Huhtamaki Sustainability Report 2013

Transcription

1 Huhtamaki Sustainability Report

2 sustainability report Contents Megatrends 2 Huhtamaki in brief 3 Business segments in brief 5 Message from the CEO 8 Position in value chain 9 Our stakeholders 11 Our material aspects 13 Managing our impact 15 About the report 17 GRI Index 17 Environmental responsibility 19 Social responsibility 26 Economic responsibility 32 Cover image Polarity plastic tumblers and lids are made of rpet, which is a recycled plastic material. User guide The features of this interactive pdf allow you to navigate around this document and find information easily. Go to main home page Search this pdf Print Go to previous page Go to next page Go to specific page Go to contents page

3 Megatrends 2 Megatrends driving our business Megatrends, such as globalization, population growth and urbanization change the way people behave and companies operate. They create and change consumer needs and thus create opportunities for innovative business concepts, products and services. On the other hand, resource scarcity pushes for efficiency improvements and new, innovative raw materials. Globalization Globalization of the market economy and the pace at which it has developed have initiated fundamental questions on how we should manage the limited resources our ecosystems have to offer. Globalization enhances market efficiency and competition, which creates more options for consumers to choose from. Everyday choices of billions and billions of people make the difference from the sustainability aspect. Population growth The world s population is set to grow 2% by 23 and the make-up of the population will shift dramatically. With three billion new middle-class consumers, most of them in developing countries, the pressure on ecosystems and resources will increase. Elderly people will constitute a larger share of the total population, especially in developed countries. All these trends increase the pressure to use limited resources effectively and raise the need for innovative products. Packaging plays a key role in decreasing the spill of food on its way to consumers and thus ensuring that resources used are not wasted. Innovative packaging also helps meet the needs of different consumer groups. Urbanization As the world population grows, it also moves from rural to urban areas. Urbanization leads to more and more food being consumed further away from the point of production and sold packaged in supermarkets, rather than loose in market places or directly from farms. In the food value chain, packaging has an important role in protecting the product on its way from the producer to the store and from the store to the consumer. Quick service and consumption on-the-go are also an integral part of urban lifestyle.

4 huhtamaki in brief 3 Huhtamaki in brief Huhtamaki Group is a leading manufacturer of consumer and specialty packaging with 213 net sales totaling EUR 2.3 billion. The Group s business areas are foodservice disposables, flexible and molded fiber packaging as well as films. 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 SEGMENTS SHARE OF NET SALES 213 Foodservice Europe-Asia-Oceania 26% North America 31% Flexible Packaging 25% Molded Fiber 1% Films 8% Net sales M 2, manufacturing units in 3 countries EPS * 1.21 Dividend**.57 Number of employees Dec 31, ,362 All figures as reported in 213. * Excluding non-recurring items **As proposed by the Board of Directors. Huhtamaki manufacturing units

5 huhtamaki in brief 4 Mission We create value for our stakeholders through efficient and innovative packaging solutions that bring convenience and safety to consumers everyday life. Values Our shared values build an important basis for our success and we do our utmost to live by them every day. We treat our world with respect. We care about each other, the environment and the community. We welcome diversity and recognize it as a source of innovation, as well as encourage people to speak up, question and develop new ideas. Strategic direction Huhtamaki focuses on packaging operations where it has a competitive advantage, good market positions and which create value for the company and its customers. The Group s focus and expertise are foodservice disposables, flexible and molded fiber packaging as well as films. Huhtamaki targets quality growth. It means uncomplicated, profitable growth based on good competitive positions without sacrificing financial returns. The Group has a solid financial base and focused business segments that are ready to capture the organic growth available in the markets. Acquisitions form a key part of quality growth as they complement current positions in providing synergies and bringing new growth platforms. The Group actively explores acquisition opportunities that support its growth targets. In developed markets, acquisitions are expected to bring synergy benefits. In emerging markets, acquisitions are expected to boost the Group s growth targets. In addition to financial, compliance and general business-related issues, environmental and social aspects are also always evaluated when investigating possible targets. Huhtamaki seeks profitable 5% organic growth, complemented with aquisitions. We know our business and are committed to understanding our customers and consumers. We value integrity and open communication. We learn from everything we do. The Group has strong positions in fast-growing emerging markets. It is looking to strengthen these positions further. In 213, 26% of the Group s net sales and 46% of its employees were in emerging markets*. We like to get it done. We deliver on our promises, trust and empower individuals and thrive on our entrepreneurial spirit. * Emerging markets as defined by IMF.

6 business segments in brief 5 Business segments in brief The Group s business is divided into five business segments: Foodservice Europe-Asia-Oceania, North America, Flexible Packaging, Molded Fiber and Films. 213 FOODSERVICE EUROPE-ASIA-OCEANIA NORTH AMERICA FLEXIBLE PACKAGING MOLDED FIBER FILMS Net sales, MEUR EBIT*, MEUR RONA*, % Operating cash flow, MEUR Personnel 4,22 3,521 4,16 1, Manufacturing units Organic growth potential, % pa ~5 ~5 Sustainability focus areas in 214 Energy efficiency Occupational health and safety Material efficiency Occupational health and safety Chemical safety Occupational health and safety Waste minimization Energy, water and material use efficiency Occupational health and safety Occupational health and safety Energy efficiency * Excluding non-recurring items

7 business segments in brief 6 Foodservice Europe-Asia-Oceania Foodservice paper and plastic disposable tableware, such as cups, plates and containers, are supplied to foodservice operators, fast food restaurants and coffee shops. The segment has production in Europe, South Africa, Asia, Middle East and Oceania. The segment has especially strong market positions in Eastern Europe and Asia-Oceania. Competitive advantages include a long-term presence in emerging markets, a global network and manufacturing footprint as well as paper forming expertise and high quality standards. The segment is also a leader in sustainable solutions and offers a wide range of products under the BioWare concept. Sustainability aspects of disposable packaging mostly relate to raw materials, product safety and disposal after use. The main raw material, paperboard, is renewable and a wide range of products manufactured from compostable materials is also available. Customers can estimate the environmental impacts of packaging throughout its life-cycle with the Life Cycle Analysis (LCA) tool, which Huhtamaki has implemented. The impacts are attributed to the chosen raw material, manufacturing location, need of transport and disposal options. The analysis also supports innovations. Littering is perhaps the most visible side-effect of disposable packaging. Suitability of materials used with local community recycling schemes is an important factor in reducing litter. North America The North America segment serves local markets with Chinet disposable tableware products, foodservice packaging products as well as ice cream containers and other consumer goods packaging products. The segment has rigid paper, plastic and molded fiber production in the United States and in Mexico. The segment has a leading position in premium branded retail tableware market with its Chinet disposable tableware products. Currently, there is strong focus on growing the segment s position in the foodservice business. The segment also has a leading position in shaped cartonboard containers used for frozen desserts including ice cream. Competitive advantages include the strong Chinet brand, paper forming expertise and systems capabilities, as well as operational and supply chain excellence, molded fiber technology and a competitive cost position. Different packaging production technologies used in the North America segment create a versatile combination of important sustainability aspects. The main raw material in foodservice and ice-cream packaging is virgin paperboard, which is renewable. Molded fiber-based packaging is made of either post-industrial or post-consumer recycled paper and most of the products are industrially compostable after use. The energy intensity of the molded fiber production is on the high side, compared to manufacturing of paperboard or plastic foodservice packaging. Overall, production efficiency remains a variable receiving high attention in relation to all technologies. Flexible Packaging The Flexible Packaging segment offers a wide range of packaging solutions for consumer products including food, pet food, and hygiene and health care products. The segment serves global markets from production units in Europe, Asia and South America. The segment has strong market positions globally in tube laminates, especially for toothpaste, as well as in retort laminates for pet food. In addition the segment has a strong position in chocolate packaging in Europe, biscuits and confectionery packaging in India and coffee packaging in Thailand and Vietnam. Competitive advantages include technical knowhow and high focus on innovation and new product development. The segment has an excellent footprint in emerging markets, especially in South and Southeast Asia.

