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September, 26. 2005

From Russia with Transparency: Implementing corporate sustainability values in the supply chain of wood and paper

In a joint pilot project, Stora Enso and publishers Axel Springer, Random House Group UK and Time Inc. combine forces to improve the transparency of the wood supply chain - Interim Report reviewed by Transparency International, the leading international NGO devoted to combating corruption.

For the first time, some of the largest international players in the supply chain of wood and paper have combined forces in order to improve the transparency of social and ecological conditions of wood supply from Russia. The Tikhvin Project focuses particularly on the legality and probity of wood, working conditions, welfare generation in the local community and environmental issues in Russia.

Wood from European Russia today makes up 20% of the fresh fibre used at Finnish pulp and paper mills. For Stora Enso, Russia is an important area in terms of wood procurement, direct investments and market potential. Stora Enso's ambition is that all wood fibre used globally for the Group's products meet Stora Enso's high sustainability requirements.

Paper customers like Axel Springer, Time Inc. and Random House Group UK do continuously express their interest in the tangible (e.g. printability, strength) as well as the intangible (e.g. supply chain integrity, social and ecological conditions) quality of the products they purchase.

"One important innovative aspect of this approach is that potential competitors work together in this task instead of seeking short-term PR advantages for their individual companies", says Cobus de Swardt from Transparency International.

In order to implement Stora Enso's Code of Ethics and sustainability agenda, the Group has installed a set of management and internal and external verification systems for the supply chains of wood raw material from Russia. The pilot project "From Russia with Transparency" is part of the sustainability agenda. For this purpose several Russian wood producers were studied as potential partners. For the pilot phase Russkiy Les, a subsidiary of Stora Enso since summer 2004, was invited to join the project. During 2004 and 2005 six working sessions took place in Tikhvin, St. Petersburg, Helsinki, Berlin and Hamburg.

To date the project has achieved:
1. Building a project team with members representing different departments of different companies from different industries and different countries.
2. Overcoming language difficulties and cultural differences, as well as developing personal relationships and mutual trust between the project partners.
3. Achieving a common understanding of the challenges and opportunities in the implementation of corporate sustainability values throughout globalised supply chains.
4. Developing the first public sustainability website (www.tikhvinproject.ru) of a wood producer in Russia as a means to promote transparency of social and ecological conditions of wood production at Russkiy Les in Tikhvin.
5. Designing a practical framework for analysing, monitoring and communicating working conditions, business practises and community involvement of wood suppliers.
6. Publishing the first project report as a basis for extending this transparency concept to other Russian wood suppliers and as a model ready to be applied with other suppliers of raw materials - not only in Russia.
7. Introducing the practice of inviting external experts providing independent knowledge on sensitive aspects of the wood supply chain. Specifically: Karelian Research Centre and Transparency International.
8. Starting an open dialogue with the NGO Transparency International (TI) on ways to address transparency issues in the supply chain of wood and paper and inviting TI to critically review the interim project report. This interaction also gave TI the opportunity to gain further experience in working with leading private sector companies and applying their expertise to the private sector.
9. Agreeing on plan of actions for the project's Phase II (October 2005 - December 2006).

Action plan:
The joint analysis of this project did identify a list of areas for improvement, which will be addressed in Phase II of the project. The specific tasks as documented in the first project report include:

* Improving the culture of safety to reduce work-related accidents (Russkiy Les)
* Preparing for forest certification to FSC (Russkiy Les)
* Upgrading supplier policies and requirements in sustainability, in particular in legality, working conditions and business practices (Stora Enso Wood Supply Russia)
* Introducing "Assured Wood Traceability" for all paper suppliers (Axel Springer)
* Actively encouraging progress towards internal forest certification targets and promoting implementation on a broader scale among US purchasers of paper products (Time Inc.)
* Implementing FSC chain-of-custody for the paper suppliers (Random House Group UK).
* Identifying, inviting and gaining the co-operation of an independent Russian wood producer to participate in Phase II of the project (all project partners).

