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Page 1: APP-China Sustainability Report 2010
Page 2: APP-China Sustainability Report 2010
Page 3: APP-China Sustainability Report 2010

—02—

The year 2010 marked a significant year for the paper industry in China. The Chinese paper industry, recovered from the global financial crisis, continued to grow rapidly and steadily. In less than two decades China has become the largest paper and packaging board producer in the world as a result of the surge in production by major domestic industry players. The opening up of the Chinese paper sector has also led to the restructuring of the global paper industry, bringing substantial investments from global giants in upgrading and mergers with domestic paper producers. All the increasing production capacity was realized in 2010. On the other hand, during this year the European Union initiated anti-dumping and anti-subsidy investigations while the U.S. began to levy both anti-dumping and anti-subsidy duties on imports of coated fine paper from China. Rising domestic capacity and drastic reduction in export to the U.S. and European markets posed dual challenges to APP-China. In the meantime, fierce global competition for raw materials, changes in the Government’s policy towards foreign investments, and increasingly stringent environmental compliance and regulations has led APP-China to face with key global issues. In spite of these mounting pressures, APP-China, guided by the company’s sustainability pledge Paper Contract with China, succeeded in achieving production volumes of 8 million tons and an export volume of 1.64 million tons of paper and packaging board products in 2010. This accounted for 8.6% of the national production capacity and 37.9% of the total export volume of China’s paper industry*. APP-China’s total assets amounted to RMB96.834 billion (US$14.90 billion) with sales revenue of RMB37.915 billion (US$5.83 billion) and profit of RMB2.517 billion (US$0.39 billion). This year’s outstanding achievement was made possible by APP-China’s management team’s leadership in a rapidly changing market and our 38,900 employees’ commitment to the corporate philosophy of “Challenging Limitations and Pursuing Excellence”. With a keen eye on the changing business environment, APP-China acted quickly in tapping into new international markets by increasing export volume as well as improving product quality and creating added value for the needs of domestic customers. Spearheaded by the strong “Integration of Plantation-Pulp-Paper” green business model, APP-China has remained competitive in securing raw materials by continuing to develop plantation sites and through acquiring pulp mills in Asia. For the corporate management, 2010 was a year of implementation with a focus on efficiency. To further reduce our greenhouse gas emissions and lower our overall environmental impact, APP-China raised the bar on the efficient use of energy and water, power

generation and power plant efficiency, and the recycling and reuse of production waste and byproducts. This strategy was proven a success, as evidenced by a strengthened competitive edge and a reduction in production costs. We are proud that APP-China has one of the lowest consumptions of energy and water per unit of production in the paper industry, both in China and the world at large. We have met the ambitious environmental standards in the Yangtze River, Taihu Lake and Hainan Island regions, which employ environmental standards more stringent than the national standards. To further the sustainable development of China’s paper industry, APP-China continues to share our industry-leading sustainability practices and management expertise with our counterparts. APP-China places strong emphasis on employee and community development. In 2010, APP-China founded APP University and developed a succession plan to identify and cultivate an innovative management team with insights and competence. As a strong advocate of corporate social responsibility, APP-China subscribes to the spirit of harmonious and economic development by providing employment opportunities and growth in the regions in which we operate. In addition to acting quickly and effectively in contributing to disaster relief and rehabilitation, APP-China has been investing in education and training for the underprivileged, promoting environmental protection, protecting cultural diversity, and supporting the Government’s modernization of agriculture and rural transformation. With the management team taking the lead and translating words into actions, APP-China employees are encouraged to take part in community services, and individual employees’ community service hours are critical towards their career advancement. In the light of intensified market competition, the integration of strategies and resources is crucial to APP-China’s sustainable development in the next three to five years. This includes consolidating resources from APP-China’s various business units to accelerate market responses, expanding into new markets through market integration, consolidating financial resources to explore alternative financing options and solidify the firm’s financial risk management, and building a diversified product mix with a focus on creating high value added products to stimulate the industry value chain. Given the global environmental changes and the National Twelfth Five Year Plan, APP-China will look into product life cycle to leverage our integrated plantation-pulp-paper model, and continue to make improvements on the efficient use of resources and promote a recycle economy with sustainable development.

Teguh Ganda WijayaChairman & CEO

Sinar Mas and APP-China

Message from the Chairman

* Information source: China Paper Year Book 2011, China Paper Association

Page 4: APP-China Sustainability Report 2010

Contents

Message from the ChairmanAbout This ReportCorporate ProfileAchievements and AwardsCorporate Governance Organization Chart

Ethical Business Practices

Anti-corruption and anti-bribery

International trade compliance

Stakeholder Engagement

Stakeholder study

Matrix of stakeholder concerns and impacts

Stakeholder communications channels

Sustainable Development and Management Sustainable Development and Management System

Sustainable Forest Plantation Development Overview of APP-China Forestry

Forestry Operation Management

APP-China Forestry sustainable

development strategy

Management policies

Legal compliance

Environment, health and safety management

Supply chain management

Modern Science and Technology Approach

Utilization of forest plantation resources

High conservation value protection

Enrichment of forest plantation

composition, structure and diversity

Greener fertilizing programs

Impact assessment and monitoring

Building Harmony within Communities

Fire prevention and control

Illegal logging prevention

Building social cohesion, harmony and security

2

4

5

7

9

17

19

Sustainable Pulp and Paper Production Overview

APP-China 2010 performance map of

sustainable plantation-pulp-paper integration

Green Procurement

Energy Saving and Resources/Emissions Reduction

Maximizing water utilization rates

Energy efficiency

Waste management and reduction

Recollect and Recycle Paper

Corporate Responsibility Responsible for Products

Product quality and safety management system

Eco-labeling and certification

Eco-friendly product design

Customer services

Customer satisfaction

Responsible for Employees

Overview of employees

Salary and welfare

Training and development

Occupational health and safety

Employee satisfaction

Responsible for Industry

Promote industry exchange

Take lead in industry development

Responsible for Community

Contributing to Society

Facts and FiguresOutlook of APP-China Sustainable Development for 2011ISO26000 Performance StatementAssurance StatementGRI IndexGlossaryFeedback

29

43

57

58

59

61

63

67

68

Page 5: APP-China Sustainability Report 2010

—04—

This is the fifth Sustainability Report published by Asia Pulp & Paper China (APP-China), and the first to utilize both ISO 26000 and GRI 3.1. Through this report we aim to keep stakeholders informed of our policies, management, actions and performance in sustainable development, as part of our ongoing commitment to society.

