Huhtamaki Sustainability Report Protecting resources

Transcription

1 Huhtamaki Sustainability Report 2012 Protecting resources

2 Contents 1 Sustainability in Huhtamaki 2 Message from the CEO 3 Our sustainability framework 6 Future friendly packaging 7 Managing our impact 9 Towards more sustainable products 12 Towards more sustainable operations 16 Our people and social responsibility 24 Our economic responsibility 28 User guide This interactive PDF allows you to find information and navigate around this document easily. Go to main home page Search this pdf Open printer friendly pdf Go to previous page Go to next page Go to specific page Go to contents page Full screen mode This PDF is set up to view in full screen mode. To turn this off, e.g. to zoom in or to print, press esc and the full toolbar is revealed. Cover image The flexible pouch packaging for flavored natural crackers has excellent protective properties and is very material efficient.

3 Sustainability in Huhtamaki 2 For Huhtamaki sustainability is all about helping customers protect valuable resources. We continuously strive to improve the eco-efficiency of our operations and the sustainability performance of the products we provide to our customers. Huhtamaki in brief Huhtamaki Group is a leading manufacturer of consumer and specialty packaging with 2012 net sales totalling EUR 2.3 billion. Foodservice and consumer goods markets are served by approximately 14,200 people in 64 manufacturing units and several sales offices in 31 countries. The parent company, Huhtamäki Oyj, has its head office in Espoo, Finland and its share is quoted on NASDAQ OMX Helsinki Ltd. Additional information is available at Business Identity Code: , domicile: Espoo.

4 Message from the CEO 3 Welcome to the Huhtamaki sustainability report for With this report we strive to provide a fair view of how we are progressing towards more sustainable operations and products. 95% of Huhtamaki s net sales are in consumer products packaging which plays an important role in protecting food, drinks, or health care products before consumer use. In addition to consumer protection, the packaging supports cost-effective logistics and reduces food waste in the supply chain. While Huhtamaki products make an important contribution to consumer well-being, the material choices, sourcing decisions, production technologies applied and end-of-life scenario chosen are all significant contributors to the final environmental impact of packaged goods. As packaging is present in our daily lives we need to recognize that the choices made by Huhtamaki and its customers, and the behaviour of consumers have a significant impact on the sustainability performance of a particular packaged product. Each party in the supply chain has a role in reducing the environmental burden of packaging, and therefore cooperation with all parties is essential to achieve the best results. Huhtamaki s role is to strive for more eco-efficient operations and packaging solutions. By presenting our approach to managing the environmental impact of packaging conversion and what we do to understand the life cycle performance of packaging, we hope to draw attention to the positive contribution that packaging has on sustainable development. We also apply our know how to support our suppliers, customers, and consumers to achieve the optimal packaging solutions. We hope that this report will help our current and potential customers and other stakeholders to form a balanced and informed view on how to assess Huhtamaki, its products and the efforts taken towards developing a more sustainable chain of packaging. Our customers care about sustainability and innovation As we have come to better understand the man-made impacts on the environment of our planet, we have witnessed a significant increase also in our customers interest in understanding environmental impacts of packaging. Calls for more sustainable packaging are continually increasing among our customers, consumers and other stakeholders although a clear path forward is not always evident. The full life cycle of a packaging solution needs to be assessed to effectively determine what sustainable packaging is. The public debate often focuses on the end-of-life impact of packaging which is understandable as it is a visible part in our daily life. The holistic consideration of optimum protection, waste reduction, or logistical efficiency is often overlooked even if the increasingly urban lifestyle needs these attributes, because less and less of world population lives next door to food or drinks production. Our customers are constantly assessing their packaging strategies and analyzing how they can maximize the positive impacts and minimize any negative footprint of their packed products on the environment, economy and society in general. This opens opportunities for packaging innovation whether it is only tweaking the product or a breakthrough concept, does not matter, as the request for reduced environmental impact by itself makes the packaging business exciting.

5 Message from the CEO 4 Our contribution to more sustainable packaging Packaging fulfils several functions such as protecting, distributing and displaying products. For Huhtamaki, which mainly manufactures food contact articles, these functions can never be overlooked when innovating new packaging solutions. Without packaging, food rots causing excessive waste, fragile products get broken, and distribution becomes hazardous resulting in inefficiencies in the supply chain. Efficiency is a prerequisite for good environmental and sustainable performance. Due to global population development and growing urbanization food will have to be increasingly transported from ideal production locations to the points of consumption. According to reports, in Western Europe 3% of food ends up as waste on its way to the consumer 1. In developing countries, up to 50% is wasted 2. Packaging and refrigeration are major contributors to preventing food and resource waste and present a significant potential for economic growth where it is most needed. Huhtamaki aims to contribute in the following ways to a more sustainable packaging value chain: We improve efficiencies and reduce waste There is a need to serve consumers quickly, safely and efficiently within the industry supply chain where Huhtamaki is a packaging converter. Specialized in food contact packaging we contribute to the sustainability of the supply chain by providing our customers with optimal packaging solutions and by innovating together with them packaging applications that are more material efficient without sacrificing the protective properties. The eco-efficiency of our operations has top priority and we measure our manufacturing units continuously, requiring them to improve their eco-efficiency performance. We choose materials carefully We assess the sustainability profiles of the materials we use as well as the sustainability of our own operations. The life-cycle performance of the finished article is assessed in the intended supply chain. We focus on continuous improvement The key environmental aspects of packaging manufacturing are monitored and targets are set and reviewed on a regular basis. Quarterly consolidated performance indicators on energy and material flows, as well as occupational health and safety provide a solid foundation for decisionmaking when allocating resources for improvement projects. For example Lean Six Sigma process-driven energy and raw material Treasure Hunts are used to improve the indirect sustainability performance of the packaging solutions produced. We work with customers to improve packaging solutions Manufacturing resource-efficient packaging that improves the environmental life cycle performance of packaged food is a fundamental principle when we develop packaging. In 2012 we worked with our customers to reduce the weight of several packaging solutions leading to lower environmental impact. We improve operational efficiency In 2012 we made special progress in lowering our energy consumption and improving waste recovery rates in several manufacturing units. We have further improved our processes to measure and improve energy efficiency. ISO has been successfully implemented and externally certified in the manufacturing units in Alf, Germany and Franeker, the Netherlands, and is now being implemented in Ronsberg and Forchheim in Germany. 1&2. Packaging in the Sustainability Agenda: A Guide for Corporate Decision Makers.

