The Smurfit Kappa vision on sustainability

The Smurfit Kappa vision on sustainability

A Message from Gary McGann, Group Chief Executive Officer Care for the environment and for the communities in which we have the privilege to operate, has always been part of Smurfit Kappa s core beliefs. As a world leader in the design and manufacture of paper-based packaging, we view sustainability not only as a key business driver but also as an important responsibility which we take very seriously. In the document that you have before you we describe why sustainability is part of the company s core beliefs. For over 75 years we have been producing innovative packaging solutions from renewable and recyclable raw materials. This commitment is a fundamental part of our supply chain management and is driven by commercial as well as environmental and community considerations. In an industry that is comprised of many different types of companies driven by different considerations, we fundamentally believe in our ability to provide innovative, sustainable and differentiated solutions to our full range of customers. In that context, we believe that our people are our key assets and our greatest point of differentiation from our competitors. In all the locations in which we operate our neighbours are a very important part of our world. Peaceful, respectful, supportive and engaged co-habitation with the people in the various locations in which we have our operations is a fundamental objective for us in how we conduct our business. CONTENTS 1 Making the difference through Sustainability 3 Sustainability is a key business driver 5 Sustainability is natural to our business 7 Why Smurfit Kappa is committed to sustainability 9 How we make our sustainability commitments tangible 11 Building blocks for reaching our sustainability objectives and targets 13 Objectives and targets per building block 16 Overview of targets Nothing stands still and we constantly strive to do better by setting and meeting increasingly challenging targets for all aspects of how we do business. Sustainability is an integral part of that mind-set. The key to our future success is to pursue growth opportunities that are commercially and economically attractive, socially progressive and environmentally sustainable. This vision statement is a further commitment by Smurfit Kappa in a journey on which we will constantly strive to improve the manner in which we serve the interests of our key stakeholders including our customers, our employees, the local communities in which we are privileged to operate, and the providers of capital. We believe that progress in our objectives can only be achieved through business practices that are based on the principles of long term sustainable development. We have made a lot of progress in our objectives. However we are on a journey and our unequivocal commitment is to continue to strive to improve in everything we do. Gary McGann GROUP CHIEF EXECUTIVE OFFICER

Making the difference through Sustainability Smurfit Kappa aims to make the difference in its key area of expertise: providing creative and innovative paper-based packaging solutions that support our customers growth and development. Our objective is to deliver optimum value for all stakeholders as a customer-focused, innovation-driven, integrated company. Our long term vision on sustainability and our sustainability objectives for 2020 will help us to make that happen. Sustainability is an integral part of our operations and part of our daily business life. In our business process, sustainability creates value for shareholders, customers, employees and local communities. Sustainability for Smurfit Kappa is about improving the quality of life today and in the future, for people and for our planet. It is what we do and have always done. Sustainability is about satisfying customers with creative and innovative products and services that carry their products, optimise their supply chains and extend the longevity of their products; using resources and materials responsibly through our forestry and recycling businesses; providing safe working environments; caring for our people; working to benefit the local communities; and safeguarding our reputation. We take our responsibilities in sustainability seriously and are conscious of our responsibilities to the environment, our people and the communities in which we are located. We aim to play a leading role in the area of sustainability: (a) in providing our customers with innovative packaging solutions and optimising their supply chain; (b) in sustainably using natural resources; (c) in creating value for our shareholders; (d) in how we care for the health and safety of our people; (e) in local community involvement. Sustainability is part of a journey striving for excellence in all aspects of our business. For us, sustainability is an important factor to be successful and profitable which in turn will allow us to re-invest appropriately in our business, the environment, our people and communities while properly rewarding our shareholders. 1