This report used all of the core and complementary indices of the Sustainability Reporting Guidelines Version 3.1 (G3.1) of the Global Reporting Initiative (GRI) with the application ranking qualified under level B+.

For the first time, it adopted the ISO26000 Guidelines on Social Responsibility launched in November 2010 by the International Organization for Standardization (ISO). Based on the foundation of the 2009 report, the Sustainability Report 2010 continues to address key stakeholder concerns so as to re-work Message from the Chairman, Corporate Profile, Corporate Governance, Sustainable Development and Management and Stakeholder Engagement etc.

Language: Chinese and English;Period: January 1, 2010 – December 31, 2010;Frequency: Annually;Last Reporting Period: November, 2010;Assurance: APP-China commissioned SGS-CSTC Standards Technical Service Co., Limited (SGS) to assure the reliability, objectivity and transparency of this report. Please refer to the Assurance Statement.

APP-China is committed to promoting and strengthening the sustainable development of our business by keeping an open dialogue with our stakeholders. We welcome your comments, perspectives, and suggestions on our work.

Index SelectionIn accordance with the GRI (G3.1), APP-China developed this report based on the following indicators:● The analysis of the most relevant and important sustainable development issues;● Stakeholder engagement;● Continuity with the previous reports.

In particular, this report placed emphasis on the first two indicators and intends to address and respond to key stakeholder concerns and their impacts on APP-China and our stakeholders with a more simplified approach.

APP-China commissioned Det Norske Veritas (DNV) to conduct an independent third party study on the perceptions, expectations, and recommendations of APP-China’s key stakeholders. Improvement measures include but not limited to redesign the written questionnaire, conduct the study complimented with face-to face interviews, enlarge the sample size and adopt a semi-quantitative analysis. All aims to examining the key stakeholder concerns and communications channels in a comprehensive manner to establish a benchmark for effective stakeholder communications and cooperation in the future. For more details, please refer to the section for Stakeholder Engagement.

Scope of ReportThe APP-China Sustainability Report 2010 includes Hainan Gold Hongye Paper Co., Limited and Hainan Gold Shengpu Paper Co., Limited for the first time, and was expanded to cover Gold Hongye Paper Group Co., Limited from the previous Gold Hongye Paper (Suzhou Industrial Park) Co., Limited. The full list, including APP-China Head Office, eight pulp and paper mills, APP-China Forestry, and 5 forestry business sub-units, covers the following entities:● APP-China Head Office● Gold East Paper (Jiangsu) Co., Limited (Gold East Paper)● Hainan Jinhai Pulp & Paper Co., Limited (Hainan Jinhai Pulp & Paper)● Ningbo Zhonghua Paper Co., Limited (Ningbo Zhonghua)● Ningbo Asia Pulp & Paper Co., Limited (Ningbo Asia)● Gold Huasheng Paper (Suzhou Industrial Park) Co., Limited (Gold Huasheng)● Gold Hongye Paper Group Co., Limited (Suzhou Gold Hongye)● Hainan Gold Hongye Paper Co., Limited (Hainan Gold Hongye)● Hainan Gold Shengpu Paper Co., Limited (Hainan Gold Shengpu)● APP-China Forestry Business Unit Head Office (APP-China Forestry)● Hainan, Guangdong, Guangxi, Yunnan and Henan Forestry business sub-units

Given the large scale, complex organizations and widespread locations, APP-China intends to extend scope of the report to cover more business operations in the future.

Data and Information CollectionAPP-China adopted industry-recognized guidelines and criteria in listing, measuring and disclosing the data. The report includes historical reference with no effort spared to help stakeholders evaluate the performance of our sustainable development.

Methodology for Data and Information CollectionBuilding upon the foundation of APP-China Sustainability Report 2009 and its methodology for data and information collection, the standards, definitions, formula, indicators and footnotes used in the 2010 report are an adaptation of major industry guidelines, including; the GRI (G3.1), the International Finance Corporation (IFC) Guidelines for Environment, Health & Safety of Forest Logging Operation and Papermaking Industry, regulations of the national and local authorities where APP-China’s different business units operate in, as well as APP-China’s best practices in sustainable development.

Clarification on Collected Data and Information:Due to a larger reporting scope in 2010, there may be variations or areas where comparison with those of the 2008 and 2009 reports is not feasible. Some data in this report was collected and included for the first time and therefore has no basis for comparison. Information from Hainan Gold Hongye and Hainan Gold Shengpu was collected and included for the first time and does not have any historical reference.

Part of the data presented in the sections of Message from the Chairman, Corporate Profile, and Achievements and Awards is the aggregate amount of all entities operating under APP-China while in all other sections, data and information presented only refer to specific entities specified in the scope of the report.

About This Report

Page 6: APP-China Sustainability Report 2010

—05—

APP-China is synonymous with Sinar Mas Paper (China) Investment Co., Limited and the group of companies under the direct investments in China. APP-China is a business entity of Asia Pulp & Paper Co., Limited of Indonesian Sinar Mar. Sinar Mas was founded by the renowned Chinese entrepreneur Mr. Huang Yicong and which operates in four major industries including pulp & paper, food & agriculture, financial services and real estate & property development. The pulp & paper business was registered as Asia Pulp and Paper (APP) in Singapore in 1994. Over the years APP has grown to be one of the top 10 global pulp and paper companies with a total asset of USD 20 billion and an annual production of 14 million tons.

APP-China began to invest in manufacturing sites in China since 1992 focusing primarily on the Yangtze and Pearl River Deltas. In less than two decades, APP-China has established more than 20 pulp and paper mills in China with state-of-the-art technology and equipment, as well as managing well-developed modern and fast-growing plantation sites. Major mills include Gold East Paper, Hainan Jinhai Pulp and Paper, Ningbo Zhonghua, Ningbo Asia, Gold Huasheng and Gold Hongye.

Gold East Paper is the largest paper mill in China and one of the world’s major art paper producers, while Ningbo Zhonghua and Ningbo Asia are two of the largest industrial paper producers in China today. Gold Huasheng is one of China’s biggest diversified fine paper producers. Similarly when it comes to tissue grades Gold Hongye is one of the top household paper makers in China. Hainan Jinhai Pulp and Paper is one of the largest pulp producers in China, and finally Yalong Paper is on the “premier league” when it comes to Chinese paper stationery producers.

