2011 Sappi Fine Paper Europe Sustainability Report

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Sappi Fine PaperEurope

2011

Sustainability

Report


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% + /

contents

03 WELCOME/WHO WE ARE

06 MESSAGE

FROM THE CEO

08 CHARTER

COMMITMENTS

14 THE GREENPAPER TRAIL

16 FORESTS

20 PULP MILL

24 PAPER MILL

30 TRANSPORT

32 PRINTER/CONSUMER

38 PEOPLE

44 KEY PERFORMANCE

INDICATORS

2 | Sappi Fine Paper Europe


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welcome

Our approachto sustainability is

based on a holistic view

of Planet, People andProsperity

Sappi Europe has undergone manychanges in recent years. The companyhas been restructured, bringing

forward new and innovative products,changing our practices and repositioningourself for the 21st century. Sappi Europe is

the leading company in the coated fine papermarket and has sustainability at its heart.

Sappis commitment to sustainabilitymanifests itself in the creation of TheEuropean Sustainable DevelopmentCouncil. This body consists of thecompanys most senior directors, and ischaired by the European EnvironmentalManager. Its existence and direct influenceensures that sustainability is given thehighest possible attention and that itreaches all parts of the organisation.

Our approach to sustainability is basedon a holistic view of Planet, People and

Prosperity (the 3Ps). These values andcommitments underpin everything we do,

from our business decisions and processesto our dealings with stakeholders andcustomers.Planet: contributing to a world ofbiodiversity, renewable energy andenvironmental care

People: adding to the wellbeing, safety andhealth of employees and communitiesProsperity: aiming at long-term profitabilityand customer satisfaction throughinnovation and ethical conduct

Under these over-arching themes wehave placed our Charter Commitments.These commitments provide clear guidanceto all our staff, suppliers and shareholderson how the company will behave and howwe believe it must operate.

We see ourself as a part of thecommunities in which we work, and whilewe strive to be a successful and profitable

company, we must achieve this aim in asustainable way.

Sustainability report

This report spells out where Sappi has come from, where it is headed, and how the companybelieves it is going to get there. Sappi Fine Paper Europe (SFPE) has been publicly reportingprogress on sustainability initiatives since 2008 as part of a global sustainability report issuedannually by Sappi Limited after the financial year-end. Our financial year starts on 1 Octoberand ends on 30 September of the following year. This year marks the first time each regionaldivision issues its own sustainability report, with consolidated global sustainability performanceincluded in the annual report to shareholders. Sappi Limited will also continue to publish aseparate online report in conformance with the Global Reporting Initiatives 3G framework anddisclosing compliance with the UN Global Compact, to which we are a signatory. This regional

reporting structure allows a deeper regional focus that reflects local markets and aspects, andcovers the financial year 2011 (1 October 2010 to 30 September 2011). Emission figures arebased on the operation of our operating mills in Europe unless it is specified otherwise. Allproduction and non-production activities on our mill premises are included. People andprosperity metrics are reported for the full region, including central facilities and sales offices.

Sustainability Report 2011 | 3


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who we are

Sappi Fine Paper Europe is theleading European producer ofcoated fine paper used in premium

magazines, catalogues, books and high-endprint advertising.

Operating eight mills in Europe andheadquartered in Brussels, Belgium, SappiFine Paper Europe is recognised for

innovation and quality. Our graphic paperbrands include Magno, Quatro, Royal, Galerieand GalerieArt ranges. Algro, Fusion, Leineand Parade are the brands for specialitylabelling, topliner, packaging papersand boards. Jaz is the paper brand fordigital printing.

Sappi Fine Paper Europe is a division ofSappi Limited (listed on NYSE and JSE),a global company headquartered inJohannesburg, South Africa, with over 14,900employees and manufacturing operations innine countries on four continents, salesoffices in 50 countries, and customers in over

100 countries around the world.Sappi Europe is a major part of

the global companys operations, employingjust over 40% of its staff and providing over60% of its paper production capacity.

Sappi Fine PaperEurope is the leadingEuropean producer of

coated fine paper



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Kirkniemi, Finland

Alfeld, Germany

Maastricht,

The Netherlands

Lanaken,

Belgium

Nijmegen,

The Netherlands

Brussels,

Head Office

Gratkorn,

Austria

Ehingen,

Germany

Stockstadt,

Germany



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Our reputationas a reliable companywith integrity serves

us well

Since I joined in 2007, Sappi hasundergone considerable change.The company has restructured itself,

advanced new products and put theconcept of sustainable development at itscore. Through these changes we have

developed a new strategy founded on the3Ps Planet, People and Prosperity.These themes encapsulate Sappisapproach for the 21st century and serveas a guide to all our employees.

SustainabilitySustainability is at the heart of everythingthat Sappi does. This has led toimprovements in greenhouse gasreductions, waste management andcertified fibre usage. Our staff are alsocontinually being trained in the importanceof sustainability and how they can make

it a reality.It is important, though, to understand how

sustainability affects the bottom line; throughreduced costs, and also because goodbusiness depends on relationships withcommunities. Sappi relies on the goodwill ofgovernments and much smaller communitiesin the regions in which it operates. By placingsustainability at the heart of our organisation,we are sending out a strong message to thesegroups, which both reassures and delivers.

Culture

Sappi has developed a health and safety

culture of which I am proud, and the level ofaccidents and injuries in our workplaces hasfallen significantly. However, there is more tobe done, especially to achieve our ultimateambition of a zero injury rate across the entire

company. I really want our employees tofeel that Sappi is not only a great place towork, but also a safe one. This meansachieving the right engagement andexpectations at each of our sites, and thereare initiatives in place to do that, which we

are, justifiably, excited about.

Competition

Sappi has been in a catch-up phase over thelast twelve months. We have substantiallyreduced our costs, cut our capacity to fit themarket and made improvements to ourservice offering, so that we are now easy todo business with and can deliver cost-effective solutions. Some of the decisionshave been hard the closure of the Biberistmill in Switzerland is a prime example.However, I am relieved and pleased that wewere able to give good support to the staff

affected and that most of them got new jobsquickly. But we must ensure that theseactions were not in vain.

With a more efficient company, we aregetting better at keeping our customerssatisfied and making profit. Our reputationas a reliable company with strong integrityserves us well.

I now believe we have a bright future, aslong as we recognise the challenges aheadand act on them early. The digital age hasbrought an overall decline in demand forpaper products. We dont yet know wherethat will stop, but we have done the right

things to deal with the consequences so far.More than ever, our focus is on ourcustomers. By delivering what they need andvalue in the most cost competitive way, wewill all prosper together.

ceo



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Berry Wiersum,

CEO Sappi Fine PaperEurope



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2008 2009 2010 2011


Our commitmentto sustainability

planetBy treading more lightly on the Planet withcleaner, more efficient manufacturing andwaste beneficiation processes, we canproduce more with less an approachwhich has obvious economic benefits. Thisapproach involves reducing the energyintensity of our business and reducing theassociated greenhouse gas emissions acrossthe full supply chain. It also necessitatesusing less water and improving effluent waterquality, mitigating our impact on biodiversityand promoting sustainable forestry through

internationally accredited, independentenvironmental management and forestcertification systems.

Reduction of Specific Water Use*

We consider the water supply to our millsas abundant and have rarely experienceda stressed supply situation.

According to the Global Water Tool of theWorld Business Council of SustainableDevelopment, the average water stress indexis considered as abundant at all but two ofour mill locations, those of Maastricht and

Lanaken where the index is considered tobe at stress level due to the relatively highpopulation living in the area.

In our experience, however, water hasalways been abundant and we do not see

a water shortage risk. We also do not expectour impact to significantly change at any of

our locations due to our water use anddischarge.

In addition, water use has an impact onenergy, as it is heated up within the processand the mills lose energy through their waterdischarge.

We have been able to reduce our specificwater use according to the target set, andare lower already than the 5% reductionenvisaged for 2012.

chartercommitments

25.0

20.0

15.0

10.0

5.0

0.0

Specific water use m3/t

Spec. water use Target 5% base year

Our approach to sustainability is based on a holistic view of Planet, Peopleand Prosperity (the 3Ps). These values and commitments underpin everything

we do, from our business decisions and processes to our dealings withstakeholders and customers. Below are our charter commitments, outlining the

way Sappi Fine Paper Europe wants to do business, our targets and results


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Reduction of Specific CO2*

Our 2012 target is the reduction of specificdirect fossil CO2 emissions (i.e. tons of CO2per tons of manufactured pulp and saleablepaper), including purchased power

emissions (calculated at 400g/kWh) by1% per year*.