6 Message from the CEO 5 Between 2010 and 2012 we initiated 909 Six Sigma and Lean Six Sigma projects and conducted in total 26 energy Treasure Hunts at 24 manufacturing units. We also embarked on 21 raw material Treasure Hunts in 13 manufacturing units. 254 employees took up the challenge, resulting in 50 trained black belts and 204 green belts currently available for Six Sigma projects. In total, we have trained more than 300 employees in Six Sigma project management. This investment will bring significant future benefits in addition to the gains we see today. We focus on workplace safety Workplace safety continued to be a key priority for Huhtamaki in 2012 and we targeted further improvements in our occupational health and safety performance. However, in 2012 the incident frequency performance flattened out and the amount of incidents increased for the first time since The incident rate increased slightly (+1.7%) and the incident severity rate was heavily impacted by a few incidents resulting in prolonged sick leaves. The underperforming segments have increased their efforts in order to return our workplace safety performance to an improving trend during We welcome the future Our global presence, broad base of renewable materials and expertise in lightweight packaging like flexible packaging and films, together with our knowledge of processing recycled materials, provide a good base from which we can meet our customers calls for packaging solutions with a good sustainability performance. As we are all aware, the world is in constant flux. However, the globalization of the market economy and the pace in which it has developed have initiated fundamental questions for us all on how we should manage the limited resources our ecosystems have to offer. Megatrends are changing our world and industry. The world s population is set to grow by 20% by 2030, three billion new middle-class consumers will increase the pressure on ecosystems and resources, more and more people are moving to cities and food is consumed further away from the point of production and sold in smaller and smaller portions. These are just some of the major trends that affect the packaging choices made by our customers and consumers. The complexity of the sustainability challenge we and our customers face becomes increasingly apparent when we combine these underlying trends with the increasing competition for limited raw materials and the consensus that open-loop material flow systems have to be revised and directed towards closed-loop or recovery societies. Huhtamaki has taken a strategic choice to increase the share of renewable and recycled material based packaging in its portfolio. Combining this with our Flexible Packaging segment s expertise in lightweight packaging, we consider ourselves to be well placed to develop optimal packaging solutions responding to our common challenges and the demands of our customers. We believe that the dynamism provided by a growing number of consumers and their changing tastes opens opportunities for packaging innovation and brings rewards to those who succeed in providing them. Jukka Moisio, CEO

7 Our sustainability framework Understanding our customers needs and their preferences in responding to external drivers is essential for success in developing optimal packaging solutions. 6 Huhtamaki utilizes a set of management systems and tools in assessing and responding to the requirements and expectations of its various stakeholders. The underlying systems and tools utilized help the organisation in improving the ecoefficiency of the Group s operations and the environmental performance of its products, and supports continual improvement within Huhtamaki. The Group s mission, values, Code of conduct and various policies provide the framework within which the activities are conducted. Further information on Huhtamaki mission and values is available on www2.huhtamaki.com/web/about Regulatory drivers Expectations & requirements Policy framework Systematic management ISO 9001 ISO OHSAS BRC / IOP / AIB PEFC ISO Customer & consumer drivers Mission Toolbox Huhtamaki organization LCA assessment tool Six Sigma & LEAN Six Sigma Data consolidation tools Chemical management Huhtamaki values Assessment & evaluation Quarterly reviews Quarterly board reports Article comparisons Internal audits External audits Huhtamaki code of conduct Expectations & requirements Other stakeholder drivers Expectations & requirements Health & Safety Contributions Improving eco-efficiency of operations Material efficient products Less food waste through protective properties Recoverable packaging Continual improvement Expectations & requirements Environmental trends

8 Future friendly packaging BioWare is Huhtamaki s future friendly packaging concept. BioWare offers a wide choice of quality products ranging from disposable tableware to food containers and biodegradable films. The BioWare concept was first launched in In addition to developing the range of BioWare products, we work constantly to improve the environmental performance of our conventional products. 7 BioWare For a foodservice operation the BioWare products can also enable a single waste stream of biowaste. Only packaging that meets all these criteria is accepted into the BioWare range. BioWare products raw material, manufacturing as well as disposal have all been developed to have a lower impact on the environment than their traditional counterparts. The BioWare range uses different compostable raw materials, mainly bio-coated paperboard, biopolymers and molded fiber made from recycled paper and paperboard. In addition to high performance and aesthetic products, BioWare offers Huhtamaki customers a simple way to contribute to more sustainable environmental performance. They are a visible demonstration of environmental awareness and can be used to build positive brand image and differentiate from competition. BioWare products are compostable and certified in accordance with the applicable regional norm. According to EN 13432, the European norm for compostability of packaging, the BioWare products degrade completely in industrial composting facilities within 60 days. The key criteria for BioWare packaging is that they: 1. Convert in an industrial composting installation into CO 2, water, mineral salt and humus 2. Disintegrate, i.e leave no visible traces in the final compost 3. Do not have a negative impact on the final compost quality 4. Are made from renewable material whenever possible 5. Do not compromise product quality compared to alternatives based on conventional materials The products in Huhtamaki s BioWare range are made mostly from renewable natural materials and decompose completely in industrial composting conditions. The materials, production methods and disposal of the products have been designed to minimize their impact on the environment in other words, to optimize their impact in relation to the requirements placed on the packaging. Currently the BioWare product range includes paper cups for hot and cold drinks, drinking cups made of the Ingeo biopolymer, cutlery, food containers, Strongholder cup carriers and trays, smooth molded fiber plates as well as biodegradable films. Go online to read more about BioWare product life cycle: www2.huhtamaki.com/web/ sustainability