8 business segments in brief 7 The key sustainability aspects of flexible packaging relate especially to material efficiency, protective features and recyclability. When comparing flexible packaging to, for example, glass packaging, less material is needed and therefore transportation is more energy-efficient packaging weighs less and takes less space. First-grade protective features increase the preservability of food and decrease spill. Easiness of size and look variation enhance the usability, especially in developing markets. As flexible packaging is a multi-layer product, the sustainability challenges are mostly related to material recovery. Molded Fiber The Molded Fiber segment is a technology specialist offering fiber based packaging for fresh products, such as eggs and fruits. The segment has production in Europe, Oceania, Africa and South America. The segment has strong positions globally in molded fiber egg and fruit packaging. Competitive advantages include a wide manufacturing footprint, in-house proprietary technology, experienced team and in-house sourcing of recycled paper. The main raw material of molded fiber packaging, post-consumer recycled paper, forms the basis for the products sustainability. It also supports our target of closing the paperboard manufacturing material loop, as cutting waste from paperboard manufacturing is being used as raw material for molded fiber-based packaging. Molded fiber-based packaging products can be industrially composted after use. The main sustainability focus remains in optimizing the rather high energy intensity of the production, light-weighting the products and seeking new recovery options for pulper reject. Films 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 arts industries. The segment serves global markets from production units in Europe, Asia, North America and South America. The segment is a global leader in release film applications and has a significant position in the global market for hygienic films. Competitive advantages include strong technical knowhow, especially in silicone coating, global manufacturing footprint, high focus on innovations and strong competence in release film applications and biodegradable films. Films are typically one component of another product, like release films used in adhesive bandaids or diapers. The film applications need to apply to the features and requirements of the primary product, for example biodegradability. Sustainability aspects of films mainly relate to material and manufacturing efficiency, product light-weighting and recyclability. Molded Fiber packaging with FSC label Huhtamaki Molded Fiber packaging products manufactured in Europe received the internationally recognized FSC certificate early 213. The products are guaranteed to be produced from 1% recycled paper and are 1% recyclable after use. The certificate guarantees that raw materials used for these products originate from responsibly managed forests. The certificate labels applied to different types of molded fiber packaging are FSC Recycled and FSC Mix. Huhtamaki is one of the first companies to receive the FSC certificate within the molded fiber industry worldwide.

9 CEO's REVIEW 8 Message from the CEO 213 was a good year for Huhtamaki. We reported a new record earnings per share, and the Board of Directors is proposing to the Annual General Meeting a record dividend to be paid to our shareholders. Globally, emerging markets continue to grow faster than developed markets. We have continuously invested in the emerging markets to support our customers growth initiatives there. 95% of our products are consumer packaging, which plays an important role in enhancing sustainability in the food chain. According to reports*, in developing countries up to half of food produced ends up as waste on its way to consumers. Packaging is a major contributor in preventing food waste and thus supporting chances for economic growth and sustainable development, especially in the regions where it is most needed. Calls for more sustainable packaging are continually increasing among our customers. As satisfying customer expectations has always been an important theme for Huhtamaki, we work together with them to innovate more sustainable packaging solutions. At the same time, the primary functions of packaging such as protecting, distributing and displaying products can never be overlooked. They are highly important especially in relation to food contact articles, which we mainly manufacture. Choices we make in our operations are significant contributors to the final environmental impact of packaging and the products packaged in it. Our focus is on continuous improvement of process efficiency, be it either material or energy efficiency, or optimal waste management. The health and safety of our employees is also in constant focus across the Group and we are pleased to see progress in all our business segments in 213. A stronger presence in emerging markets increases the complexity and variability of our operating environment. We emphasize the importance of health and safety as well as ethical business conduct and principles equally in all countries where we operate. Huhtamaki is a safe pair of hands to its customers and other partners in all locations. A solid, predictable and successful working environment also helps us internally in fostering better team spirit and attracting and retaining excellent talent. Last year was a record-breaking year. And, because all records are meant to be broken, in 214 we aim to improve once again on all fronts. In order to reach these goals, we will develop our sustainability initiatives and reporting further. We will not reach these improvements on our own; the feedback and ideas of our customers, suppliers, employees and all other stakeholders will play a key role. Jukka Moisio CEO Our overall aim is to help our customers succeed. * Packaging in the Sustainability Agenda: A Guide for Corporate Decision Makers.

10 position in value chain 9 Packaging plays an important role in food value chain Huhtamaki works with global consumer goods companies, who have high standards and requirements for the packaging they use. Together with our customers, we develop new and more sustainable packaging innovations, which help protect our customers products on their way to the consumers. The environmental impacts of food production, transportation and consumption all over the world are significant packaging can offset a certain amount of this impact by, for example, reducing food waste. Calls for more sustainable packaging are continually increasing, although it is not always evident, which path to choose. Customers 95% of Huhtamaki s net sales are derived from consumer products. Our packaging plays an important role in protecting food, drinks, or health care products before consumer use. In addition, Huhtamaki packaging supports cost-effective logistics and helps reduce food waste in the supply chain. While our products make an important contribution to consumer well-being, their material choices, sourcing decisions, production technologies and end-of-life disposal have an important impact on the environment. In addition to protection, packaging fulfills several other functions, such as distributing and displaying products. As Huhtamaki mainly manufactures food contact articles, these functions can never be overlooked when innovating new packaging solutions. Without proper packaging, food rots and fragile products break, causing excessive waste, and distribution becomes uncertain, resulting in inefficiencies in the supply chain and potentially unsafe products. Top 5 customers account for 2% of net sales. Our customers are constantly assessing their packaging strategies and analyzing how they can maximize the positive impacts and minimize any negative footprint of their 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 and keeps packaging an exciting business. Public debate, with reason, often focuses on the end-of-life impact of packaging; misplaced waste is often the most noticeable packaging. However, our increasingly urban lifestyle, with fewer people living next door to food and drink production, requires a holistic perspective of optimum protection, reduction of food waste, and logistical efficiency. Responsible sourcing Raw material choice has a significant impact on the environmental life cycle performance of packaging. Environmental impacts need to be considered; even when it comes to renewable resource-based raw materials, like paperboard. Sustainable forestry, the legality and acceptability of the fiber s origin, has received a lot of ink 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 adapting methodologies and tools in order to manage this risk. Huhtamaki s paperboard manufacturing units in Europe, Russia, Turkey, China, South Africa and Oceania have been certified according to the internationally recognized program for the endorsement of forest certification schemes (PEFC). 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. Huhtamaki buys materials from a limited number of world-class suppliers who are able to meet the high standards and requirements of our customers. Consistent quality and sustainability of raw materials are of high importance in our packaging, as it is mostly used in food contact. We expect all suppliers to comply with our Supplier Code of Conduct (available at Molded fiber packaging is manufactured entirely of recycled paper. In Europe the Molded Fiber segment has its own paper recycling business with the primary function of acquiring waste paper for the segment s manufacturing units in Europe. In Russia, Oceania, Africa and South America waste paper is bought from external suppliers. The ultimate source of the paper - from post-consumer or post-industrial use - varies between countries depending on the development stage of the national paper recycling systems.

