage of information. The production process has little impact on the environment. However, the process does consume a great deal of electricity. After de-inking recovered newspapers and magazines make an excellent raw material for new printing paper. Worn out cellulose fibres can be used as a biofuel. Paperboard is produced from pine and birch wood. The production process has little impact on the environment. Much of the energy that is needed is produced using biofuel from internal sources. The board is mainly used for packaging and graphic purposes. Paperboard can be used for hygienic packaging that can be treated to provide protection against moisture, fat, odour and taste. It is light and economical to transport. The advantages of paperboard in terms of the environment and use of resources emerge quite clearly when they are balanced against the value to consumers of receiving the purchases in usable condition. Sawn timber. Holmen produces sawn timber from pine logs. The products are mainly used as components for interior décor, such as wooden floors and panels. Holmen decided in 2007 to build a large, new sawmill to produce structural timber from spruce. Using wood for buildings instead of materials that affect the climate, such as concrete, steel and plastic, reduces emissions of carbon dioxide. Wood products also lock in carbon dioxide so long as the product is in use, thereby functioning as a carbon sink. Biofuel. Holmen also produces a growing volume of biofuel in the form of branches and treetops from company forests. Holmen has set itself a target of increasing the harvesting of biofuel from the Group s forests corresponding to 1 TWh by Holmen s products are used for many different types of packaging, printed matter, and newspapers and magazines. Once the new sawmill at Braviken comes into production at the end of 2009 Holmen will also be a supplier of structural timber. Bioenergy provides almost half of the heat that is needed in the production of Holmen s products. Hydro power. Holmen owns, wholly and partly, 23 hydro power stations that in 2007 provided 23 per cent of the Group s electricity requirements. The production of hydro power is a natural and sustainable process and therefore satisfies rigorous environmental demands. District heat. The surplus heat from Iggesunds Bruk and the Hallsta mill is delivered to the respective municipal district heating systems. Product security paperboard Iggesund Paperboard s products are produced exclusively from virgin fibre. The chemicals used in production are approved by the authorities. The paperboard satisfies the requirements in national and international laws and regulations on safety, hygiene, odour and taste. The paperboard also meets the requirements of the EU Packaging Directive, which includes regulations on weight, volume and recovery potential. Iggesund Paperboard carries out regular customer surveys to find out how its paperboard is used so that it can make further improvements. h o l m e n a n d i t s w o r l d

38 Financial development Sharply higher costs Holmen was affected during 2007 by sharply higher costs. The weakness of the US dollar lowered European industry s profitability and competitive position. Despite relatively stable demand for printing paper and paperboard in Europe Holmen Paper s and Iggesund Paperboard s profitability came under pressure from increasing costs. Profitability was good at Holmen Skog and Holmen Energi as well as at Holmen Timber. Holmen s result for The operating profit, excluding items affecting comparability, amounted to MSEK (2 303). The result was positively affected by higher prices but pulled down by the higher cost of wood and recovered paper, extensive stops for maintenance and rebuilding and lower deliveries. During the fourth quarter there were net income items affecting comparability of MSEK 557. This consisted of MSEK as a result of the revaluation of forests, a cost of MSEK due to write-downs in the value of goodwill and tangible fixed assets by Holmen Paper and income of MSEK 60 resulting from the reversal of previous write-down by Holmen Timber. Holmen Paper printing paper The market situation for newsprint in Europe was stable. Compared with the previous year deliveries remained unchanged. However, North American newsprint doubled its market share in Europe to 6 per cent. In total deliveries of wood-containing printing paper in Europe rose by just over 2 per cent. Holmen Paper s deliveries remained broadly unchanged in relation to Prices were raised by an average of 2 per cent. Holmen Paper s result for The operating profit, excluding items affecting comparability, declined to MSEK 623 (754). The rising cost of wood, recovered paper and pulp, as well as costs for maintenance and rebuilding stops had an adverse effect on the result. Sustainability a firm foundation Holmen has a distinct role to play in a sustainable society by virtue of its position as a successful and profitable company manufacturing products from natural raw materials. This creates jobs and makes it possible to purchase input goods, pay taxes and pay a return to shareholders and financiers. Profitability is also a pre-condition for investments that enable the company to develop in line with gradually changing market conditions. Holmen has therefore set itself two financial targets that support sustainable financial development. Financial target 1. Profitability shall be healthy and the return on invested capital shall consistently exceed the market cost of capital. In short, this means that an investment in Holmen shall be at least as rewarding as an average investment in any other business. A company that cannot achieve such a target will not be able to develop in a positive way in the long term. In 2007 the return on capital employed, excluding items affecting comparability, was 10 per cent, which may be compared with an estimated cost of capital of around 8 per cent. Financial target 2. Holmen shall have a strong financial position that enables it to make long-term decisions regardless of the short-term economic conditions and borrowing situation. This means that the level of debt should not be too high and defined in terms of the debt/equity ratio (financial net debt in relation to equity) it should be At the end of 2007 Holmen s debt/equity ratio was Furthermore there is a financial target that means that each year s ordinary dividend should amount to 5 7 per cent of equity. During the past ten years Holmen has paid ordinary dividends that have amounted on average to 5 6 per cent of its equity.

39 Iggesund Paperboard paperboard Deliveries of virgin fibre board from European producers to Europe increased by 5 per cent during 2007, mainly owing to strong growth in Eastern Europe. The demand for Iggesund Paperboard s products remained firm, although deliveries declined by 4 per cent from their record level in 2006 owing to an extensive rebuilding stop at Iggesunds Bruk. Holmen s operations in 2007 divided by stakeholders 1) Customers Sales of paper, paperboard, sawn timber, wood and electricity Suppliers Purchases of goods and services and depreciation etc Employees Wages and social costs Lenders Interest Government Taxes Shareholders Net result MSEK Iggesund Paperboard s Result The operating profit fell to MSEK 599 (752). The decline was mainly due to lower deliveries, higher costs as a result of the rebuilding stop and higher wood prices. Price increases had a positive effect on the result. 1) Based on the Group s income statement 71% Of which divedend paid Remaining in the company Sales to customers MSEK Holmen Timber sawn timber The market situation for sawn timber was very strong in However, the market weakened during the second half-year and prices fell towards the end of the year. Holmen Timber s result The operating profit, excluding item affecting comparability, increased to MSEK 146 (80) as a result of higher prices and deliveries. Holmen Skog wood Competition on the wood market further intensified and wood prices rose by around 15 per cent. The background to this is the growing demand for bioenergy and unsettled conditions on the North European wood market in the wake of Russia s threat to radically increase its export duties. Holmen Skog s result The operating profit excluding item affecting comparability rose to MSEK 702 (643), mainly due to higher wood prices. Holmen Energi electricity The production of electricity at the Group s wholly and partly owned hydropower stations increased during the year as a result of favourable weather conditions. Holmen Energi s result The operating profit increased to MSEK 272 (197). The improvement is mainly explained by the increase in production in relation to the low level in Suppliers Growth (1 000 tonnes, m 3 ) Holmen Paper Iggesund Paperboard 4 5 Employees 14% Lenders Government Holmen Timber Shareholders Rebuilding of KM2 board machine Iggesunds Bruk 2. New paper machine PM53 Braviken 3. Rebuilding of BM2 board machine Workington 4. Acquisition of Papelera Peninsular (Madrid) 5. New paper machine PM11 Hallsta 6. Rebuilding of the BM2 board machine Workington and KM1 board machine Iggesunds Bruk 7. New paper machine PM62 Madrid 8. Rebuilding of KM2 board machine Iggesunds Bruk 9. New sawmill at Braviken 6 7 1% 8 6% 8% 9 h o l m e n a n d i t s w o r l d

40 Concern for the environment Working practices Holmen s environmental policy states how environmental responsibility in the Group is to be allocated and how environmental activities are to be carried out. The business is supervised by the environmental authorities and auditors who are certified to audit management systems. Holmen s environmental policy contains principles for the Group s environmental activities and covers most of the environmental aspects that are of relevance to Holmen and its stakeholders. The environmental policy will be revised during Environmental responsibility. The Group s Board and the CEO, as well as the heads of the business areas have overall responsibility for the environment. Operative responsibility rests on mill managers and forest region managers. The Group s sustainability director chairs Holmen s environmental council, coordinates environmental measures and initiates and chairs the joint environmental groups in Holmen. Official supervision. The environmental authorities regularly inspect the activities at the mills. External experts also carry out inspections. The forestry activities are supervised by the National Board of Forestry. Management systems and forestry certification Environmental management systems certified in accordance with ISO are applied at all mills and in the forestry. All the mills have quality management systems that have been certified in accordance with ISO Certified forestry standards. Holmen s forestry is certified in accordance with the international PEFC and FSC standards. All the Swedish units have energy management systems. A corresponding management system will be introduced at Workington at the beginning of 2008, to be followed by Madrid. Supervision of environmental certification. All certified systems are audited regularly by external certified auditors, who carry out a detailed study of compliance with the system requirements. Supplier appraisals. Holmen s purchasing units have been coordinated. This improves the ability to make clear, Groupwide environmental and quality demands on suppliers. Joint action groups The aim of the Environmental Çouncil is to see that the environmental policy is applied, deals with business referred to it by joint action groups, and prepares policy issues. The council consists of the environmental managers of each business area and mill; it is chaired by the Group sustainability director. The Energy Council makes decisions on the hedging of electricity prices, electricity certificates and emission rights. Strategic energy issues require its approval, as do decisions on major purchases/sales of biofuel, natural gas and oil. The Energy Council consists of representatives from the relevant business areas and group staffs. Climate issues are mainly monitored by Group Technology and dealt with at Senior management level. Responsibility for energy efficiency rests on the business areas. There is some coordination via Group Technology and Senior management. Management systems. This group deals with matters relating to the quality, environment and energy management systems. Chemicals. This group handles product safety and legislation. The most important task for this group relates to the implementation in the Group of the EU s new REACH chemicals regulation system. Transport. The group surveys Holmen s transport and explores the potential to further reduce its environmental impact. Water treatment. The group s purpose is to improve the efficiency of the mills water treatment installations. Waste handling. The group is engaged in finding alternative ways of using waste.