9 Future friendly packaging 8 New Generation Cup Carrier Frisby The Frisby cup carrier development focused on further enhancing the environmental properties of the product. In addition to being based on renewable and recycled raw material that is suitable for several recovery options, including industrial composting, the weight of the reengineered product was reduced by 4%. This lightweighting exercise also resulted in lower product height, thus improving its stacking capabilities and delivering dual logistical benefits also contributing to efficient warehousing. The Frisby cup carrier is suitable for cup sizes ranging from 4oz 22oz. Protect+ Protect+ is our new aluminum-free sealed-edge pouch, sold for example in Germany. By replacing the aluminum barrier with a 40% lighter solution we reduced the total weight of the packaging by 8% without reducing its protective properties. The improved environmental performance of the packaging resulted in a cheaper disposal fee in the German waste recovery system. And equally important, the packaging simultaneously delivers an optimal barrier, excellent machinability, vastly improved puncture resistance, excellent flexural stiffness and simple, controlled opening. Primo Hot Cups For the renewable material based (paper + PE) Primo Hot Cups the lightweighting efforts during 2012 resulted in a 7% weight reduction. The amount of raw material was reduced without deteriorating the cups insulation properties, thus further improving the life cycle performance of this cup. For the larger cup in the same series, an additional 1% weight reduction was achieved. Future friendly films Huhtamaki is one of today s most experienced producers of sustainable films and the development of films based on renewable materials such as polylactic acid (PLA), thermoplastic starch (TPS) and green polyethylene (PE) and polyethylene furaonate (PEF) is a ongoing process. A broad range of inventive films offers the possibility to integrate new functionalities by combining bio-based materials with conventional ones. The films, which may additionally be biodegradable, consist mainly of polymers derived from renewable raw materials and are able to meet the multiple requirements of the very diverse customers within the bio-packaging market.

10 Managing our impact At Huhtamaki, managing our impact is all about taking systematic actions to minimize the negative environmental impacts of our operations and products, and maximizing the positive impacts on society. For Huhtamaki, all three dimensions people, planet and profit matter. 9 Huhtamaki s main sustainability aspects lie in the environmental dimension and are energy use, emissions into the air and solid waste. Our actions focus on two main areas: managing the eco-efficiency of our packaging manufacturing operations and constantly seeking more optimal packaging solutions with improved sustainability performance. Managing sustainability All manufacturing units within Huhtamaki are governed by the same overreaching policy framework. The overreaching policies and principles are supported by management systems that systematize the actions taken. The systems implemented provide a basis for continuous improvement and regular performance assessment at a manufacturing unit level as well as at business segment and Group levels. In addition to covering operational eco-efficiency, our management systems include systems supporting product sustainability performance Our sustainability management model Legislators Other stakeholders Expectations & requirements Regulatory drivers Expectations & requirements Suppliers Customers Consumers Policy framework Community Customer & consumer drivers Mission Huhtamaki strategy and actions Board of Directors Chief Executive Officer Group Executive team Segments and functions Implementation Huhtamaki values Financial & commercial drivers Huhtamaki code of conduct Financial stakeholders Expectations & requirements Expectations & requirements Other drivers Media Employees

11 Managing our impact 10 improvements. Risk management systems include asset risk management audits covering 60% of the asset base annually and every manufacturing unit in a three-year sequence. Several tools are applied in this work within Huhtamaki. Our policies and principles Respecting the environment is important for Huhtamaki and the Group is a signatory to the International Chamber of Commerce (ICC) Business Charter for Sustainable Development. Huhtamaki s environmental commitments are described in the Group Environmental Policy. Huhtamaki focuses on minimizing natural resource depletion, optimizing process efficiency, using the best applicable technologies and practices, and reducing solid waste generation, effluent discharges and emissions into the air. Corporate governance Huhtamäki Oyj is listed on NASDAQ OMX Helsinki Ltd. and it complies without deviations with the Finnish Corporate Governance Code adopted by the Securities Market Association. The code is available at fi. Huhtamäki Oyj is a support member of the Securities Market Association. Huhtamaki s corporate governance comprises the General Meeting of Shareholders, the Board of Directors and committees founded by it, the Chief Executive Officer (CEO) and the Group Executive team (GET), laws and regulations applicable in the Group s operations as well as the Group s internal policies, guidelines and practices. Management systems At the end of 2012, 30 manufacturing units (from a total of 64 units), including the 10 largest units by net sales, followed an externally certified environmental management system such as ISO 14011, Eco-Management and Audit Scheme (EMAS) or another externally audited internal program such as the US Environment Care program. In addition to the environmental management systems, Huhtamaki manufacturing units have adopted occupational health and safety systems (OHSAS 18001), hygiene management systems (BRC/IoP, AIB), quality systems such as ISO 9001, energy management system ISO and PEFC Chain of Custody systems. The system status is presented on sustainability. A Groupwide reporting tool Operational targets and performance are easily accessed through a common reporting tool implemented at all manufacturing units. The consolidation tool also allows for effective benchmarking and best practice sharing and helps in external performance reporting. All Huhtamaki manufacturing units regularly submit information on their sustainability performance using some 40 GRI-derived sustainability performance indicators. The reporting sequence varies from monthly to annual depending on the indicator. A purpose-built sustainability management system software program is utilized for consolidating the data and benchmarking performance. Annual and long-term targets are set for occupational health and safety performance indicators as well as eco-efficiency indicators such as energy use, waste amount, waste treatment, waste recovery percentage and water extraction amounts. Current long-term targets are set until year-end Performance against set targets is reviewed in internal reviews and reported to the Board of Directors quarterly.