The CO2 figures shown in the graph arethe sum of specific direct CO2 emissionsand the indirect CO2 emissions from theexternal electricity supply. It is calculatedwith the factor of 400g/kWh. The nationalaverage factors in the countries of operationare lower or higher than the 400g. The 400gis close to the European average and alsothe factor used by the EU-Flower criteria forcopying and graphic paper.

This target has the disadvantage in thatthe capacity of the integrated chemical pulp

production is limited, as is the availabilityof our most important biofuel black liquor,for which generation is proportional to thepulp production.

When the paper production is increasedcompared with the integrated chemical pulpproduction, the share of fossil fuels isincreased and, in line with it, the fossil CO2emissions. This is the case for ourintegrated mills Alfeld, Ehingen, Gratkornand Stockstadt.

For efficiency reasons it is of coursealmost always sensible to maximiseproduction of our machines. As a rule of

thumb, the higher the machine utilisationthe lower the specific energy needed.We have been successful in reducing the

specific CO2 level and are on track to meetthe 2012 target.

Certified Fibre*

Our 2012 target for certified fibres overallis 70%. We have achieved this highfigure from 2009 onwards. Increasing thecertified share further will be a challengeas we must also take operational targetsinto account, such as the preference tosource locally.

The certification of the chain of custodyhas improved significantly over the past

years with most of our suppliers followingthis route. All of our pulp suppliers arecertified, in most cases in accordance withboth FSCTM and PEFC certificationschemes. Some of our smaller woodsuppliers, however, are still not certified.Some certified wood material loses itscertification in the chain as a fewintermediary traders do not hold the samecertification as the traded material.

Any non-certified material entering ourproducts is subject to strict risk assessmentprocesses, which meet the FSCTMControlled Wood requirements and those of

the PEFC Due Diligence System.

PEFC FSCTM Target

Certified fibre share SFPE

40

50

60

70

80

90

100

30

20

10

0

2008 2009 2010 2011

400

500

600

300

200

100

0

2008 2009 2010 2011

Spec. CO2 (fossil) kg/t Target 5% base year

Specific fossil CO2 kg/t, inclpurchasing power at 400g CO2/kWh

*Important to note: targets were initially set in 2008 to be achieved in 2012, but as we acquired

several M-real mills in 2009 we had to adjust accordingly by including the performance of thosemills retrospectively in the targets as well. The benchmark is the average of the mill performancesof the year 2009 for Kirkniemi and Stockstadt, and 2008 for Alfeld, Gratkorn, Ehingen, Lanaken,Maastricht and Nijmegen. The reference year 2008 is actually better than 2009 due to the higheremission average of the new mills and mainly due to the extremely low utilisation of our papermachines in this year. The figures only include mills that are in operation to help comparability.Mills that do not produce anymore are not included.


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The Lost Time Injury Frequency Rateachieved in 2011 (LTIFR) by Maastricht Mill

0.26peopleBy creating a safe, healthy workplace forour People in which diversity is encouragedand valued, and people are provided withon-going development opportunities so thatthey can develop to their full potential, weenhance productivity and our ability toservice global markets. Active corporatecitizenship programmes relevant to theneeds of the communities where we operate

ensure that we promote socio-economicdevelopment within these communities.

Each employee should receive 30 hoursof training per annum. In 2011, we achievedan average of 25.52 hours of training peremployee. Our various people developmentinitiatives, which include training, havehelped us to ensure that our employees canwork more effectively and confidently andare able to take up different roles.

A Safe and Healthy Workforce

A true health and safety policy is somethingyou keep working on. Sappis safetyapproach is based on no less than fivefundamental principles:

A zero-injury targetIntegrated health and safety planning and

managementTraining at every organisational levelParticipative information and control

structures

Adherence to international best practiceand safety standards

Other initiatives include an annual GlobalSafety Awareness Day at all our sites,offering preventive medical check-ups, andprograms to stay in excellent condition bothmentally and physically. Our 2011 targetwas to reduce the LTIFR (Lost Time InjuryFrequency Rate) to 0.39 (this includescentral units) and to report occupationalinjuries better and more comprehensively.

We achieved a LTIFR rate of 1.3 in 2011with Maastricht Mill achieving an LTIFR of

0.26. We have been continuously successfulin lowering our LTIFR each year, and in2012 we will continue our commitment toachieving a LTIFR target of 0.21 for theentire European operation.Hours training per employee 2012 Target

Hours training per employee

chartercommitments


5

10

15

20

25

30

35

0

2009 2010 2011


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prosperityBy generating Prosperity, we can continue toattract investors, leverage growth opportunitiesand invest more in our processes, people, andthe communities in which we operate. This

ensures that the business becomes morecustomer-centric, and keeps us focused onongoing product, process and serviceinnovation. Investing in research anddevelopment ensures we maintain acompetitive global advantage.

Generating Prosperity

Sappi started the financial year with a strongperformance and produced good resultsduring the first half of the year. Increaseduncertainty in global markets, the deepening ofthe European debt crisis, as well as increasinginput costs, however, negatively affected sales

volumes and profit margins. This resulted in thefinancial performance for the year falling shortof our targets, despite our best efforts.

We took decisive action in 2011 to improvethe cost base and competitiveness of thebusiness. These actions have proven to bequite successful and made significantprogress. These actions were not easy toimplement and unfortunately, and regrettably,also resulted in the loss of a considerablenumber of jobs in Europe.

We expect to see the results of these actionsin 2012 as we continue our cost-savingprograms, and our production efficiencies and

customer service continue to improve,reaching very good levels. Our 2012 target isto achieve a RONA* of 7.13%.

Focus on Innovation

The speciality packaging business in Europeperformed very well in 2011. The variety ofspeciality products and the service offer makeSappi very competitive in this area.

Sappi launched Fusion, a new generationtopliner in 2011, as well as Algro Nature, ahome compostable paper for flexiblepackaging. We will continue to grow ourspecialities business in 2012 and further

penetrate the flexpack, release liner, premiumcartonboard and white top liner markets.

Sappi launched Jaz silk in 2011, meetingour target to bring a digital paper to market.Jaz silks technology was developed incooperation with HP for high speed inkjetweb printing.

After being introduced to the market in early2011, trial runs have been successful and theproduct is now commercially available. The Jazproduct will be extended, with the addition ofJaz Book, currently under development for lowgrammage high speed inkjet web printing andexpected to be brought to market in 2012.

In the coming year we will continue to worktowards the further commercialisation of theJaz family, growing the market and extendingthe portfolio to include other OriginalEquipment Manufacturers (OEMs).

The year Sappi launched Fusion, Algro Nature and Jaz

2011

*Return on net average operating assets

chartercommitments



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PAPER

MACHINE

WE SEND 2.7M m3 OFROUNDWOOD TO OUR PULPMILLS EACH YEAR, AS WELLAS 1.6M m3 OF WASTE WOODFROM SAWMILLS4

All our fibre materialcomes from certified

sustainable andcontrolled sources.

As well as providinghabitat for wildlife andrecreation for people,

forests protect soiland water. One

hectare of forest alsoabsorbs about 2.5tonnes of carbondioxide a year3

Our pulp mills aredesigned to avoid

emissions of sulphurdioxide a raw material

needed for chemical pulpproduction. They feed as

much SO2

as possibleback into the process and

use it again

225,000 PEOPLEARE EMPLOYED BY

EUROPES PULP ANDPAPER INDUSTRY2

At Gratkorn Mill, steamfrom the power-plantturbines, rather thanfossil fuels, is reused

to warm up thegas supply

34.2% OF THE FUELS USEDBY SFPE ARE BIOFUELS4

665,000 PEOPLEARE EMPLOYED BYEUROPES FORESTRY

INDUSTRY1

273,000 PEOPLEARE EMPLOYED

BY EUROPESSAWMILLS2

In Finland, strict rules governeffluent discharges into

Lake Lohja, nextto Kirkniemi Mill.State-of-the artprocesses mean

the mill meets themby a large margin

At Maastricht Mill, waste sludgeis dried and sold to farmers asbedding for cows (the cows love

it). Sludge is also used as aningredient in bricks

At Alfeld Mill, during waste-water treatment, 12,000m3of biogas is produced each

day. This is used to generateenergy, and supplies about

1.2% of the mill's needs

The green

paper trailSappi is determined to reduce the environmental impactof its processes. This report follows our product lifecycle,from forest to pulp, paper to print, and shows how thepeople at Sappi are instrumental in making this happen