41 Environmental activities in 2007 Holmen s effect on the environment is gradually being reduced through a series of interactive measures. The ongoing changes in the earth s climate are prompting the Group to take action to reduce its use of fossil fuels and increase the production of biofuel from its own forests. Holmen s business is regulated by the conditions established by the environmental authorities. Furthermore the certified management systems make additional environmental demands. The systems include quantitative environmental and energy targets that are regularly revised and tightened with the object of making continuous improvements. The targets are presented by unit in the online version of Holmen and its World Emissions into air and water as well as waste are priority environmental aspects. Progress is monitored regularly by means of continuous measurements and extensive statistics that are public and supervised by the environmental authorities. As can be seen in the diagrams on the next page favourable progress in terms of per tonne of final product in all aspects of the environment is made. Detailed figures for each unit are presented on pages Developments on the environmental front are based on the Group s environmental policy, the environmental authorities demands and local targets in the certified management systems. The Group has long-term, Groupwide goals for the issues of greatest current interest, namely, climate and energy: The use of fossil fuels by the Swedish mills is to be reduced by 90 per cent by 2020, which is equivalent to tonnes of carbon dioxide emissions. The Group s energy efficiency will be improved by 15 per cent by Growth in Holmen s forests is to be increased by around 25 per cent within 30 years and the habitats of existing plants and animals will enable them to go on living in a natural forest environment. The harvesting of biofuel in Holmen s forests will be increased by equivalent 1 TWh by Energy and use of resources are aspects that have a natural place in almost every project in the Group. Holmen has a very strong basic platform for these globally More than people employees, contractors and their personnel underwent training in Holmen Skog s new Guidelines for Sustainable Forestry. Ola Kårén, Environment and silviculture manager, is seen here with some course participants from Örnsköldsvik. important environmental issues. Production is based on wood, a renewable raw material. Around half of the thermal energy is produced using biofuels. Dramatic reductions in use of fossil energy. Holmen s efforts when it comes to energy and the climate will lead to a radical reduction in the consumption of fossil fuels at the Swedish mills over the next ten years. The English and Spanish mills use electricity and heat from local gas-fired combination power stations. These use natural gas, which as far as the climate is concerned is the best fosssil based alternative to biofuel. In 2007 several environment related measures and investigations were carried out. Here is a selection: Hallsta reduced its oil consumption by 45 per cent between 2006 and 2007 by introducing heat-saving measures. At Iggesunds Bruk measures were taken to reduce the consumption of fossil fuels. It is estimated that oil consumption will fall by 75 per cent by The mill in Madrid is exploring the scope for using treated municipal effluent water that is further treated with the aid of advanced techniques. A decision on the first stage on a full scale is expected during Holmen Skog provided extensive training in the use of the company s new Guidelines for Sustainable Forestry for around people including employees, contractors and their personnel. Exceeded limits. At some of the mills the limits for emissions into air and water were exceeded. However, the threshold values in the environmental permits were met in every case. The environmental authorities were informed and measures taken to prevent a recurrence. Complaints. A small number of complaints about noise and odours were received from people living close to some of the mills. Representatives of Kassjö IF protested against Holmen s intention to harvest forests on the company s land at Lindgård, about 2 km from Kassjö. The complaints referred to the importance of the forest s recreational value. Holmen modified its plans in response to the views expressed and refrained from harvesting around 30 per cent of the stand. Holmen carried out the harvesting after obtaining the approval of the FSC s authorised auditor and the National Board of Forestry. More information on Holmen s environmental activities: h o l m e n a n d i t s w o r l d

42 c o n c e r n f o r t h e e n v i r o n m e n t Emissions and waste 2007 Holmen s emissions into air and water declined. The use of fossil fuels was reduced by more than 15 per cent and so were emissions of fossil carbon dioxide. This also resulted in a reduction in emissions of sulphur dioxide, nitrogen oxides and dust. Emissions into air FOSSIL CARBON DIOXIDE. The Group s total emissions fell by more than 15 per cent. Per tonne of final product the decline was around 15 per cent. SULPHUR DIOXIDE. The Group s total emissions continued to fall during 2007 by just under 10 per cent in relation to Per tonne of final product, emissions fell by just over 5 per cent. NITROGEN OXIDES. The Group s total emissions fell by 10 per cent. Per tonne of final product they fell by just under 10 per cent. DUST. The Group s total emissions fell by just over 10 per cent. Per tonne of final product they also fell by 10 per cent. Sulphur dioxide and dust kg/tonne of final product Sulphur dioxide (represented by S) Dust Nitrogen oxides Fossil carbon dioxide kg/tonne of final product Nitrogen oxides kg/tonne of final product Emissions into water COD. The Group s total emissions remained unchanged between 2006 and Per tonne of final product emissions increased marginally. SUSPENDED SUBSTANCES. The Group s total emissions increased by 15 per cent. Per tonne of final product emissions also increased by 15 per cent. The increase in emissions was due to problems with the effluent treatment units at Wargön and Workington. NITROGEN. Total emissions declined by 13 per cent. Per tonne of final product emissions fell by 12 per cent. PHOSPHORUS. The Group s total emissions fell by 16 per cent. Per tonne of final product they declined by 15 per cent. Waste DEPOSITED WASTE. Compared with 2006 the quantity fell by just over 20 per cent. Calculated per tonne of final product the reduction was just under 20 per cent. The amount of waste sent to landfill has therefore fallen by 60 per cent since Of the waste that is not used to produce energy, some 90 per cent is put to use in other ways, both internally and externally. COD and Suspended substances kg/tonne of final product Nitrogen and Phosphorus kg/tonne of final product Deposited waste kg/tonne of final product COD Suspended solids Nitrogen Phosphorus 4 0 h o l m e n a n d i t s w o r l d

43 Permits and certifications Holmen s production in each country requires a permit from the environmental authorities there. The EU s IPPC Directive (Integrated Pollution Prevention Control) is a keystone in its environmental legislation. In Sweden, the formal requirements of IPPC were satisfied by the introduction of the Environmental Code of Statutes in The permits for the mills in Sweden whose permits are based on the Environment Protection Act are being harmonised with IPPC in accordance with guidelines issued in Certifications. Holmen applies certified systems for environmental, energy and quality management as well as for its forestry. All of its systems are integrated into the business and audited annually. ISO and ISO 9001 are international standards for environmental management and quality management. SS is a Swedish standard for the introduction of energy management system at energy-intensive facilities. FSC Forest Stewardship Council is an international system for certification of forestry that has the support of many environmental organisations. PEFC Programme for the Endorsement of Forest Certification schemes was originally a European system for certification of forestry, but has now also gained global recognition. Traceability Certification enables wood used at a certified mill to be traced back to its origin. The proportion of certified wood at each mill varies depending on supplies in the district. Holmen Skog s traceability certification provides an assurance that noncertified wood satisfies certain conditions: has not been harvested illegally or in conflict with native peoples does not come from controversial sources has not been gene modified does not come from natural forests that have been converted into plantations. Forest certification: see pages 24 and 25 Permits from authorities, year Hallsta Environment Protection Act 2000 Braviken Environment Code of Statutes 2002 Madrid IPPC 2006 Wargön Environment Code of Statutes 2002 Iggesunds Bruk Environment Protection Act 2003 Strömsbruk Notifiable activities subject to local government supervision 2007 Workington IPPC 2002 Sheeting units Only require a permit for a few parameters Skärnäs harbour teminal Environment Code of Statutes 1999 Iggesund Sawmill Environment Protection Act 1994 Holmen Energi Permit under Water Act (Environment Code of Statutes) Certifications, year ISO SS ISO 9001 Hallsta Braviken Madrid Wargön Iggesunds Bruk Strömsbruk Workington ) 1990 Iggesund Sawmill Holmen Skog ) Energy management system introduced but not possible to certify in accordance with Swedish standard Forestry certifications, year FSC PEFC Holmen Skog Traceability certifications, year FSC PEFC Hallsta Wargön Iggesunds Bruk Workington 2005 Iggesund Sawmill Holmen Skog 2007 Holmen Mets 2007 Environmentally certified forests in Sweden 2007 The total figure has been adjusted for the wood from forests with double certification Acreage, Of all forest, millions hectares per cent FSC, forest companies FSC, private forest owners PEFC, forest companies PEFC, private forest owners Total Proportion of certified wood reaching Holmen s mills 2007 Hallsta Braviken Wargön Iggesunds Bruk Workington Iggesund Sawmill FSC PEFC Total of which from company forests Figures based on both verified and estimated volumes h o l m e n a n d i t s w o r l d

44 c o n c e r n f o r t h e e n v i r o n m e n t Environmental costs Holmen reports its environmental costs in accordance with guidelines form Statistics Sweden (SCB). Direct environmental investments. Costs relating to emission treatment investments (e.g. different types of treatment equipment). Integrated environmental investments. Costs relating to emission prevention investments (e.g. the replacement of old process equipment with new, more environmentally efficient technology). Internal and external environmental costs include costs for personnel, operations, maintenance, supervision, environmental administration, training, site investigation and environmental consultants. Capital costs. Depreciation of treatment equipment, for example. Environmental taxes and environmental charges. For example tax on waste sent to landfill, carbon dioxide tax and charges for emissions of nitrogen dioxide. The environmental cost of forestry is estimated as the value of the wood that is not harvested for environmental reasons. Holmen protects around 10 per cent of the acreage and refrains from harvesting some 10 per cent of the possible volume. The annual loss of income is estimated at some MSEK 60. The allotted emission rights for fossil carbon dioxide were used in 2007 for incompany production. No emission rights were sold during the year. Electricity certificates for renewable electricity were sold during 2007 for MSEK 54 (41). Penalty charges can be imposed on a company that exceeds the official threshold values for emissions. Holmen did not cause any emissions in 2007 that resulted in such a penalty being imposed. Notes. As of 2007 electricity- and heatsaving investments have been reported separately. Most of the stated amounts refer to the new pulp line for thermomechanical pulp production at Braviken. This investment will reduce the pulp line s A new thermo-mechanical pulp mill will be brought into production at Braviken in August It will reduce electricity consumption by more than 20 per cent in comparison with the pulpline it will replace. electricity consumption by around 20 per cent. The current investments for reducing oil consumption at Iggesunds Bruk are also included. In line with declining use of oil the tax item will also fall because this includes taxes on both carbon dioxide and nitrogen. It may be noted that this type of environmental cost fell between 2006 and Sales of district heat and various kinds of waste for recovery and other areas of use generated some MSEK 25 in Environmental investments, MSEK Direct (emission treatment) Integrated (emission prevention) Electricity and heating 1891) Total ) New separate information for Environmental costs, MSEK Internal 1) and external Capital Environmental taxes and charges Forestry Total ) All business areas and environmental functions at Group Technology. Environmentally related income, MSEK Sales of emission rights (carbon dioxide) electricity certificates heat to district heating systems 3 4 waste for recovery and re-use ) Total ) New separate information for h o l m e n a n d i t s w o r l d