11 position in value chain 1 Huhtamaki value chain FOOD RAW MATERIAL SUPPLIERS FOOD MANUFACTURING PACKAGING AT HUHTAMAKI CUSTOMER DISTRIBUTION AND STRORAGE CONSUMPTION END-OF-LIFE PACKAGING RAW MATERIAL SUPPLIERS PACKAGING CONVERSION RECYCLING

12 Our stakeholders 11 Our stakeholders Huhtamaki aims to engage in an open and mutually beneficial interaction with its stakeholders. We are committed to developing our business operations and products according to the needs and expectations of our stakeholders. Our key stakeholders include customers and consumers, investors, employees, suppliers of goods and services, media, society and public authorities as well as various associations. Collaboration is also maintained with local communities, universities and other educational institutions. Huhtamaki s stakeholder interaction and related activities and evaluation methods are presented in the following table. STAKEHOLDERS EXPECTATIONS WAYS OF INTERACTION EVALUATION METHODS ACTIONS IN 213 Customers and 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 Customer audits Customer satisfaction survey in Molded Fiber business segment Customer satisfaction survey and competitive advantage development program covering foodservice business in Europe, Asia, Oceania and North America Total 378 audits were conducted Shareholders, banks and other investors Dividend Profitability, return on investment (ROI) Long-term, responsible business conduct Reliable, accurate and timely information Transparency Publications and releases Investor events and meetings Quarterly conferences and conference calls for analysts, investors and press Annual General Meeting Investor section on company website Structure of shareholder base Share turnover Earnings per share (EPS) Dividend ROI Listings on sustainability indexes Investor relations activity (number of meetings) Benchmarks Foreign ownership increased from 34% to 4% Annual share turnover about 35% of free float EPS (excl. NRI) EUR 1.21 Dividend EUR.57 (Board of Directors proposal) ROI (excl. NRI) 12.1% Share included in Kempen/SNS Smaller Europe SRI and OMX GES Sustainability Finland indices About 5 investor events including meetings and roadshows Capital Markets Day with more than 4 participants in Espoo

13 Our stakeholders 12 STAKEHOLDERS EXPECTATIONS WAYS OF INTERACTION EVALUATION METHODS ACTIONS IN 213 Employees Good working conditions with strong focus on occupational health and safety Fair and equal treatment Stable income Development opportunities High ethical standards and management principles Employee involvement in developing company operations Continuous training and leadership and competency development Occupational health and safety practices and actions Cooperation through European Work Council activities Strive for open and active internal communication Development of internal communication channels Code of Conduct with whistleblowing system Employee engagement surveys Systematic performance management (Annual Performance Reviews) Surveys on attractiveness as a workplace Leadership assessment First global employee engagement survey conducted in November; results will be combined with North America employee opinion survey Launch of new global intranet in March 213 Launch and training of updated Code of Conduct: materials translated into 24 language; Group-wide training on-going Suppliers of goods and services Business opportunities Profitable cooperation Development of operations in collaboration Supplier Code of Conduct Supply contracts Continued evaluation of supplier relationship: -- Purchase development -- Number of suppliers -- Degree of centralization of purchasing -- Terms of payment Evaluations, audits Supplier audits Media Reliable, accurate and timely information Publications and releases Company website and presentation material Media briefings and press conferences Visibility measurements through media monitoring Website user surveys Website user survey was conducted during 213. The survey results will be used in the Group website redesign project. Society, local communities, public authorities, industrial organizations and associations Open interaction and relations Responsible conduct Compliance with regulations and laws Responsible and profitable business Job creation for local people in all organizational levels Contribution to local welfare Local and regional cooperation and regular communication and presentation of activities Compliance with applicable laws Cooperation with public authorities Hiring local people for open positions in all organizational levels Publications and company website Media monitoring Charity or other cooperation with the local community Minimize the number of legal disputes Contribution to local welfare, see more on cases p. 3 Universities and other educational institutions Work experience opportunities for students Cooperation and support in research Training programs Research and product development projects Student visits, lectures and seminars Employer image surveys Number of trainees hired Local activities, for example Open Doors for local schools in Russia with more than 5 students visiting the plant

14 our material aspects 13 Our material aspects The environmental impacts of food production, transportation and consumption all over the world are significant and are increasing together with population growth. More and more food is being consumed further away from the point of production and sold packaged in supermarkets, rather than loose in market places or directly from farms. According to reports, 3% of food spills on its way to consumer in Western Europe. In developing countries, up to 5% is wasted. It is important that such waste of scarce resources is minimized. for example, management, sales, production and environment, health and safety. The working group evaluated a comprehensive range of environmental, social and economic sustainability aspects on different life cycle phases of our products. The most important aspects from Huhtamaki s point of view were selected. Indicators were then chosen to measure our performance and development. By concentrating our efforts and activities on prioritized areas, we are better positioned to make constant improvement in environmental, health and safety issues and to increase the value of the company. We engage in a continuous dialogue with many of our stakeholders in our everyday business. Our stakeholders need to respond to the sustainability protective properties and the highest standards for product safety and hygiene. Eco-efficiency means manufacturing packaging products using less energy and fewer raw materials, resulting in less waste, less pollution and less cost. In assessing the sustainability performance of packaging, it is essential to understand the requirements set for packaging throughout its life cycle. Promoting health and safety of our employees and creating wellbeing in the societies where we operate are also priorities on our agenda. Health and safety Health and safety is not only related to our employees daily work duties, but also to the packaging products we manufacture. In terms of food-contact The final packaging product is sustainable only when we, as a company, act sustainably. Packaging has an important role in protecting pressures from their own stakeholders and we are packaging, product safety in all life-cycle phases, the product on its way from the producer to the there to help them. Listening and understanding including disposal of packaging, needs special at- store and from the store to the consumer. When their needs and expectations is essential in target- tention. The most important contributors in product developing new and more sustainable packag- ing a more sustainable and commonly beneficial safety are the safety and suitability of materials used. ing solutions, this primary function can never be way to do business. As we operate in a manufacturing industry, overlooked. At Huhtamaki we believe that the final packaging product is sustainable only when we, as a company, act sustainably. Our identified material aspects Huhtamaki s main sustainability aspects lie in the health and safety of shop-floor employees is of high importance. For many years, Huhtamaki has focused on employee health and safety and has Materiality assessment Huhtamaki has defined its most important material environmental dimension of sustainability. Our actions focus on two main areas: managing the eco-efficiency of our manufacturing operations been successful in making its manufacturing units safer places to work. As an example, the incident rates of our North America segment are 5% of a sustainability aspects in an internal working group. and constantly seeking more optimal packaging typical manufacturing business in the United States. Participants to this group represented all business solutions with improved sustainability performance to Health and safety is measured by lost time incident segments as well as various corporate functions, meet our customers needs, without compromising frequency (LTIF) and lost day rate (LDR). When in-

15 our material aspects 14 In assessing the sustainability performance of packaging, it is essential to understand the requirements set for packaging throughout its life cycle. cidents occur, the root causes are always identified and corrective actions implemented. Energy efficiency Even though packaging manufacturing is not a highly energy-intensive industry, efficient energy use is important to Huhtamaki from environmental and cost-efficiency aspects. Relative energy efficiency is measured by the total volume of primary and secondary energy used in relation to production volume. The amount of greenhouse gas emissions correlates strongly with the amount of energy used. Manufacturing of molded fiber-based packaging is the most energy-intensive technology used by Huhtamaki and there the improvement actions focus on closing the energy loop in each manufacturing plant. The relative energy efficiency of the Group has improved by 12% in the past five years. Responsible sourcing and material efficiency Certified, traceable and renewable raw materials are key drivers in our sustainability. For virgin fiber-based raw materials our target is to continually increase the share of fiber originating from certified forests. Whenever feasible, we prefer renewable and recyclable raw materials. In addition, the energy-intensity of raw material manufacturing as well as emissions caused by transportation are of high importance to us. Closing the material loop Our planning and design always aim to the lowest possible weight and volume, without compromising the functionality and safety of packaging. All life cycle phases, including disposal, are taken into account. Whenever feasible, we prefer renewable and recyclable raw materials. The available local recycling schemes vary a lot, but packaging ending up as waste to landfill is always the least-desired option. Thus, the available disposal options are key drivers when selecting the raw material. Emissions The manufacturing industry is never free of emissions to air, water or land. Huhtamaki packaging conversion operations cause greenhouse gas and volatile organic compounds (VOC) emissions to air. The volume of greenhouse gas emissions is directly dependent on production volume. Local greenhouse gas emissions vary substantially between regions and countries, as they are strongly dependent on the mix of each country s national energy grid. Greenhouse gas emissions are measured locally by total emission volume converted into CO 2 equivalents. VOC emissions are caused mainly by the solvent-based printing inks used in our production. Huhtamaki has invested in plant-specific VOC recovery systems, which enable recycling and reuse of the solvent used in printing inks. Huhtamaki also uses water-based printing systems, which are solvent-free and do not cause VOC emissions. Huhtamaki has identified a systematic approach to identify and manage its material sustainability In today s global world, expectations towards The extent of closed material loop is measured aspects. This approach is described in the next responsible sourcing practices and principles are by the share of waste recovered (waste to recovery pages. increasing. Huhtamaki follows the ICC, UN and ILO ratio). Huhtamaki s waste to recovery ratio contin- key principles in its own operations and also requires ues to be good and was 87% in 213. The ratio responsibility and compliance of ethical business has increased by 4% during the past five years. practices from its suppliers.

