In support of action against climate change

Policy Statement
SKG recognises its responsibility for ensuring sustainability with regard to the sourcing of wood and virgin fibre from third parties or timber harvested from its owned forest lands, for the purposes of converting it into appropriate value added products.

Whether SKG owns, leases or manages areas of forest, we:

• as a minimum, adhere to all relevant national laws and international treaties
• seek to achieve accreditation by a recognised forest certification scheme at the earliest possible date
• pursue the protection of natural forests, so as to ensure conservation and sustainable use of their biodiversity and as far as possible contribute to watershed and habitat protection
• contribute to the development of a forestry culture by means of an open information exchange with interested parties. We also promote meaningful relationships with Government, local communities, NGOs and other relevant stakeholders
• allocate resources to sustainable forest management, including education and training in forest research and natural ecosystems.

For timber and pulp purchases from third parties we:

• ensure that all wood suppliers are legally compliant and preferably certified to FSC or PEFC or a credible alternative standard. We further request all wood suppliers to guarantee that their wood originates from non-controversial sources.
• ensure that all our European mills using wood as a raw material are certified with Chain-of-Custody (CoC) certification, either through FSC or PEFC. In Latin America, two thirds of our wood based paper production is FSC certified
• purchase or produce bleached pulp that is either elemental chlorine free or total chlorine free
• purchase pulp only from mills that have CoC certification from FSC or PEFC or a credible alternative certification scheme.

For other forest based products purchased by SKG we require that all our suppliers meet the commitments expressed above for wood or fibre.

We have implemented appropriate communication, training and auditing procedures to ensure that all SKG operations meet the requirements outlined in this policy statement.

SKG’s involvement in forestry
Our products are manufactured from virgin fibres and/or recycled fibres. The charts above show per region the type of fibres produced by our pulp, paper and board mills and also the papers externally sourced for our converting operations.

SKG owns forests in Colombia and Venezuela, where we have over 95,000 hectares and we manage a further 6,500 hectares. These plantations provide the mills in both countries with almost all of their virgin fibre requirements. During 2009 the total amount of virgin pulp that we processed in Colombia and Venezuela (both market and wood) was over 260,000 tonnes.

The forest plantations in Colombia have been FSC certified since 2003. In March 2009 our plantations successfully renewed their FSC Chain of Custody certification.

During 2009, we have worked hard to extend the FSC Chain of Custody certification to all our operations in Colombia for all our products (pulp, all grades of paper and board and all types of packaging). In October 2009, Smurfit Kappa Cartón de Colombia and all its subsidiaries were granted this certification.

The forest plantations in Venezuela have not yet been certified but are well advanced in terms of best practice and will seek certifications as local circumstances permit.

The main species harvested are varieties of Eucalyptus and the ones most commonly used by SKG in Colombia and Venezuela are grandis and urograndis. The Eucalyptus plantations act as effective water regulators through the filtration and gradual release of water into streams and rivers, thus helping to avoid soil erosion and localised flooding. As a tree that grows very rapidly, Eucalyptus is also an efficient purifier of air. As with all trees, the plantations act as efficient carbon sinks whereby the trees absorb carbon dioxide (thus “fixing” the carbon in their wood) and release oxygen.

Colombia has the largest concentration of the Group’s forest ownership, 69,000 hectares. The company manages its forest estate based on sustainable development principles, promoting economic growth, a responsible use of natural resources and fostering social equity in the regions where forest plantations are located.

In Venezuela, the Forestry Division owns 35,000 hectares in three western states of the country. Of this total, 19,000 hectares are commercial plantations, 13,000 hectares are natural reserves and the balance is given over to infrastructure (roads, facilities and nurseries).

Commercial plantations include over 12,000 hectares of short fibre (Eucalyptus mainly) while 6,400 hectares are long fibre (Pinus caribaea). The balance is used for research and development such as silviculture, plantation management, forest protection and forestry research.

During the plantation life cycle, SKG conforms to the numerous governmental legal, technical and environmental regulations, for which, in most cases, annual renewals are required.

In Europe, SKG neither owns nor leases forests. We act as forestry ’managers’ with our forestry co-operation partners in France and Spain.

In 2009 SKG processed 1.4 million tonnes of virgin pulp in Europe, either from wood or market pulp.

Certification schemes
SKG recognises and utilises the two major international forest certification schemes, FSC and PEFC.

A credible forest certification for our suppliers provides assurance to us and to our customers that the wood and fibres we source externally originates from sustainable forests and are legitimately sourced.