Protecting and preserving our customers products through our sustainable packaging 2 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Sustainability is a key business driver By 2050, some nine billion people will live on our planet compared to seven billion today. This development will offer plenty of business opportunities for companies that are able to offer products and services that meet the increasing needs of a growing population within natural resource constraints. The key to future success will be to find growth opportunities that are economically, socially and environmentally balanced. Business is and will be a critical part of the solution to providing people worldwide with the means to live well. To accomplish this in the next decades, a transformation to sustainable growth models is needed which will pose challenges for business. At the same time this transformation will offer opportunities as the global population growth, increasing urbanisation, potential resource scarcity and environmental change become business drivers that will reshape today s business agenda. At Smurfit Kappa, we believe strongly that these challenges offer business opportunities and are in no sense contrary to our business objectives. We believe we have the expertise, the experience and the drive to tackle the challenges ahead and turn them into business opportunities. We believe we can secure profitable growth while having a positive impact on our environment. We can do this in three ways: 1. By minimising product waste through our packaging solutions 2. By optimising resource use / re-use through recycling solutions 3. By stimulating afforestation through sustainable forestry Together with our customers, our supply chain partners and our people, we are committed to a socially just society that is resource and energy efficient. As part of the paper and packaging industry, Smurfit Kappa is committed to using the natural resources that it needs such as energy, wood and water in an efficient way; reducing potential environmental impacts to a minimum thereby meeting society s need for sustainable consumption; and creating employment in the communities where it is located. 3

Our products are made of sustainable materials for over 75 years 4 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Sustainability is natural to our business Providing paper-based packaging solutions to our customers is Smurfit Kappa s core business. Through our innovative offerings we help to minimise waste by securing the durability of products, a critical consideration in a resource-constrained world. Paper packaging is one of the most sustainable types of packaging as it relies on renewable resources and is fully recyclable. Packaging is about collecting, storing, transporting, distributing and preserving goods. Through packaging, the global population is able to have safe access to essential products such as food, medicines, clothes, etc. Paper packaging is the most sustainable solution to maintain local and global flows of goods. It is based on a natural renewable resource (wood) which, if managed well, is inexhaustible and the paper on which our packaging relies can be recycled many times. Smurfit Kappa has been in the paper-based packaging business for over 75 years and from the beginning the use of sustainable material has been an important basis for our products. Over time we have increased our ability and expertise to improve our operations by using less raw materials, water and energy while maintaining or improving performance levels. We have always been aware of the importance of taking a cradle to cradle approach to our business, from sourcing raw materials through to post-consumer waste. As a result, we have integrated sustainability into our operations by developing our own recycling capabilities and managing over 100,000 hectares of sustainable forests. Today, as in the past, we are committed to continuously improve our performance, delivering quality products while optimising our environmental impacts and gaining competitive advantage in the process. 5

Our people are at the heart of our business 6 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Why Smurfit Kappa is committed to sustainability In our view, sustainability is not about corporate altruism but makes perfect business sense. It helps us grow our revenue, reduce our operating costs and manage risks. We are part of the supply chain of our many responsible and reputable customers who are clearly committed to sustainability. We are proud to be the partner of choice in our field of expertise for these customers. Our commitment to sustainability will strengthen the partnerships we have and help to form more, and puts us in a position to develop sustainable packaging solutions for our customers thereby assisting them to meet their own targets and commitments on sustainability. As part of an industry using natural resources, we have the drive to minimise the potential impact of our activities on the environment. As forest owners we practise sustainable forestry, promoting afforestation and rejecting illegal logging. Our use of recycling solutions and a focus on energy efficiency throughout our operations are also cost effective. Our suppliers are an important part of the supply chain and it is necessary to get them to embrace our vision on sustainability and to commit to our sustainable sourcing principles. Our people and the communities in which we operate are at the heart of our business. We invest in the health and safety of our people, and in their training and development. We help to develop the communities in which we operate through local economic and social development, and job creation. This helps us secure the practical and moral authority to operate in all our chosen locations. Furthermore, as the regulatory environment gradually shifts towards the promotion of low energy and low carbon solutions, particularly within the EU, our proactive approach enables us to remain ahead of our competitors. For these reasons we believe sustainability increasingly forms part of investors considerations. Our commitment to sustainability will enable us to broaden our potential investor base to include those with a preference for sustainable companies. 7

Our investment in energy efficiency helps the environment 8 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

How we make our sustainability commitments tangible Our vision on sustainability is part of a journey striving for continuous improvement across all business parameters. To measure the progress we make on that journey, we have defined key building blocks that allow us to formulate objectives and tangible and measurable targets to be achieved within agreed timeframes. These building blocks include the long term commitments that we have already made. We have also included additional areas to reflect our objective to take all aspects of sustainability into account. These building blocks impact the four key pillars of our business: our supply chain, our production operations, our customer base and our role as a responsible employer and corporate citizen. There are seven building blocks for which we have formulated objectives and also specific targets: chain of custody; fossil CO 2 emissions; waste; water; health & safety; sustainable sourcing; and community involvement. We believe that the ultimate targets are stretching, measurable and also economically feasible. We also believe they are compelling for our customers and their customers. We consider it a fundamental aspect of our commitments that we use appropriate metrics to measure our progress and our performance on sustainability. We are convinced that achieving our objectives and targets will increase stakeholders satisfaction and will support us to develop our business into the future. 9