16 Managing our impact 15 Managing our impact At Huhtamaki, managing our material aspects and their impact is all about taking systematic action 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. Managing sustainability All manufacturing units within Huhtamaki are governed by the same overarching policy framework. Huhtamaki policies and principles are based on our mission and values (see more on page 4). These policies and principles are supported by management systems that lead to consistent actions. The systems 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, we have management systems which encourage improvements in product sustainability. Key policies Huhtamaki is committed to complying with laws and regulations and to acting in accordance with commonly accepted best practices. Violation of any laws or regulations or unethical business dealings are not accepted. The Huhtamaki Code of Conduct sets out the standards for ethical behavior for all employees. The Code of Conduct was reviewed during 212 and a revised Code was launched and communicated throughout the organization during 213 (see more on page 31). According to the Code, Huhtamaki and its employees do not pay or accept bribes or other similar payments. Huhtamaki does not participate in money laundering or financing of terrorist, military or criminal activities in any way. Huhtamaki deals fairly with customers, suppliers and competitors. Antitrust laws and competition regulations are to be strictly followed. Competition for business shall be fair and honest. Any activities that distort free competition are prohibited. All employees are expected to familiarize themselves with the Code. A public summary of the Code of Conduct is available on the Group web pages. In addition to the Code of Conduct, Group-wide policies on corporate governance for subsidiaries, competition compliance, contracts and agreements, management of claims, disputes and proceedings as well as insider matters have been issued. Huhtamaki policies are based on the Group s values. 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 available technologies and practices, and reducing solid waste generation, effluent discharges and emissions into the air. Huhtamaki supports the International Labor Organization (ILO) Principles and does not use any forced or involuntary labor. Child labor is not used. Recruitment principles and compensation and benefit policy guide our everyday work in labor relations and other human resource matters. 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. More information can be found in the Corporate Governance Statement in Huhtamaki 213. Management principles At the end of 213, 35 manufacturing units (of a total of 61 units), including the 1 largest units by net sales, followed an externally certified environmental management system such as ISO 1411, Eco-Management and Audit Scheme (EMAS) or another externally audited 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 181), hygiene management systems (BRC/IoP, AIB), quality systems such as ISO 91, energy management system ISO 51 and PEFC Chain of Custody systems.

17 Managing our impact 16 A Group-wide reporting tool for environmental and health and safety performance 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 around 4 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 reporting and 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 215. Performance against set targets is reviewed in internal reviews and reported quarterly to the Board of Directors and Group Executive Team. Continuous improvement Huhtamaki applies the Lean Six Sigma methodology to implement business excellence throughout the Group. More information on business excellence can be found under social responsibility in page 29. Risk management Our risk management systems include for example asset risk management audits covering 6% of the asset base annually and every manufacturing unit in a three-year cycle. Annual enterprise risk management survey is conducted in all manufacturing units and covers strategic, financial, operational and information risks. More information on risk management can be found in the publication Huhtamaki 213 in the Directors Report and Corporate Governance sections.

18 about the report 17 About the report This report provides information on Huhtamaki s environmental, social and economic performance in January 1 December 31, 213. The previous report was published for 212 and is available on our website Consequently, the reporting cycle is annual. The reporting boundary is the same as for financial reporting covering all five business and reporting segments, with the difference of excluding individual sales offices. Part of the environmental and social indicators are reported on Group level, whereas others are, in addition, reported on the segment level. The reporting scope includes information on aspects defined material to us. There are no significant changes from the previous report in the scope, boundary or measurement methods applied. A group-wide tool to gather data on environmental as well as health and safety performance is used in all manufacturing units. Data on around 4 GRI-derived sustainability performance indicators is consolidated and monitored on group, business segment and manufacturing unit levels. This report contains standard disclosures from the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines. The fully or partly reported standard disclosures and their location in this report are listed below. Global Reporting Initiative G4 Index G4 Indicator Content Reference section General standard disclosures Strategy and analysis G4-1 Message from the CEO Message from the CEO Organizational profile G4-3 Name of the organization Huhtamaki in brief, Back cover G4-4 Primary brands, products, and services Huhtamaki in brief G4-5 Location of the organization s headquarters Back cover G4-6 Number of countries where the organization operates Huhtamaki in brief G4-7 Nature of ownership and legal form Huhtamaki in brief G4-8 Markets served Huhtamaki in brief G4-9 Scale of the organization Huhtamaki in brief, Business segments in brief G4-1 Employee details Social responsibility G4-12 Supply chain Position in value chain, Economic responsibility G4-13 Significant changes during the reporting period Economic responsibility G4-15 Charters, principles, or other initiatives to which the organization subscribes or which it endorses Managing our impact

19 Global reporting initiative g4 index 18 G4 Indicator Content Reference section Report Profile G4-28 Reporting period About the Report G4-29 Date of most recent previous report About the Report G4-3 Reporting cycle About the Report G4-31 Contact point Back cover Governance G4-34 Governance structure of the organization Annual Accounts 213 Ethics and integrity G4-56 Organization s values, principles, standards and norms of behavior Huhtamaki in brief, Managing our impact Economic responsibility Economic performance G4-EC1 Direct economic value generated and distributed Economic responsibility Environmental responsibility Material G4-EN1 Materials used Environmental responsibility G4-EN2 Percentage of materials used that are recycled input materials Environmental responsibility Energy G4-EN3 Energy consumption within the organisation Environmental responsibility G4-EN5 Energy intensity Environmental responsibility Emissions G4-EN15 Direct greenhouse gas (GHG) emissions (Scope 1) Environmental responsibility G4-EN16 Energy indirect greenhouse gas (GHG) emissions (Scope 2) Environmental responsibility G4-EN18 Greenhouse gas (GHG) emissions intensity Environmental responsibility Effluents and waste G4-EN23 Total waste Environmental responsibility G4-EN24 Significant spills Environmental responsibility G4-EN25 Transported, imported, exported, or treated hazardous waste Environmental responsibility Social Responsibility Labor practices and decent work G4-LA6 Rates of injury and lost days Social responsibility G4-LA1 Programs for skills management and lifelong learning Social responsibility G4-LA11 Regular performance and career development reviews for employees Social responsibility Society G4-SO3 Operations assessed for risk related to corruption Social responsibility G4-SO4 Communication and training on anti-corruption policies and procedures Social responsibility G4-SO7 Legal actions for anti-competitive behaviour Social responsibility

