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Stora Enso approach to governance and sustainability Yngve Stade 12 September 2005.

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Presentation on theme: "Stora Enso approach to governance and sustainability Yngve Stade 12 September 2005."— Presentation transcript:

1 Stora Enso approach to governance and sustainability Yngve Stade 12 September 2005

2 UPS2 It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations for market growth and developments; expectations for growth and profitability; and statements preceded by believes, expects, anticipates, foresees, or similar expressions, are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of Since these statements are based on current plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Such factors include, but are not limited to: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development, acceptance of new products or services by the Groups targeted customers, success of the existing and future collaboration arrangements, changes in business strategy or development plans or targets, changes in the degree of protection created by the Groups patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Groups products and the pricing pressures thereto, price fluctuations in raw materials, financial condition of the customers and the competitors of the Group, the potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Groups principal geographic markets or fluctuations in exchange and interest rates.

3 12 September 2005UPS3 Outline Introduction to Sustainability Corporate Governance Environmental Responsibility Corporate Social Responsibility Conclusion Questions and Discussion

4 Introduction to Sustainability

5 12 September 2005UPS5 Business cannot be sustainable if it is not competitive and it cannot remain competitive if it is not sustainable.

6 12 September 2005UPS6 We view sustainability as being a natural part of our business practice and industrial tradition because our business is based on renewable and recyclable raw material - wood.

7 12 September 2005UPS7 Environmental Social (CSR) Economic Accountability: Transparency, Stakeholder dialogue Sustainability (Corporate Responsibility) Balancing different aspects of sustainability

8 12 September 2005UPS8 Towards superior performance Company strategy: Stora Enso wants to achieve operational excellence and superior performance and image in sustainability. Mission:Our products promote well-being Vision: We take the lead Values:Responsibility Policy:Code of Ethics Environmental and Social Responsibility Policy CSR Principles Set of Environmental Principles

9 12 September 2005UPS9 Tools to implement the commitments e.g. –Environmental management systems –Traceability and forest certification systems –98% of all the fibre used covered by traceability systems –48% of the wood used come from certified sources (2004) –CSR Unit Implementation –Significant social aspects, related action plans and key performance indicators identified by each unit by the end of 2006 –Excellence 2005 Third-party verified external reporting –Group Sustainability report –48 production-unit-specific EMAS statements (2004) Stakeholder engagement Managing Sustainability at Stora Enso

10 12 September 2005UPS10 Sustainable companies Take a long-term focus Address overall impacts and footprint Engage with full range of stakeholders Seek economic growth, ecological balance and social progress Well governed companies have mitigated risks The Business Case for Sustainable Development

11 12 September 2005UPS11 Customers sustainability expectations Acceptability of fibre –Traceability of fibre, forest/plantation certification, illegal loggings –Case: Upper Lapland, Harry Potter Emerging markets –Human rights, labour rights, land usage –Health and safety –Business practices –Case: Tihkvin, Veracel Sustainability governance –Internal monitoring, helplines Managing our supply chain –Sustainability criteria and monitoring of suppliers & contractors

12 Corporate Governance

13 12 September 2005UPS13 Stora Ensos Corporate Governance is guided in addition to laws and regulations by: Corporate Governance Code Working Order of the Board of Directors Charter and Working Order of the Financial and Audit Committee Charter of Compensation Committee Charter of Nomination Committee

14 12 September 2005UPS14 Stora Enso Governance Structure Committee responsibilities

15 12 September 2005UPS15 Board Structure Currently, the Board has 10 ordinary members: –Nine non-executive members who are independent and not affiliated with Stora Enso –One executive member (CEO) Competence –Long and extensive experience within paper industry, finance, marketing, capital markets and large international corporations

16 12 September 2005UPS16 Remuneration Policy Remuneration of the Board members is decided by the shareholders at the AGM Paid to non-executive members only No options granted EURChairmanVice Chairman Board Member

17 12 September 2005UPS17 Protection of minority shareholders Annual General Meeting (AGM) Invitations sent to all shareholders AGM simultaneously translated into Finnish, Swedish, English Live webcasted in Finnish, Swedish, English Nominee-register voting Proxy voting arranged for ADR holders -> All shareholders have the possibility to participate or follow the AGM online In the past there has been even lively stakeholder dialogue in the AGMs