Sustainable use of water is one of our key responsibilities 10 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Building blocks for reaching our sustainability objectives and targets Smurfit Kappa is committed to applying its expertise as a leading paper-based packaging producer to the sustainable growth of the company and its customers Chain of custody Health and safety IMPACTED AREAS KEY BUILDING BLOCKS Sustainable sourcing Water CO 2 emissions Waste Seven building blocks impact four key pillars of our business Supply Chain Ensure all suppliers support Smurfit Kappa in reaching its sustainability objectives Production operations Sustainable production taking into account local conditions Customers Provide innovative packaging solutions that improve sustainability impacts for our customers Community involvement Responsible employer We value people as they are at the heart of our business and the communities in which we operate 11

Multi-functional packaging creates additional value for our customers and is also sustainable 12 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Objectives and targets per building block Chain of custody Chain of Custody certification will help us to ensure that the natural fibre resources which we need and depend upon are responsibly managed, and that we can provide our customers with the sustainably produced products that they require. Objective KEY TOPIC TARGET/ACTION Our objective is to contribute to sustainably managed forestry (i.e. no illegal logging, wood of sustainable origin) and stimulate the improvement of ecosystems and biodiversity. Our ability to label all our packaging products guarantees to our customers the sustainable origin of our fibre raw materials and our processes. Origin of fibre Certification of final products By 2015 all fibre produced and purchased is labelled as Chain of Custody certified under FSC, PEFC or SFI. As a minimum requirement fibre should be from a sustainable origin By 2015 over 90% of our paper-based packaging is labelled as Chain of Custody certified under FSC, PEFC or SFI IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER CO 2 emissions Decreasing our fossil CO 2 emissions will contribute to a less carbon-intensive economy and will support our customers in reducing their environmental footprint. Objective KEY TOPIC TARGET/ACTION Our objective is to contribute toward a lower fossil CO 2 -intensive economy and we will promote the use of renewable energy sources where economically feasible. Scope 1 & 2 emissions Carbon footprint A 20% reduction in relative fossil CO 2 emissions in our mill system by 2020 compared to 2005 Collaborate with customers to determine the carbon footprint of the packaging lifecycle IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER 13