By the end of 2010 APP-China was operating more than 20 pulp and paper mills as wholly-owned subsidiaries and holding companies representing total assets of RMB 86.83 billion. Total production volume from the mills achieved 8 million tons with sales revenues exceeding RMB 37.9 billion. The full time work force of APP-China by the end of 2010 totaled 38,900 personnel.

In line with sustainable development, APP-China is committed to

operations being that are in harmony with the environment and social development. As a world-class integrated Plantation-Pulp-Paper operator in the 21st century, APP-China is devoted to a renewable economic model with more than 300,000 hectares of forestry plantation.

In January 2010, APP-China was honored with the “2009 Multinational Corporation in China Contribution Award” for its Circular Plantation-Paper Business Model. In January 2010, at the first annual meeting of Low Carbon China Forum, APP-China was awarded the “International Enterprise Contribution to Low Carbon in China Award”. In December the same year APP-China was the first paper-making enterprise in China to obtain the “China Environment Labeling (Type I)” from the Environmental Certification Center of the Ministry of Environmental Protection for five of the products manufactured by the six mills, Gold East Paper, Hainan Jinhai Pulp and Paper, Ningbo Zhonghua, Ningbo Asia, Gold Huasheng and Suzhou Gold Hongye.

By the end of 2010, APP-China had invested more than RMB 5.5 billion in sustainable and responsible papermaking and in turn has gradually changed the perception of the paper industry as a major source of pollution in China.

As a responsible corporate citizen, APP-China plays an active role in supporting local communities and giving back to society in line with government policies. By the end of 2010, APP-China has cumulatively paid more than RMB 15 billion in taxes in China, and made more than RMB 600 million in charitable donations. In March 2010, APP-China was honored the first “Global Charity Award.”

Through introducing state-of-the-art technologies and large-scale production, APP-China has transformed the Chinese paper industry into an innovative, modern and sustainable one. APP-China will continue to strengthen our best practices in sustainability and promoting the green cycle concept in order to achieve a green papermaking industry that balances economic, environmental and social benefits.

Total production volume (10,000 ton)

02008 2009

437.76 444.96479.88

700.87764.46

909.9

2010

400

500

100

200

300

Total assets (RMB 100 million)

4002008 2009 2010

1000

600

800900

500

700

Note: The data and information disclosed in the two charts refer to the sum of those entities specified in the scope of report. Due to a larger scope of report in 2010 and a different data collection system used in 2009 and 2010, there may be variations or areas where comparison with those in the previous reports is not feasible.

Corporate Profile

Page 7: APP-China Sustainability Report 2010

—06—

Main products of APP-China

Mills / Biz units

APP-China Forestry

Hainan Jinhai Pulp and Paper

Gold East Paper and Gold

Huasheng

Ningbo Zhonghua and Ningbo Asia

Suzhou Gold Hongye, Hainan Gold

Hongye and Hainan Gold Shengpu

Main products

Wood

Wood pulp

Coated paper, one side label, offset paper, light coated print paper, photocopy paper, drawing used for engineering, digital printing paper, carbonless paper

White paperboard

Toilet paper, tissue paper, toilet

tissue, kitchen towel and wet tissue

Main brands

---

Dragon

Space Shuttle, Dongfan,

Shendun, Likede, Gold Ball,

Gold Butterfly

Jinbei1, Jin’ou1, Qiuzhang, Hanwei,

Gold Butterfly1, Yupai and Baiyu

Virjoy2, Breeze2, Zhenzhen

Product

Forest plantation

Pulp

Fine art paper

Industrial paper

Household paper

Paper

Note 1: Gold Butterfly C2S two side coated art board, Jin’ou C2S playing card board and Jinbei C1S coated duplex board are recognized with the honor of “Famous Product” of Zhejiang province in 2010.Note 2: Virjoy is recognized as “Famous Brand” of Jiangsu province; Breeze is “Famous Brand” and “Famous Product” of Jiangsu province and Suzhou city.

Page 8: APP-China Sustainability Report 2010

APP-China emerged from the global financial crisis with steady operations and ended the year 2010 with total sales revenues of RMB37.9 billion

37.9billion

In 2010 APP-China achieved a production capacity of 8 million tons to meet the rapid growth from the Chinese and International markets.

8million tons

With increasing production capacity, APP-China provides stable employment and career development to more than 38,900 employees.

38,900employees

By the end of 2010, APP-China had invested more than RMB 5.5 billion in environmental protection.

5.5billion

By year end 2010, APP-China employees have accumulatively contributed more than 98,000 man-hours towards voluntary service.

98,000man-hours

APP-China continued to improve water-use efficiency for both pulp and paper production. Wastewater discharge at major paper mills in 2010 amounted to 7.28 tons per ton of paper and 15.78 tons per ton of pulp for major pulp mills.

7.28 tons

15.78 tons

—07—

Achievements and Awards

Page 9: APP-China Sustainability Report 2010

The Shanghai World Expo Coordination Bureau awarded a Letter of Appreciation to Mr. Teguh Ganda Wijaya, Chairman and CEO of APP-China in recognition of his contribution to EXPO 2010 SHANGHAI.

APP-China was honored the “2010 Global Corporate Philanthropy Award” from Global Charity magazine which was supported by the China Soong Qing Ling Foundation, the Red Cross Society of China and the Care for China Next Generation Working Committee.

APP-China was featured for the second consecutive year as one of the “Top 100 CSR Enterprises in China”. At the second annual meeting of “CSR Enterprises of China” organized jointly by the China Association of Enterprises with Foreign Investment (CAEFI), China Foundation of Consumer Protection (CFCP), China Private Economy Research Institute, and China Forum of Environmental Journalists (CFEJ), APP-China was honored with the “2010 China Good Corporate Citizen Enterprise Award”.

APP-China’s “Circular Forestry-Paper business model” was honored with the “2010 Multinational Corporation in China Contribution Award” presented by the China Enterprise News and the CSR Research Center for Chinese Companies for the second consecutive year.

People’s Daily Online awarded APP-China the “2010 Innovative Award for Top 10 Low-carbon Technology & Product in China” for the second consecutive year.

APP-China was awarded the “2010 Best Recruitment Management Award” and “2010 100 Best Human Resource Management Company” by 51Job.com in recognition of the company’s outstanding practices of recruitment management and human resource development.

—08—

Page 10: APP-China Sustainability Report 2010

—09—

Since 1992, APP-China has been dedicated to reviving one of the greatest Chinese inventions – papermaking. APP-

China is committed to transforming the industry into a modern and sustainable one through introducing state-of-the-art

technologies, large-scale production and cleaner production. To support Chinese government’s advocate of plantation-

pulp-paper integration model, APP-China has spared no effort in building infrastructure of raw material supply and in

social responsibility and sustainable development in the communities where we operate.