FOREST

European tree usage2:

Energy 42%

Sawmills 24%

Pulp and paper 17%

Other 17%



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Sludge left over from effluenttreatment contains fibres andbiomass a perfect sourceof energy. Alfeld Mill turnsthe sludge into pellets and

uses it as fuel

SFPE PRODUCES 950,000TONNES OF PULP EACHYEAR AND BUYS INANOTHER 1.1M TONNES4

PULP MILL

908,000 PEOPLEARE EMPLOYED

BY EUROPESPRINTING

INDUSTRY2

CONSUMER

PRINTER

Digital printingis increasingly

popular. It allowsshort runs,

personalisedprinting and

less waste

The paper we sell4:

Coated fine paper: 2.4M tonnes

Mechanical coated: 1.4M tonnes

Uncoated: 284k tonnes

Speciality papers: 162k tonnes

Lignosulfonates a by-product from the pulpingprocess can be used

in making buildingmaterials. In 2010,

lignosulfonates fromSFPE pulp mills helped

create 18M m3of concrete

The black liquor createdduring pulping is a great

source of renewableenergy. In our integrated

mills it is burned toproduce steam

and power

All SFPE mills bleachpulp without using

chlorine

All the power plants supplyingour European mills are

combined heat and powerplants. As well as generatingelectricity from gas, they alsouse the heat generated in theprocess, raising their energyefficiency to about 80%

twice as much as traditionalpower plants

Paper brings joyto people. It's

relaxing to read,

easy to use andmore effectivethan screensfor education

SOURCES: 1) FAO, 'State of the World's Forest 2011' 2) Eurostat, 'Forestry in the EU and the world', 2011 3) approximation, value can varydepending on factors such as tree species, location and density 4) 2011 SFPE 5) Sappi sustainability leaflet, 2011 6) CEPI Sustainability Report 2011

69% OFPAPER IN

EUROPE GETS

RECYCLED6 UP TO

SEVEN TIMES


45% of our deliveries

now go by rail or canal5.To reduce our carbon

footprint we're switchingfrom road to railwherever we can


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Sappi Europe iscommitted to sustainableforestry and to reducing

our carbon footprint

73%

To be a sustainable industry, papermanufacturers need to have effectiveand transparent policies dedicated

to the long-term survival of the worldsforests, woodlands and other naturalhabitats. Sustainable forestry and thereduction of our carbon footprint must be apriority for all companies, and Sappi Europehas focused on this area. This involves

working with partners to ensure that thewood purchased can be traced throughoutits supply chain, ensuring strict sustainableforestry practices.

Supply chain

Sappi is committed to purchasing onlywood and fibre when it understandsprecisely how it came to market. The bestway to combat illegal logging and non-sustainable practices is for all wood andfibre to be certified or at least controlled.

Understanding the supply chain is crucial,and certification is required if we are to besure of how our products are made. Sappiset a target that 70% of all the fibre wepurchase should be certified, and we arepleased that this goal was exceeded bya large margin. In 2011, 73% of the fibreswe used were certified, placing us astep above the European average. The

remainder of the fibre came from knownand controlled sources.

forest

The amount of fibres weused that were certified




DID YOU KNOW?European forests grow by

the equivalent of 1.5 million

football pitches each year


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CERTIFICATIONAs part of our commitment to

sustainable practices, Sappi has worked

with the Programme for the

Endorsement of Forest Certification

(PEFC) and the Forest Stewardship

Council (FSCTM) to achieve globally

recognised standards. One of our

milestones was that we were the first

paper company to achieve multi-site,

cross border group chain-of-custody

certification for our entire European

operations from both bodies. These

standards cover an array of

environmental, social and economic

factors pertinent to the safeguarding of

the worlds forests. Crucially, they

provide a mechanism for tracking

certified material from forest to final

product. Therefore, when you buy or

sell Sappi products you can be certain

the wood fibre in the product supported

the sustainable management of our

forest resources.



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In order to be committed to purchasingwood only from sustainable forests andcontrolled sources, it is crucial that our

efforts extend to the entire supply chain. Inthe forests that we purchase from, the cycleof planting, growing and logging ismeticulously managed. Such a sustainableapproach ensures that there is always moregrowth than what is harvested.

Working closely with partners

The forests of Austria hold a special affectionin the hearts of its people. Therefore, Sappiworks closely with its wood purchasingcompany Papierholz Austria (PHA) tomaintain the biodiversity of the forests andharvest its wood in a sustainable way. In fact,the Sappi Gratkorn mill was one of thefounder companies of PHA in 1997. The keytasks of PHA are wood supply, wood logisticsand administration. Through this co-operation, the mill is able to produce almostone million tonnes of paper every year, while

maintaining a sustainable approach.Key market information is shared, which

means the two companies can ensure theirapproaches are aligned and optimised.Both Sappi and PHA hold high standardsand have independent certification todemonstrate this fact, such as PEFC, FSCTMand ISO 14001 certifications. Sappi aims toengage with the communities its operationsare based in. Similarly, the wood purchasersof PHA are well-trained forestry experts thatsupport wood land owners with theirexpertise with forest management andwood harvesting.

The Gratkorn mill is a key part of the localeconomy. However, its future must besustainable and this means the wood fromAustrian forests needs to be used in themost efficient way possible. It is worth

mentioning that Austrian forest law is one ofthe strictest in the world and both Sappi andPHA are able to work within its boundaries.In fact, over the past 50 years, the forest hasgrown by over 300,000 hectares in Austria seven times the size of Vienna.

Sustainability across the chain

The way in which Sapin the exclusive wood

supplier to Sappi Lanaken in Belgium manages the forests in which it operates hasalso helped Sappi Europe realise itsenvironmental aims in terms of its fibrecertification. Sapin has been at the forefrontof sustainable forestry practices for overeight years. In 2004, the company gainedPEFC certification, and the following year itgained FSCTM certification. In the years sincethen, the world as a whole has altered itsviews on the types of products it buys asmore and more consumers are demandingeco-friendly products. Sapin and itssuppliers are very aware of this fact, and the

company is committed to environmentalprotection. Indeed, the growth of the certifiedmarket means there is little other choice forcompanies in the wood and paper markets.

Many of Sapins achievements mirrorSappis in terms of accreditations. Forinstance, the company has long led the wayin certification, holding ISO 9001 and ISO14001 standards, as well as FSCTM andPEFC accreditations. For both companies, itis important that accreditation goes all theway down the supply chain, indeed it is arequirement of such standards. Sapin haslong worked with all its suppliers to

encourage a more sustainableapproach, and the result of thiswork can be seen in theincreasingly higher yieldsof certified wood.

Our goal: sustainablepaper production

forest

Employees ofPapierholz Austria


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Sappi Europe is thebiggest producer of sulphite

pulp on the continent,producing 675,000tonnes per year

T

he work that takes place in SappiEuropes pulp mills is central to our

efforts to be a truly sustainablecompany. In fact, Sappi Europe is thebiggest producer of sulphite pulp on thecontinent, with the capacity to produce675,000 tonnes of sulphite pulp every year.

We are commited to reducing our energyuse and emissions, and the production ofsulphite pulp goes a long way towardsachieving this.

There are several advantages tomanufacturing sulphite pulp, ratherthan kraft (sulphate). It produces higherfibre yields and requires fewer bleachingchemicals, for example all our pulp mills

are totally chlorine-free (TCF). In addition,less energy is required in the refiningprocess, and there are fewer odorousemissions. Wood is also used moreefficiently, as a high proportion of residues

from the saw mills can be added to the mix.Sulphite pulping also lends itself well to

smaller operations; the Alfeld Mill, forinstance is our smallest pulp mill.

Sappis mills take wood with a lowresin content, such as spruce or beech. Thewood arrives either as logs or chips fromthe saw mills. The logs are debarked,reduced to chips and then added to thechip mix. The chips are cooked in acid forsix to eight hours at temperatures of 140Cand a pressure of eight bar. During thisprocess the binding elements of wood turninto liquid. The resulting by-product (ligninand acid) is called lignosulphate.

Lignosulphate has useful applications

in the building and construction industry,but Sappi Europe uses most of it is asa biofuel to power its mills. The pulpingchemicals are recycled in this processas well.

pulp mill



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The manufacture ofsulphite pulpproduces higher fibreyields, and requiresless specific energythan kraft pulping



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Sustainability

The raw materials begin their transformationinto paper products in Sappi Europes pulpmills where there has been considerableinnovation in recent years.