45 Transportation Holmen takes regular measures to limit the impact on the environment from the transportation of raw materials and products. The collection and follow-up of extensive transport data provides a basis for making improvements. The business areas have responsibility for transporting their products from the mills to the customers. Holmen Skog organises the transportation of wood from the forests and of imported wood from their countries of origin to the mills. In England, the transportation of wood is organised by the mill in Workington. The respective suppliers are normally responsible for transportation of other raw materials and consumables. 60 per cent of Holmen s transportation (tonne-km) goes by ships operated on longterm charter. Capacity utilisation on the ships is high at over 90 per cent. The ships are also used to carry recovered paper to Sweden. Rail is mainly used for the distribution of products to southern Europe and to a certain extent also for incoming raw materials. Holmen aims to use rail whenever it is practical and financially viable. Trucks are the main means of transport for saw logs and pulpwood. Trucks are also often the only option when transporting products from the terminals in Europe to the customers. The same also applies to distribution within each country where products are manufactured. Holmen s approach to transportation Transportation studies. Holmen aims to improve transport efficiency and reduce the impact of transport on the environment. The transportation environment group collects data relating to Holmen s transportation within Europe. The transport data then serve as a basis for proposing improvements. More environmentally-efficient ships. All the ships employed by Holmen run on oil that satisfies the condition that their fuel has a sulphur content of less than 1.5 per cent, which is the level required for Baltic and North Sea shipping. In 2007, a catalytic converter was installed on one of the five ships operated on long-term charter by Holmen Paper. For four years, commencing in 2010, at least three of Holmen Paper s vessels will be Some 60 per cent of Holmen s total transportation (tonne-km) goes by ship. The load factor on the ships is high above 90 per cent. equipped with catalytic converters, which will reduce emissions of nitrogen oxides. Homen Skog uses an Internet-based system of optimising wood transportation. The company also arranges joint transportation with other forest companies as a means of minimising transport distances. Holmen Skog also supports the industrywide En trave till (One more stack) project that aims to raise the load capacity of trucks used to transporting wood, without raising the axle pressure. El-Forest el-hybrid forwarder, which is now available in prototype form, reduces fuel consumption by per cent when used for transporting wood in the forests. Holmen is a member of the project group developing it and has ordered its first forwarder for delivery in Groupwide travel survey. At the end of 2007, the Group began to examine company travel with a view to reducing its extent and impact on the environment. A company travel policy is being drawn up. Ship 60 % 3 % Electric train Truck 37 % Holmen s transport within Europe The percentage breakdown is based on transport that has taken place (tonne-km), including the transport of wood, recovered paper, chemicals, fuel, waste and finished products. Holmen s total transport requirements within Europe for raw materials, products and waste amount to around 5.1 billion tonne-kilometres. h o l m e n a n d i t s w o r l d

46 c o n c e r n f o r t h e e n v i r o n m e n t Waste Holmen is carrying out large-scale trials into the use of incinerator ash as filler in connection with roadbuilding. Iggesunds Bruk. Ash, precipitation sludge and woodroom grit are used for covering municipal landfills. A local recycling company is producing site-levelling earth using quicklime from the mill. A project is underway involving the use of incinerator ash and green lye to strengthen a forest road. Hallsta and Holmen Skog. Large-scale trials are going on involving the use of incinerator ash as a filler in road construction. The admixture of ash improves the bearing capacity of the roads and reduces the risk of frost damage. Various kinds of waste arise in the manufacture of paper and paperboard. Some of it is incinerated, some is recovered, and some is sent to landfill. The volume of waste sent to landfill has declined by more than 60 per cent since Holmen aims to minimise the amount of waste and to utilise as much of it as possible. Laws, taxes on waste and the cost of sending it to landfill also make it worthwhile to process waste as cost-effectively as possible. Waste is sorted at source at all of Holmen s units. Employees and contractors receive regular training in waste procedures. A groupwide team is taking steps to find alternative ways of using the waste that arises. Waste is dealt with in various ways Waste from production can be roughly divided into four categories: Combustible waste that is used. This is mainly used to produce thermal energy in the mills solid fuel boilers. After processing, certain kinds of waste, such as effluent treatment sludge, can be used as soil improving materials. Non-combustible waste that is used. In recent years several projects have been carried out with the object of finding alternative uses for non-combustible waste. For example, ash has been tested as a road construction material, as a means of improving the soil, as an alternative to cement, and for covering over landfills. Non-combustible waste sent to landfill. As a result of successful efforts to find alternative uses the amount of waste sent to landfill has been reduced by more than 60 per cent since Hazardous waste consists of waste oil, chemical residues, fluorescent lights and such like. The hazardous waste is removed by authorised recovery companies and recovered. Some of it is destroyed under controlled conditions. Current waste projects Holmen has been engaged since 2003 together with Värmeforsk on a project to develop methods and equipment for the environmentally-sound use of incinerator ash. Combustible waste that is used Bark, wood residues, recovered paper waste Non-combustible waste that is used Ash and treatment sludge Non-combustible waste sent to landfill Hazardous waste waste oil, chemicals etc. Madrid. Sludge from the de-inking of recovered paper is used as a binding agent in the production of building blocks in the ceramics industry. The sludge is also used for agricultural purposes. Hallsta, Braviken and Madrid. Metals in the form of staples and packing wire are removed from recovered paper at the sorting stage and sold externally for recycling. Braviken. DIP sludge is used for covering outside landfills. In 2007 recovered paper waste of a kind for which there used to be no practical use was dug up from the mill s landfill. Metals were separated out and recycled externally. In the past waste oil accounted for the bulk of the hazardous waste, and it was used as a fuel by an outside company. The method used to process waste oil has been altered and it can now be cleaned and reused externally. As a result of Holmen s measures to utilise waste the proportion going to landfill has declined to only 3 per cent. 60 % 37 % 3 % 0.1 % 4 4 h o l m e n a n d i t s w o r l d

47 Noise Noise is included as one factor in the environmental permits at Holmen s Swedish units. A variety of measures can be used to limit or eliminate disturbances from noise in the vicinity of each unit. Holmen measures the noise emitted by its units. All units are below or close to the threshold levels in the environmental permit. Noise levels at Holmen s units have been reduced by bringing noise into the equation when replacing old equipment and by taking noise abatement measures of various kinds. Holmen Timber. Last year, noise protection equipment was installed at the sawmill to allow the timber grading unit to run at night. Noise is an important aspect in the environmental consequences survey being carried out in readiness for the planned sawmill at Braviken. Iggesunds Bruk. Measurements provided data for making a decision in noise-abatement measures that will be carried out in Workington. A programme to reduce noise levels has been developed together with the authorities and local residents. An analysis of the noise will be carried out by no later than Madrid. During the year noise abatement equipment was installed at the mill, which now satisfies official requirements. Chemicals The EU s new REACH chemical regulations were introduced in Holmen is well placed to satisfy the new requirements. Chemicals are needed in the production to give products specific characteristics. Certain chemicals are used in large quantities, while others are used only in small amounts. Holmen Skog uses chemicals at its nurseries to protect seedlings against fungal and insect attack. Only approved chemicals. There are chemical groups at all of Holmen s mills to decide which chemicals may be used. The chemicals are assessed on the basis of technical function, product safety, work environment and external environment. Holmen is taking regular steps to develop and maintain an industrywide chemicals database in Sweden. The mills in England and Spain are also involved in these activities which take place in close association with chemical suppliers. Each year, Holmen sends a comprehensive report on its use of chemicals to the environmental authorities. The EU s new REACH regulatory system for chemicals has raised the demands on manufacturers and importers of chemicals to make risk assessments. Holmen is in favour of REACH since the regulatory system reflects a holistic approach to health and environmental hazards. Holmen is taking steps to satisfy the new demands. A REACH network has been set up. Holmen is also monitoring the REACH process through its trade associations in Sweden, England and Spain. Discontinued businesses The Swedish Code of Environmental Statutes contains clear rules regulating how sites that have been contaminated by previous businesses are to be dealt with. Cases of ground contamination have been discovered at some of the Group s discontinued facilities. These require investigation and possibly action. This process is being carried out in consultation with the environmental authorities. Responsibility for follow-up treatment is established after detailed investigations to determine responsibility and legitimacy. In 2007 Holmen took action in relation to the following discontinued businesses: Håstaholmen and Stocka. The ground and water areas at these discontinued sawmills, which were closed down in 1989 and 1995 respectively, have been examined on several occasions. The ground at both sites is contaminated by wood preserving agents and decontamination measures are needed. Supplementary surveys and risk assessments will be made in Responsibility for the decontamination has not yet been determined. Sikeå. The sawmill at Sikeå was closed down in Ground surveys have revealed that parts of the industrial site have been contaminated by wood-preserving agents and that decontamination measures are needed. Holmen has responsibility for decontamination, which will take place in Ströms bruk is a former sulphite pulp mill that was closed down in The ground is contaminated and an investigation will be carried out in 2008 to determine the methods of decontamination. Domsjö sulphite mill. Holmen and the companies currently engaged in business on the site noted from the investigation made in 2007 that the site is contaminated. Complementary surveys will be made in Loddby sulphite mill. A ground survey has been carried out, and this shows that part of the former mill site is contaminated. Supplementary surveys will be made in h o l m e n a n d i t s w o r l d

48 Social responsibility Working practicies Holmen s personnel policy is aimed at developing leadership, the organisation, and employees. Activities in this area are based on laws, collective agreements, and internal policies. Important issues affecting employees are coordinated by the HR management team. This consists of the personnel managers of the large business areas and is chaired by the Group HR director. For specific HR issues, working groups are formed in which unions representatives participate. Personnel activities at business area level are run by the HR Council. The large units have their own personnel managers and HR specialists. The HR process The activities of the Group s personnel departments are based on Holmen s personnel policy and HR strategy. Emphasis is given to competence sourcing, leadership and the organisation. The results are followed up by means of key ratios and Holmen Inblick, the Group s employee survey. HR is a natural component in the Group s business plan. The HR concept Personnel issues at Holmen are coordinated under the internationally established HR concept (Human Resources). This emphasises the direct link between personnel activities and the company s business concept. Policies The personnel policy reflects the Group s view about what constitutes a sound human resources management. It has been developed in association with the Group s union organisations and underlines the joint responsibility of managers and employees for a sound work and development climate at the workplace. The policy also clarifies the demands made on a good leader. The equal opportunities policy expresses the Group s stance on conditions in the Group for men and women. It stipulates that workplaces are to be just as suitable for female as for male employees and that Holmen finds it natural to combine parenthood with work. The policy promotes a more equal gender distribution in the Group and an increase in the number of women in qualified positions. Wage policy. The wage policy expresses the management s attitude towards the factors that determine wage formation. Internal mobility encouraged Holmen supports employees who wish to transfer within the Group and sees internal mobility as a way of helping individuals to develop. The policy for the internal labour market means for instance that: all vacancies are advertised internally, the company defrays the cost of relocating to a new place of residence and pays an extra month s wage as a contribution towards relocation costs. Other HR-policies There are additional Groupwide or local policies for: Service abroad Pensions Travel Work environment, protection and safety Discrimination Drugs Rehabilitation Internet and Work environment, fire and safety These issues are handled by a Groupwide group consisting of specialists from the business areas. Laws and collective agreements/facts A number of laws and collective agreements regulate the Swedish labour market. Similar laws exist in England, Spain and the Netherlands. Work Environment Act Working Hours Act Labour laws that relate to the right to form and belong to unions and the Co-Determination At Work Act EU Anti-discrimination law Agreements between the Forest Industries Federation and union organisations Local agreements between Holmen and local union organisations