12 Managing our impact Our stakeholders Huhtamaki aims to engage in an open and mutually beneficial interaction with its stakeholders. The company s stakeholder relations, as well as its business operations and products are developed according to the expectations and needs of its stakeholders. Huhtamaki s key stakeholders are its customers, investors, employees, suppliers of goods and services, media, public authorities and various associations. Collaboration is also maintained with local communities, universities and various educational institutions. 11 Stakeholder Expectations Examples of Huhtamaki interaction with stakeholders Evaluation methods Customers, consumers Understanding customer needs High quality innovative packaging solutions that create value for the customer s products and help protect resources Cost efficiency Reliability Sustainable and eco-efficient operations Responsible conduct Customer support Joint product development projects Customer events and meetings, exhibitions Publications, releases and company website Customer satisfaction surveys, purchasing trends, generated sales to the customer Stock level development Investors, analysts and other members of the financial community Return on investment and profitable, long-term, responsible business operations Reliable, accurate and timely information Transparency Investor events and meetings Publications and releases Press conferences Quarterly earnings conference calls General Meeting of Shareholders Investor section on company website Size and structure of shareholder base, share turnover, annual earnings per share, listings on sustainable development indexes, benchmarks Employees Good working conditions, stable income and development opportunities Employee involvement in developing company operations Continuous training and leadership and competency development Occupational health and safety practices Cooperation through European Works Council activities Open and active internal communication and development of communication channels Employee job satisfaction surveys Systematic performance management Attractiveness as a workplace Leadership assessment Suppliers of goods and services Business opportunities, profitable cooperation and development of operations in collaboration Code of Conduct for Group suppliers, supply contracts Purchase development, number of suppliers, degree of centralization of purchasing, terms of payment Evaluations, audits Media Reliable, accurate and timely information Publications and releases Company website and presentation material Media briefings and press conferences Media monitoring Website user surveys Industrial organizations, associations, society and authorities Open interaction and relations Responsible conduct Contribution to local welfare, compliance with regulations and laws and responsible business Local and regional cooperation and regular communication and presentation of activities, best practice sharing Cooperation with public authorities, compliance with applicable laws Publications and company website Media monitoring Universities and educational institutions Work experience and research cooperation Training programs, research and product development projects, student visits, lectures and seminars Employer image surveys

13 Towards more sustainable products The essential starting point for assessing the environmental performance of packaging is understanding the property requirements set for the packaging throughout its entire life cycle. 12 Life Cycle Thinking & Assessment Huhtamaki gives high priority to operational performance and the improvement of eco-efficiency. However, to get a complete picture of the overall impact of a product, it is necessary to consider its entire life cycle. This means that the environmental impacts caused by packaging have to be assessed in relation to the entire life cycle of the product packaged in it and the requirements placed on the packaging throughout this period. For packaged consumer goods, the impacts caused by the manufacture of the packaging itself are typically relatively low when the full life cycle of the product is considered. The largest environmental impacts of packaged food, for example, typically arise at upstream stages such as food production. This implies that the main function of the packaging also from the environmental and sustainable development perspectives is to protect the food product and in this way protect the impacts of its previous life cycle stages. The overall environmental burden can be significantly reduced by extending the shelf life of food. Food waste places a much greater burden on the environment than would be the case if all of this food could be preserved until its time of consumption. Thus the essential starting points for assessing the environmental impacts of packaging are its protective properties and the requirements placed on it by customers, consumers, legislation and authorities. Life Cycle Thinking Life Cycle Thinking (LCT) is a concept that integrates existing consumption and production strategies, preventing a piece-meal approach. LCT can be used to improve the way we approach problem solving and use available information. Life cycle approaches help avoid shifting problems from one life Optimal pack design Negative Environmental Impact Underpacking Overpacking Optimum Pack Design Minimum Environmental Impact Minimum Material Increasing Packaging Material Weight or Volume Source: The Inventia Model: Packaging in the Sustainability Agenda; a Guide for Corporate Decision Makers.

14 Towards more sustainable products 13 cycle stage to another, from one geographic area to another and from one environmental medium (air, water, soil) to another. Life Cycle Assessment (LCA), Design for Environment (DfE), and Integrated Product Policy (IPP) are all examples of approaches and tools building on the concept of LCT. Overall, Life Cycle Thinking is much broader than and distinct from quantitative and qualitative tools, amongst which Life Cycle Assessment is a very prominent one, and which continue to evolve for mapping life cycle aspects. Introduction to LCA Life Cycle Assessment (LCA) is a tool in the context of Life Cycle Thinking (LCT) that can be used to support decision making. It is an analytical tool for the systematic evaluation of the potential environmental aspects of a product or service system through all stages of its life cycle. LCA is described and defined within the series of Environmental Cyclero A flexible packaging solution outperforms glass packaging Cyclero is an innovative flexible packaging solution in the shape of a can. It is lightweight, it has the feel of a flow pack and yet it has the barrier properties of metal cans. Cyclero can be used to package both liquids and solid foods requiring high barrier. An internal Life Cycle Analysis (LCA) comparing three different versions of Cyclero packaging with a returnable bottle made of glass and a drink packaging made of cartonboard was conducted. The evaluation covered five categories: the greenhouse effect, eutrophication of the soil, acidification of the soil, use of fossil resources and smog. The values used for the glass bottle and the cartonboard packaging originated from a systematic comparison carried out by the German Federal Ministry for the Environment when evaluating the ecological benefits of drink bottles. According to the analysis, all three Cyclero versions outperformed the glass bottle in the greenhouse effect, eutrophication and acidification of the soil categories. When printing and raw material usage was optimized, the performance of Cyclero was equal to the glass bottle s performance also in the categories smog and use of fossil resources. The basic Cyclero packaging was outperformed by the drink packaging made of cardboard. When the use of raw material was optimized, Cyclero s values for eutrophication of the soil were equal to and the values for smog and acidification of the soil were lower than those of cardboard packaging. Based on these results Cyclero also has ecological advantages compared to plastic bottles and metal cans, and it is a good substitute for other packaging materials, especially in portions packs of 100 to 333 ml.