One approach is Sappi Europes ongoingcommitment to reducing waste sent tolandfill. Our organic waste material is burntto make energy. By creating heat out ofbiomass and using it to power Sappis ownoperations, as well as helping others tomeet their energy needs, the company is

adding positive value. It is mainly ash thatgoes to landfill, when its not used in theproduction of cement, other buildingmaterial, fertilizer and soil substrates.

Currently, the use of chemicals at the pulp

HOW SAPPI HELPED

BUILD AN AIRPORTOne byproduct of the pulp productionprocess, produced by the reaction of

cooking acid and lignins, is called

lignosulphate. This liquid chemical is

used as a biofuel and is used to

power Sappis pulp and paper mills.

However, in modified form it can also

be used as a speciality chemical with

many beneficial applications.

This useful byproduct is actually all

around us everyday, as it is used in

the production of plasterboard,

chipboard, bricks and paving stones.

Lignosulphates have the

advantage of being non-toxic and

environmentally friendly, unlike many

other industrial chemical substances.

Some of Sappis byproduct has been

used in building materials at high-

profile locations, such as Frankfurt

International Airport buildings.


pulp mill

mill is process-given. However, SappiEurope has strict policies designed to ensurethat the environmental impact of this part ofthe operation is as low as possible. Sappisbleaching processes are entirely TCF, webleach with peroxide which leaves behind noharmful chemicals. Our market pulp can alsobe elementary chlorine free (ECF).

Water usage is a crucial part of Sappisoperations, so its important that thecompany continues to make strenuousefforts to minimise water intake and to

recycle and reuse it as much as possible.After use, Sappi cleanses effluents in highlysophisticated waste water treatment plantsto meet local legislation, before they arereturned to the environment.


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The number of times paper canbe recycled. Virgin fibres areneeded to start the cycle



We continue to raisethe bar in terms of

certification and energy

management

Sappis paper mills are at the forefront ofour move towards increasedsustainability. New technologies,

initiatives and changes in culture have beenthe drivers for some exciting developments,and amid a changing industry and challengingeconomic landscape, the commitment to ourpeople, planet and prosperity across Sappis

mills is stronger than ever.

Navigating a changing market

Economic conditions in the paper marketcontinue to challenge even the mostresourceful. Overcapacity in the market andmacroeconomic uncertainty across Europeare key factors, as is the longer-termbackdrop of efforts by Sappi and others tocreate and preserve a level playing fieldagainst global competition.

Sappi has made some timely andnecessary adjustments to its operations inthe face of these conditions, with the

closure of the Biberist mill in Switzerlandperhaps the most notable.There is no doubt that the closure of

Biberist had a major impact on the lives andcareers of the many staff based there.

Nonetheless, we worked hard to ensure thatour employees had a good prospect ofalternative employment, and were positionedas well as possible after the closure. Theresults have been promising: within fourmonths of our confirmation of the millsclosure, 70% of staff had found new jobs.Furthermore, all of the mills apprentices were

found positions in other companies, and wereable to complete their apprenticeships.

These results speak well of the excellentskills and experience levels of the Biberiststaff, and of the hard work on Sappis part inensuring that potential negative impacts ofthe closure were minimised for all concerned.

Custodians of our environment

We have spent a considerable amount oftime, money and effort in reducing pollutionand waste in our mills. Conserving water,decreasing emissions and discharges, andusing energy more efficiently, are key

priorities for the company. These aims arenot just environmentally beneficial, but arealso regarded as essential for the long-termgrowth and prosperity of the company.

All of Sappi Europes mills are located near

paper mill



WARM EXCHANGESappi Europes mill in Maastricht hasinstalled a heat exchanger in thechimney of its plant to capturewarmth, which is then used to warmand cool nearby buildings in theMosae Forum.

The Mosae Forum, which is 700m

from the Sappi mill, is a large sitecontaining residential apartments,offices and retail units. Maastrichtaims to reduce its CO2 emissions byhalf as of 2050. As a result of thecollaboration with Sappi, this is nowcloser to becoming a reality, as excessheat from the mill is supplied tomunicipal buildings.



to rivers or surface waters where watersupply is plentiful all year. Water gatheredfrom these sources is cleaned before useand then used several times before it isthoroughly treated to remove impurities andreturned to the environment. Recycling waterin this way makes our mills more efficientand reduces our environmental impact.

The way in which water is used isconstantly monitored. Sophisticated piping

and instrumentation allows onlinevisualisation of how Sappis water circuitsoperate, in order to maintain a high efficiencylevel, reducing waste and increasingrecycling. One breakthrough has been toestablish that waste water impurities areturned into biogas which is recoveredand used as fuel.

At Sappi Europe, we operatecombined heat and power(CHP) plants in all of ourmills. These plants not onlygenerate electricity butalso heat, which is used at

the paper machines to drythe paper. Such efficienciesmean the companys CHPunits are twice as energyefficient as conventional powerplants. We make such investmentswith consideration to our long-termplans, which are designed to create prosperitytoday as well as in the future.

Innovation and energy efficiency

With energy prices increasing, energyefficiency remains a financial imperative,as well as an environmental concern.

Sappi Europe has made considerableheadway in reducing its carbon emissionsand improving energy efficiency. But whilethese efforts have won recognition, they arejust part of an ongoing drive for moreefficient use of energy across the business.

Specific carbon dioxide emissions fromfossil fuels in our paper mills has droppedan impressive 6.7 per cent over the pastthree years outperforming all our statedemissions targets.

While Sappis European mills wereamong the first to achieve internationalenvironmental ISO14001 and EMAS

accreditation, we continue to raise thebar in terms of certification and energymanagement. We publish our Environmental(EMAS) declaration, covering the operation,environmental performance and the

environmental programs on our website. Formaximum efficiency, and because verysimilar procedures are used across thegroup, Sappi mostly uses group certification.

Sappis management system encompassesorganisational structure, planning,responsibilities, procedures, processes andthe provision of resources for developing,implementing, achieving and reviewing theactivities of the company. This management

system has a long record of certification; firstwith quality management, then thecertification of environmental managementstandards, health and safety, forestry chain ofcustody, and energy management.

Our environmental and health and safetystandards also undergo aspect and

impact analyses, the results drivingour mills health, safety and

environmental programs. Andthe push for ever highercertification continues.Pleasingly, Sappi EuropesStockstadt and Kirkniemi

mills were the first papermills to gain EN160001

certification, while Nijmegenexpects to receive the

ISO50001 certificate in 2012;with accreditation of all of our mills

to follow by 2014.The example of the Netherlands shows

the uniqueness of our approach: there areonly four EMAS registered companies in thecountry, two of them are our Maastricht andNijmegen mills.

Less waste, smaller footprint

Sappi is committed to increasing prosperityboth now and in the long term, and tointernational treaties and legislationpromoting best environmental practice, aswell as the importance of reporting andmeasuring impact.

Sappi Europes mill in Alfeld has found aninnovative way to deal with its waste itconverts it into fuel. Sludge from the plantcontains enough fibres and biomass to giveit a heating power comparable to that ofbrown coal. Since 2009, weve beenconverting the waste into pellets and usingit as fuel in the plants bark boiler to

generate steam for the production process.This process uses around 18,000 tonnes ofwaste and saves on 900 truck journeys overan average distance of 100km.

Waste sludge from the production

DID YOU KNOW?Specific emissions from

fossil fuels in our paper

mills has dropped by 6.7%

over the past three years

paper mill


28/48

process is oten urther used in applications

such as the manuacturing o bricks or

cement. However, there are also more

novel applications.

When companies innovate, there are

sometimes unexpected benets rom their

eorts. Sappi Europe ound that the dried

residual paper sludge rom its waste water

was very popular with some local

inhabitants the cows in the stables o the

region. Their armer attests to the act that

his cows are happier sleeping upon Sappisdried waste sludge than their more

traditional bedellows o sawdust and straw.

The material keeps the animals cleaner, as it

is less sticky, and is more comortable. The

improved hygiene also means the number

o white cells in the cows milk has

increased and is thereore more healthy too.

At Sappi Europes Gratkorn Mill in Austria,

too, we have ound a more ecient way o

using natural gas. Previously, the incoming

natural gas was pre-heated by burning

ossil uels. Now, hot steam rom the mills

turbines is used to power the water heat

exchanger. And while our Stockstadt millalready uses a mixture o ossil uels and

renewable energy sources to power its

paper production, the mill is moving

towards the implementation o more

sophisticated energy management systems.

Culture and values

However, the drive towards greater energy

eciency isnt just about changing

technologies, but changing mindsets, too.