Vision and Mission (Please refer to APP-China Sustainability Report 2009 p. 9-10 for more information):

The management strategy of APP-China in 2010 was to reinforce the integration and development of its upstream and

downstream industry chain. For the upstream, APP-China actively expanded the forest plantation and pulp production.

For the downstream, APP-China adopted more sophisticated processing to create value added product lines and

customized paper products with special functions.

Core concept: Plantation-Pulp-Paper integration green cycle

Vision: APP-China will continue to be the world's premier, fully integrated green-cycle plantation-pulp-paper conglomerate.

Mission: Be sensitive to the environment; Preserve paper-making inven-tions; Improve quality of life;

Corporate Governance

Page 11: APP-China Sustainability Report 2010

—10—

APP-China’s governance structure is composed of the Shareholders’ Meeting, Supervisor, the Board of Directors, and four Management Committees. Shareholders are responsible for major policies. The Board of Directors is the policy-making body that reports to shareholders. APP-China doesn’t set up the Board of Supervisors. One Supervisor is instead commissioned by the investment party. The General Manager is appointed by and reports to the Board of Directors and is in charge of the

Governance Structure

Note: Suzhou Gold Hongye, Hainan Gold Hongye and Hainan Gold Shengpu are included in the Gold Hongye Paper Group Co., Ltd.

Anti-corruption and anti-briberyIn 2010, APP-China continued with its internal anti-corruption and anti-bribery measures with special attention on sales, procurement and logistics positions. APP-China introduced the whistle blower program especially to supervise sales involved in the supply chain whereby honest informers are duly rewarded. All moves are to further combat commercial bribery to ensure a clean and law-abiding business environment for all its business transactions. APP-China maintained open communications channels to handle criticism and complaints from customers and employees, to consolidate financial and economic benefit audit, and to constantly improve internal control and risk management.

APP-China has a strict business code of ethics for its employees

Ethical Business Practices

in business transactions. There is a set of explicit corporate policies and punishment rules against paying or accepting bribes, kickbacks or favorable treatments, including gift sets and recreational activities with higher budget. By the end of 2010, APP-China had never had any litigation resulting from bribery and corruption.

Moreover, APP-China extends its business code of ethics of anti-bribery and anti-corruption throughout the supply chain to the contractor and supplier contracts.

International trade complianceIn recent years, a number of Chinese companies have been

management and daily operation and other affairs assigned by the Board of Directors. The Chief Financial Officer (CFO) is in charge of financial and accounting and shall submit both reports to the General Manager and the Board of Directors. The Board of Directors shall remove posts from the management any time in the event it is guilty of serious delinquency and disqualification, illegal or non-appropriate personal gains or succumbing to malpractice.

Shareholders’ meeting

Board of Directors

Corporate Headquarters

Supervisor

Personnel Review Committee

Price CommitteeManagement Committee

Forestry Pulp Industrial Paper Fine Art Paper

Decision-making Committee

Seventeen com

panies

Yalong Paper Products (Kunshan) Co., Ltd.and six companies

Jinyu Tissue Paper Industry Co., Ltd.

Gold Hongye Paper Group Co., Ltd.

Gold H

uasheng

Gold E

ast Paper

Shanghai Jin Feng Yuan Paper (Shanghai) Co., Ltd.

Ningbo A

sia

Ningbo Zhonghua

Guangxi Jingui P

ulp

Jinan Pulp

Hainan Jinhai Pulp and Paper

Hainan Forestry Biz Subunit

Guangdong Forestry Biz Subunit

Guangxi Forestry Biz Subunit

Yunnan Forestry Biz Subunit

Henan Forestry Biz Subunit

Household Paper

2010 APP-China Organization Chart

Paper Products Domestic Sales

Page 12: APP-China Sustainability Report 2010

—11—

APP-China emphasizes the expansion of various open communications channels with our stakeholders. We believe in engaging stakeholders for mutual understanding and long term cooperation.

Stakeholder studyTo keep abreast of the key concerns and expectations of stakeholders, APP-China commissioned DNV Sustainability Center as an independent third party to conduct a stakeholder study.

The study covers a wide range of stakeholders with a significant influence such as customers, banks, employees (top management and different levels), industry associations, contractors/suppliers, schools and local communities. All respondents have had more than three years of working and cooperation relationship with APP-China.

Compared with the study for APP-China Sustainability Report

Stakeholder Engagement2009, four areas were improved this year:

- Questionnaire designIn line with AA1000 SES Stakeholder Engagement, GRI 3.1 and Corporate Responsibility Assessment (CRA), DNV standards and the most relevant conditions of APP-China, the questionnaire covers 15 issues under four impact areas, with score ranking according to degree of concerns and performance respectively.

- MethodologyThe study was conducted by written questionnaire mainly with complimentary use of phone or face-to-face interview. In 2009, the stakeholder study was conducted solely by phone interviews and quality of the conversation was somewhat compromised by the interviewee’s speaking environment.

- Statistics and analysisA semi-quantitative method was adopted to analyze and

imposed with anti-dumping (AD) and countervailing duties (CVD), special tariffs imposed by importing countries. These measures are having a significant impact on the Chinese coated paper export business.

In September 2009, the U.S. Department of Commerce (DOC) accepted the petition submitted by three American paper manufactures (NewPage Corp., Sappi Fine Paper North America, Appleton Coated Paper LLC) and the United Steelworkers Union (USW). Their petition claimed that certain coated paper manufactured by the Chinese and Indonesian paper producers benefitted from government subsidies and were selling certain coated paper at unreasonably low prices.

The DOC carried out its AD/CVD investigations for the coated papers imported from China and Indonesia and announced the results in September 2010. The DOC imposed the CVD tariffs against Chinese enterprises with levies from 17.64% to 178.03%, and 17.64% for APP-China, while the AD rate ranged from 7.60% to 135.83%, and 7.6% for APP-China. In October 2010, the U.S. International Trade Committee (ITC) found that these imports were threatening the U.S. coated paper industry and determined that the above-mentioned duties will be imposed on imports of certain coated paper from China. APP-China disagreed with these findings, and has challenged them in U.S. court.