49 HR activities in 2007 Holmen s HR activities are based on clear goals in well-defined areas. The increasingly consistent working practices at the Group s mills foster the positive trend that typifies the HR process at Holmen. Holmen s aim is that HR issues such as hiring, competence development, and discontinuation should be handled consistently throughout the Group. The new HR system that is being successively introduced at Holmen s Swedish mills in 2008 will be a valuable instrument in this endeavour. It will also have been introduced at Holmen s other units by no later than A consistent approach will improve the efficiency of the process and HR specialists will have more time for strategic and supportive measures. HR goals Holmen has set a number of strategic goals for its HR activities. The goals relate to human capital, leadership, performance reviews, the number of accidents at work, and the proportion of managerial positions filled by women. These goals have been broken down to business area and mill level. As of 2008 they also include the units in Spain and England and apply to the period up until In addition, there are also key ratios, which are followed monthly via the payroll system and complemented with the results of the employee surveys. The ratios are analysed and, in the event of shortcomings, result in action plans. Goal achievement Sweden The Human Capital and Leadership indices have improved as a result of a sharper focus on leadership and personnel issues. Performance reviews. The number of reviews that take place has risen but their HR targets and results, Holmen s Swedish units quality is not satisfactory. According to the personnel policy, each manager shall perform annual performance reviews, during which they shall draw up personal development plans. Both the manager and the subordinate are also given opportunity to undergo training to enable them to carry out these reviews constructively. The number of reviews carried out and their quality are measured in the employee surveys. The new HR system provides aids to help carry out performance reviews. Accidents at work that lead to sick leave at the Swedish units has declined to 18 per Target Human capital 1) Leadership index 1) Performance reviews, % 1) Accidents at work leading to sick leave /1 000 employees Proportion of female managers, % ) Figures taken from Holmen Inblick employee surveys for 2005 and Ainsley Heffor, Zoe Winn and Andrew Southwell works for Iggesund Paperbard s English mill in Workington. As of 2008, Holmen s HR targets also apply to the Workington mill employees from 34 in However, the present level is far from satisfactory. For 2009, therefore, Holmen has set itself the target of reducing the incidence of accidents to 10 per employees. A low accident rate is not only important for the people who already work for the company, but also for its effect on recruitment. The proportion of female managers has risen to 11 per cent after remaining constant for several years. The target for 2007 was therefore achieved. For example, four women have been hired for positions in the mills management groups, of whom one has joined Group management. The target is for the proportion of female managers should be at least 13 per cent by Sick leave declined from around 7 per cent in 2002 to 4.7 per cent in This means that the target of 4.5 per cent is more or less achieved. As sick leave is determined to some extent by political decisions relating to levels of benefit, early retirement, and queues in the health service, it is no longer seen as one of the Group s strategic targets. h o l m e n a n d i t s w o r l d

50 s o c i a l r e s p o n s i b i l i t y Employee surveys Holmen carries out its Holmen Inblick employee survey every second year. The results are analysed and then serve as a basis for local action plans. In 2007, employee surveys were carried out in Sweden, the Netherlands and Estonia, and at Holmen Paper s foreign marketing companies. The main purpose is to check that managers and subordinates live up to their responsibilities as laid down in the HR policy. The survey also evaluates the organisation and leadership to provide basis for development. Response rate. In Sweden, 79 per cent of the employees answered the survey in In other European units the corresponding figure was 89 per cent. Comments Sweden. With a figure of 616 for human capital, Holmen is well above average for process industries. The figure has improved year by year. One-third of the total of 500 units/departments included in the survey had an index of above 700, which must be regarded as very good. The leadership index is also better than the industry average. This index has also improved year by year and is now 56. Onethird of the managers achieved high scores 70 or more. There are also some whose scores were much lower, and they need support to develop their leadership skills. Competence development and a more efficient organisation are two areas with potential for improvement, to which considerable attention will be devoted in coming years. The climate for modernisation is weak and more encouragement and support need to be given to new ideas. There are also cases of bullying and discrimination, which is not acceptable in Holmen. Two new topics commitment and attraction on the labour market were added to the survey in Both noted values above 70. In 2007, Holmen Inblick employee surveys were carried out at most Holmen units. Anders Norén and Sebastian Kasesalu work on Hallsta s PM11 paper machine. Other European units. Iggesund Paperboard (the Netherlands) and Holmen Paper s market organisations both improved their indices. Holmen Skog s purchasing companies in Estonia carried out the employee survey for the first time in Holmen Paper s market organisation. Since the previous survey, Holmen Paper has carried out a training programme for the entire market organisation. The programme included the company s management system, project implementation, and the customer survey in The company has also launched an improvement project with the object of providing individual employees with a clearer picture of their own role and their importance for the company. Iggesund Paperboard s market organisation has noted distinct improvements in more or less all the areas surveyed, which may be seen as evidence that the action programmes launched after the three earlier surveys have produced results. The personnel turnover rate, for instance, has declined. How the results are used All the results are broken down to business area, region, mill and department (with at least six employees) level. Smaller units are given a written summary. Each manager is given a personal profile of his/her leadership skills. Action plans are drawn up at all units to remedy the identified weaknesses. Senior management follows up twice a year to ensure the plans are being put into effect. The results are summarised at Group level and incorporated into the next year s HR strategic plan. Holmen Inblick is now an established means of measuring and recording the employees views on key issues. Together with other analyses and assessments, it serves as a basis for the development of leadership skills and the organisation. Employee surveys/facts Holmen has carried out employee surveys every second year in Sweden since In the Netherlands the first survey was carried out in 2003, in Spain and England in 2006, and in Estonia in A new employee survey for all the Group s employees will be carried out in Result Sweden Group Human capital Leadership index Human capital is a measure of how well employees think their job conditions allow them to do a good job (scale ). The higher the value the better. The Ledership index is an employee ranking of managers (0 100). 4 8 h o l m e n a n d i t s w o r l d

51 Leadership development Håkan Lindh, Holmen Timber s President, in a discussion with Lars-Håkan Flöjt, group supervisor. Holmen takes systematic action to identify and develop employees with management potential. Sound management and effective leadership are key strengths and require regular measures if they are to be maintained and developed. Every second year Holmen makes a survey of employees who have the capacity, and are interested in, being promoted to more qualified tasks. It is just as important to identify managers ready to shoulder broader and more demanding responsibilities. The analysis is made at unit level and then coordinated at Group level. The aim is that at least 75 per cent of all managerial vacancies in the Group should be filled by internal recruitment. A further aim is to be able to identify more female employees with managerial potential. An international programme to develop capable managers within the Group has been carried out in association with the Swedish Institute for Business Management (IFL). The aim is to develop leadership and management skills and also to create a common approach to strategic issues. The programme is arranged every second year, and the next one will be in Local managers are trained within their unit. For the past few years, Braviken has been arranging a two-week management development programme with the object of creating a common position on leadership. Gradually, the programme has also come to include employees at other Holmen units. Clear demands on managers. It has emerged from the employee surveys that a number of managers have a very low leadership index. Holmen s Group management has made it quite clear that a situation in which the employees do not have complete confidence in their managers is unacceptable. Each unit is to identify those managers who do not match their requirement specification and launch action programmes. In cases where it is obviously unrealistic to develop a manager with a low index he/she will be offered a transfer to a more suitable job in the company. The target is that by the time of the next employee survey, in 2009, there will be no managers with a low leadership index. Holmen Inblick/Manager. It has emerged from Holmen Inblick that a high proportion of the Group s managers are not entirely aware of what is expected of them as managers. To tackle this, a survey, Holmen Inblick/Manager, was carried out at the end of the year among 400 Swedish line managers. The survey will provide information to serve as a basis for an action programme that will be prepared in per cent of Holmen s managers replied to the survey. The most important conclusions are: 88 per cent consider that they are well aware of what is expected of them as managers. Nine out of ten have annual performance reviews with their managers, but only half of them think this has any effect on their development. Many of them consider that they need more support from the HR department on leadership issues. SIFO Research International, the polling company that carried out the survey explains that several different approaches are possible. For instance, senior management can make clearer demands and control the quality of the dialogue between subordinate managers and their line managers. Women make better managers. The employee survey also showed that in general women achieved higher values for leadership. They are judged to be better at making decisions, and making clear demands. They are also felt by their subordinates to be better at listening and encouraging than male managers. As regards serving as a role model, the gap between men and women is no less than 15 per centage points. One possible conclusion is that women make better managers than men. Involved managers. During the year a process was launched with the object of describing more clearly the principles that leadership in the Group is based on. The process began with Senior management and will involve all managers during the course of It could involve supplementing the personnel policy with a section on leadership profiles. This will make the company s demands in this area clearer, and enable them to play a greater role in managerial appointments. The profile will become the foundation for the Group s new management development programme. h o l m e n a n d i t s w o r l d

52 s o c i a l r e s p o n s i b i l i t y Competence development Each year Holmen devotes substantial resources to competence development for its employees. The main purpose of this is to increase professional skills and offer the employees opportunities for promotion to more qualified positions. Competence development traditionally has been about improving skills within a particular vocation or acquiring qualifications for performing new tasks. But the term also covers competence gained from having greater responsibility, using new equipment and from taking on new tasks. All Holmen s business areas provide numerous training programmes each year, and the average Holmen employee receives about 40 hours of training per year. In addition, there is the day-to-day learning that takes place at each workplace. Participants in Holmen s Adept and Mentor programme: adepts Anna Svedberg, Fredrik Holgersson and Hedvig Ericsson. Learning without a Course is a concept that could in the future become the main principle for competence development. The advantage is that the learning process is a natural element in the day-to-day work. Experience shows quite clearly that on-the-job learning produces better effects than traditional training methods. Here are some examples: Broader responsibility of new role Learn how to use new equipment Project work Internal mobility Acting position Mentor programme Study visits Company s representative in network. The new HR system that will be introduced in 2008 will provide better opportunities to work with competence development. In a few years, all job descriptions will be based on competence. Each employee will be able to compare the competence he/she possesses with what the position requires. This will make it more natural, in performance reviews between manager and subordinate, to discuss how any competence gap can be dealt with. Each employee s development plan will more clearly be related to each position s competence requirements. International induction programme In addition to local induction programmes there is also an international group-wide programme for newly hired graduates. Around 60 new employees from six countries participated in The aim is to increase their knowledge of the Group and offer participants opportunities for networking. Adept and Mentor programme Holmen s Adept and Mentor programme is carried out each year. The aim of the programme is to give the participants an opportunity to develop personally and professionally and to build networks within the Group. In 2007, 15 adepts participated, each of whom had their own personal mentor from another unit. In the assessments made later, the programme scored highly from all angles. Not only the adepts but also the mentors considered that they had developed. Holmen competence exchange In 2006 a pilot project was launched for development engineers at Holmen who, for a limited period of time, could consider working at another unit in the group. The purpose of the project is to retain competent personnel in the Group, to give employees opportunities to develop and to transfer competence between the units. Leadership training Managers at all levels are given a training in leadership and management skills, see page 49. Work environment training All new employees are given training in safety and the work environment. Trainee programme at Iggesund Iggesund launched a local trainee programme for 13 employees, adapted to the mill s needs. The mill has a pent-up need for employees with a high level of competence, not least since the process equipment is constantly becoming more advanced. The trainee programme runs for about a year. Biggest training programme ever at Holmen Skog More than people underwent a training programme covering Holmen Skog s new silvicultural programme that came into effect during the year. The training programme included the company s own employees and contractors personnel who perform much of the day-to-day work in the forests. See also page h o l m e n a n d i t s w o r l d