20 environmental responsibility 19 Environmental responsibility 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. We are increasingly on a path to meet the challenges of tomorrow. Materials The main raw materials used for our packaging are virgin paperboard, recycled paper and various polymers. Virgin paperboard is used to manufacture disposable tableware such as hot and cold drink cups and plates, and other foodservice packaging, such as food containers and ice cream packaging. In addition, polymers such as PS, PET and increasingly also rpet and PLA are used for transparent cups, tumblers and containers as well as lids and cutlery. Post-consumer recycled paper is used to manufacture molded fiber packaging, such as egg and fruit packaging and foodservice cup carriers. Post-industrial recycled paper, such as cutting waste from our cup production, is used to manufacture the molded fiber Chinet plates. Polymers, including PE, PET and PP, are the main materials and an important barrier component in multi-material multi-layer flexible packaging. In addition to the main raw materials, inks are used in printing. The composition of printing inks varies, but both solvent and water-based inks are used. 213 Group In 213, 29% of all raw materials Huhtamaki used for packaging conversion were recycled materials. The main recycled materials were post-industrial and post-consumer recycled paper. The share of recycled raw materials decreased slightly compared to 212, largely because of changes in the Group s product mix; the share of paperboard products in comparison to molded fiber and plastic-based products has increased. Secondly, 71% of raw materials used were virgin materials, mainly paperboard and polymers. The fibers used in the paperboard are mainly wood fiber, but Huhtamaki also uses sugar cane fibers for certain packaging applications. The sugar cane fiber used, i.e. bagasse, is a by-product from the sugar production process. The polymers used stem from both fossil sources as well as renewable sources. The majority of the manufacturing units using virgin fiber are PEFC CoC certified giving our customers the opportunity to source fiber-based packaging made of raw material externally certified to originate from sustainably managed forests. Virgin paper represents a large share (34%) of the materials used. One of the key reasons for this is that it is used to manufacture food contact articles and thus need to meet strict food contact regulatory requirements. Group material use by raw material group in % 2% 7% 27% Plastic Paperboard Recycled paper Inks and dyes Other 34%

21 environmental responsibility 2 Energy The Group uses both primary energy sources (fuel) and converted secondary energy (electricity and heat) in its operations. Energy consumption in relation to production volume has decreased over the years. 213 Group Of the Group s total energy use, 47% was primary energy and 53% converted secondary energy. There Among the tools used to identify energy-efficiency improvement opportunities, Lean Six Sigma Energy Treasure Hunts have been important. In 213, around 3 energy, material and cost Treasure Hunts were done across manufacturing units, many of them focusing on more efficient use of energy. The Group s relative energy consumption continued to decline for the fifth consecutive year and the relative energy consumption decreased by 3% during 213. Annual consumption patterns have not changed significantly and outside temperatures Flexible Packaging After a few years of little change, the segment achieved a robust 7% decrease in relative energy consumption in 213. Molded Fiber Compared to other packaging technologies applied by Huhtamaki, molded fiber production is rather energy-intensive, and the segment took many actions to further improve its relative energy consumption in 213. The improvements mainly relate to manufac- Huhtamaki has systematically improved the energy efficiency of its operations. was no material change in the relation of the energy still impact the total energy consumption profile. turing technology and include, for example, dryer sources used compared to the previous year. The primary energy sources used are non-renewable and Foodservice Europe-Asia-Oceania improvements and changes in the raw material mix. The positive trend in the energy consumption contin- the fuels include natural gas, heavy and light fuel oil In 213, the segment s relative energy consump- ued with a 3% decrease in 213. (HFO), liquefied petroleum gas (LPG) and other fossil fuels. Primary energy is mainly used in the drying tion decreased by a further 5%. The segment has focused on continuous improvement of energy Films process of post-consumer recycled fiber-based efficiency especially through the Lean Six Sigma The segment s relative energy consumption in- packaging. Energy Treasure Hunts, which have increased the creased significantly in 213. The increase was due 99% of the Group s secondary energy con- awareness of the importance of working practices in to a one-time occurrence related to a manufacturing sumption was electricity. Electricity is used as a manufacturing unit s energy consumption. unit s heating system detected at the end of the year. process energy, for melting polymers (extrusion process) and in the drying of post-industrial smooth North America The root cause has been identified and corrective actions taken. recycled fiber-based packaging. In addition, The segment s relative energy consumption contin- secondary energy is used for heating, lighting and ued to decrease. The 211 acquisitions of folded internal logistics. The share of renewable secondary carton operations increased the weight of paper energy varies between operating countries and is board-based packaging in the segment s portfolio. dependent on the mix of each country s national This contributed to a steep drop in the relative ener- energy grid. gy consumption in 212, followed by a further 5% decrease in 213.

22 environmental responsibility 21 Energy consumption Group % Foodservice Europe-Asia-Oceania % North America % Flexible Packaging % Molded Fiber % Films % Production weight-related indexed energy consumption

23 environmental responsibility 22 Emissions Huhtamaki s main direct emissions to air consist of carbon dioxide and depend strongly on the absolute amount of energy used in the manufacturing processes and on the source of each country s national energy grid. In addition to greenhouse gas emissions, Huhtamaki s manufacturing operations cause emissions of some volatile organic compounds (VOC). The VOC emissions are mainly related to solvent-based printing inks. Many manufacturing units that have recognizable VOC emissions have an efficient recovery system in place. The systems enable recycling and reuse of the solvent used in printing inks. The reduction of VOC emissions is one of Huhtamaki s environmental ambitions and investments to VOC recovery systems continued in 213. Huhtamaki also uses water-based printing systems, which are solvent-free and do not cause VOC emissions. Expansion of water-based printing systems is constantly evaluated. 213 Group The Group s absolute greenhouse gas emissions increased by 3% in 213. The increase was due to an increase in absolute energy consumption, which is strongly dependent on production volumes. The reported scope 1 and scope 2 greenhouse gas emissions are gross amounts and include all greenhouse gases covered by the WBCSD Greenhousegas Protocol converted into CO 2 equivalents. Group greenhouse gas (GHG) emissions (Scope 1 and 2) 1,, 8, 6, 4, 2, Scope 1 Scope Group greenhouse gas (GHG) emissions intensity % Production weight-related indexed GHG emissions

24 environmental responsibility 23 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 internally as a raw material for post-consumer fiber-based packaging. The paper board packaging cutting waste is used internally as raw material for molded fiber packaging or sent for external recycling. The unprinted plastic packaging scrap is recycled internally and the printed plastic packaging by-products are sent for external recovery. Waste recovery refers to internal and external recycling, incineration with energy recovery and composting. Since 23, Huhtamaki has set specific targets for each manufacturing unit to reduce the production process waste and the rate of waste recovery has increased steadily over the years. 213 Group Amount of waste in relation to production output increased by 6% in 213. The main reason for the increase is the growing share of paperboard packaging in the Group s product portfolio. Stronger demand for paper-based cups and packaging over plastic cups and other plastic packaging has driven the change. Compared to plastic packaging process waste, which can be reground and fed back into the manufacturing process, paperboard cutting waste cannot be re-used in the same way. The above development also contributed to the increased share of waste sent to recovery, which was 87% in 213. The most important ways for waste recovery were external material recycling and incineration with energy recovery. Available and most suitable methods for recovery vary substantially between regions and countries. No significant spills of oil, fuel, waste, chemicals or other hazardous items were reported in the Group s manufacturing units in 213. The share of hazardous waste of the total waste has remained stable during the past years and was 3% in 213. Hazardous waste is handled locally by dedicated hazardous waste handlers and treated in line with local regulatory requirements. No hazardous waste is being imported, exported or transported internationally. Foodservice Europe-Asia-Oceania The increase of paperboard-based packaging in the product portfolio has caused the segment s relative waste to increase. However, the share of waste to recovery continued on a high level and improved in 213. North America Product mix changes have caused the segment s relative waste to increase during the last few years. Increase in the amount of paperboard-based production waste sent to external recycling was a main contributor in improving the segment s waste to recovery rate in 213. Flexible Packaging Product mix changes contributed to an increase in the segment s relative waste. The amount of waste recovered continued to increase as new ways for recovery were identified in some manufacturing units. Molded Fiber Both the relative amount of waste and waste to recovery ratio for the Molded Fiber segment improved in 213. The most important waste driver for the segment is material quality, as the majority of waste stems from raw material rejects. The segment focuses on identifying dedicated recovery handlers for pulper rejects close to each manufacturing unit. The pulper reject largely consists of mixed plastic materials and is thus complex to recover. Films The long-term relative waste trend of the segment is positive, although the relative amount of waste increased slightly in % of the segment s waste is recovered, mostly via external recycling.