In late December 2009 and March 2010 the European Commission (EC) accepted two petitions filed by the European Association of Fine Paper Manufacturers (CEPIFINE), alleging that imports of certain Coated Fine Paper products were

imported into the European Union at dumped and subsidized prices respectively. The EC initiated both investigations in February and April 2010 respectively. This is EU’s first countervailing duty investigation on imports from China. In November 2010, the EC imposed provisional AD duties against Chinese imported paper for a six month period at a rate as high as 31.5% for most Chinese paper companies, and a lower rate of 19.7% for APP-China. Final adjudication for this case is expected in May 2011.

APP-China considers the decision and action by ITC and EC an unfair treatment against the Chinese paper manufacturers. It is a violation of the principle of fair competition in international trade and imposes damage to the interests of the downstream sector and the consumers.

APP-China is disappointed in the one-sided investigations adopted in both cases. In the face of the challenges from international trade protectionism, APP-China, on the one hand responded to the allegations proactively and in a strong stance on behalf of Chinese paper industries to attain a fair treatment. On the other hand, APP-China adjusted its market strategy and began to aggressively develop new markets to reduce the impacts of AD and CVD. APP-China has unweaving commitments to our customers and to offer high-quality products and services.

APP-China will continue to abide by the principle of fair competition in international trade and do its utmost to resist trade protectionism in any form to promote the sustainable development of Chinese and global papermaking industry.

Page 13: APP-China Sustainability Report 2010

—12—

interpret stakeholders’ key concerns and areas for improvement across the 15 issues. The findings, presented in a matrix, were used to assess the level of impacts on each issue for APP-China and our stakeholders.

- Sampling sizeCompared with the 2009 study, valid questionnaires for the 2010 study was increased from 25 to 116, and with coverage expanded from APP-China headquarters only to include the

scope of the report. The wider coverage allows for a more comprehensive evaluation.

Note: This study did not include the Huang Yicong Foundation

Key stakeholder concerns:DNV carried out an analysis on the key stakeholder concerns. This report aims to provide responses to those concerns according to APP-China’s current conditions and operations.

The level of stakeholder concerns and impacts are as depicted in the matrix. The horizontal axis represents the impact of the issue on APP-China and the vertical axis represents its impact on the stakeholders. In the diagram, the size of the ball represents the scale of the problem. According to the AA1000 Stakeholder Engagement Standard (AA1000 SES), when the issues have higher impact on stakeholders and APP-China, the level of concerns is also higher. Therefore, the closer the ball to the upper right hand corner with a corresponding larger diameter ball indicates higher level of stakeholder concerns of the said issue.

Valid Questionnaires

Employees

Suppliers / Con-tractors

Senior Executives

Customers

Others

15 74

10

7

10

Impacts on stakeholders

Impacts on APP-China

Low risks withlow level of concerns

High risks withhigh level of concerns

Moderate risks withmoderate level of concerns

Supplier & contractor management

Labor relations

Society & communities

Recruitment & retention

Business ethics

Human rights

Anti-corruption

Diversity in workforce

Working conditions

ProductsNatural resources

Ecosystems

Climatechange

Market

Waste & emissions

Supplier & contractor management

Market

Labor relations

Society & communities

Recruitment & retention

Business ethics

Human rights

Anti-corruption

Ecosystems

Diversity in workforce

Working conditions

Products

Natural resources

Waste & emissions

Climate change

High

HighLow

Matrix of stakeholder concerns and impacts

Page 14: APP-China Sustainability Report 2010

—13—

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Issues for Improvement in priority

Comparison between internal & external stakeholders

(by issues)

Comparison between internal & external stakeholders(by areas of impacts)

The above chart revealed that the issues most needed to be improved pointed out by stakeholders are “Recruitment & Retention” and “Supplier & Contractor Management”.

Comparison with key concerns between internal & external stakeholders: External stakeholders pay much more attention to “Business Ethics”, “Market” and “Supplier & Contractor Management”. Among four impact areas, external stakeholders cared more about “Corporate Integrity & Business Ethics”.

Key Findings

Page 15: APP-China Sustainability Report 2010

—14—

Communications channels with stakeholdersAPP-China employs an open communication with key stakeholders via various channels and platforms. (Please refer to the table below).

In 2010, APP-China, in cooperation with APP Indonesia, established an internal platform to offer a systematic training curriculum on the issues of sustainability to appointed APP employees for the first time. Trainers, teaching materials

and data base will be refined after collecting feedback. The Environment and Sustainability Communications Coordinator (ESCC) was recruited from more than 20 APP-China’s mills, the Headquarters, and domestic and overseas trading departments. The ESCC is equipped with the knowledge and the best practices in sustainability and communications to respond to potential stakeholder enquiries on environmental and sustainability issues in a timely manner.

1.8

2.8

2.2

3.0

2.0

2.6

2.4

SeniorExecutivesNon-executiveEmployees

1.8

2.8

2.2

3.0

2.0

2.6

2.4

SeniorExecutivesNon-executiveEmployees

1.8

2.8

2.2

3.0

2.0

2.6

2.4

Deg

ree

of a

ttent

ion

Businee ethics

Anti-corru

ption

Supplier & contracto

r management

Natural reso

urces

Waste

& emissions

Climate ch

ange

Ecosys

tems

Society

& Communitie

s

human rights

productsmarke

t

diversi

ty in workf

orce

working co

nditions

recruitm

entretentio

n

labor relatio

nsD

egre

e of

atte

ntio

n

Corporate Integrity & Business e

thics

Envionment

Society

Employees

This stakeholder study will become a benchmark against future studies for APP-China Sustainability Reports. More importantly, APP-China will leverage the findings to reinforce its engagement with stakeholders and strengthen further cooperation.

Comparison with key concerns between senior executives & non-executive employees: Both groups have divergent views regarding “Labor Relations”, “Supplier & Contractor Management”. The biggest gap in areas of impacts lies in “Society & Communities”. Apart from “Market,” and “Products”, non-executive employees hold higher expectation than those of senior executives for all the other issues. The gap of expectation in areas of impacts comes from “Environment”; the biggest gap of issues is in “Labor Relations”, and “Society & Communities.”