53 Recruitment During the coming decade many Holmen employees will be retiring. The annual number of people retiring at the Swedish units will rise radically over the next few years and reach a peak in Retirement figures in Sweden The number of people retiring at Holmen s Swedish units will more than double in the coming years and reach a peak in Holmen is taking various types of action to lay a sound foundation for its future recruitment activities. In recent years efforts have focused on upper secondary schools and universities. Holmen aims to increase the proportion of graduates in the organisation. At present, around 40 per cent of all new employees have a higher education. forest in school. It is important that young people acquire an awareness of the forest and the forest products industry at an early stage. Holmen therefore participates in the nation-wide programme arranged by the Forest in School organisation. This type of activity is important, particularly since fewer young people these days have any natural contact with forests and nature. During the past five years Forest in school has undergone extensive changes, which makes its ability to reach children and young people better than ever. Journey into the future. Holmen is involved in a project known as Journey into the Future, together with the Swedish Forest Industries Federation. The project is aimed at young people and teachers at upper secondary schools. In 2007 theme days on the forest industry were arranged at 148 schools throughout Sweden. More than pupils took part. Holmen follows up the days with study visits to nearby mills. Further education for teachers. Holmen has been running annual further education courses since 2003 for some 30 social science teachers from all over the country. The programme highlights various aspects such as raw materials, energy, the environment and education. Nine out of ten teachers say that they have found the training useful for their own teaching. In association with other forest companies Holmen has provided training for around 750 teachers since the programme began in Industry evenings. Holmen, in association with other forest product companies, arranges industry evenings for students at six institutes of technology. In 2007, 680 students participated. Career days. Holmen takes part in the career days that are organised at institutes of technology and at the Royal College of Forestry. These events are often followed up by study visits to Holmen s mills Degree projects. Holmen supports various kinds of degree project. In 2007 Holmen hosted 25 students who carried out their degree projects at the Group and provided work for 550 young people during their summer holidays. In addition, there were numerous interviews and surveys in connection with examinations papers. Trainees at Holmen Skog. Holmen Skog employed some forty students of forestry in 2007 as summer trainees. Having a summer job in the right environment for a few months offers trainees valuable experience and the company has the opportunity to get to know prospective employees. Holmen Skog has also set up several trainee positions that are regularly filled by young forest officers or senior forest rangers. These are permanent posts that enable trainees to work in several different places doing different jobs over a seven to nine month period. Numerous candidates apply for these traineeships and experience so far has been very good. Sweden s best work experience. Holmen also acts as host for work experience schemes at schools. In the Hudiksvall region these are turning out very well within the framework of what is known as Sweden s best work experience. Over a 10-day period some 60 elementary school pupils get to participate in the work in the forest and at the mills and to follow the wood on its way from the forest to finished product Magnus Rydstrand, Annika Zetterlund, Jessica Holmback and Johan Abrahamsson are taking part in Hallsta s one-year graduate trainee programme, after which they will start to work at the mill. h o l m e n a n d i t s w o r l d

54 S o c i a l r e s p o n s i b i l i t y Equality of opportunity As a result of equal opportunities measures the number of female managers at Holmen has increased. During the year four women were recruited to senior positions, one of which to Senior management. Holmen sees equality of opportunity as a priority issue for the future. Holmen s equal opportunities policy aims to promote the development of both women and men within the Group. This requires local action plans and analyses of the salary structure. The policy is an important instrument in the coming process of ensuring equality of opportunity for the sexes. Its application is monitored by means of key ratios and employee surveys. Relatively few women Women have always been underrepresented in the forest industry, and Holmen is no exception. Today 17 per cent of the Group s employees are women. This proportion has remained broadly unchanged for many years. and female managers The proportion of female managers at Holmen s Swedish units doubled between 2000 and However, progress slowed down the next two years. In 2007 the share increased again and is now 11 per cent. However, this level is far too low in relation to Holmen s goals, and an internal project group is now investigating the causes. A dialogue has been launched with Holmen s female managers to discuss how the company can support women s development more effectively. Furthermore two university theses on the subject have been initiated. Departure interviews have been held with the female managers who have left in recent years. When the results are ready in 2008 measures will be taken. The target for 2009 for the proportion of female managers has been lowered from 16 per cent to 13 per cent. More women in management groups A female mill manager was hired for Holmen Paper s Hallsta mill in The male dominance in Holmen s Senior management will be broken in May 2008 when a women takes over as head of Group Public Relations. There are seven women in management groups at Senior management, business area and mill level, which is three more than the previous year. There are two women on Holmen s Board, of whom one was elected by the AGM and one is a representative of the employees. Proportion of newly employed women increasing 23 per cent of new employees during the past three years are women. Holmen s goal is for this figure to rise. Slightly fewer than 60 per cent of the newly employed women have a higher education, which creates conditions that will enable the proportion of women in qualified positions to rise. In 2007, the proportion of women on Holmen s induction programme for newly employed graduates was 25 per cent. Equality of opportunity and the employee survey The latest employee survey shows that human capital index of female employees is higher than that for men. In the 2003 survey the situation was the opposite, and in 2005 men and women were at the same level. This development can be interpreted to mean that the equality of opportunity activities have had an affect. However, many work places, especially the mills, are still characterised by a blokes jargon. Nine per cent of women experience discrimination at some time on account of their gender. Holmen therefore sees women as an identified minority group. The employee survey is a valuable means of discovering any problems that may exist among this and other minority groups. Women and men also see the ability to combine work and family in different ways. Women see greater difficulties with this than men do. The departure interviews with female managers confirm this picture and indicate that something needs to be done about the situation. More men take paternity leave Holmen encourages men to use their right to take paternity leave when a child joins Hannele Arvonen has been appointed mill manager at Hallsta, which makes her Holmen s first female mill manager. the family. The company pays 80 per cent of that part of the salary that is not covered by the Swedish benefit system, which makes it easier for both parents to share parental leave. The total number of days of parental leave rose by almost 30 per cent between 2003 and No form of discrimination can be accepted Holmen applies the EU s discrimination laws. The employee survey includes questions on discrimination on the grounds of sexual orientation, religion, ethnic origin, age or disability. The results of the survey in 2007 show that no one experienced discrimination on grounds of their sexual orientation although two per cent of employees felt discriminated against on account of their gender. Three per cent felt discriminated against on account of their age and one per cent on account of their ethnic origin. Holmen does not accept discrimination in any form. Those units where some form of discrimination has been discovered are required to investigate the causes and take action. Ungrounded wage differentials According to Swedish law wages at the Swedish units must be analysed every second year to ensure that there are no ungrounded wage differentials between the two genders. For all positions the degree of difficulty has been determined with aid of external consultants and an established method for analysing the wages. The results are analysed within each position class. Only a few cases of ungrounded wage differentials have emerged and action plans have been drawn up in consultation with the union organisations. 5 2 h o l m e n a n d i t s w o r l d

55 Health and safety Holmen aims to create safe and stimulating workplaces. Encouragingly, sick leave and accidents at work have declined over the past three years. Sweden Total sick leave. As a consequence of various measures, total sick leave showed a further decline at Holmen s mills. In 2007, the level of sick leave fell to 4.7 (4.8). The target for 2008 is 4.5 per cent. Long-term sick leave (longer than 60 days) declined to 2.7 (2.8) per cent. The rate for women is still higher than that for men. In all probability, there are many different factors behind the relatively high level of long-term sick leave seen overall: Lifestyle, poor management, shift work and long hospital queues may all play their part. Helen Nygårds and Mats Kling work on the KM1 board machine at Iggesunds Bruk. Sick leave Holmen, Sweden, % The level of sick leave declined for the fifth year in a row. 7 6 Accidents at work resulting in sick leave per employees The number of accidents at work has declined but the figure is still too high. 40 Short periods of sick leave (1 14 days) have for several years been below 2 per cent, which is normal England and Spain At Workington, the total level of sick leave was 4.1 (3.0) per cent, at Madrid it was 4.0 (2.5) per cent and in the Netherlands it was 3.9 (4.5) per cent. The increase in Madrid is due to the past practice of not including sick leave caused accidents at work in the sickness statistics. It is difficult to make an objective comparison between the countries owing to differences in their health insurance systems. Improved good health index For the fourth year in a row Holmen has measured what it calls its Good health index, which is defined as the proportion of the employees who were not off sick at all during a calendar year. In 2007, the Good health index at Holmen was 45 (44) per cent Work environment and safety Each unit has a set of work environment targets. According to local policies and guidelines, there are procedures for the registration and follow-up of accidents and incidents. The Work Environment Inspectorate makes regular inspections of how the measures are carried out. Each year internal audits are made of the work environment and fire safety activities at Holmen. Occupational accidents. The number of accidents that resulted in more than eight hours of sick leave fell to 23 (25) per employees. No fatal accident has occurred in the Holmen Group for a long time. Far too many accidents are caused by failure to use safety equipment and failure to follow procedures. Reducing the number of unnecessary accidents represents a major challenge. Holmen s target is for the number of occupational accidents not to exceed 10 per employees in All units have set their own targets for The work environment task force is drawing up a groupwide action plan with the aim of significantly reducing the number of occupational accidents, so that the above targets can be achieved Total sick leave Long-term sick leave, 15 days or more Short-term sick leave, up to 14 days Sweden Group Incident reporting has improved over the past few years. The risk of accidents can be reduced by identifying such incidents and their causes. Work environment training. All new employees at the units are given training in safety and the work environment. All managers and safety representatives attend safe work environment courses that last 3 5 days. Legionella The effluent treatment plants at several Swedish pulp and paper mills contain Legionella bacteria. The Swedish Institute for Infectious Disease Control has recommended all mills in the industry to assess the risks. An industry-wide method of doing this is being prepared. h o l m e n a n d i t s w o r l d