18 12 September 2005UPS18 Reliable financial reporting and disclosure processes Supervised by the Disclosure Committee –Headed by Group Controller and the other permanent members are the head of Internal Auditing and the General Counsel –Reports to the CEO and the CFO Currently on the agenda are initiatives to comply with Sarbanes-Oxley Act Stora Enso financial reporting has received international recognition already for many years

19 12 September 2005UPS19 Economic aspect – the 1st pillar Profitable growth, mergers and acquisitions in mature and emerging markets, enhancing efficiency through continuous improvement, asset restructuring Strong balance sheet, operating profit, cash flow, debt/equity, etc. Create value for employees, customers, shareholders, suppliers, capital providers and the public sector Transparent independently audited reporting

20 Environmental Responsibility

21 12 September 2005UPS21 Environmental aspect – the 2nd pillar Product life cycle, eco-efficiency, holistic view Strive for continuous improvement (minimise environmental footprint) Protection of natural resources, avoiding depletion, preserving ecological values Transparent independently audited reporting

22 12 September 2005UPS22 What is environmental responsibility? Operating in natural resources industry –Conflicting values Ensuring the environmental and social acceptability of raw materials Minimising the environmental impacts of mill operations Resource and energy efficiency –Minimising solid residuals –Maximising use as raw materials for other processes –Combined heat and power production and energy conservation Minimising the environmental impacts of transportation –E.g. noise and vibration

23 12 September 2005UPS23 Major wood procurement areas Other countries Finland The Baltic Countries Continental Europe Portugal Canada USA Russia Sweden Wood flows between procurement areas Total consumption of wood in Stora Enso's own mills in 2004 was approximately 46 million m 3 (solid under bark). The total figure includes deliveries to joint venture and subsidiary companies.

24 12 September 2005UPS24 Maximising wood coming from certified forests Stora Enso promotes forest certification wherever it operates The Group is working towards the mutual recognition of credible certification schemes Due to different conditions, Stora Enso sees a need for more than one forest certification system in various regions

25 12 September 2005UPS25 Traceability – Knowing every step Stora Ensos traceability systems cover 98% of all wood. All wood must come from sustainably managed and legal sources. Sources must also be perceived as acceptable. Traceability systems –Guarantee compliance with corporate policies and national legislation –Can be third-party-verified through EMAS, ISO Auditing Wood origin data Contracts C B A External audits D

26 12 September 2005UPS26 Less is more Water needed to produce your daily newspaper 10 litres 30 years ago 2.5–6 litres today 30 years ago Now Waste and residuals

27 12 September 2005UPS27 Making more with less by Continually reducing energy consumption per ton of product Overall resource efficiency, for example by decreasing water consumption Minimising production breaks

28 12 September 2005UPS28 96% of the mills residuals utilised Stora Enso strives to use raw materials as efficiently as possible Group-level target: landfill waste reduced by 10% from 2004 to 2009 Achieved by: increased raw material efficiency in the mills identifying new ways to reuse landfill waste

29 12 September 2005UPS29 Bio-fuels replacing fossil fuels High share (63%) of bio- fuels in energy production Target to improve utilisation in countries with remaining potential For Stora Enso, the most important bio-fuels are black liquor, bark and logging residues

30 12 September 2005UPS30 Stora Enso and Climate Change (CC) Our business is from a CC perspective basically sound –Renewable raw material, high bio-fuels proportion, products store carbon We work systematically to develop our operations –Reduce specific energy consumption (per unit of production) for all processes and product lines –Increase bio-fuel know-how better in markets with potential, such as Germany and the USA –Improve wood procurement through full-assortment buying, and by increasingly providing bio-fuels also for external users We participate in EUs Emissions Trading Scheme and are a founding member of the voluntary trading scheme Chicago Climate Exchange (CCX) We are included in the recently launched Climate Leadership Index

31 12 September 2005UPS31 Carbon Dioxide (CO 2 ) Emission Rights EU has issued emission rights to participating entities to emit a specified level of emissions. Participants in the scheme have received certain amount emission rights for free and they are also able to buy and sell these rights in a market. Stora Enso has received 4.6 million tons of emission rights for 2005, which is estimated to be sufficient to cover the emissions. Stora Enso has not recorded any effect of the emission rights on its income statement nor balance sheet. EUR / CO 2 ton Emission Rights Price Trend