25 environmental responsibility 24 Waste and waste to recovery Group % Foodservice Europe-Asia-Oceania % North America % Flexible Packaging % Molded Fiber % Films % Indexed waste Waste to recovery

26 environmental responsibility 25 Product responsibility Life cycle analysis When considering the environmental impacts caused by packaging, the entire life cycle of the packaged product has to be assessed together with the requirements placed on the packaging throughout this period. For packaged consumer goods, the impacts caused by the manufacture of the packaging typically represent a relatively small share of the total impact of the product. The largest environmental impacts of packaged food, for example, typically arise at upstream life cycle stages, such as food production. Therefore, the main function of the packaging also from the environmental and sustainability perspectives is to protect the food product and in this way protect the impacts of its previous life cycle stages. The overall environmental burden of food can be significantly reduced by extending the shelf life and reducing spill. 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, authorities and other stakeholders. Life Cycle Thinking (LCT) is a concept which integrates existing consumption and production strategies and prevents a piece-meal approach. It hinders shifting problems from one life cycle stage, geographic area or environmental medium (air, water, soil) to another. LCT can be used to improve the way we approach problem solving using available information. Based on LCT, Huhtamaki has implemented a Packaging Life Cycle Assessment (PLCA) model, which is an analytical tool for systematic evaluation of the potential environmental aspects and impacts of packaging through all its life cycle stages. The model is attached to a database allowing Huhtamaki to simulate different packaging and packaging recipes and quantify the environmental impacts of packaging products. The tool applies to all types of packaging manufactured by Huhtamaki and 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. The primary goals of the tool are: To evaluate the environmental performance of our products and to provide reliable and up-to-date data to meet the information needs of our customers, suppliers, internal research and development team members, other employees and senior management. To help Huhtamaki reach its environmental goals through benchmarking products and production processes and subsequently identifying targets for improvement. 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 location can have a significant impact on the environmental profile of packaging. Also the chosen energy profile impacts the results considerably, and one has to constantly keep in mind the scope of the life cycle that is being assessed. The largest contribution to the life cycle performance of a typical product that Huhtamaki manufactures, such as a paper cup, is related to the production of the raw material chosen. This Material efficiency brought the Alufoil Trophy to Foil Pillow Lid A new lidding concept shows how advances in material technology are making possible better sustainability without loss of performance. Foil Pillow Lid from Huhtamaki Flexible Packaging Europe offers improved tear resistance, outstanding stamping characteristics and 1% sealing resistance, while maintaining maximum barrier properties and using less foil. By embedding a polymer cushion between two thin aluminium foils, Flexible Packaging Europe created a symmetrical structure offering outstanding flatness. The resulting higher elasticity of the polymer cushion allows Foil Pillow Lid to be ultra-flexible compared to rigid aluminium explains the particular focus on constantly lightweighting packaging without sacrificing the protective properties or the high standards for safety and hygiene. Another significant impact is related to the end-of-life scenario chosen. 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. foil, enabling it to compensate better for any unevenness during the sealing process, without loss of machinability. The partial substitution of the aluminium helps to make energy savings during production, due to lower sealing temperatures. Typical applications include margarine and yoghurt pots as well as foil lids for drinks bottles and a wide range of cosmetic products. Additional consumer benefits include improved tear resistance and easy opening with easy peel. Foil Pillow Lid won the Alufoil Trophy 213 in the Resource Efficiency category.

27 Social Responsibility 26 Social responsibility At the end of 213, Huhtamaki employed 14,362 people in 3 countries around the world. The Group s core values include caring about its employees and treating them with respect. Foodservice Europe-Asia-Oceania The positive trend in the segment s lost workday injury frequency continued in 213 with lost workday injury frequency showing a 9% improvement. The lost day rate, however, was negatively affected by a few serious incidents. The long-term positive safety Molded Fiber The segment s safety performance during the year was mixed; lost workday injury frequency increased, but lost day rate decreased. After some severe incidents in the year before, the segment focused on preventing severe incidents. Working together to improve safety and prevent accidents To recognize ILO s World Day for Safety and Health at Work, two Huhtamaki business segments, Foodservice Europe-Asia-Oceania Workplace safety and employee wellbeing Workplace safety is a key priority within Huhtamaki and the Group s ultimate target is an injury-free development is a result of cross-unit networking and successful organizational learning in relation to, for example, carrying out preventive actions based on the experience of near-miss incidents. North America Films The segment s safety performance during the year was mixed; lost workday injury frequency increased, but lost day rate decreased. The segment s safety performance has developed well over the years, and Molded Fiber have jointly organized annual World Day of Safety program in The program is an opportunity for plants to demonstrate their safety activities and to showcase how they reinforce their safety systems. The aim is to generate ideas and share best prac- workplace. Efforts to improve workplace safety were After the clear unfavorable impact in safety perfor- despite some fluctuations in LWIF. tices that can help in preventing accidents. All continued during 213 with special focus on identifi- mance from the units acquired in 211, the actions employees can submit ideas and vote to select cation of near-miss situations and chemical safety. taken have turned the lost workday injury frequency the best ideas. Finally, the three ideas with the 213 Group trend into positive, with a 9% improvement in 213. The lost day rate was negatively affected by a few isolated severe incidents. During the year, special most votes are rewarded. The Group s safety indicators show a long-term focus on soft tissue injury prevention and personal improvement, even though the development has flat- accountability for safety continued and were ex- Istanbul team celebrating with their winning lined during the recent years. The main reason for panded to the acquired units. trophy - Thumbs up for safety! the flat-lining is that Huhtamaki has acquired units with safety performance below the Group average. Flexible Packaging Actions taken already show an improvement in 213 The segment paid a lot of attention to employee indicators in certain segments. The Group s lost health and safety in 213 after some serious inci- workday injury frequency (LWIF) increased slightly in dents the year before. As a result, both lost workday 213. At the same time, lost day rate (LDR) returned injury frequency and lost day rate improved during to the 211 level after a temporary peak in 212. the year.

28 Social Responsibility 27 Incident frequency and severity Group Foodservice Europe-Asia-Oceania North America LWIF 1 LDR 1,5 LWIF 15 LDR 3, LWIF 5 LDR 1,5 8 1,2 12 2,4 4 1, , , Flexible Packaging Molded Fiber Films LWIF 5 LDR 1, LWIF 1 LDR 4, LWIF 2 LDR 6, ,2 16 4, ,4 12 3, ,6 8 2, , LWIF* LDR** * LWIF = Lost Workday Injury Frequency ** LDR = Lost Day Rate

29 Social Responsibility 28 Diversity and equal opportunity Employee diversity is welcomed and recognized as a source of innovation, and equal opportunities are offered to employees independent of their religion, sex, ethnicity, race, caste, or involuntary personal attributes such as disability, age or sexual orientation. Employees are encouraged to speak up, question and develop new ideas. Gender distribution 213 Men Women Board of Directors 57% 43% Group Executive Team 87% 13% race or caste. The Group participates annually in a global salary survey to have accurate data on salary development in the markets where it operates. 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 has an active dialogue with its employees. In addition to local works councils, a European Works Council gathers together representatives from all of the Group s manufacturing units in Europe once a year. The European Works Council was originally established in 2 for the purposes of dialogue on the Group s plans and strategies affecting employees in two or more countries in Europe. Items included on every ordinary meeting s agenda are, for example, education and development plans of personnel, environmental matters and safety. Focus on employee engagement Huhtamaki launched a new global employee engagement program in November 213. The aim of the program is to find out what drives employees performance and success and to start an improvement journey towards excellent performance and improved engagement. Receiving feedback is the first step in the journey of improvement. A global employee engagement survey was conducted in the end of the year, with employees in four business segments Flexible Packaging, Films, Molded Fiber and Foodservice Europe-Asia-Oceania delivering their answers either online or on paper. The response rate was 8%, which is considered very high. The North America business segment has conducted an annual employee opinion survey since 25. In 213, the North American survey was conducted in October and to the extent possible, the results were combined with the global level results for planning actions. The response rate in North America was 72%. The aim of the global employee engagement survey was to collect feedback, to measure involve- All employees* 68% 32% * Based on data reported by units Employment and labor relations The Group s human resources strategy is based on respecting individuals and the standards for ethical behavior defined in the Huhtamaki Code of Conduct. The objective of the human resources strategy is to support the execution of the Group s quality growth strategy and the achievement of its business targets. Means to support these targets are for example various development programs, systematic performance management including succession planning, and communication. Huhtamaki s compensation philosophy is to provide employees with total compensation that is competitive in the market. Compensation is independent of employees religion, sex, ethnicity, Number of employees 15, 14,17 14,362 12,9 12,739 12, 11,687 9, 6, 3, Employees by business segment Dec 31, 213 6% 11% 29% 29% Foodservice E-A-O North America Flexible Packaging Molded Fiber Films 25% Employees by function Dec 31, 213 5% 4% 1%1% 6% 19% 64% Direct employees Production overheads Administration Sales & Marketing Distribution Research & Development IS