56 s o c i a l r e s p o n s i b i l i t y Union cooperation Holmen s management and the union organisations cooperate on issues relating to health, safety, equality of opportunity and competence development. This section mainly describes union relations and labour law in Sweden. Conditions are more or less the same in the Netherlands, Spain and England. Right to organise. The employees right to belong to a union is regulated by law, the so-called right to organise. By this is meant the right of employees and employers to form and belong to unions or employer associations. The Swedish Codetermination at Work Act. The Codetermination at Work Act applies to all important changes in the work organisation. The object of the act is to give the employees influence and a voice in important issues. In the event of major changes to the work organisation, the employer is bound to negotiate before a decision is made. The union organisations do not have the right of veto but do have the right to be party to the information, analyse the consequences and express their opinion before a decision is made. Union cooperation. The company s employees are represented on the Board by three members and three deputy members. The union organisations meet regularly in consultation groups at each unit. These consultation groups are appointed at Group, business area and workplace level. They meet the management of the respective units on a regular basis. Union activities and time for such activities are regulated in agreements between the company and the union organisations. The company regards union activities as an asset. Holmen European Works Council ( HEWC), which is regulated by EU law in this field, is the Group s internal European union council. It consists of members, from Sweden, England, Spain and the Netherlands. The council serves as a forum for cooperation and communication across national borders. Experiences are positive and the HEWC has helped Group units in the various countries to come closer to each other. Disputes and disagreements concerning working conditions that cannot be resolved by the manager and the subordinate are referred to local negotiations between representatives of the company and the employee s union. If the parties still fail to agree, the matter can be referred to central negotiations between representatives at national level. The Labour Court is the court of final instance. Overmanning arises when the company s organisation is larger than is required for the long-term running of the business in accordance with the established strategy. When it arises, the employer negotiates with the unions with a view to reaching a mutually acceptable solution. In Sweden, an impact study is made in accordance with the guidelines issued by the Occupational Health and Safety Board. When redundancies are necessary, the company aims to minimise the number of redundancies by the use of redeployment, early retirement etc. The level of union membership is high at Holmen; in 2007 it was 94 per cent in Sweden. The corresponding figures for England and Spain were 68 and 43 per cent respectively. Conditions of employment are mainly regulated by means of agreements at national level. These agreements include the conditions for annual wage reviews and general terms of employment such as pension and insurance conditions. National agreements are supplemented by local agreements at unit level covering working hours, production bonuses, and preventive health care. Health and safety rules have been drawn up at all units in association with the union organisations. Union influence. For the most part the unions are involved in major development projects. A current example is the Group s new HR system. All policies relating to personnel issues have been drawn up in consultation with, or have obtained the support of the union organisations. Personnel reductions Braviken and Iggesund. The decisions on personnel cuts made in 2005 have had the effect that 180 employees have left or will leave the company without being made redundant. Ten are expected to leave in 2008, bringing the programme to a conclusion. In 2007 decisions were made to reduce manning in Holmen Paper as a consequence of poor profitability and high costs. It has been estimated that some 100 positions are supernumerary. The aim of the efficiency and productivity programme that is currently underway is to deal with all overmanning by means of natural wastage. Lower production of newsprint. At the end of 2007 it was announced that Holmen intended to reduce its production of standard newsprint by a total of tonnes per year, owing to the high cost of wood, recovered paper, and energy, which is making it necessary to review the business area s structure and establish a stronger foundation for the future. A review of Hallsta paper mill s structure has therefore been launched with the object to closing down the oldest of the mill s four paper machines. This is expected to result in the number of positions at the mill being reduced by some 30 per cent. Serious consequences will be felt by Hallstavik and its local citizens in coming years. However, in the long range the competitiveness of the mill will improve, which will strengthen its position in the community. Holmen is taking action to arrive at the best solution for those employees that will have to leave the company. The final decision on the cutbacks will be made in the spring of All in all, as far as Holmen Paper is concerned, this will mean that the total number of employees will be reduced by between now and the end of h o l m e n a n d i t s w o r l d

57 Facts How the facts are compiled The facts that are presented in the following pages are to a great extent the same as those that Holmen is statutorily and contractually required to submit to the authorities. Some figures have been extracted specifically for this report. Financial The financial information provided in Holmen and its World 2007 is identical to what is presented in Holmen Annual Report Personnel The key ratios provided are more detailed for Holmen s Swedish units than for those abroad. The definitions used are those in currently use within industry. Most of the figures are collected monthly via the salary system. No key ratios are available for Carpa in Spain, Holmen Mets in Estonia, and the sheeting units in the Netherlands and France. Reporting procedures will be developed in Each large unit has a reporting system for occupational accidents. Data are also presented to the authorities and union organisations. Production and environment Production and environmental data are compiled monthly at Holmen s units. The licensing authorities s conditions for emissions into air and water requires regular tests in accordance with specific rules. Holmen reports its environmental data to the supervisory authority monthly and annually. Consultation meetings are held with the supervisory authority several times a year. Procedures for measuring and recording data within the framework of the environment and energy management systems are checked by internal and external auditors. All reports to Swedish authorities are available to the public through the freedom of information principle. Data from all the mills are reported to the EU annually. Data from all parts of the Group are gathered in the same way, compiled and quality assured centrally. Some of the information provided in this report was already collected by the end of the year it refers to, so it might differ slightly from the information finally reported to the authorities. This means that some of the data for personnel and environment that are now stated for 2006 could have been revised. Units and abbreviations which appear on the fact pages. Hectare: m 2, 100 x 100 m. m 3 fub: Cubic metres solid under bark; true volume (that is no space between the logs) of whole trunk or trunk wood excluding bark and tree tops. m 3 sk: Forest cubic metres; volume of tree trunks, including bark, from the stump to the top. Electric energy and heating energy: Stated in GWh; 1 GWh = 1 million kilowatt hours, 1 GWh = 3.6 TJ MSEK: Million Swedish Kronor. h o l m e n a n d i t s w o r l d

58 f a c t s Finance MSEK Income statement Net turnover Operating costs Depreciation according to plan Interest in earnings of associated companies Items affecting comparability 1) 557 Operating profit Operating profit excl. items affecting comparability 1) Net finacial items Profit before tax Tax Profit for the year Balance sheet Assets Fixed assets Current assets Total assets Equity and liabilities Equity Liabilities Total equity and liabilities Cash flow from current operations from investment activities from financing activities Cash flow for the year Key ratios Operating margin, % Holmen Paper 2) Iggesund Paperboard Holmen Timber 2) Group 2) Return, % Capital employed 2) Equity Debt/equity ratio ) Items affecting comparability relate to write-down Holmen Paper of MSEK , a reversed write-down Holmen Timber of MSEK 60 and a positive revaluation of forests by MSEK in ) Excl. items affecting comparability. Net turnover and operating profit by business area, MSEK net turnover Operating profit Holmen Paper Iggesund Paperboard Holmen Timber Holmen Skog Holmen Energi Group central costs and other Items affecting comparability 1) Intra-group sales Group ) Items affecting comparability relate to write-down Holmen Paper of MSEK , a reversed write-down Holmen Timber of MSEK 60 and a positive revaluation of forests by MSEK in h o l m e n a n d i t s w o r l d

59 Personnel Employees Average number Of whom female, % temps, % 1,2) Average age Retirement age (average of different types of retirement) Sick leave, % Total Of which longer than 60 days employees: 29 years of age and below years of age years of age and above male female Health index (share of employees with no days of sick leave during the year) Equality of opportunity, % Female managers of total number of managers Female share of managerial positions Females joining the company of total new employees Education, % Elementary school Upper secondary school University, at least 2 years Graduates of new employees Female graduates of all new female employees Competence development, hours Traditional training per employee year 1) Labour turnover rate, % Labour turnover Of which given notice retirement at own request New employees Accidents and incidents, number per employees Incidents Occupational accidents, less than 8 hours of absence Occupational accidents, more than 8 hours of absence Unionisation, % Units with independent trade unions Units with safety committee Rate of union membership Employee surveys Sweden Human capital ( ) Leadership index (0 100) Group 1) New separate information for ) There are very few part-time employees, less than 5 per cent. h o l m e n a n d i t s w o r l d

60 f a c t s Production and environment Holmen Holmen Paper Production, tonnes Total Hallsta Braviken Madrid Wargön Newsprint, standard MF Special SC paper Coated printing paper Paperboard, coated and laminated Paperboard 1) Sulphate pulp, int. and ext. deliveries Sawn timber, m Raw materials, tonnes Wood, million m 3 fub 2) Purchased pulp/paperboard Recovered paper Plastic granules/foiling material Water consumption, million m Process effluent, million m Chemicals 3) Filler, pigment Thermal energy, GWh Biofuels Recovered liquor Bark, wood fibre-based fuels Recovered in the TMP-process 5) Fossil fuels Oil, LPG Natural gas ) 804 6) 951 6) 681 Purchased 7) ) Electric energy, GWh Company, hydro power Consumption of electricity 7) ) ) ) of which own back-pressure power Emissions into air, tonnes Sulphur dioxide, (counted as S) <1 <1 < Nitrogen oxides Dust <1 <1 < Carbon dioxide, tonnes Fossil Biogenic Emissions into water, tonnes COD, tonnes Suspended solids Nitrogen Phosphorus Waste, tonnes Hazardous 12) Sent to landfill, wet Utilised or recycled 13) Other deliveries Thermal energy, GWh ) 18 14) 17 14) Crude tall oil 16), tonnes ) The figures also include manufactured cellulose substitute and other materials. Use of raw materials and energy, as well as environmental data, are shown for total production at the mills. 2) At Group level, consumption is estimated taking into consideration internal deliveries of chips from the Iggesund Sawmill to Iggesunds Bruk. 3) Stated as 100 % active substance. 4) Thermal energy from Iggesunds Bruk. Emissions from the production of thermal energy are included in Emissions into air. 5) Thermal energy is a by-product from the electricity used in the TMP production process. This thermal energy is recovered and used in the production. 6) From Peninsular Cogeneración (half-owned). This is where the amount of thermal energy used for production at the plant is reported. 7) The emissions of carbon dioxide from the production of purchased thermal energy and electricity amounted to around tonnes in ) Surplus steam from Vargön Alloys (smelter). 9) From Nordanstigs Bostäder s district heating plant in Strömsbruk. 10) Thermal energy and electricity are produced from natural gas by another company (Powergen CHP) in a facility adjacent to the mill. 11) Electricity from Peninsular Cogeneración (half-owned) which is used in the production. Electricity is also sold externally: 232 GWh for 2007, 124 GWh for 2006 and 143 GWh for Ancillary gas consumption and emissions into air are not included in the table. 8) 8) 5 8 h o l m e n a n d i t s w o r l d

61 Iggesund Paperboard Holmen Timber Holmen Skog Iggesunds Bruk Workington Iggesund Sawmill <0.02 < <0.01 < ) ) 4) ) 1.89) 1.9 9) 10) ) ) <0.05 <0.05 < <0.05 <0.05 < <0.01 < ) 8115) 7915) ) Hazardous waste is dealt with by authorised recovery companies. Braviken, Hallsta and Skärnäs harbour terminals have an obligation to deal with oil-containing waste from the ships calling at the ports. In 2007 the volume of this type of waste at the three harbours amounted to tonnes. 13) Waste can be used as road-building aggregate, as a construction material, or as a soil improving agent. 14) Surplus steam for delivery to the district heating system in Hallstavik. 15) 86 GWh as surplus steam for delivery to the Iggesund Sawmill. The corresponding fuel energy for production of heat and associated emissions into air are stated under Iggesund Sawmill. 4 GWh as surplus steam for delivery to the district heating system in Iggesund. 16) For delivery to the chemical industry. Total land holdnings hectares Productive forestland hectares of which protected forests hectares Productive forestland excl. protected forests hectares Barren land hectares of which forest land hectares Protected forests and forested impediments that are not managed hectares Timber volume, per hectare 114 m 3 sk Timber volume, total m 3 sk Types of tree Pine 50 %, spruce 34 %, hardwood 12 %, Contorta pine 4 % Age class distribution 0 30 years 39 %, years 24 %, years 15 %, 91 år years 22 % Wood procurement million m 3 fub Total, gross of which from company forest other Swedish forest owners import Wood deliveries million m 3 fub To Holmen mills External sales Silviculture, hectares Reforestation Of which, % Planting Seeding Natural regeneration under seed trees under shelter trees 1 1 Controlled burning Plant production Millions of plants Growth and felling in Holmen s forests Million m 3 fub of timber Annual felling The volume harvested in Holmen s forests is well below each year s growth. The growth figure has been converted into cubic meters solid under bark. Volume of timber in Holmen s forests is increasing 100 Cubic metres of timber per hectare Iggesund Paperboard sheeting units Annual growth approx 3 million m 3 Valence, France and Utrecht, the Netherlands. Production in 2007 amounted to (74 500) tonnes. The raw material consisted of (81 300) tonnes of paperboard from Iggesunds Bruk and Workington, and 100 (140) tonnes of plastic. Energy consumption amounted to 0.7 (0.7) GWh (natural gas) and 2.3 (2.7) GWh (electricity). Emissions of fossil carbon dioxide into air totalled 140 (140) tonnes. In total 23 (24) tonnes of waste were sent for incineration. h o l m e n a n d i t s w o r l d