waste Reducing waste is a beneficial method of reducing our environmental impact and improving our operational efficiency. Objective KEY TOPIC TARGET/ACTION Our objective is to contribute to a circular economy, utilising cradle to cradle principles where relevant. All paper packaging which we provide to our customers is already 100% recyclable. Eventually, we will take all avoidable waste out of our production system and we will minimise our waste to landfill to those materials that are not further recyclable and/or recoverable. Non-hazardous waste Waste to landfill Hazardous waste Conduct a company-wide assessment to minimise non-hazardous waste before the end of 2015 Conduct a company-wide assessment to minimise waste to landfill before the end of 2015 Conduct a company-wide assessment to minimise hazardous waste before the end of 2015 IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER water Water is a vital element in our manufacturing process and we recognise that fresh water availability is a growing global concern. Objective KEY TOPIC TARGET/ACTION Our objective is to minimise the impact our water usage and discharge have on the environment, the water ecosystems and the water balance of the areas where our operations are located. In areas with fresh water scarcity, we are committed to help safeguard the availability of fresh water for the local communities where we operate. Water usage Water discharge Perform water impact assessments of our sites on their environment in relevant areas and develop water usage measures as appropriate before 2017 Decrease relative Chemical Oxygen Demand (COD) in our mill system by ⅓ by 2020 compared to 2005 and assess specific mills for phosphorous and nitrogen effluents before the end of 2015 IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER Health and Safety Providing healthy and safe working conditions for our people is a core commitment. Objective KEY TOPIC TARGET/ACTION Our objective is to take a holistic approach to increasing safety and well-being at work. Reaching zero fatalities in our operations is a must. Investing in awareness programmes and safety training should support our drive to further decrease the number of accidents. Fatalities Safe behaviour and well-being Zero fatalities Develop a holistic approach to increase safety and well-being at work Increase awareness of safety in the working environment by promoting actions such as the reporting of near misses Stimulate pre-emptive actions on reporting of near misses to avoid serious accidents Injuries Reduce the lost-time and injury rate by 5% annually for the next 5 years (2013-2017) IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER 14 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Sustainable sourcing Sustainable sourcing supports our processes and products to become more sustainable and will contribute to an enduring supply chain for our customers. Objective KEY TOPIC TARGET/ACTION Our objective is to only partner with supply chain participants that are willing to embrace our sustainability principles. Our approach is to engage with our suppliers, requesting them to employ sustainable practices. Recurring audits and follow up programmes will be used to assure continuous progress. Risk assessments Supplier audits Sustainable sourcing key principles Perform risk assessments of suppliers regarding food safety, technical data sheets, material safety, substances of high concern Implement system of auditing based on the key sustainable sourcing principles Implement our key sustainable sourcing principles with our suppliers IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER Community involvement Community involvement is a key corporate responsibility already practised in many locations where we have operations. Objective KEY TOPIC TARGET/ACTION Our objective is to contribute positively to the economic and social development of the communities in which we are privileged to operate by providing jobs and responding to the communities social needs. We strive to be an integral part of the communities where we are located by supporting activities and community support programmes focusing on, for example, health and education. Quality of life Smurfit Kappa foundations to reach 100,000 people in local communities by 2020 by spending at least 1 million per annum on the education of children and 1 million per annum on (scientific) research on e.g. biodiversity Local employment & education Local management teams (mill/plant level) to comprise at least 90% local residents in every country where we operate IMPACTED AREAS SUPPLY CHAIN PRODUCTION CUSTOMERS RESPONSIBLE EMPLOYER 15

Overview of targets Key topic targets Chain of custody Origin of fibre Certification of final products By 2015 all fibre produced and purchased is labelled as Chain of Custody certified under FSC, PEFC or SFI. As a minimum requirement fibre should be from a sustainable origin By 2015 over 90% of our paper-based packaging is labelled as Chain of Custody certified under FSC, PEFC or SFI CO 2 emissions Scope 1 & 2 emissions Carbon footprint A 20% reduction in relative fossil CO 2 emissions in our mill system by 2020 compared to 2005 Collaborate with customers to determine the carbon footprint of the packaging life cycle Waste Non-hazardous waste Waste to landfill Hazardous waste Conduct a company-wide assessment to minimise non-hazardous waste before the end of 2015 Conduct a company-wide assessment to minimise waste to landfill before the end of 2015 Conduct a company-wide assessment to minimise hazardous waste before the end of 2015 Water Water usage Perform water impact assessments of our sites on their environment in relevant areas and develop water usage measures as appropriate before 2017 Water discharge Decrease relative Chemical Oxygen Demand (COD) in our mill system by ⅓ by 2020 compared to 2005 and assess specific mills for phosphorous and nitrogen effluents before the end of 2015 Health and safety Fatalities Zero fatalities Safe behaviour and Develop a holistic approach to increase safety and well-being at work well-being Increase awareness of safety in the working environment by promoting actions such as the reporting of near misses Stimulate pre-emptive actions on reporting of near misses to avoid serious accidents Injuries Reduce the lost-time and injury rate by 5% annually for the next 5 years (2013-2017) Sustainable sourcing Risk assessments Supplier audits Sustainable sourcing key principles Perform risk assessments of suppliers regarding food safety, technical data sheets, material safety, substances of high concern Implement system of auditing based on the key sustainable sourcing principles Implement our key sustainable sourcing principles with our suppliers Community involvement Quality of life Smurfit Kappa foundations to reach 100,000 people in local communities by 2020 by spending at least 1 million per annum on the education of children and 1 million per annum on (scientific) research on e.g. biodiversity Local employment & education Local management teams (mill/plant level) to comprise at least 90% local citizens in every country where we operate 16 THE SMURFIT KAPPA VISION ON SUSTAINABILITY

Supporting local communities is our privilege

Smurfit Kappa Group plc Beech Hill, Clonskeagh, Dublin 4, Ireland +353 1 202 7000 www.smurfitkappa.com May 2013