15 Towards more sustainable products 14 Management Standards of the International Standard Organization, ISO (ISO 14040/14044, 2006). Life cycle assessment at Huhtamaki As part of the ongoing work on understanding the environmental performance of its packaging products, Huhtamaki has implemented a Packaging Life Cycle Assessment (PLCA) model where packaging conversion data can be assessed together with impacts from the various stages of the packaging s life cycle. The model is attached to the GaBi LCI database, which allows Huhtamaki to simulate different packaging and packaging recipes and quantify the environmental impacts of packaging products. This interactive tool covers four technologies applied within Huhtamaki and applies to packaging manufactured by all Huhtamaki s business segments. It allows Huhtamaki to tailor the input parameters of different scenarios to the products or process steps being investigated, allowing real-time comparisons to be made. The primary goals of this tool are: To calculate the environmental performance of Huhtamaki s product portfolio and to provide reliable and up-to-date data to meet the information needs of our internal research and development teams, our customers, suppliers and other stakeholders. To help Huhtamaki reach its environmental goals through benchmarking of products and production processes and the subsequent identification of targets for improvement. The intended audiences for the results of the LCA tool are primarily Huhtamaki customers and R&D teams, as well as employees, not only in environmental functions but also product designers, engineers, marketing and communications as well as senior management. The model considers the full product life cycle from cradle to grave, starting with raw material extraction, through production and use to end of life with all the significant transport, material and energy inputs included. All activities associated with the production of packaging at Huhtamaki s sites, upstream activities such as the production of granulates, paperboard, inks, electricity or natural gas and downstream activities such as transport to the customer, the treatment of waste generated during production and the treatment of post-consumer waste are also included. Understanding a typical foodservice article s environmental performance One needs to be very careful when drawing any general conclusions on the life cycle impacts of packaging. For example, raw material impact profiles vary greatly and production technology and country of production can have a significant impact on the environmental profile of packaging. Also the chosen energy profile impacts results significantly and one has to constantly keep in mind the scope of the life cycle that is being assessed. For a typical product that Huhtamaki manufactures, such as a paper cup, the largest contribution to for example the global warming impact is attached to the production of the raw material we use. This explains the particular focus on constantly trying to lightweight packaging without sacrificing the protective properties or the high standards for safety and hygiene. Another significant impact is related to the End-of-Life (EoL) scenario chosen, and the combination of the raw material and the EoL scenario. A packaging s environmental profile can vary significantly depending on whether it is assumed to be incinerated with energy recovery, recycled, industrially composted or the least preferred option, taken to landfill.

16 Towards more sustainable products 15 Global warming potential of 16oz coated paper cup Standard in calculation Low option High option Not CO2 intensive grid CO2 intensive grid Credit from incineration Waste land filling -2 Raw material Conversion Transportation End of life For example with renewable raw materials, incineration provides a lower GHG impact compared to land filling where the renewable raw material starts to degrade, releasing methane gas, a powerful GHG gas. In an incineration scenario no additional GHG s are released into the atmosphere and therefore this end of life option can be considered CO 2 neutral. The contribution of the conversion phase of packaging to the GHG impact is typically not significant, though conversion in itself can vary greatly depending on the energy mix used in the manufacturing plant. Transportation does not contribute significantly to the GHG profile of the product either, unless the transportation distance is expanded to intercontinental transportation, in which case the impact becomes significant. As a summary, the chosen raw material and its suitability for the EoL options available on the market where the product is released, are the two major impact areas affecting the life-cycle performance of the packaging. And one must keep in mind that the material choice must not have a negative impact on the protective properties of the packaging. Responsible sourcing of materials Raw material choice has a significant impact on the environmental life cycle performance of packaging. A renewable resource based raw material like paperboard is not automatically free from negative environmental aspects. Sustainable forestry, the legality and acceptability of the original forest from where the fiber is retrieved, is a discussion subject that has received a lot of attention in the media in recent years. The European Union timber regulation aims at creating a legal framework to reduce the risk of fiber sourced from unsustainable forests ending up on the European market. Huhtamaki, together with its suppliers, has been adopting methodologies and tools in order to manage this risk in the supply chain of paperboard. For example the manufacturing units in Poland, Spain, UK, Finland, Russia and Turkey that manufacture paperboard based articles are PEFC Chain of Custody -certified. Together with our suppliers (who have a certified chain all the way to the original forest), we have created a completely certified trail of sustainable paperboard. The Programme for the Endorsement of Forest Certification schemes (PEFC) is an international forest certification system promoting ecologically, socially and economically sustainable forestry throughout the world. Approximately ten percent of the world s forests are certified and of these, two thirds about 245 million hectares to PEFC standards. More information on Huhtamaki UK leads industry by adopting use of PEFC certified board ahead of new EU timber regulations. Patrick Smith Marketing Director, PEFC