62 Glossary Biofuel/bioenergy Renewable fuel originating from plant life, such as wood (including liquors, bark and crude tall oil). Biogenic deriving from biofuels. Biological treatment The cleaning of effluent with the aid of micro-organisms. The principle is the same as that found in nature, but the process of degradation goes faster. Carbon dioxide (CO 2 ) Carbon is the building block of life and is found in every living thing. Biogenic carbon dioxide is released when biological matter decomposes or when wood is burnt. Fossil carbon dioxide is released when coal, oil or fossil gas is burnt. Cash flow The actual payments received or made by the Group in the form, for example, of payments received from customers and to suppliers, creditors and shareholders. Certification An examination carried out by a third party. A certificate is a document showing that the conditions for certification have been satisfied. COD Chemical oxygen demanding substance. A measure of the amount of oxygen needed for the complete decomposition of organic material in water. Crude tall oil Extracted from black liquor and used as a raw material in the production of soaps and paints. It can also be used in the lime kiln instead of oil. Debt/equity ratio The ratio between the Group s net financial liabilities (mainly borrowed capital) and its equity. DIP Pulp that has been produced from de-inked recovered paper (De-Inked Pulp). Dust Ash particles which are formed during the incineration of materials such as bark and liquor. Environmental audit An audit evaluating the functioning of a company s environmental protection organisation, management procedures and environmental equipment. FBB Multi-layered paperboard made from mechanical and chemical pulp (FBB, Folding Box Board). Filler Filler is used to add bulk to paper and to make it more uniform in structure and brighter. Various types of pigment are used, including ground marble and china clay (kaolin). Financial items Largely, the difference between the Group s interest income on placements with banks and other credit institutions and its interest costs on loans raised from such institutions. Fossil fuels Fuels based on carbon and hydrogen compounds mainly coal, oil and fossil gas. FSC FSC Forest Stewardship Council seeks to promote use of the world s forests in ways that are acceptable according to three sets of criteria: environmental, social and financial. IPPC Integrated Pollution Prevention and Control. EU directive to integrated, application procedures and supervision of major industrial companies. ISO International environmental management standard that has been drawn up by the International Organisation for Standardisation (ISO). Two important principles laid down by ISO stress the need for regular environmental audits and that the requirements intended to result in continuous improvements should be gradually raised. MF paper Includes standard and coloured newsprint (MF, Machine Finished). Net turnover Invoiced sales of products, wood and energy after deduction of value added tax (VAT, moms ). Nitrogen (N) A chemical element found in wood. Emissions of nitrogen into water can cause eutrophication. Nitrogen oxides (NO X ) Gases composed of nitrogen and oxygen that are produced during combustion. In moist air, nitrogen oxides can form nitric acid, which is then precipitated as acid rain. Since the gas contains nitrogen, the emission of nitrogen oxides can also have a fertilising effect. Operating profit/loss The Group s income from the sale of products, wood and energy, less cost of production; cost of delivery to customers; depreciation in value of machinery, buildings etc. PEFC Programme for the Endorsement of Forest Certification schemes. Originally a European forest certification, is now gaining greater global acceptance. In Sweden the PEFC and FSC standards are broadly identical. Phosphorus (P) A chemical element found in wood. Excess phosphorus in water can cause eutrophication and oxygen deficiency. Productive forestland Forestland that is able to produce an average of at least 1 m 3 of wood total volume over bark per hectare per year over the lifetime of the stand. REACH Registration, Evaluation and Authorisation of Chemicals. A chemicals law that will require many of the chemicals that are available on the market in the EU to undergo tests in order to assess their effects on health and the environment. RMP Refiner-Mechanical Pulp Pulp produced by refining wood chips, with or without chemical or heat treatment. SBB Multi-layered board made of bleached chemical pulp (SBB, Solid Bleached Board). SC paper Super-calendered paper. Uncoated, glazed magazine paper in grammages between 50 and 65 gsm (SC, Super Calender). SDC SDC (data centre for the forest industry). Cooperative with responsibility for all reporting on wood in Sweden. Softwood Pine or spruce wood. Suspended solids (SS) Water-borne substances comprising fibres and particles, most of which can be separated out using a fine mesh filter. Sulphate pulp A chemical pulp that is made by cooking wood at high temperature with white liquor (sodium hydroxide and sodium sulphide). Sulphur dioxide (SO 2 ) A gas consisting of sulphur and oxygen that is formed during the combustion of sulphur-containing fuels such oil. On contact with moist air, sulphur dioxide forms sulphuric acid, which contributes to the acidification of rain. Tax cost Computed tax on the year s result. The Group s normal tax rate is approximately 29 per cent. TMP Thermo-Mechanical Pulp A high-yield pulp (94 96 per cent yield from the wood) Obtained by heating spruce chips and then grinding them in refiners. Transportation (tonne-km) Describes extent of transport and logistics activities. Defined in terms of tonne-km, which is obtained by multiplying the weight of the goods (in tonnes) by the distance covered (kilometres). Links FSC Global Compact GRI IPPC eu/environment/ippc ILO ISO LUSTRA OECD PEFC REACH enterprise/reach SDC UN Human rights h o l m e n a n d i t s w o r l d

63 Subject index Subject...Page Accidents... 47, 53 Audit Bioenergy Biofuel , 32 Board Bribes Business areas Business partners Carbon analysis Carbon cycle Carbon dioxide Carbon sink Certifications Chemicals Child labour Climate Climate goal... 7 Competence development Contacts with the society Corporate governance... 2 Discontinued businesses Discrimination Electricity certificates... 34, 42 Electricity production Emission rights Emissions into air Emission into water... 27, 40 Employee surveys Employment conditions... 47, 54 Energy efficiency Energy targets... 7 Energy management system... 29, 41 Energy supply Environment, concern for... 15, 38 Environmental aspects Environmental certification Environmental costs Environmental facts Environmental targets... 7, 39 Environmental management system... 15, Environmental permit Environmental policy Equal opportunity... 16, 52 External audit Extortion Subject...Page Female managers Fertilisation Finance, facts Finance, working practices Financial development Financial targets... 7 Forest growth Forestry Forestry certification... 15, 24 FSC... 15, 24 Geographical presence Global Compact... 3, 17 Government engagement Government involvement GRI... 2, Ground contamination Growth... 7, 23 Guidelines for sustainable forestry Health HR HR targets... 7, 47 HR system Human capital... 7, 48 Human rights ILO Induction programme Insurance Internal mobility... 46, 50 International recognition... 3 Joint action groups Landfill Leadership index Links Management development Management survey Management system... 38, 41 Market conditions Mentor programme Nature conservation... 21, 23 Net turnover Noise OECD Official bodies... 19, 41 Operating result/profit/loss , 56 Organisation Overmanning Subject...Page Paperboard... 8, Parental leave PEFC... 15, 24 Performance review Permits Personnel, facts Personnel policy... 16, 46 Personnel reductions/cuts Policies Printing paper... 8, Producer responsibility Production, facts Production units Products Purchasing REACH Recovered paper... 9, 26 Recruitment Research and development Retirement figures Right of association Sawn timber... 9, 12 13, 33 Schools, contacts with/activities for Self-sufficiency... 22, 28 Senior management Shareholders Sick leave Social responsibility... 15, 46 Sponsoring Stakeholders Strategy... 7 Sustainable development , Traceability, wood Transportation Union membership, rate of Unions, relations with Wages and salaries, policy Waste... 40, 44 Water treatment Water use Wind power Wood harvesting Wood procurement Work environment h o l m e n a n d i t s w o r l d

64 Holmen and GRI Holmen has been following the Global Reporting Initiative s (GRI) recommendations for sustainability reporting for some years. The list below shows where and how GRI indicators for application principles and core indicators are presented. GRI s supplementary indicators are shown in the GRI register on Holmen s website where also deviations from the guidelines are reported with comments. Holmen has taken the GRI s reporting principles into account in the preparation of Holmen and its World The purpose of these principles is to ensure that information describing the business in terms of its sustainability is included, and that the quality of the information provided satisfies the GRI s criteria. SR = Sustainability report AR = Annual report www = Holmen s website ( 1. Vision and Strategy 1.1 Statement from the CEO and chair of sustainability to SR 4 5 the organization 1.2 Description of key impacts, risks and opportunities SR 4 7, 14 16, AR 25 33, 35, 40 41, 43 45, 49 53, Organisation Profile 2.1 Name of the reporting organization SR Primary brands, products and/or services SR Operational structure of the organization SR 6 11, Location of organization s headquarters SR Number of countries where the organization operates SR Nature of ownership and legal form SR 6, AR 3, 7, 27, 37, Markets served SR 6 11, AR 6, Scale of the reporting organization SR 1, 6 11, 36 37, 56 59, AR 42 43, cover 2.9 Significant changes during the reporting period SR 2, 55, AR 2, regarding size, structure and ownership 2.10 Awards received SR 3 3. Report Scope Report Profile 3.1 Reporting period SR Date of most previous report SR Reporting cycle (annual, biennial etc.) SR Contact point for questions regarding the report SR 2, 65 or its content Report Scope and Boundary 3.5 Process for defining report content SR 2, 4 5, Boundary of the report SR 2, Specific limitations on scope of the report SR 2, 4 5, 58, Basis for reporting on joint ventures, subsidiaries etc. SR 2, 55, AR 36 38, www 3.9 Data measurement techniques and SR 55 59, AR assumptions applied 3.10 Explanation of restatements provided in earlier reports SR Significant changes from previous reports SR 2, (regarding measurement methods etc.) GRI Content Index 3.12 GRI disclosure table SR 3, 62 64, www Assurance 3.13 Policy and current praxis with regard to seeking SR 2, 55, 64, AR 65 external assurance for the report 4. Governance, Commitments and Engagement Governance 4.1 Governance structure including board committees SR 14 15, AR Is the chairperson the executive officer? SR 14 15, AR 67, www 4.3 Number of independent board members SR 67, (if unitary board) 4.4 Mechanisms for shareholders and employee feedback SR 14, 18 19, 54, AR Executive compensation SR 46, 52, AR 44 45, 67 68, www 4.6 Process of board to ensure avoidance of conflicts SR 14, AR 67 of interest 4.7 Process for determining qualificiations of SR 14, AR board members 4.8 Mission and value statements, codes of conducts SR 4 5, 14 17, 34, and the status of their implementation 43 49, 51, 53, 54, Board-level processes for overseeing performance, SR 14 15, AR risks and compliance 4.10 Process for evaluating board performance SR 2, AR Commitments to External Alternatives 4.11 Appliance of the precautionary approach SR 17, Endorsement of external charters, principles SR 2 3, 14 15, 17, or other initiatives 24 25, 29, 34, Significant memberships in associations SR 3, 12 13, 17, 21, Stakeholder Engagement 4.14 List of stakeholders engaged by the organization SR 2 3, 18 19, 37, Basis for identification and selection of stakeholders SR Approaches to stakeholder engagement SR 12 16, 18 21, 29, 46 48, Key issues raised through stakeholder engagement SR 14 15, 18 21, 48, Performance Indicators E C O N O M I C I N D I C AT O R S Disclosure on Management Approach Goals and Performance SR 7, 14 15, 36 37, 56 AR 4 12 Policy SR 7, 16 Additional Contextual Information SR 2 5, AR 4 12, Economic Performance EC1 Direct economic value, generated and distributed SR 1, 36 37, 56, AR 60, 62 EC2 Risks and opportunities due to climate change SR 5, 13, 22, 32 EC3 Coverage of defined benefit pension plan obligations AR 44 45, EC4 Significant financial assistance from government SR 12, AR 44 Market Presence EC6 Policy, practices and proportions of spending SR 20 21, 24 on locally-based suppliers EC7 Procedures for hiring locals (including proportion of local managers) www EC8 Description of infrastructure investments that provide SR public benefit E N V I R O N M E N TA L I N D I C AT O R S Disclosure on Management Approach Goals and Performance SR 4 5, 7, 30, 34 35, 38 41, AR 4 12 Policy SR 16 Organizational Responsibility SR 14 15, 38 Training and Awareness SR 38 Monitoring and Follow-up SR 14 15, Additional Contextual Information SR 22 29, AR Materials EN1 Weight of materials used SR EN2 Percentage of materials used that are recycled SR 26, Energy EN3 Direct energy consumption SR 28 29, 39, EN4 Indirect energy consumption SR 58 59, www Water EN8 Total water withdrawal by source SR 27, h o l m e n a n d i t s w o r l d