30 Social Responsibility 29 Information sharing on Business Excellence projects ment and to understand which areas most affect employee engagement at Huhtamaki. The results of the survey are shared with all employees and Training and development programs On-the-job learning and job rotation play an impor- takes place at business unit level. The number of local training days is currently not consolidated on the Group level. At the annual Black Belt Trade Fair, participants across all Huhtamaki business units present their top three business excellence projects. At the most recent Fair, over 6 actions for improvement are planned jointly during the first half of 214. Improvement implementation tant role in personnel development at Huhtamaki. Project assignments, whether local or international, Lean Six Sigma projects were presented and the project Establish continuous improvement culture on the will start without delay. are a great way to broaden perspective and gain The Lean Six Sigma methodology is used to imple- daily work at Huhtamaki Spain was voted the Huhtamaki is committed to continued improve- new skills and competence. To support job rotation, ment business excellence throughout the Group. Best Project. Fostering a culture where iden- ment in employee engagement and will repeat open positions are offered to internal candidates Systematic business excellence programs were tifying opportunities to improve are in focus the global survey in the future. The next survey is first. To further support job rotation, a global job begun in manufacturing operations, but are now on a daily basis, the Nules, Spain project was planned for 215. postings system is a part of the Group s new being expanded to other functions such as sales, successful in rallying key individuals across Employees by country 31 Dec, 213 intranet. A leadership development program called customer service and product development. Fifteen new Black Belts were trained during 213 and the the site to identify 2 indicators used to measure performance and prioritize improvements. Navigate is run annually in the Group. Navigate is a total number of full-time Black Belts within the Group Indicators include health and safety, team United States 3,468 four-day training program targeted at the Group s second-level managers. Prior to the actual training, at the end of 213 was 55. Approximately 45 new Green Belts were trained during the year and there work, environmental management, employee engagement and production management, Germany 1,886 the participants complete a 36 Leadership are now a total of 26 Green Belts who devote among others. India 1,743 China 1,741 Thailand 847 UK 674 Russia 532 Assessment to identify specific development areas to increase their effectiveness as a leader. The actual program is split into two parts, improving the participants financial acumen via a business simulation game and developing their people and team management skills. During 213, 24 managers par- approximately 4% of their work time to business excellence projects. In recent years, more than 36 employees have been trained in Six Sigma project management. In total, more than 12 Lean Six Sigma projects were initiated as part of the business Vietnam 386 ticipated in the Navigate program. A total number excellence program during the last four years. The Brazil 384 South Africa 337 Other 2,364 of 113 managers have participated in the program since 28. A new top-management level program, Huhtamaki Academy, was fully launched in 212 in cooperation with certain executive business school program included, amongst others, raw material and energy Treasure Hunts and initiatives to improve health and safety. The growing number of projects indicates that continuous improvement programs in Europe, Asia and North America. is becoming a culture in Huhtamaki and will bring In addition to Group level training programs, significant future benefits, in addition to the gains there are also business segment specific programs. we see today. Still, the vast majority of training within the Group

31 Social Responsibility 3 Donation to the local community Performance management Systematic performance management enables the alignment of business goals and action plans with individual objectives, thus helping to engage employees with Huhtamaki s goals. The annual performance review process clarifies and aligns the responsibilities and efforts of each individual with Huhtamaki s values, strategies, business objectives and targets. It is the single most important tool for the Group to ensure strategy execution. The employee s achievements as well as growth and development needs are documented during the process, providing input into compensation management as well as human resource and succession planning and, for example, talent recognition. As part of the process, the manager and employee also create together an individual development plan to improve the employee s ability to achieve objectives, to improve performance in the current role and to develop for the near future. A management succession planning process is used to systematically plan and prepare for organizational changes. The objective is to ensure each business has the right people with the right skills, experience and motivation in the right roles to meet current and future needs of the business. Succession plans for senior management level positions and the overall succession pipeline are reviewed on business unit, segment and Group level and appropriate capability development actions are agreed upon. New talent emerging below the senior level is also identified and nominations to Group development programs are made. Internal communication The Group publishes an internal newsletter Sails six times a year. Sails is published in English and distributed electronically to all units. Some units translate it to the local language and print copies. Sails is also available electronically in the Group s intranet. In addition, some units publish local employee newsletters. The Group launched a new global in February 213. The aim of the new intranet is to increase global awareness and understanding of broad Huhtamaki business strategies and encourage information-sharing and team collaboration within the is designed to provide easier access to business tools, resources and other critical information. It creates a completely new user experience bringing global, segment-specific and location-specific information into one channel in addition to introducing interestspecific communities. The CEO s blog called CEO s Corner is published on the landing page During the year 14 blog entries were published. Huhtamaki Zero Accidents Club (ZAC) was awarded Gold membership in ZAC as acknowledges units for their achievements well as EUR 1,5 in September 213. The in occupational safety. When a unit receives unit decided to support the local community a ZAC award, it has an opportunity to make by providing a much-needed defibrillator for a contribution to the local community. The common use. The local fire brigade can Molded Fiber unit in Okrisky, Czech Republic access the device 24/7. operated two years without accidents and The mayor of Pribyslavice (at right) receives a donation from Ivo Urbanec, General Manager of Huhtamaki Okrisky.

32 Social Responsibility 31 Renewal of the Code of Conduct The Huhtamaki Code of Conduct sets out the standards for ethical behavior for all employees. The Code was reviewed during 212 and a revised Code was launched with a Group-wide communication program initiated during 213. The Code is based on the Huhtamaki values and describes our company culture, commonly accepted practices and our commitment to comply with laws and regulations. Furthermore, the Code should encourage employees to think and discuss how to further develop and extend practices which reflect high ethical performance to live up to Huhtamaki values. The Group-wide communication program on Code of Conduct was started in November 213. The Code is being discussed in teams led by managers. In addition to getting familiar with the Code, each team is expected to focus especially on areas relevant to their work and to record difficult situations they have possibly experienced. The difficult situations from all teams will be collected and shared so that other employees and teams can learn from them. Employee participation in the agreed timeframe is monitored. Presentation material in 25 languages, cascade guide, animation, posters and How we work paper cups have been provided for managers and employees in all locations. All materials are also available in the global intranet. The whistle-blowing system, with the possibility to report any experience or witness of suspected violations to the Code anonymously, has also been highlighted. The symbols describe the main areas of the Huhtamaki Code of Conduct: We create an equal and safe place to work; We do business fairly; We take individual responsibility. These symbols summarize How we work at Huhtamaki. Enhancing compliance As part of Huhtamaki s global compliance training program, 16 trainings on anti-corruption and competition compliance were conducted in 213 with more than 5 employees participating. In addition, the anti-corruption and competition compliance policies currently included in the Code of Conduct have been discussed at global level in connection with the Code of Conduct communication program. Risks related to corruption and non-compliance are assessed as part of the Group s annual risk review process. During the year, risk reviews were conducted at Group, segment and business unit levels. Risk mitigation action plans were prepared and implemented at the business unit level. More information on risk management can be found in the risk review in Directors Report, page 5 in the Annual Accounts 213. In September 212, Huhtamäki Oyj received the European Commission s statement of objections concerning alleged anti-competitive behavior in the markets of plastic trays used for retail packaging of fresh food, such as meat and poultry, in South- West Europe, North-West Europe and France. The alleged infringements of EU competition regulations relate to the Group s operations during the years The operations referred to in the statement of objections were part of the Group s rigid plastic consumer goods business in Europe. Most of the operations in question have been closed down or divested in 26 and 21, and the part of the concerned operations that currently remains in the Group is reported within the Foodservice Europe-Asia-Oceania segment. The Group s other business segments, Flexible Packaging, Films, North America and Molded Fiber, are not concerned with the statement of objections. Huhtamäki Oyj has examined the documents received from the European Commission, responded to the statement of objections as requested by the European Commission and is exercising its rights of defense in the process. It is expected that the European Commission s investigations will take several months.