"Many forest sector businesses aim for sustainability but are uncomfortable talking about sensitive business issues, such as corruption. The Tikhvin project team members have the courage to acknowledge that sustainability and ethical business practices are linked. We welcome this pioneering effort and we hope the team will implement our recommendations", said Cobus de Swardt from Transparency International.

"Successful implementation of corporate policies and principles requires local adaptation. In Russia we have the tools needed to have a firm grip on wood sources to ensure compliance with our quality principles - including sustainability aspects. However we are aware that there are some areas where we still need to work hard to reach our sustainability targets", said Kauko Parviainen, Senior Vice President of Stora Enso Wood Supply Russia.

"We expect our paper partners to take sustainability values very seriously. Therefore we welcome this innovative partnership along the wood and paper chain", said Herbert Woodtli, Head of Central Purchasing of Axel Springer.

The interim project report published today in Helsinki documents how corporate values can be cascaded through the whole supply chain - from Russian forests in Tikhvin to Finnish paper mills, to demanding customers in Germany, UK and USA and to readers of newspapers, magazines and books all over the world.

About the partners of this project:

Stora Enso is an integrated paper, packaging and forest products company producing publication and fine papers, packaging boards and wood products, areas in which the Group is a global market leader. Stora Enso sales totalled EUR 12.4 billion in 2004. The Group has some 45 000 employees in more than 40 countries in five continents and an annual production capacity of 16.4 million tonnes of paper and board and 7.7 million cubic metres of sawn wood products, including 3.2 million cubic metres of value-added products. Stora Enso's shares are listed in Helsinki, Stockholm and New York.

Russkiy Les is a medium-sized logging company based in Tikhvin, Russia. The company operates silviculture, forest regeneration, harvesting and transportation of wood in its long-term forest lease areas, which total 152 000 hectares. The wood is processed in Stora Enso's mills in Russia (sawlogs) and Finland (pulpwood). Russkiy Les was acquired by Stora Enso in 2004.

Time Inc. is the world's leading magazine publisher, publishing 140 regular-frequency titles with over 300 million readers. Time Inc. a wholly-owned subsidiary of Time Warner Inc., is a leading media and entertainment company whose businesses include interactive services, cable systems, filmed entertainment, television networks and publishing.

Random House Group UK is the leading consumer books publisher in the UK, with subsidiary companies in Australia, New Zealand and South Africa. It is part of the worldwide Random House Publishing Group, the largest English language publisher in the world. Random House Publishing Group is a division of Bertelsmann AG, an international media company.

Axel Springer is the leading newspaper publisher in Germany and one of the leading international media enterprises. The core business of Axel Springer AG is newspapers, magazines and digital distribution channels, supported by state-of-the-art printing works and efficient marketing organisations.

For further information:
Kauko Parviainen, Senior Vice President
Stora Enso Wood Supply Russia, tel. +358 400 891 460
Vladimir Fast, General Director
Russkiy Les, tel. +7 813 675 2044
David Refkin, Director of Sustainable Development
Time Inc., tel. +1 212 522 3356
Stephen Esson, Group Production Director
Random House Group UK, tel. +44 207 840 8502
Katherine Hockley, Production Manager
Random House Group UK, tel. +44 207 840 8746
Florian Nehm, Corporate Sustainability Officer
Axel Springer, tel. +49 302 591 793 70
Cobus de Swardt, Global Programmes Director,
Transparency International, tel. +49 30 34 38 20 658
Central press contact:
Pirjetta Soikkeli, Stora Enso Oyj
Tel. +358 2046 21294, +358 40 750 0093, Fax +358 2046 21267
e-mail pirjetta.soikkeli@storaenso.com
Photos from Tikhvin are available at
http://bmt.storaenso.com/storaensolink.jsp?imageid=20050926
The project report is available at www.tikhvinproject.ru

www.storaenso.com


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