Comparison with key concerns between senior executives & non-executive employees

(by issues)

Comparison with key concerns between senior executives &

non-executive employees(by areas of impacts)

Page 16: APP-China Sustainability Report 2010

—15—

Overview of Stakeholder Concerns and Communications Channels

Key concerns of stakeholders

-Waste and emissions (Waste management – storage,

treatment, disposal and recycling; Discharge and

spillage to water, ground and air)

- Working conditions (Health & safety; Hours of work;

illegal employment)

- Recruitment and retention (Compensation and

benefits, including health insurance); Career develop-

ment, training

- Business Ethics (Competition practices; Lobby-

ing and political donations; Whistle-blowing;

Conflict of interests; Political concerns; Privacy)

- Products (Safety and quality, including positive

/negative impact on society; Management, includ-

ing post-consumer waste; Labeling of content and

other consumer information)

- Market (Customer relations; Marketing activities

and advertising; Pricing; Accessibility of products)

- Business Ethics (Competition practices; Lobby-

ing and political donations; Whistle-blowing;

Conflict of interests; Political concerns; Privacy)

- Anti-corruption (Fraud; Embezzlement; Bribery;

Connivance; Extortion)

Stakeholders

Employees

Customers

Industry

associations

Selected target audience

- Employees

- Customers

- Consumers

- Industry

associations

Communications Channels

- Labor union

- Employee social clubs and seminars

- Career development and promotion committee

- Environment & Sustainability Communications Coordinator (ESCC)

- Environmental inspector system

- Informal meetings (i.e., Starbuck time)

- Human Resources Live News Room

- “Happy Work Happy Life” series of activities

- Training (including training in sustainable development)

- Management rules of employee community service activities

- Company trips

- Charity programs

- Employee satisfaction survey

- Website/newsletters

- PCwC quarterly reports

- APP-China Sustainability Reports

- Market research

- Customer visits

- Key account clubs

- Blue Sky customer service project

- Sinar Mas Printing Award

- Exhibitions

- Quality service teams

- Service hotline

- Regular exchanges

- Customer satisfaction survey

- Website/newsletters

- PCwC quarterly reports

- APP-China Sustainability Reports

- Daily communication

- Exchange and fact-finding tour

- Industry forums/seminars

- Website/newsletters

- PCwC quarterly reports

- APP-China Sustainability Reports

Page 17: APP-China Sustainability Report 2010

—16—

Key concerns of stakeholders

- Business Ethics (Competition practices;

Lobbying and political donations; Whistle-

blowing; Conflict of interests; Political concerns;

Privacy)

- Supplier and contractor management (supplier

/contractor management; localization in procurement)

- Waste and emissions (Waste management –

storage, treatment, disposal and recycling;

Discharge and spillage to water, ground and air)

-Products (Safety and quality, including

positive/negative impact on society); Manage-

ment, including post-consumer waste; Labeling

of content and other consumer information)

- Ecosystems (Locations and scope of operations; Site closures,

remediation and rehabilitation; Biodiversity conservation)

- Natural resources (Acquisition and use of water,

protoplasm, wood, land, fossil fuels, minerals etc.)

- Products (Safety and quality, including positive / negative

impact on society); Management, including post-consumer

waste; Labeling of content and other consumer information)

- Society and communities (Job creation and promoting local

economic development; Maintain dialogue and transparency with

local stakeholders; Community investment)

- Waste and emissions (Waste management -

storage, treatment, disposal and recycling;

Discharge and spillage to water, ground and air)

- Ecosystems (Locations and scope of opera-

tions; Site closures, remediation and rehabilita-

tion; Biodiversity conservation )

Stakeholders

Partners

Third party

organizations

Communities

Selected target audience

- Banks

- Suppliers

- Contractors

- Non-government

Organization

(NGO)

- Academic research

institutions

- Schools

- Media

- Student groups

- Poverty-stricken

areas

- Local communities

where scope of report

operate in

Communications Channels

- Regular visits

- Operational reports

- Expert meetings

- Site visits and fact-finding tour

- Communications on industry and market update

- Q&As of special topics

- Tender and bidding meetings

- Supplier code of conduct

- Supplier/contractor contract

- Supplier/contractor trainings/ networking events/seminars/customer

exchange meetings /contractor & supplier mutual assessment/

contractor competition & related activities

- Daily communications

- Website/newsletters

- PCwC quarterly reports

- APP-China Sustainability Reports

- Site visits

- Independent research

- Road shows and press conferences

- PCwC Paper Industry Sustainability Forum

- News releases/media coverage/Feature articles

- Special co-operation projects

- Website/newsletters

- PCwC quarterly reports

- APP-China Sustainability Reports

- Harmonious community platform

- Scholarship

- Discussion meetings

- Suggestion box/ bulletin board

- Charity initiatives and community

services

- Local hiring

- Website/newsletters

- PCwC quarterly reports

- APP-China Sustainability Reports

Overview of Stakeholder Concerns and Communications Channels

Note: Key concerns of stakeholder are identified in the stakeholder study 2010.

Page 18: APP-China Sustainability Report 2010

Sustainable Development and Management

Page 19: APP-China Sustainability Report 2010

Sustainable Development and M

anagement

—18—

Strategic sustainable development is at the center of APP-China’s corporate vision and mission (Please refer to APP-China Sustainability Report 2009 p. 9-10 for more information).

APP-China is both an advocate and practitioner of its sustainability pledge, the “Paper Contract with China (PCwC)” (Please refer to next paragraph). APP-China recognizes that a sustainable paper industry is attainable only by managing the balance of increasing market demand, environmental concerns, the lack of resources and economic growth, and is resolutely committed to being part of the solution.

The establishment of a sustainable development & management systemAll but one of APP-China’s pulp and paper mills is certified with OSO14001 (the newly established mill, Hainan Gold Shengpu has not yet obtained any certification). Ningbo Zhonghua was APP-China’s first paper mill in China to be certified with OSO14001. In addition, twelve of APP-China’s pulp and paper mills hold PEFC-CoC certification. By the end of March 2009, six pulp and paper mills and two forestry business sub-units had completed their “carbon footprint” assessment. APP-China is the first pulp and paper company in China to have a carbon footprint assessment covering the plantation-pulp-paper industry chain.

In 2010, APP-China continued to reinforce its sustainable management system for its mills and other business units. (Please refer to APP-China Sustainability Report 2009 p.13-14). Building upon the foundations set in 2009, the scope of report (except for the newly established mill, Hainan Gold Shengpu, has not yet obtained any certification), including six APP-China Forestry business sub-units, has all qualified for recertification and periodic audit. A summary of the actions is listed below:

Sustainable Development & Management System

APP-China applies MBOS in the sustainable development and management system platform of product quality and human resources with good performance. Taking example, APP-China Head Office invites senior executives from around the organization to be the conveners and to lead discussions on a wide range of topics including manufacturing, SEIRI, operational management, power plant, environmental protection, occupational health & safety, R&D, quality control, customer service with marketing to join in 2011. Each committee elects their own convener to hold four or five discussion meetings throughout the year.