The eorts by management and employees

at the Stockstadt mill demonstrate the

challenges that exist in this area, and point

to some o the ways in which thosechallenges can be overcome.

Eorts are also already underway to

urther improve energy usage. Management

is constantly engaging with employees on

ways to change practices that are

energy intensive and to promote

best practice. Sta have been

provided with special training

in energy conservation, there

are special quizzes with prizes,

awareness days and the

promotion o energy eciency

via newsletters and company

literature. The eects o thesecampaigns is that the Stockstadt

mill achieved a total reduction in

energy use o 3.6% in 2011, well

above the mills 2% target.

Increasing efciency, reducing waste

Sappis Kirkniemi mill is located by

Lake Lohja in Finland an important natural

resource, which is used by locals or

recreational shing among other things.

Conservation o this lake and o the many

others in Finland is crucial, however it is

also an opportunity; water is so abundant in

this part o the world that by producing

products in Finland there is less pressure on

countries where water is scarce.

Although there are no restrictions onwater usage there are tight limits on efuent

discharges, and Kirkniemi mill remains well

within these limits. Water usage is 25% less

than the general level or a paper mill

process and it is circulated 18 times.

Efuent discharges into the environment

have also been minimised. The efuent

treatment plant in Kirkniemi consists o

mechanical, biological and chemical

treatment steps. Kirkniemi was the rst

paper mill in Finland to use biological

treatment methods or its waste water and

this, and other environmental policies, have

had benecial eects.The efuent discharges containing

suspended organic matter have

caused there to be a biological oxygen

demand in the lake. However, in response

to this, Sappi has installed our oxygenation

pumps in the deep-water site to help

restore the biological condition o the

lake. The company also supports eorts

to increase sh stocks by sponsoring

the introduction o over 20,000 whitesh

annually.

As a result o Kirkniemis eective water

protection actions, the Kirkniemi mill

accounts or only about 7% o phosphorusand 5% o the nitrogen loading in Lake

Lohja, although it is the biggest industrial

establishment by the lake. As an indication

o the mills good work, Salla Leskinen, who

is responsible or the waste water treatment

plant in Kirkniemi, was named Water

Protector o the Year by The Western

Uusimaa Water and Environment

Association. This was the rst time that

the association had chosen an industrial

representative or this award.

Sappi Europes dedication to the

environment has also been highlighted by

its success at awards held by the DutchPaper Industry Association. Sappis mill in

Nijmegen won the VNP Trophy or the

lowest energy use, and Sappis mill in

Maastricht came third.

In 2011 Salla Leskinen,

who is responsible orthe waste watertreatment plant inKirkniemi, was namedWater Protector o theYear by The WesternUusimaa Water andEnvironment

Association

paper mill


29/48

A DAY IN THE LIFEHenri Welman heads up the Utilities

department at Maastricht Mill. He tells

us about his job. Along with my team,

I ensure that the mill has the energy it

needs to unction the electricity,

steam and water. But we also use

energy to make money or Sappi. The

power plant at Maastricht produces

more energy than we need, so

residential neighbourhoods take our

excess heat, and we sell electricity on

the open market, which can be

lucrative. We also clean waste

water rom local rms in our efuent

treatment plant.

Turning waste into value is another

speciality. We dry waste-water sludge

rom the mill with residual heat rom our

power plant. Farmers use the dried

sludge as bedding or cows, and the

construction industry or bricks.

There are 20 o us in the team.

Everyone is always coming up with

new ideas. Thats what makes the

department special enthusiastic

people. My job is to keep them

that way! I also try to keep things

calm when they get hectic. The mill

depends on us.

Each day is dierent but I alwaysspend some time looking or the best

price we can get or our electricity.

Mills ProductsPaper

Capacity(tons ps)

PulpCapacity(tons pa)

Certifcations

Aleld,Germany

GraphicPaper,

SpecialityPaper

330,000 125,000

ISO 9001 / ISO 14001 /EMAS / OHSAS 18001 /

PEFC CoC / FSCTM CoC /FSCTM CW / EN 15595hygiene management

Ehingen,

Germany

Graphic

Paper250,000 135,000


PEFC CoC / FSCTM

CoC /FSCTM CW

Stockstadt,Germany

Coated anduncoatedfne paper

430,000 160,000

ISO 9001 / ISO 14001 /EMAS / OHSAS 18001 /PEFC CoC / FSC CoC

/ FSC CW / ISO 50001energy management

Kirkniemi,Finland

CoatedMagazine

Paper730,000 330,000


PEFC CoC / FSCTM CoC /EN 16001 energy

management

Lanaken,Belgium

CoatedMagazine

Paper,GraphicPaper

500,000 180,000ISO 9001 / ISO 14001 /

OHSAS 18001 / PEFC CoC/ FSCTM CoC / FSCTM CW

Maastricht,The

Netherlands

GraphicPaper

280,000ISO 9001 / ISO 14001 /

OHSAS 18001 / PEFC CoC/ FSCTM CoC / FSCTM CW

Nijmegen,

TheNetherlands

GraphicPaper 240,000


PEFC CoC / FSCTM CoC/ FSCTM CW / ISO 50001

energy management

Gratkorn,Austria

GraphicPaper

950,000 255,000


PEFC CoC / FSCTM CoC /FSCTM CW

TotalCapacity1

3,710,000 1,175,000

PEFC Programme or the Endorsement o Forest CertifcationFSCTM Forest Stewardship CouncilEMAS Eco Management and Adult System: a voluntary clean citizenship initiative,constituting the highest environmental standards in EuropeOHSAS Occupational Health and Saety


Sappi Fine Paper Europe - Mills


30/48

Sappi transportsaround four million

tonnes per year and

were committedto minimising ourenvironmental impact

Sappi Europe has a large andextensive supply chain comprisingmany individuals, vehicles and

depots. The company transports aroundfour million tonnes of finished paper everyyear. Understandably, such a largeorganisation must look at its impact,which could be considerable if notmanaged correctly.

Less road, more rail

Much of Sappis raw material and finished

produce is now transported by rail or canal,rather than road. Investment in railinfrastructure at the mills plays an importantrole in this. For example, Sappis mill inGratkorn, Austria, recently shifted 17,000tons of material to cargo train. Previously,these materials were carried by truck.

Sappi aims to increase this capacity tothe maximum, and block trains from

Gratkorn to its operations in Wesel nowtow some 22 wagons. Similar effortswere taken with regard to the Lanakenand Maastricht operations, wheretransportation to the south of Europe

was shifted from road to intermodal(rail and road).Nevertheless, road transportcontinues to be an importantmeans of distribution; most

customers simply do not have access torail or canals, and road is often the onlypractical method of transport for shortdistances. However, the move to intermodaltransport means that 45% of all Sappisfinished paper is transported by rail orcanal; both comparatively energy efficientmeans of transport.

Intermodal transport

Produce from Sappi Europes mills inLanaken, Belgium, and Maastricht, the

Netherlands, is now taken to the southof Europe via a combination of rail androad transport. This intermodal approachmakes sense from both a financial andenvironmental point of view. Intermodaltransport is a cost saver, good for theenvironment and more reliable, says DanielThiemann of Sappi Logistics Wesel.

The move to intermodal transportationalso means that Sappis delivery fleet hasbeen significantly reduced. There are now5,000 fewer truck deliveries per year asa result of using trains for long distancejourneys to deliver and collect materials.

Sometimes the benefits are even greater,as it is possible for trains to be powered byhydro-electricity. This means emissions canbe cut by over 30,000 tonnes per yearcompared to road transport.

transport

Daniel Thiemannof SappiLogistics Wesel


31/48

45%of all Sappis finished paper istransported by rail or canal

FROM NORTHTO SOUTHSappi Europes distribution centre at

Wesel in northern Germany offers a

clear example of how intermodal

transport can be simple, effective and

environmentally beneficial. Trucks carry

shipments to the nearest rail port.

There, the entire trailer gets heavedonto a train where it sets off to

a destination in Europe. Another

truck picks up the trailer at this

destination and completes the last

leg of the journey.




We have streamlinedand refocused our brands,

making it easier for

customers to understandour offering

printer/consumer

Print communication remains apowerful medium that plays a vitalrole in any media mix. Despite the

rise of digital media and the challengingeconomic climate, the paper industry isadapting to new circumstances and print istaking its place alongside new media. Inorder to maintain our position as a marketleader, it is vital that Sappi rises to thechallenges of this new environment. To doso, we must continue to sharpen ourcompetitiveness and deliver the productsand services our customers need at a

cost-effective price. We are committed toadding value to the businesses of theprinters and end-users that depend on thequality of our paper, technical knowledge,and reliable service.