17 Towards more sustainable operations In addition to improving the environmental performance of products, eco-efficient production can reduce costs. Huhtamaki has implemented environmental management systems to continuously help reduce operational costs and the environmental footprint of its production processes. 16 Making progress towards sustainable operations is key to long-term business success. The packaging industry is being reshaped by megatrends such as resource scarcity and rising energy costs and Huhtamaki has made good progress on addressing these issues. Our achievements include using 31% recycled materials. With more than 96% of our waste being non-hazardous and with a recovery percentage well exceeding 80% Huhtamaki is increasingly on a path to meet the challenges of tomorrow. Material aspects The key environmental aspects of Huhtamaki s operations are energy consumption, solid waste and emissions into the air. Continually improving operational eco-efficiency without sacrificing the highest standards for hygiene and safety means using energy and raw materials as efficiently as possible and thus improving the environmental lifecycle performance of Huhtamaki s packaging products. Environmental Management Huhtamaki s Group Environmental Policy lays the framework for the environmental efforts of its local operations. Environmental aspects and impacts are taken into account systematically in all operations and are integrated into daily practice at the manufacturing sites. Environmental management systems and tools have been created to implement the policy, monitor progress and share best practices. In addition to the Grouplevel short- and long-term operational environmental eco-efficiency targets, the performance of the manufacturing units is regularly measured, assessed and internally reported against the annual performance targets. The aim is to support continuous environmental improvement, identify areas requiring improvement, identify risks and opportunities, and support risk management. Energy Consumption Huhtamaki uses both primary energy sources (fuels) and converted secondary energy forms (electricity). The fuels used include natural gas, heavy and light fuel oil, liquefied petroleum gas (LPG), and other fossil fuels. Primary energy is mainly used in the drying process of post-consumer recycled fiber-based packaging, whereas electricity, a converted secondary form of energy, is used as process energy and for melting plastics (extrusion process) and in the drying of post-industrial recycled fiber-based packaging. In addition, energy is used for heating, lighting and internal logistics. Huhtamaki works systematically to identify opportunities for energy savings. Water consumption Huhtamaki monitors the incoming water flow, process discharge water and the volume of water evaporated during the process as water vapour. In Huhtamaki s processes water is mainly used for cooling and process water, during which the temperature of the cooling water rises. Although recycled fiber processes are more water demanding, the water flows at several sites are closed loop systems. At units where the water flows are not completely closed, the environmental permits set stringent discharge limits. At some sites, small amounts of nutrients end up in watercourses. These amounts are monitored and reported in accordance with the environmental permits and local authority requirements. Huhtamaki seeks to improve the efficiency of its water consumption on a continual basis.

18 Towards more sustainable operations 17 Waste The waste generated by Huhtamaki s processes consists mainly of paper board packaging cutting waste, printed plastic packaging by-products and non-fiber materials strayed into the recycled fiber flow that cannot be used for manufacturing post-consumer fiber -based packaging. The paper board packaging cutting waste is recycled and used as raw material for smooth molded fiber packaging, such as Chinet plates. The plastic packaging scrap is recycled internally and the printed plastic packaging by-products are sent for recovery. Waste recovery refers to recycling, incineration with energy recovery and composting. Huhtamaki has set specific targets for each manufacturing unit to reduce the share of production process waste and the rate of waste recovery has increased steadily. In 2012, 85.5% of the waste leaving Huhtamaki sites was sent to recovery, compared to 83.9% in The aim of waste recovery is to increase the efficiency of the use of resources and land, and to protect the soil and groundwater. Group progress in 2012 Emissions The solvent-based printing inks used by Huhtamaki produce volatile organic compounds (VOC emissions). To reduce these emissions several environmental investments have been made and by the end of 2012 VOC combustion systems were implemented in five manufacturing units in Europe. In addition, the manufacturing units in Ronsberg and Forchheim in Germany and Tortona in Italy have invested in VOC recovery systems, where the solvent used in printing inks is recycled and used again. The manufacturing unit in Poland has invested in a waterbased printing system (solvent free). Huhtamaki s main direct emissions to air consist of carbon dioxide emissions from the drying process of molded fiber products. See fig 7.1. Energy Consumption The production related energy consumption decreased during 2012 and reversed the trend towards a positive development. Annual consumption patterns have not significantly changed with outside temperature conditions still impacting the annual total energy consumption profile. See fig 7.2. Waste (Production side product) Waste in relation to production output increased slightly in 2012 compared to year end of Key reason for this was changes in product mix, partially driven by product lightweighting activities and partially by the shift in type of products requested. See fig fig 7.1. Emissions to air TCO 2 Ekv Scope 1 Scope 2 900, , ,00 225, fig 7.2. Energy consumption indexed Year end total 125% fig 7.3. Waste indexed Year end total 125%