To drive all of APP-China’s business units to break new ground, APP-China recognized its top performers as a benchmark and set example for all other operating units. In 2010, APP-China held 39 seminars for nine functions. The outcome was a total benefit amounting to RMB1.56 billion. Seven out of twelve-five inter-company mutual cooperation projects achieved Olympic Goals with the contribution amounting to RMB150 million.

ISO9001periodic auditperiodic auditperiodic auditperiodic auditperiodic auditrecertification

not yet auditedrecertification

ISO14001recertificationperiodic auditrecertificationperiodic auditperiodic audit

preliminary reviewnot yet obtained certification

periodic audit

OHSAS18001recertificationrecertificationperiodic auditrecertificationperiodic audit

preliminary reviewnot yet obtained certification

recertification

PEFC-CoCnot yet auditedperiodic auditperiodic auditperiodic auditperiodic audit

not yet obtained certificationnot yet obtained certification

recertification

Gold East PaperGold HuashengSuzhou Gold HongyeNingbo ZhonghuaNingno AsiaHainan Gold HongyeHaina Gold ShengpuHainan Jinhai Pulp & Paper

2010 APP-China certification status overview

Note: For further details on PEFC certification, please refer to p.33 Green Procurement of this report. As a pioneer in setting up an energy management system of APP-China, Gold Huasheng was qualified energy auditing in 2010 and targets to establish the system in 2011.

APP-China’s commitments are to:● continuously seek to improve sustainable forest plantation, bio-diversity and conservation protection practices in the areas where we operate.● contribute to the fight against global warming by implementing measures throughout its business to conserve energy, reduce emissions and enhances its capacity to further engage employees to support the company’s environmental initiatives.● continue APP-China’s commitment to community empowerment by promoting economic growth, creating job opportunities, investing in infrastructure, and building schools and establishing skills training workshops to educate and improve local populations in areas where we operate.

The progress of APP-China’s sustainable development and PCwC commitments are reported on a quarterly basis on the websites of APP-China and PCwC (http://www.app.com.cn/english/promise/lscn/index.html; http://www.papercontract.com/)

APP-China invites all parties (including non-profit organizations, media, government, research institutes, student groups and other third-parties) that have similar concerns for a sustainable approach to paper manufacturing, to share their thoughts with us, visit our facilities and help assess and supervise our operations.

Page 20: APP-China Sustainability Report 2010

Sustainable Forest Plantation Development

Page 21: APP-China Sustainability Report 2010

Sustainable Forest Plantation Development

—20—

In line with the progress towards a green economy, APP-China is committed to pursue a balanced and environmentally sound business model. Its integrated plantation-pulp-paper model is the right approach to transform a traditional papermaking industry into a sustainably developed future.

The sustainable development of forest plantation lays the foundation for APP-China’s plantation-pulp-paper integration. In accordance with national legislation and forestry development policies, APP-China adopts a scientific management approach to develop forest plantation to meet the growing demands for timber and paper products and to alleviate pressure on imported fiber.

APP-China commenced tree planting projects in China in 1995. By the end of 2010, APP-China Forestry has established 19 forestry companies, with a total of 303,893 hectares of rental land (including 24,385 hectares non-timber resources utilization area) for forest plantation development; collectively it manages more than 13,000 forest plantation compartments distributed across 9 Chinese provinces with over 390 million standing trees,

composing of Eucalyptus, Acacia, Poplar, Pinus, Casuarina and other tree species.

The organization structure comprises of a forestry head office, 5 regional management units and 2 nurseries. The forestry operations are located in the provinces as shown in the map.

Overview of APP-China Forestry

APP-China Forestry operations

Page 22: APP-China Sustainability Report 2010

—21—

At the end of 2010, APP-China Forestry employed a total of 1,912 direct and non-direct staff. Of the total number, 65% is local, 11% is female and 20% is ethnic minorities and 97% forms the members of the worker’s union. In 2010, APP-China

Forestry engaged over 950 contractors and suppliers for its forestry activities contributed more than 95,000 job opportunities amounting to 9 million working hours for local communities.

Forest plantation and commercial value forest● Forest Plantation: Forest plantation by definition is man-made. According to the United Nation Food and Agriculture Organization Report published in 2011 on the world’s forest status, the gross area of the world’s forest plantation is about 260 million hectares, accounting for about 7% of the world’s forest cover and 2% of global land area. It also provides more than half of the global industrial timber requirement. The scales and types of forest plantation varies from small farm forests to industrial forests and are spread from cold temperate zones to tropical zone countries.

According to the results of the Seventh National Forest Resource Inventory (2009) as published in the National Bulletin on China’s Land Afforestation Status for 2009, the area of China’s forest plantation covers 62 million hectares, making it the largest in the world. Of that land area, Eucalyptus forest plantation occupies about 2.6 million hectares.

● Commercial Forest: In contrast to ecological forest, commercial forest aims to provide economic benefits in the form of goods and services. According to the Environmental Protection Law of the People's Republic of China, the different types of commercial value forest are defined as below: Timber forests: Forests and trees that are used mainly for producing timber, including bamboo forests that are used mainly for producing bamboo timber; Economic forests: Forest trees that are used mainly for producing fruit, edible oil, beverage ingredients, condiments, industrial raw material and medicinal materials; Firewood forests: Forest trees that are mainly used for producing fuel wood.

Page 23: APP-China Sustainability Report 2010

—22—

APP-China Forestry is committed to supporting an integrated plantation-pulp-paper business model for a green cycle economy. It will continue to foster sustainable forest plantation practices, adding value towards the direct and indirect development of the environment, society, and economy and herewith endeavor to:

1) Abide by laws and regulations of China. These laws and regulations shall form the backbone concerning all legal compliances for the forest plantation management system and practices to achieve sustainable development. APP-China Forestry shall employ scientific methods to develop forest plantation within approved areas while protecting the natural forest in strict accordance with classified forest management system formulated by the government.2) Make the most of, and protect existing land and related resource. APP-China Forestry shall apply modern science and high technology approach and adopts international best practices to meet the increasing demands for wood by the pulp and paper industry of China.3) Protect and preserve the ecosystem and its service functions. APP-China Forestry shall at all time monitor the impact of its operational activities on the environment. An environmental management system covering the protection of natural ecosystem, biological diversity, water, soil and air has been established and is reviewed regularly for continuous improvement to minimize the ecological footprint in the course of forestry operations.4) Strengthen supply chain management, raise corporate value and promote win-win situations. APP-China Forestry shall work closely with contractors to form effective advocacy, education and empowerment programs to support business in addressing quality, health, safety and environment concerns. In all the localities where APP-China Forestry operates, it aims to upgrade multiple management efforts to create more job opportunities and indirectly contribute towards the local socio-economic development.5) Build on social cohesion, harmony and security. APP-China Forestry shall cooperate with industrial associations, technology institutions and universities on scientific research & development to strengthen the sustainability of its forest plantation. It shall build on social development through constant engagement with local communities to help improve and solve industrial and social issues to achieve a win-win solution.