All our operations handling wood in Europe are Chain of Custody certified by FSC or PEFC. These include all our mills where virgin fibres are produced, together with our plywood plant in France and the two wood supply companies of the Group in France and Spain.

Certification ensures that, both for our operations and for external suppliers, assessments are performed regularly by an independent accredited organisation.

The lack of availability of certified wood in some countries where we purchase wood (mainly Sweden and Spain) lead us to restrict the volume of end product that may be labelled as certified.

While 100% of our virgin paper capacity in Europe was Chain of Custody certified in 2009, we can certify only 57% of our paper production.

The statistics from Confederation of European Paper Industries (CEPI) show that in 2008, 76% of virgin paper, tissue and board production capacity at European mills is Chain of Custody certified by PEFC or FSC, but only 13% of paper, tissue and board is sold as being certified.

Our customers increasingly require us to supply them with certified packaging. Early in 2009 we started to certify Chain of Custody at a number of our converting plants. This effort was initiated in the UK where demand for certified packaging is strongest. In order to be flexible and to take into account the total European situation we seek dual certification (PEFC and FSC) of our plants.

Currently we are in the process of certifying all our European recycled containerboard mills. This will allow us to certify significant volumes of packaging as FSC or PEFC certified. This is a commitment in our Sustainability Roadmap for 2010.

In 2009 we achieved full CoC FSC certification of our recycled mill system in the UK, which represents 15% of our recycled containerboard production in Europe. In our Roadmap, we have committed to increase this to 100% in 2010. 100% of our European uncoated solidboard production is also FSC recycled certified.

Biodiversity
As all our forest ownership is located in Latin America, these comments are concentrated on that region.

In Colombia, the Forestry Division, in cooperation with the National Centre for Coffee Research (CENICAFE) and more recently with the Forestry Engineering School of Universidad Nacional de Colombia in Medellin, has continued its research work to determine the water consumption of Eucalyptus grandis, which is one of the main sources of short fibre for our Colombian Mills.

In addition to the water usage project, the forestry R&D group and the CENICAFE plant physiology team are now working on the potential carbon sequestration capabilities of the pine and eucalyptus species planted by Smurfit Kappa Cartón de Colombia.

In Colombia 21,000 hectares of the total forest area of 69,000 hectares are natural forest, while in Venezuela the balance is 13,000 hectares of natural forest, of the 35,000 hectares owned by the Group.

Natural forests located on our lands are protected and not replaced by plantations, thus maintaining biodiversity, preserving watersheds and helping to conserve natural habitats.

SKG fully recognises both the rights and the responsibilities which come with being members of the community, as established by Colombian legislation. We participate and cooperate with the progress and improvement in the quality of life of the communities established in the areas where we manage our forests. This acts as a complement to the responsibilities of the Government.

At the Claridad farm, located in the Cauca region of Colombia, a seed orchard has been established using the best clones from the genetic improvement programme, involving hybrid crosses between diverse tree species.

These combine the optimum features of the species in relation to growth, disease resistance and quality of fibre.

Included amongst the principles of the company’s forestry policy in Latin America are:

• the development of a continuous and systematic research programme to preserve and enhance soil productivity
• identifying appropriate species and forestry systems that will enable the increase of plantation yields with environmental protection
• the preservation of natural forests located on company lands, so as to ensure the sustainability of forest diversity and thereby contribute to the protection of water sources and the habitat of flora and fauna.

SKG has also participated in the studies carried out by the Forestry Engineering School concerning a micro river basin with pastures, native forest regeneration and eucalyptus plantations on former grassland. The study measures the effects of water yield when grassland is replaced by plantations.

The company contributes to the development of a forestry culture by means of an open, non proprietary, information exchange with interested individuals and organisations. There is also a continuous dialogue with customers, communities, government, employees and investors aimed at an improvement in goods and services obtained from sustainable forest management.

Protected Areas
We have identified the SKG operations which are either within or in close proximity to legally protected areas or areas of high biodiversity value.

Natura 2000 is an ecology network of protected areas in the territory of the European Union which has been created in 1992 after governments adopted legislation designed to protect the most seriously threatened habitats and species across Europe. Ten of our European sites are located or adjacent to such protected areas.

Some eleven other sites are adjacent or within areas protected by national or local status. Additionally, five of our operations withdraw from or discharge water to bodies that are protected or classified as sensitive.

SKG is keenly aware of these situations and continues to take all necessary steps to ensure both the environmental protection and the sustainability of these sensitive areas.

The list of these sites can be found on our website at www.smurfitkappa.com.