19 Towards more sustainable operations 18 Occupational health & safety The occupational health and safety efforts taken within the Group have during the years paid off as a significant decrease in the amount of occupational incidents and a reduction of working time lost due to these incidents. However, in 2012 the incident frequency performance flattened out and the amount of incidents increased for first time since The incident rate increased slightly (+1,7%) and the incident severity rate was heavily impacted by a few incidents resulting in prolonged sick leaves. See fig 7.5. Sustainability management In 2012, several manufacturing units successfully implemented new externally certified management systems. The manufacturing units in Russia, Brazil, and Turkey successfully implemented ISO environmental management systems. With the manufacturing units in Russia and Turkey the total amount of units that have PEFC Chain of Custody systems implanted increased to seven. At the end of 2012, 30 manufacturing units, representing 46% of all manufacturing units in the Group, including the 10 largest units by net sales, followed an externally certified environmental management system such as ISO 14001, the Eco-Management and Audit Scheme (EMAS) or an internally audited program such as the US Environmental Care Program. During 2012 the manufacturing units in Alf, Germany and Franeker, the Netherlands successfully passed the external audits of the International Standardization Organization s (ISO) energy management system ISO Two additional units, Ronsberg and Forchheim in Germany, started the implementation of ISO during In addition to the Group s key sustainability aspects, presented above, each business segment has identified segment specific key sustainability aspects and defined target levels for the corresponding key sustainability indicators. Performance in 2012 against the set sustainability targets is described in the following pages. Though the key sustainability aspects and corresponding indicators vary between the business segments due to geographical and technological differences, energy consumption, non-product output (waste) and occupational health and safety aspects are reported for each segment. fig 7.4. Waste to recovery Year end total 50% 25% fig 7.5. Health & Safety LTIF LTIF LTIS , , , LTIS

20 Towards more sustainable operations Progress report: Flexible Packaging Improving the safety of our people is a very high priority for the Flexible Packaging segment in In addition we will continue to focus on actions targeting reductions on production related energy consumption. Suresh Gupta, Executive Vice President, Flexible Packaging 19 Flexible packaging is used for a wide range of consumer products including food, pet food, hygiene and health care products. The business segment serves global markets from manufacturing units in Europe, Asia and South America. Energy consumption The production related energy consumption continued the flatlining performance and underperformed the target set for the year-end of The higher than targeted energy use was negatively impacted by product mix changes and smaller lot sizes in several manufacturing units. See fig 8.1. Waste to recovery The waste recovery percentage increased during 2012 to its all time high and more than 92% of waste was recovered. See fig 8.3. Occupational Health & Safety With a total of 33 incidents recorded for 2012, the segment continued a negative performance trend. The segment consequently underperformed its occupational health and safety target and recorded an increase in the incident rate. The severity rate was furthermore significantly negatively impacted by a very serious accident. See fig 8.4. fig 8.1. Energy consumption indexed Year end total 2012 target 125% fig 8.2. Waste indexed Year end total 2012 target 125% fig 8.3. Waste to recovery Year end total 50% 25% fig 8.4. Health & Safety LTIF LTIF LTIS LTIS Waste (production side product) Production related waste output was also negatively influenced by changes in the product mix and continued to grow. As a consequence the reduction target set for the year-end of 2012 was not met. See fig 8.2.

21 Towards more sustainable operations Progress report: Films Our key focus in 2013 is the safety of our employees. We target a further 30% reduction in LTIF and LTIS by end of Additionally we will continue to focus on reducing the amount of waste through operational improvement and product innovations. The Films unit in Forchheim, Germany will implement the ISO Energy Management system in Peter Wahsner, Executive Vice President, Films 20 Films are mainly used for technical applications in the label, adhesive tape, hygiene and health care industries, as well as building and construction, automotive, packaging and graphic industries. The segment serves global markets from manufacturing units in Europe, North and South America and Asia. Energy consumption The production related energy consumption decreased compared to previous years and the target set for the year end 2012 was exceeded by 2%. The improved performance was positively affected by the increased focus given to energy efficiency and the fact that the winter in the northern hemisphere was warmer than expected. See fig 9.1. Waste (production side product) The waste reduction projects implemented within the segment contributed to significant reduction of relative waste output compared to year end 2011 and the target set for year end See fig 9.2. Waste to recovery The waste to recovery rate remained at for the fourth consecutive year. See fig 9.3. Occupational Health & Safety The safety activities taken within the segment resulted in a reduction in recorded incidents. As a result, the segment continued its incident rate improvement mirroring the target set for the year-end of The severity rate improved significantly and the target set for the year-end 2012 was clearly surpassed. See fig 9.4. fig 9.1. Energy consumption indexed Year end total 2012 target 125% fig 9.2. Waste indexed Year end total 2012 target 125% fig 9.3. Waste to recovery Year end total 2012 target 50% 25% fig 9.4. Health & Safety LTIF LTIF LTIS 20 6, , , ,500 LTIS

22 Towards more sustainable operations Progress report: North America Safety is our highest priority. We sustained excellent recordable injury performance in We also made big improvements in energy consumption reducing environmental footprint and costs. Future focus is on further reducing energy, water and material consumption. Clay Dunn, Executive Vice President, North America 21 The business segment includes rigid paper and plastic, and molded fiber businesses in the United States and Mexico. Local markets are served with Chinet disposable tableware products, ice cream containers as well as other foodservice and consumer goods packaging. Energy consumption The production related energy consumption decreased significantly compared to previous years and was positively affected by the recent acquisitions made within the segment. Energy usage reduction in 2012 was also positively affected by implementation of capital and noncapital projects in molded fiber operations. See fig Waste (production side product) and waste to recovery The production related waste output continued a positive trend and the waste recovery percentage also improved, returning the recovery rate to the high level of +80%. Overall waste was improved further with reductions in material weights while meeting market requirements. See fig Occupational Health & Safety The segment returned the incident rate towards an improvement and overperformed slightly compared to the year-end 2012 target. The incident severity rate continued to increase as a result of two serious incidents that occurred during Incident rates are 50% of typical manufacturing business in the US. Special focus on ergonomic soft tissue injury prevention and personal accountability for safety will be expanded to the recently acquired units. See fig fig Energy consumption indexed* Year end total 125% fig Waste indexed* Year end total 125% fig Waste to recovery* Year end total 50% 25% fig Health & Safety* LTIF LTIF LTIS 6.0 1, , LTIS * Performance data includes the segment s units in the United States