33 economic responsibility 32 Sustainable business is profitable and cash-generating Economic responsibility within Huhtamaki primarily means responsibility towards share holders by creating a good return on equity invested in the company and a competitive and predictable dividend. Accordingly, Huhtamaki targets quality growth profitable growth based on good competitive positions without sacrificing financial returns. Through strong financial performance, the Group is able to develop the other dimensions of sustainability; to allocate resources in developing more environmentally- friendly packaging options for its customers and to offer long-term job security for its employees. Key principles in our financial communications are transparency, consistency and accountability. We treat all market participants equally and provide everyone simultaneous access to material information. Through solid financial performance, Huhtamaki contributes both directly and indirectly to the economic welfare of its stakeholders. Our oper- ations create jobs and wealth in countries where we operate. Profitable business creates prosperity for our shareholders and the public sector as well as creates opportunities for further growth and investments. Through dividends, the Group also participates in supporting arts and sciences as Huhtamaki s largest shareholder is the Finnish Cultural Foundation, a private trust dedicated to promoting the arts, science and other fields of intellectual and cultural endeavor in Finland. For several years, instead of sending traditional Season s Greetings cards, Huhtamaki headquarters has donated money to various charity projects. In 213 Huhtamaki decided to support important efforts for guaranteeing quality care for children and made a donation to the New Children s Hospital 217 Project in Helsinki, Finland. Several of our manufacturing units also participate in local charity projects by donating money or doing voluntary work. In the medium term, the Group has the following financial ambitions: Ambition Medium term target 213 Organic net sales growth 5+% 3% EBITDA margin 12+% 11.2%* EBIT margin 8+% 7.1%* ROI 15% 12.1%* ROE 15+% 15.8%* Capex/EBITDA ratio 4% 46% Net debt/ebitda Free cash flow, MEUR ~1 56 Dividend payout ratio 4 5% 47%** Organic net sales growth in constant currencies was 3%. * Excluding non-recurring items. ** As proposed by the Board of Directors.

34 economic responsibility 33 Financial review 213 The Group s trading conditions remained relatively stable during 213 despite general economic uncertainty and customer caution. The year started slowly but demand for consumer packaging improved as the year progressed and was reasonably good at year-end. Unfavorable currency fluctuations characterized the year. Price levels of our main raw materials, paperboard, polymers and recycled fiber, remained relatively stable. The Group performed well in 213. Organic net sales growth in constant currencies was 3% with all business segments, except Films, reporting growth. Organic net sales growth was strongest in the Molded Fiber business segment. In the emerging markets, organic growth in constant currencies was 8%, accelerating towards the end of the year. Profitability development was positive, especially in the Molded Fiber and Foodservice Europe-Asia-Oceania business segments. Earnings in the North America business segment were unsatisfactory despite strong net sales growth, as they were burdened by ongoing investment costs. The implementation of the Group s strategic direction which focuses on quality growth was continued during the year. Total capital expenditure increased by almost 3% compared to 212. The majority of the capital expenditure was related to business expansion investments; most significant Direct economic value generated and distributed 213 (212) ECONOMIC VALUE GENERATED + Customers Net sales EUR 2,342 million (EUR 2,321 million) - Suppliers of goods and services Purchases EUR 1,645 million (EUR 1,594 million) = Value added EUR 697 million (EUR 728 million) of them being in the United States, where premises acquired in Batavia, Ohio, were transformed into a new world class manufacturing and distribution unit. The total investment including the site purchase, improvements in infrastructure and machinery investments to set up capacity is estimated at ECONOMIC VALUE DISTRIBUTED Personnel Personnel expenses EUR 483 million (EUR 495 million) Shareholders Dividends paid EUR 58 million (EUR 47 million) Financial expenses EUR 26 million (EUR 26 million) Public sector Taxes reported EUR 13 million (EUR 13 million) Total economic value distributed EUR 58 million (EUR 581 million) ECONOMIC VALUE RETAINED IN THE GROUP EUR 117 million (EUR 147 million) approximately USD 6 million (EUR 45 million). The new unit allows the Group to begin to fully leverage its paperboard packaging expertise and global foodservice position also in the United States. The site location is optimal with excellent rail and highway access and proximity to major foodservice markets. The unit commenced operations towards the end of 213. In addition to the significant capacity addition with the new unit in Batavia, the North America segment s folding carton operations were reorganized in order to facilitate the Group s growth ambitions. More information on the Group s financial performance in 213, Corporate Governance and risk management is presented in the publication Huhtamaki 213 Annual Accounts and Directors Report, which is available on the Company s website:

35 economic responsibility 34 In Europe, a manufacturer of specialty corrugated packaging for the foodservice, confectionery and cosmetics markets was acquired in the UK. With the acquisition, the Group expanded its foodservice product offering in Europe with complementary corrugated food-to-go products. The integration of the business acquired in Asia in 212 continued during the year. Several efficiency enhancing measures to improve the competitiveness of the Foodservice Europe-Asia-Oceania segment were taken during the year. The manufacturing units in Viul, Norway, and Epping, South Africa were closed. In addition, reorganization measures with some impact on personnel were taken in Alf, Germany, and Hämeenlinna, Finland. The total number of employees affected was 17. The strategic review of the loss-making foodservice business in Italy was concluded with the sale of the business. During the third quarter, an expansion of the molded fiber production premises and a new production line were inaugurated as part of Huhtamaki s 2th anniversary celebrations in Russia. In addition, capacity expansions were implemented in several European Molded Fiber units. Customers and suppliers Net sales distribution per segment is presented in page 3. 1 largest countries by net sales are: Largest countries by net sales in 213 Country MEUR The United States Germany India Great Britain 111. China 11.3 Russia 8.7 Thailand 78.8 Australia 72.5 The Netherlands 62.5 Other countries Net sales and purchases from suppliers MEUR 2,5 2, 1,5 1, 5 1,832 1,952 2,44 1,382 1,328 1,425 2,321 2,342 1,67 1,645 29* 21* Net sales Materials, goods and services purchased * Continuing business Employees Followed by an acquisition, the number of employees increased the most in the U.K. Information on employee benefits including post-employment benefits is found in Huhtamaki 213. Personnel expenses MEUR ,4 431,6 44,9 494,5 483,

36 economic responsibility 35 Shareholders In May 213, EUR.56 dividend per share for 212 was paid. Total amount of dividend paid was EUR 57 million, corresponding to 2.4% of net sales and 47% of earnings per share. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR.57 per share shall be paid for 213. Shareholder structure Dec 31, 213 7% 18% 8% 6% 21% 4% Foreign ownership incl. nominee registered shares Non-profit organizations Households Financial and insurance companies Private companies Public-sector organizations Earnings per share and dividend per share EUR Earnings per share (EPS) Dividend per share (DPS) EPS 29, 21; continuing business EPS 29, 211; excluding non-recurring items DPS 213; as proposed by the Board of Directors