Seizing opportunities

Sappi has embarked on a journey to bringus even closer to our customers; to providethem with the right offering of products andservices at a competitive price. ThroughProject Breakthrough, in addition to regularbusiness interaction, we continue to engagewith our major customers in creating new

value propositions, product positioning,brands and services, and working with themto create a business model that createssustainable value for both parties.

Sappi has long been focused on improving

customer service and today has adopted amore structured approach. By making abetter assessment of customer needs anddeveloping cost-effective solutions, we addvalue to the supply chain without addingcosts, while becoming more flexible andresponsive to customer needs. Usingeffective tools to measure the added value ofnew initiatives, the business has madesignificant changes to the way it interactswith its customers. For instance, in the pastthe company used to send customers manyshipping documents and we discovered that

this was considered to be excessive. Nowsuch dispatches have been greatly reducedand customers have welcomed this servicechange. This is just one example of our manyinitiatives. Customers appreciate the effortswe have made on this front and a recentsurvey on customer service showed that wehave earned a score of 8.17 on a scale of 10.This result demonstrates the excellence ofour logistics service and puts us among thebest in the industry.

Over the last year, we have significantlyreduced our cost base and improved ourefficiency and will continue to reduce our

fixed and variable costs. Sappi has awell-respected reputation for reliability andis working hard to maintain this reputationwhile meeting customers needs, at acompetitive price.


33/48

STREAMLINING OURPRODUCT OFFERINGSappi Europe has streamlined and

refocused its brands, making it easier

for customers to do business with us

and easier for them to understand

our offering. By simplifying our brand

ranges, customers benefit from more

targeted products that better suit

their needs. Not only that, our

steamlined product ranges provide

a one-stop-shopping option for

customers, allowing them to choose

from a range of products within a

familiar brand name. The change will

allow Sappi to concentrate our

efforts on just a few brands.



34/48

JAZ: A COATEDPAPER DESIGNEDFOR FULL COLOURPERSONALISATIONThe move to personalisation has led to

an increase in the need to tailor

information to consumers. The transfer

of information from web to print

(e.g. printed photo albums, personal

publishing) in a cost and time efficient

manner is also driving demand.

Launched in 2011, Jaz silk is a

coated paper that delivers excellent

print quality for high-speed inkjet

printing with full-colour personalisation.

But its not just an aesthetic choice; its

also a practical one. Its technology is

jointly developed with HP and further

fine-tuned to perform perfectly well on

other high speed inkjet printers. Jaz silk

eliminates the use of bonding agents

and reduces ink consumption. The

market response has been positive and

Sappis ongoing partnerships with mainOEMs have resulted in our market

innovator position being maintained.



35/48

Sappis commitment to innovation isbest expressed through its productrange. We have considerable

expertise in creating special grades ofpaper designed for specific markets.Several of our most recent productlaunches demonstrate this point clearly.

Fusion: The premium white top liner

Sappi launched Fusion premium top liner in2011 in response to the increasing demandfor high-quality print finishing for packagingand displays. Fusion is the first liner wehave produced and it opens up an excitingnew business market for us. In anincreasingly tough economic environment,there is a need and interest for creative andbusiness-savvy ways to differentiate brandsand to maximise point of sale presence, andFusion meets this need.

Fusion offers a whiteness and brightness

that was rarely achieved previously withliners. In addition to the extra dimensionthat Fusion can bring to packaging anddisplays, it has numerous other benefits thatcan be experienced throughout theproduction chain. These include lessdowntime related to washing intervals in theprinting process, reduced glue consumptionin the lamination process, and a choicebetween sheet and reel formats from theoutset. A simplified pricing model and thelighter weight of the paper itself meansmore sheets per stack, and reducedtransport costs. By coating and calendering

the paper, the Fusion surface offers asuperior quality and gloss that other topliners cant match, all elements thatour customers were asking for combined inone product.

Algro Nature

Sappi joined forces with Innovia Films Ltd in2011 to demonstrate potential laminatestructures, using their respective products,suitable for end users in the food,confectionery and pharmaceuticalindustries. These bio plastic laminates

provide technical functionality in addition tobeing made from renewable resources andoffering compostability.

Both companies recognise that the bestend-of-life options for flexible paper/filmlaminates are either industrial, homecomposting or ultimately anaerobicdigestion, which turns waste into a usefulenergy source, compared to current landfillor incineration solutions.

Innovia Films Ltd with its NatureFlexproduct range, brings its unique expertisein manufacturing renewable andcompostable cellulose-based films with

tailored moisture and barrier properties.Sappi brings our expertise in manufacturingflexible packaging papers, and now offerscoated and uncoated compostable paperoptions; Algro Nature is a homecompostable one side coated paper; LeineNature is an uncoated equivalent, which isalso compostable. The products have beenindependently tested and have received theOK Compost Home certification byVinotte, and also the compostability DINE13432 certification by DIN CERTCO.

Trials have been made on both extrusionand adhesive laminate systems, targeting

end users who are seeking alternatives toexisting non-compostable structures.

We have considerableexpertise in creating

special grades of paper

printer/consumer




Initiatives that youshould know about

Ideas that Matter

The Ideas that Matter competition run bySappi for over a decade places the

emphasis on the realisation of designprojects to generate awareness of wellknown, and less well known issues in thebroad categories of Environment, Culture,Education, Healthcare, Human Rights andSociety. The strong partnership approachbetween designers, non-profit organisationsand Sappi that has been established duringthe lifetime of this initiative has proved tomake a difference, helping people anddoing our planet some good. The winners ofthe 12th edition of the competition havebeen announced and can be found on thededicated Ideas that Matter website.

sappi-ideasthatmatter.eu

Sappi European Printers of

the Year Awards

The Sappi European Printers of the YearAwards (SEPOTY Awards for short), firstlaunched in 1993, were established bySappi to reward and recognise excellence inprint. The competition has evolved

alongside the industry, by recognisinginnovation in the sector and adding newcategories along the way, such as digitalprint and both sheet fed and webmagazines. The SEPOTY Awards encourageprinters to find the best processes, find thebest papers and find the best combinationof experience and graphic materials toachieve the best results for their customers.Recognising printers who give their utmostand set new standards in print excellence,the contest is open to any printer fromEurope and the Middle East who has his orher work commercially printed on mainly

Sappi paper. Out of an average of 5,000entries, the best print job in each continentis rewarded and competes for the globalPrinters of the Year Award.sappi.com

printer/consumer


37/48Sustainability Report 2012 10

Whats NextWhats Nextis first and foremost a support tool for Sappi and itscustomers. With several grades and types of paper used in everyissue, Sappi combines sight and touch to bring the articles aliveand provide new ideas and tools for printers. The magazine is theultimate showcase of Sappi papers. The diverse content featuredin Whats Nextreflects Sappis passion for print. By focusing onhow innovation in paper and publishing can help push theboundaries of creativity, Sappi aims to show that paper is morerelevant than ever, providing engaging and sensory functionalitiesthat set it apart from the online world. A recent survey has shownthat the magazine is very much appreciated amongst publishersand design agencies who are pleased that Sappi supports theindustry in such an innovative way. They appreciate the source of

inspiration it provides. And the figures are showing this with anincreased membership and paper sample ordering. Also, thecomplementary content on the Whats Nextwebsite serves toamplify and add to the story in the magazine paper versiondemonstrating how print and digital can work well together.whatsnextmagazine.net

My Life in Print

My Life in Print, released by Sappi in 2011, celebrates therichness that print has brought, and continues to bring, tothe lives of people in all walks of life, in all sorts ofsituations and for all sorts of reasons. A myriad ofexamples in a creatively and specially designed publicationthat looks like a magazine but reads like a book, reflect

how print andpaper is integral toour daily lives.

In it, fascinatingcontent onsubjects rangingfrom print and theenvironment, toprint and business,to print and theintimate detail ofpeoples lives, isshared withcurious readers.