23 Towards more sustainable operations Progress report: Molded Fiber A solid pipeline of projects to improve energy efficiency across the segment yielded good results in 2012 and we expect to further speed up the development in The Franeker unit in the Netherlands was the first Molded Fiber unit to achieve the ISO Energy Management certificate. Olli Koponen, Excutive Vice President, Molded Fiber 22 Recycled molded fiber is used to make fresh product packaging, such as egg and fruit packaging. The business segment has manufacturing units in Europe, Oceania, Africa and South America. Energy consumption Production related energy consumption continued the improving trend for the third consecutive year, improving 2% compared to previous year. The production related energy consumption however slightly exceeded the target set for the year-end of See fig Waste (production side product) The waste in relation to production improved for the third year in a row and supported the long-term trend of reduced relative waste output. The relative waste output for year-end of 2012 was slightly above the target. See fig Waste to recovery The waste to recovery percentage continued its upward trend but did not reach the ambitious target, though the improvement compared to year-end of 2011 was significant (+30%) and a recovery percentage of 41% was reached. See fig Occupational Health & Safety The recorded lost time incidents reduced significantly during 2012 with six recorded incidents compared to fourteen recorded in Correspondingly, the incident frequency improved compared to the previous year but the segment recorded a deterioration in the incident severity performance due to the impact of a few severe incidents. See fig fig Energy consumption indexed Year end total 2012 target 125% fig Waste indexed Year end total 2012 target 125% fig Waste to recovery Year end total 2012 target 50% 25% fig Health & Safety LTIF LTIF LTIS , , , LTIS

24 Towards more sustainable operations Progress report: Foodservice E-A-O I am particularly proud of the work our teams have done on safety. It is a priority to ensure we create a safe environment for our employees. We have achieved remarkable performance in recent years and we intend to continue in We are also working very hard to further reduce the environmental impacts of our operations this is in the DNA of Huhtamaki. Eric Le Lay, Executive Vice President, Foodservice Europe-Asia-Oceania. 23 Foodservice Europe-Asia-Oceania segment manufactures and supplies paper and plastic disposable tableware to foodservice operators, fast food restaurants and coffee shops. The business segment has manufacturing units in Europe, the Middle-East, Asia and Oceania. Energy consumption Production related energy consumption has showed an improving trend since 2010 and continued to decline. The segment s performance exceeded the target set for year-end 2012 by 2%. However, it is expected that the units acquired in China during 2012 will have a negative effect on the segment s production related energy consumption. See fig Waste (production side product) The year-end 2012 production related waste performance continued a deteriorating trend with 4% more waste being produced for each ton of product. However, the year-end target was reached. Product mix changes and product lightweighting exercises are the main reason for the increase of relative waste output. Efforts are being taken to improve the reduction in material conversion efficiency. See fig Waste to recovery Though not reaching the targeted waste recovery level of 97%, the year end 2012 waste recovery percentage remained on a high level (94%) with a slight reduction compared to year-end 2011 performance. See fig Occupational Health & Safety The improving trend continued and incidents reduced to 11 by year-end 2012, an overall reduction of 21% measured by the number of incidents compared to previous year. The segment has two manufacturing units that have had no accidents recorded in over two years. fig Energy consumption indexed 125% Year end total 2012 target fig Waste indexed 125% Year end total 2012 target The segment s severity of accidents was reduced significantly with minor soft tissue injuries being the main consequences from accidents. Cross-unit networking of near-miss incidents to reinforce preventive actions has resulted in successful organizational learning within the segment. See fig fig Waste to recovery Year end total 2012 target 50% 25% fig Health & Safety LTIF LTIF LTIS , , , LTIS

25 Our people and social responsibility At the end of 2012 Huhtamaki employed 14,228 people in 31 countries around the world. One of the Group s core values is caring about its employees and treating them, as well as the environment and community, with respect. Employee diversity is welcomed and recognized as a source of innovation and employees are encouraged to speak up, question and develop new ideas. 24 The Group s human resources vision is based on respecting individuals and the standards for ethical behavior defined in the Huhtamaki Code of Conduct. The objective of the Group s human resources function is to support the execution of the Group s quality growth strategy and the achievement of its business targets by ensuring that right resources are available in the right place at the right time. Means to support these targets are for example various development programs, systematic performance management and succession planning as well as communication. Huhtamaki aims to provide a market competitive total compensation to employees. The Group participates annually in a global salary survey to have accurate data on salary development in the markets it operates in. Pension arrangements follow local regulation and practices and there are no Group level pension arrangements. The largest pension schemes within the Group are in the United States, the UK and Germany. Huhtamaki endorses the International Labour Organization (ILO) Principles and does not use any forced, involuntary or child labor. Workplace safety and employee well-being Workplace safety is a key priority within Huhtamaki and the Group s ultimate target is an injury-free workplace. Efforts to improve workplace safety were continued during 2012 with special focus on employees safety awareness. Recognition for achievements was given for example via the Zero Accident Club. Increasing attention was also paid to occupational health initiatives for example in the Flexible Packaging unit in Ronsberg, Germany, where a systematic employee health program had been started in The program s main targets are long-term maintenance and improvement of employability of the people, long-term employee retention as well as improvements in the company s ability to recruit competent and motivated employees. Development programs On-the-job learning and job rotation play an important role in personnel development at Huhtamaki. Project assignments, whether local or international, are a great way to broaden one s perspective and gain new skills and competence. To support job rotation, open positions are first offered to internal candidates. To further support job rotation a global job postings system is being launched as part of the Group s new intranet. The Lean Six Sigma methodology is used to implement business excellence throughout the Group. Systematic business excellence programs began in manufacturing but are being expanded to other functions such as sales, customer service and product development. Nine new Black Belts A coaching session to improve work station ergonomics in Ronsberg. The Ronsberg team participating a charity running event.