32 Corporate Social Responsibility

33 12 September 2005UPS33 Corporate social responsibility aspect – the 3rd pillar Business practices (Code of Ethics) Communication (accountability, stakeholder engagement and transparent reporting) Community involvement (responsible partner) Reduction in work force (respect, sensitivity and assistance for those impacted) Principles regarding human rights

34 12 September 2005UPS34 Corporate Social Responsibility – the principles Business Practice Communication Community Involvement Reduction in work force Principles regarding Human Rights – Working Conditions – Diversity – Freedom of association – Free choice of employment – Child labour – Remuneration – Working hours

35 12 September 2005UPS35 Principles in action – Working conditions Our employees are entitled to safe and healthy workplaces. No employee shall be subject to any physical, psychological or sexual harassment, punishment or abuse.

36 12 September 2005UPS36 Principles in action – Diversity We recognise diversity as a strength. Discrimination against any employee in respect of race, ethnic background, gender, disability, sexual orientation, religion, political opinion, maternity, social origin or similar characteristic is prohibited. Age distribution 2004 < 200.7% 21 – % 31 – % 41 – % 51 – % > 602.9% Women in recruitment 2004 Permanent hires26% Permanent hires, bachelors or higher degree 38% Gender distribution 2004 Female18.4% Male81.6% Employee distribution by country 2004 Employees% Finland Sweden Germany USA Russia Austria France Estonia9702 Netherlands9542 China8492 Canada7752 Belgium6031 Other countries TOTAL, average

37 Conclusion

38 12 September 2005UPS38 Key sustainability issues Acceptability of fibre sources Environmental performance Occupational Health and Safety Emerging Markets

39 12 September 2005UPS39 Sustainability Why Does it Matter? The Drivers Operating in natural resources industry Lack of trust toward companies Legislative pressures Legitimacy of globalisation questioned Size – a major player in forest industry Knowledge society – transparency and life on-line Vulnerability of brands The Business Case Supports companys license to operate Creates competitive advantage Enhances access to capital Mitigates investor risks Attracts the best employees The right thing to do – value driven

40 12 September 2005UPS40 Transparent reporting Accountability, including transparency and open stakeholder dialogue, is the basis for Stora Ensos sustainability work Public reporting as part of transparency is a way to show how the company is moving towards its targets Third-party verification is an essential part of transparent external reporting Stora Ensos sustainability performance is reported in companys annual sustainability report and production-unit-specific EMAS statements –Stora Enso uses Global Reporting Initiative (GRI) in its annual sustainability report as applicable

41 12 September 2005UPS41 Direct results of implementing environmental principles Increased environmental awareness and involvement of all employees Improved environmental performance and resource efficiency –e.g. 25% reduction of landfilling of solid waste in 2002 Improved proactivity Enhanced stakeholder credibility –the only forest products company that has been included in the Dow Jones Sustainability Index since 1999 Enhanced monitoring and transparent reporting –100% covered by environmental management systems Generated cost savings

42 Visit for more

43 Appendix

44 12 September 2005UPS44 Ownership Distribution 25% 2% 3% 31% 3%3% 22% 14% Finnish institutions Finnish state Swedish institutions Swedish private shareholders Finnish private shareholders ADR holders Under nominee names (Non-Finnish/ Non-Swedish shareholders) 12% 2%2% 9% 15% 16% 42% 4%4% By % of voting powerBy % of shares held

45 12 September 2005UPS45 Dow Jones Sustainability Index Tracks the financial performance of leading sustainability-driven companies worldwide Stora Enso listed seven years in a row and remains ranked as one of the leading forest products companies FTSE4Good Index Index series for socially responsible investors Assesses achievements in: –Upholding and supporting universal human rights –Developing positive relationships with stakeholders –Working toward environmental sustainability Stora Enso listed continuously since inception in 2001 Other Ethibel Sustainability Indexes Nordic Sustainability Index Sustainability Indices – Independent Assessment of Performance

46 12 September 2005UPS46 World Business Council for Sustainable Development (WBCSD): a coalition of 170 international companies united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance and social progress. The U.N. Global Compact: a partnership of private sector and U.N. agencies seeking to advance responsible corporate citizenship so that business can be part of the solution to the challenges of globalisation. Business Leaders Initiative on Climate Change: an international program for industry committed to reducing the impact of business-related greenhouse gas emissions. Involvement and Leadership in Sustainability Organisations

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