65 Biodiversity EN11 Location and size of land owned, leased or managed SR 10, 22 23, 59, for product activities www EN12 Description of significant impacts of activities on protected areas SR 22 23, 27, 42 43, www Emissions, Effluents and Waste EN16 Total direct and indirect greenhouse gas emissions SR 40, EN17 Other relevant indirect greenhouse gas emissions SR EN19 Emissions of ozone-depleting substances www EN20 NOx, SOx and other significant air emissions SR 40, EN21 Total water discharge (quality and impact) SR 40, 58 59, www EN22 Total weight of waste SR 40, 44, EN23 Total number and volume of significant spills SR 39, 45, AR 60 Product and Services EN26 Initiatives to mitigate environmental impacts SR 3, 12 13, 15, 22 31, of products and services 34 35, 39, EN27 Percentage of products sold reclaimed at end SR 26 29, 44, of product life cycle (by category) Compliance EN28 Value of fines and numbers of non-monetary SR 39, 42, AR 29 sanctions for non-compliance S O C I A L I N D I C AT O R S LA, Labor Practices and Decent Work Disclosure on Management Approach Goals and Performance SR 1, 7, 46 47, 52 Policy SR 16 17, 46, 52 Organizational Responsibility SR 14 15, Training and Awareness SR 48, 53 Monitoring and Follow-up SR Additional Contextual Information SR 3, 50, 54, 60 Employment LA1 Breakdown of total workforce SR 10 11, 57 LA2 Total number and rate of employee turnover SR 57 Labor/Management Relations LA4 Percentage of employees covered by collective SR 54, 57 bargaining agreements LA5 Minimum notice period(s) regarding SR 16, 54 operational changes Occupational Health and Safety LA7 Rates of injury, disease, lost days, absenteeism SR 47, 53, 57 and fatalities LA8 Education, training etc. regarding serious diseases SR 50, 53 Training and Education LA10 Average hours of training (per year per employee) SR 50, 57 Diversity and Equal Opportunity LA13 Composition of governance bodies and breakdown SR 14, 51 52, 57, of employees (for example regarding gender AR and minority group memberships) LA14 Ratio of basic salary (by men/women) SR 52 HR, Human Rights Disclosure on Management Approach Goals and Performance SR 2, 7, 17, Policy SR Organizational Responsibility SR 14 15, 52, 54 Training and Awareness SR 52 Monitoring and Follow-up SR 17, 54 Additional Contextual Information SR 62 Investment and Procurement HR1 Percentage of significant investments agreements screened for HR issues www HR2 Major suppliers screened for HR issues SR 17 Non-discrimination HR4 Incidents of discrimination (and actions taken) SR 52 Freedom of Association HR5 Operations where freedom of association and collective bargaining Child Labor HR6 Operations where there is a risk for incidents of child labor Forced and Compulsory Labor HR7 Operations identified as having significant risk for incidents of forced or compulsory labor SR 17, 54, www SR 17, www SR 17, www SO, Society Disclosure on Management Approach Goals and Performance SR Policy SR 16 Organizational Responsibility SR 14 15, Training and Awareness www Monitoring and Follow-up SR Additional Contextual Information Community SO1 Nature, scope and effectiveness of any programs SR 14 21, 45, 51, 54 and practices that assess and manage the impact of operations Corruption SO2 Percentage and total number of business SR units analyzed for risks related to corruption SO3 Percentage and total number of business units analyzed and procedures SO4 Actions taken in response to incidents of corruption Public Policy SO5 Public policy positions and participation in public policy development and lobbying Compliance SO8 Value of significant fines and numbers of non-monetary sanctions for non-compliance with laws and regulations SR 16 17, www SR 16 17, www SR 4 5, www www PR, Product Responsibility Disclosure on Management Approach Goals and Performance SR 7 9, 26 Policy SR 16, Organizational Responsibility SR Training and Awareness Monitoring and Follow-up SR 15 Additional Contextual Information SR 35, www Customer Health and Safety PR1 Life cycle stages in which health and safety SR 29, 35 of products and services are assessed Product and Service Labeling PR3 Product information required by procedures Marketing Communications PR6 Programs for adherence of laws, standards and voluntary codes related to marketing communications Compliance PR9 Value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services SR 8 9, 14, 24 25, www SR 16, www www h o l m e n a n d i t s w o r l d

66 GRI Holmen complies with GRI s application level A GRI Global Reporting Initiative is a partnership with the United Nations Environment Programme. The organisation has developed global guidelines for how companies should report on that which is covered by the concept of sustainable development. The purpose is to create uniformity in sustainability reporting and to make it easier to assess and compare companies from the social, environmental and economic perspectives. The application of GRI s guidelines is entirely voluntary. Holmen looks favourably on GRI and has chosen to harmonise its reporting principles with the GRI criteria that are relevant to the Group. Holmen is of the opinion that the reporting of social, environmental and economic facts/aspects in Holmen and its World 2007 satisfy application level A of GRI s regulatory framework, that is to say the highest level. KPMG, an audit company, made in February 2008 a general review on Holmen s behalf of the content of Holmen s GRI report for compliance with the information requirements in GRI s Guidelines for Sustainable Reporting (G3). Holmen s GRI Report consists of Holmen and its World 2007, Holmen Annual Report 2007 and the GRI register on Holmen s website. Its brief was to state whether KPMG shared Holmen s assessment that the report complies with GRI s application level A. In its independent assurance report KPMG states that the information Holmen has provided in the abovenamed documents complies with GRI s application level A. For more information: GRI index: A digital GRI register is provided on Holmen s website with links to the documents where the information can be accessed. KPMG s independent assurance report can also be accessed on the website. GRI. The organisation s website provides a comprehensive picture of GRI and its regulatory framework.

67 We welcome your views and comments Holmen and its World 2007 provides answers to many questions about Holmen s approach to sustainability but it s a large subject and there are certainly many more. So, we welcome further questions and comments on the topics that are covered in this report. Concern for the environment Lars Strömberg, Director of Sustainable and Environmental Affairs +46 (0) lars.stromberg@holmen.com Social responsibility Thommy Haglund, Senior VP, Group Human Resources +46 (0) thommy.haglund@holmen.com Financial development Anders Almgren, CFO, Group Finance +46 (0) anders.almgren@holmen.com Addresses Holmen AB Head office P.O. Box 5407 SE STOCKHOLM Sweden +46 (0) info@holmen.com A complete list of addresses is available on Holmen s website: Holmen Paper AB SE NORRKÖPING Sweden +46 (0) info@holmenpaper.com Holmen Skog AB SE ÖRNSKÖLDSVIK Sweden +46 (0) info@holmenskog.com Iggesund Paperboard AB SE IGGESUND Sweden +46 (0) info@iggesund.com Holmen Energi AB SE ÖRNSKÖLDSVIK Sweden +46 (0) info@holmenenergi.com Holmen Timber AB P.O. Box 45 SE IGGESUND Sweden +46 (0) info@holmentimber.com More about Holmen Holmen Annual Report 2007 provides detailed information about the Group s financial performance and conditions on its markets during the year. Guidelines for Sustainable Forestry contains detailed instructions for the management of Holmen s forests. It includes the requirements laid down in the PEFC and FSC certifications. The guidelines will be published in English in June You may order these publications from Holmen. ANNUAL REPORT 2007 ANNUAL REPORT Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning 2007 Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Guidelines for Sustainable Forestry Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Låggallring Lägsta slutavverkningsålder Lövbränna Moder Naturskog Nollytefrekvens Nyckelelement Okulär Piskning Population Referenslandskap Rostjord Rotröta Rödlistade arter Skiktad Skärmställning Solitär Ståndort Successioner Sumpskog Surdråg Temperatursumma Textur Tröskelvärde Uppfrysningsjordar Urskog Vargtyper Årsmånsberoende Överståndare Allelopati Beståndsföryngring Biotop Brandfält Brandljud Dimensionsavverkning Enskiktat Fläckmarkberedning Fröbanksart Fröår Fungicider Fältskikt Förna Föryngringsavverkning Groddplanta Grundyta Heddegenererad mark Herbicid Höggallring Högläggning Intermittent Kvalitetsgallring Låga Lågga ng Läg a u avve kn ng å de Lövb änna Mo Holmen and its World 2007 Sustainability report. Holmen and its World describes the Holmen Group from three perspectives: financial development, concern for the environment and social responsibility. Available in three languages. Holmen and its World is available in Swedish, English and Spanish. The cover is printed on Iggesund Paperboard s Invercote Creato matt 280 gsm solid bleached board, which has been embossed and UV varnished. Production: Holmen, sustainability task force. Editor: Lars Klingström Layout, graphic production: Energi Reklambyrå, Linköping More information on the Internet. More information is available on Holmen s website concerning the environmental activities at the Group s units in There is also a GRI register with links to the documents containing the information. Translation into English: Ian M Beck AB, Stockholm Cover design: Johan Resele, Stockholm Photographs: Rolf Andersson, Bo Göran Backström, et al Graphic illustrations: Bo Persson, Designmakarna, Stockholm Cover print: Strand Grafiska, Malmö, 2008 Insert print: Strokirk-Landströms, Lidköping, 2008 Further copies may be ordered via Holmen s website or from: Holmen Group Public Relations P.O. Box 5407 SE STOCKHOLM Sweden +46 (0) info@holmen.com