The bookcontains fivechapters, exploring

how print puts us intouch with ourselves; the unique place of print in the mediamix; why print and paper are key to a sustainable future; theenduring adaptability of print and paper; and how printallows us the space to be who we really are. Intimate storiesusing real life examples bring our relationship with paper tolife in a relevant and meaningful way. This latest publicationby Sappi Fine Paper Europe belongs to the Life With Print(LWP) initiative, the objective of which is to show theefficient and effective use of the right media mix.sappi.com

Houston

Sappi developed a brand new onlineknowledge platform in 2011 called Houston,specifically designed as a support toolfor professionals working in the paperand graphic industries. As well as easilyaccessible information on paper, printing

and converting-related topics, live expertswill work with professionals to find solutionsto issues in real time. Once users register,they will be able to access information onthe latest printing techniques and papertypes, market trends etc. Polls, marketfeedback and opinions will also be hostedon the regularly updated site providingvaluable news to users about the broaderindustry environment they are working in.sappi.com/houston



38/48

people

Every one of the6,000 people employedby Sappi across Europe

underpin our successas a business

Acommitment to People is one of thepillars on which Sappis businessrests. Our employees are vitally

important to the success of our businessand we want our mills and offices to begreat places to work. Sappis ethos of the3Ps Planet, People and Prosperity illustrates this commitment. However, thereis no single policy that can make thishappen, but rather, a series of differentinitiatives, which help to create a culture ofhealth and well-being.

Sappi is very committed to having a

fulfilled and engaged workforce that deliverson its key business drivers.

We believe it is important that thework of each and everyone of ouremployees is connected to our overallstrategy. As a result, Sappi focuses oncreating work environments that stimulateand support our employees in buildingstrong skills through various training anddevelopment initiatives. This, in turn, willhelp staff to improve their performancesand increase the prosperity of the companyas a whole. It is needless to say that ourleaders play a key role in that process!

Strong and effective leadership willmake the difference be it towardsengaging our staff, further transforming thework place, or leading the changes neededin response to the constantly evolving

environment we are operating in.We strongly believe, and are confident

that, our people initiatives are wellestablished and support the variouschallenges we are facing, and aregoing to face.

Skills and sustainability

We are committed to building a sustainablefuture for our business and staff. Skills andtraining play an important role in thisambition. However, responsibility for thisrests with both management and staff.

Sappi creates a work environment thatstimulates and supports employees tocontinuously increase their skills. This desireto improve must, however, be driven by thestaff members themselves otherwise theprogramme wont work.

An ever increasing skill and experiencebase means more flexibility, enablingmanagers to more easily realign thecompanys operations with customerdemands as they change.

The paper industry is going througha period of many challenges at themoment and this dynamic period is

likely to continue for the foreseeablefuture. But by increasing and improvingtheir skills, staff wil l provide a resourcefrom which management can continuouslydraw upon.



39/48



Connecting our

people to our

business

Sappismanagement takesconsiderableefforts to discussthe future of thebusiness with allemployees. Its

processes enable them to understand fullywhat they need to do in their roles tocontribute to the overall achievement of thestrategy and annual business targets.Sappis communication and strategyinitiatives include:Annual roadshows by the CEO,supported by the respective EuropeanFunctional Heads. The last roadshow,which took place in the fall of 2011, wasa great successlAnnual strategy deployment sessions toensure that the targets of the managementpopulation are well aligned

lActively working to ensure allemployees participate in the performancemanagement process

During the past year, we have continuedin our efforts to reach a 100% participationrate in our performance managementprocess. One major step toward achievingthis was an agreement with the workscouncil at our Lanaken Mill to launch thepilot for the performance managementprocess with the blue-collar staff.Meanwhile, discussions to include blue-collar employees at our Stockstadt millin the performance management process

are on-going.

Training and development

Our focus on training and development,whether it is to learn new skills, improveperformance or to prepare for a futurecareer step, is recognised as a strategic toolfor Sappis continued growth, productivityand its ability to retain valuable employees.Together with our employees we aim tofoster a culture of life-long learning. Thisapproach is becoming increasingly critical

for our success, especially in the contextof ageing workforces, rapidly changingdemands, declining numbers of apprenticesand a lack of skilled workers in theforeseeable future.

The industry is going through manychanges. Continuously investing in ourpeople, as well as bringing in new/youngerstaff with potentially different skills andmind-sets, will help us to remaincompetitive. Sappis apprenticeshipprogramme provides over 220 schoolleavers with training for roles such as papermakers, process operators, engineering

artisans and business clerks. This trainingcomprises both formal learning andpractical on-the-job experience, and meansa new generation of workers are cominginto Sappis operations. At the managementlevel, Sappis pan-European two-yeargraduate trainee program enables thecompany to source and grow managerialtalent. Meanwhile there are company-widetargets to ensure that every employee gets30 hours of training per year. In the past twoyears (2010 and 2011) the average amountwas 25-26 hours.

Developing a strong leadership cultureSappi focuses on building leadershipcapability at all levels of the business and iscommitted to bringing through these peoplefrom within the existing workforce. We

believe that a strongleadership culture drivesothers and that this iscrucial for effectiveexecution of our strategicpriorities. Sappi hasdefined a set of leadershipcompetencies, which statewhat qualities and

behaviors are expectedfrom our leaders. It alsoruns an annual bottom-uptalent review process toidentify, validate and

BusinessYear

Total numberof employees

in Europe

Total numberof population

eligible toparticipate inPerformanceManagement

Total numberof completedperformance

appraisals

CompletionRate

2009 6,870 3,200 2,400 75%

2010 6,615 5,600 3,976 71%

2011 6,010 5,233 3,980 76%

Performance management process

1.4%The voluntary staffturnover rate at Sappi

people


41/48

further develop all its talents acrossthe organisation.

Over the last six to seven years,approximately 80 managers haveparticipated in Sappis LeadershipAcademy. During this 12-month program,participants undergo a series ofdevelopment initiatives focusing on Sappissix leadership competencies. The companyaims to run this initiative for a group of up to

15 participants on a regular basis.By continuously developing the

leadership skills of managers and ensuringthey have an understanding of leadershipappropriate for the times, Sappi isestablishing some of the essentialprerequisites for attracting, retaining anddeveloping good people. All managerial andsupervisory staff have been trained in-housein Situational Leadership II. This training istargeted to further enable managers toadjust their leadership style to the task-related development level of the employee,and thereby improve the overall

effectiveness of process and results.Over 130 employees have participated in

the Business Academy over the past six toseven years. This program provides insightsinto the pan-European business and

functional strategiesand networkingopportunities.

A series ofprofessional toolsare used to give itsleaders regularfeedback on howtheir environment

sees them behaving,as well ascontinuouslygrowing their

self-awareness to build effective relationsacross the organisation (MBTI, 360feedback tools, etc.).

Women and diversity

As a global company, we employ a diverseworkforce. We value this diversity, believingthat it contributes to innovative thinking andour ability to serve diverse global markets.A workplace free of discrimination and

harassment is the minimum requirementfor all modern companies, and Sappi haseffective policies in place that take thisinto account.

Sappi has recently had some success in

bringing forward people with differentnationalities, backgrounds and experienceinto management positions. Of the mostrecent 25 new management appointmentstwo-thirds were from a different function,location or nationality or any combinationof the three.

Sappi has also intensified its efforts torecruit, retain and promote women.

This will be a challenge because women

traditionally have been underrepresented inengineering domains. Sappi is aware of theneed to appoint women at managementlevels and continuously strives to findopportunities to address this shortage.

Business Year2010

Business Year2011

Women as %of total

Europeanworkforce

12.5% 12.2%

Women as % inEuropean

Managementpositions

12.0% 12.4%

Engagement and staff retention

The Sappi Group employee engagementsurvey measures staff attitudes with regardsto their work. It looks at the employees levelof discretionary effort and intent to remainwith the company by measuring theirrational and emotional commitment.

In the most recent survey (2011)

European employees said working for theirteam, their boss and Sappi, in general, isgiving them the best opportunities forpersonal growth and recognition. This, inturn, has a positive impact on their intent tostay with the company.

One area that requires further attention,though, is employee commitment andwillingness to go beyond the minimumrequirements of their jobs. Whilediscretionary effort is at good levels for ourmanagement population, it decreases forour middle-management, and is below thebenchmark for our white- and blue-collar

populations. Efforts are underway toaddress this issue staff will be engagedthrough workshops, team analyses,feedback sessions and action plans. Inaddition we have launched our Driving

220Sappis apprenticeshipprogramme provides trainingfor over 220 school leavers



42/48

Change program, which will supportaddressing some of the organisationaltopics identified.

Sappi needs to keep our best people, anda low staff turnover rate is a clear indicatorof whether or not this is happening. In 2011,Sappis turnover rate was 14.2% up from7.4% the year before, although this wasprimarily due to restructuring activities. Thecompanys voluntary turnover numbers are

considerably lower 1.4%.Sappis aim is to keep voluntary turnover

below 1.5%.

Trade unions

The Industrial Relations climate betweenSappi Fine Paper Europe and its unions andemployee representatives is generallyconstructive and good bargaining andnegotiations overall take place in goodfaith. The company will continue to keepdialogues open and cordial and ensure staffare properly represented.

Health and safety in the workplaceSappis health and safety approach has fivekey ambitions: a zero injury rate, integratedhealth and safety management, training atall levels, participative information andcontrol structure, adherence to internationalbest practice and safety standards. We holda Safety Awareness Day at all our sitesaround the world. The purpose of the day isto focus the attention on health and safetyissues and to ensure that all staff behave ina responsible way for the sake ofthemselves and their colleagues. Sappismills are getting safer and the majority of

the companys plants have achieved thetarget of one million hours without an injury.The company officially recognises plantswhen they surpass this milestone.

Another measure of good health andsafety is the Lost Time Injury Frequency rate(LTIFR). The table (right) demonstratesSappis progress.

Sappi supports its staff in maintainingtheir physical and mental capacity toperform, and in encouraging them to adopthealthy lifestyles throughout their workinglives. The company offers preventivemedical check-ups and programs. Activities

range from flu vaccinations and counselingfor employees whose well-being is affectedby work or external factors, support ofemployee sports and social activities, toconsultation with a dietician, and stop-

smoking support programs.Sappi has advanced its health and safety

programme through the development ofSARA its new state-of-the-art Europe-wideIT system for improving safety andenvironmental management. The systemsupports that all of Sappis European millsand workplaces conform to the sameprotocols and reporting standards. Thismakes measurement easier and has

improved management.

Compensation philosophy

Sappis compensation policy is aboutrewarding staff fairly and equitably inrelation to job level, experience andemployment market. Variable rates of paydesigned to drive individual and teamperformance are part of this policy.

The majority of staff participate in avariable bonus program which will pay out abonus if certain thresholds and targets aremet. In addition we have a Sales IncentivePlan in place for our sales staff, as well as a

globally aligned Management IncentiveScheme for our management employees.Long-term incentive awards are granted toour management group across Europethrough the Sappi Limited Share IncentiveScheme and the Sappi Limited PerformanceShare Trust.

Pensions

The majority of our employees are coveredthrough social security funded state pensionschemes. Sappi offers company pensionschemes to:

(i) All employees where minimal statepension schemes are provided (e.g. TheNetherlands)

(ii) Certain employees (seniormanagement) where state pension schemes

provide a replacement income only up to acertain salary level (e.g. managementpension schemes in Germany and Austria);

(iii) All employees in line with marketpractice and in response to relatively low

Business YearLTIFR (own

employees)

LTIFR

(contractors)

2009 1,85 6,77

2010 1,44 4,77

2011 1,30 3,67


people


43/48

state pensions (e.g. Belgium). While ourexisting schemes are a combination ofDefined Contribution and Defined Benefitplans, the way forward will be to offerDefined Contribution plans only whereappropriate.

In summary

Sappi can secure its future by attractingskilled employees, continuously developingtheir skills, and building loyalty through awide range of initiatives and services as

detailed in this report. Measures that willhelp us to achieve our goals include:

Offering attractive conditions and trainingprograms to prepare young, skilledemployees for their future work andensuring that we retain employees with keyskills for the long termAnalysing individual competencies and

focusing on developing them through ourcompetency and talent managementprograms

Showing our appreciation for ouremployees dedication for example,through competitive remuneration and a

range of additional benefitsPromoting the mental and physical health

of our employees and providing them withsecure, healthy jobs

Supporting collaboration within thecompany between people of differentcultural backgrounds, age groups andgenders

Complying with all the relevant standardsand declarations at all times (e.g. ILO)

It takes inspirational and engagingleadership to attract, develop and retaintalented and motivated employees whoform the heart of a high performance

culture. At Sappi we are confident that ourprogrammes are sufficiently rigorous andfar-reaching to enable the company tocreate a high performance culture and forthe business to fulfill its ambitions.

DID YOU KNOW?The majority of staff

participate in a variable bonus

program which will pay out a

bonus if certain thresholds

and targets are met



44/48

The managementof the environmental

aspects of our production

processes is part of ourday-to-day work

Our paper is based on fibres derivedfrom wood a renewable resourcewith high levels of renewable energy,

and a resource that is completelyrecyclable. The pulp and paper productionrequires sophisticated processes, raw

materials and energy. The managementof the environmental aspects of theseprocesses and their impact is part of ourday-to-day work.

The following performance indicatorsoffer readers a deeper look at ourenvironmental performance data over thepast five yearsfrom fibre procurementand energy usage to how our operationsimpact on air, water and solid waste.They are based on actual production,and include production of those papermachines and mills that have sinceclosed (Blackburn, Maastricht PM5, Kangas

and Biberist).

It is important to note:

that 2009 was a significant year for SappiFine Paper Europe with the integration offour paper mills from m-real Kirkniemi andKangas in Finland, Stockstadt in Germanyand Biberist in Switzerland. This, coupled

with extreme production curtailments due topoor market demand from the economiccrisis, had a negative impact on theenvironmental performance indicators.Paper machines are designed forcontinuous production. Starting andstopping them required extra water andenergy and impacted on the raw materialefficiency of the production process.If the indicators are also GRI indicatorsthey are reported according to theseguidelines. SO2 and NOx (GRI indicatorEN-20), water use (GRI indicator EN-8 andEN21), COD and TSS (EN-21), solid waste

to landfill (EN-22).

Keyperformance

indicators

% + /



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Total fibre input 2011

Waste to landfill (kg/adt)

Certified

Controlled wood

Own made fibre

Purchased fibre

Fibre-split 2011

FibreOver the last five years we were able to increasethe share of certified fibres and keep it well above 70%.

Our European mills predominantly use PEFCcertification for their fibre sources. In a few regions,including Finland and the state-owned forest in someareas of Germany, both FSCTM and PEFC certification isplanned. Overall the number of certified forests is slowlyincreasing in Western and Central Europe.

Any non-certified material entering our products issubject to strict risk assessment processes which meetFSCTM Controlled Wood requirements and the PEFCDue Diligence System.

We are the Europe market leader in integratedsulphite pulp production. Together with the CTMP(Chemical Thermo Mechanical Pulp) production at ourLanaken and Kirkniemi mills we produce 47% of ourfibre needs ourselves.

Certified fibre share SFPE

PEFC FSCTM Target

100

2007 2008 2009 2010 2011

90

80

70

60

50

40

30

20

10

0

WasteThe material that is landfilled is to a large extent ash,which can be used for other things, such as theproduction of cement, other mineral building material,fertiliser and soil substrates. The majority of our ashesare already recycled and we are further working toreduce the amount of material to landfill.

There is no organic material from our mills going tolandfill. Where possible, the organic waste materialgenerated at our sites is used as a renewable fuel onsite to produce by-products.

Waste paper, scrap metal, scrap electronics and evenmost of the hazardous waste and building rubble isrecycled, while residual waste is sent to sorting centres

where recyclable material is recovered.

1.0

2007 2008 2009 2010 2011

2.03.04.05.06.07.0

8.09.0

10.0



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EmissionsThe emission parameter which is receiving most ofthe attention is carbon dioxide due to its impact onclimate change. We are addressing this with ourreduction target (see page 9).

SO2 and NOx are two emission parameters importantto control as they can contribute to acid rain which, inturn, negatively impact our forests health, as well asthe health of the plant and wildlife around us.

SO2 is emitted from the use of fossil fuels, such

as coal and oil. More significant, however, are theemissions from our recovery boilers which usethe black liquor from the pulping process. The SO2in the off gas of the incineration process is recoveredin a cascade of wet scrubbers and recycled intocooking acid.

NOx emissions are caused by any combustionprocess where nitrogen (air) is present. Hightemperatures, which are sometimes needed to increaseefficiency, can increase the generation of theseemissions. A small downward trend can be shown overthe past three years.

Water

emissionsCOD and TSS are key indicators for organic pollution to water.Our highly sophisticated waste water treatment plantsdramatically reduce the organic pollution. Some of the COD isresidual lignin that our treatment plants cannot reduce further.However, it is inert and does not reduce oxygen levels inreceiving waters. The general specific trend is downwardswith a small increase in COD in 2011.

0.05

2007 2008 2009 2010 2011

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.10

2007 2008 2009 2010 2011

0.20

0.30

0.40

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2011 Sappi Fine Paper Europe Sustainability Report

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