Forestry Operation Management

Management policiesOn 15 July 2010, APP-China Forestry released its updated “Plantation Management Policy” and “Environmental Policy”. The two policies will be the guiding principles for which APP-China Forestry will measure all its operating units against for their environmental, social and economic performances. Promotional campaigns were introduced to communicate the policies to the staff and key stakeholders. Publicity materials

were placed at strategic locations in the office areas, place of work as well as key gathering places within the communities to enhance awareness. A pocket guide was distributed to stakeholders such as employees, contractors and their workers. A total of 6,700 pocket guides and 452 posters were distributed to reach out to its stakeholders.

APP-China Forestry sustainable development strategy

Page 24: APP-China Sustainability Report 2010

—23—

APP-China Forestry seeks to be a good corporate citizen and ensures strict compliance with all the laws, rules and regulations of China and international conventions applicable for its operation in a responsible manner. APP-China Forestry announces that it was not reported for any environment related legal violations in 2010.

In 2010, APP-China Forestry revised its Regulations for Forestry Contractor Management, with the aim to strengthen the legal compliance of contractors undertaking forest plantation contracts with APP-China Forestry. The new regulations set obligatory operation guidelines for which contractors’ performance was evaluated against; this includes abiding by operation norms, complying with environmental management standards, efforts in workers’ training, conforming to prescribed forest plantation management, policies and so on. To enforce environmental responsibility and resolving social issues in forest plantation operations, new clauses on land use, soil/biodiversity

conservation, community dispute prevention, complaint handling and meeting minute filing were added to contracts and followed through during implementation.

Environment, health and safety managementTo strengthen environmental performances through continuous review and improvement of its environmental management system, APP-China Forestry had in May and June 2010, expanded its internal audit team, by training 26 new internal auditors in Guangxi and Yunnan districts, who received over 189 hours of intensive training. Between June and July the same year, APP-China Forestry subsidiaries conducted internal audit and management review of its operations. In August, 6 forestry companies located in Hainan, Guangdong and Guangxi Provinces underwent third-party ISO 14001 certificate renewal audits on their environmental management systems and succeeded in receiving their certificates.

2008 - 2010 APP-China Forestry water and energy consumption

Water consumption (ton)

Gasoline (GJ)

Diesel (GJ)

Electricity purchased (MWh)

2008 - 2010 APP-China Forestry chemical usage

Unit (ton)

Herbicide

Fungicide

Pesticide

Chemical fertilizer

Note 1. In 2009, the demand for seedlings increased significantly; thus extending the nursing time and increased irrigation water usage.Note 2. In 2010, water usage decreased due to improved production method in the nurseries.

Note 3, Forest plantation pickup after the economic crisis, thus, correspondingly increase demand for nursery stocks and chemicals usage.

With a recovery of the economy, APP-China Forestry operational activities increased significantly, in turn triggering a potential surge in work place incidents in 2010, calling for a stronger emphasis in occupational health and safety awareness. In 2010 APP-China Forestry utilized a total of 1,770 hours to train 475 employees on occupational health and safety. It also provided 3,702 hours of health and safety awareness training program to contractors and their workers totaling 10,245 persons. In 2010,

20 work related accidents were reported compared to 8 work related injuries for 2009 and 15 for 2008. The industrial accident for 2010 resulted in 6,786.5 lost hours per million working hours, a new issue and challenge that demand APP-China Forestry attention to review its systems and strengthen new contractors’ occupational health and safety training to make improvement in 2011.

2008 - 2010 APP-China Forestry water and energy consumption

Water consumption (ton)

Gasoline (GJ)

Diesel (GJ)

Electricity purchased (MWh)

2008 - 2010 APP-China Forestry chemical usage

Unit (ton)

Herbicide

Fungicide

Pesticide

Chemical fertilizer

Legal compliance

Page 25: APP-China Sustainability Report 2010

—24—

Supply chain management - Involving contractors in exploring new management approachAPP-China Forestry acknowledges that forest operation contractors play an important role within the supply chain to provide raw material feed stock to the pulp mills. In 2010, APP-China Forestry actively worked on an overall solutions under the principle of the TMS3 spirit together with its 3P concept to establish the “Harvesting, Plantation Integrated Package (HPIP) Program” hereby contractors will be responsible for the whole forest plantation management cycle including tree planting, tending and forest plantation protection.

In 2010, APP-China Forestry instituted quality control, environment, health and safety training programs for its contractors and their workers. The scope of the training includes operational guidelines to set up buffer zones, identification and protection of flora and fauna, work safety procedures, chemical use safety and its safe disposals, emergency management, hygiene keeping in living and site areas, fire prevention and firefighting, maintenance of harvesting equipment and proper handling of any hazardous materials.

In 2010, APP-China Forestry continued with advancing environmental, health and safety performances, adopting modern management systems and technologies in enhancing the sustainability of its forest plantation operations:1) In 2010, APP-China Forestry upgraded its management in activating the SAP system to all its regional operations. 20 sessions of related technical trainings were conducted for 447 employees so as to facilitate all the deliverables;2) To reinforce the chain of custody (CoC) management, APP-China Forestry rolled out several enhancement projects, such as an improved “Wood transport tracking and control system”, “SkyView project” and so forth, to increase the efficiency of monitoring forest plantation sites, tracking of wood extraction and transportation and shorten transport routes. With the optimization of transport route, transportation cost is expected to reduce by 5% and simultaneously increase efficiency, reducing energy consumption and emissions;3) In facing APP-China Forestry’s vastly distributed and fragmented forest plantation compartments, and tracking site-based foresters due diligence conduct and routine patrol of the forest plantation assigned under their care, APP-China introduced a real-time Location Based Service (LBS) system to track and record individual site status monitoring and foresters performances to guardian forest resources and wood safety;4) To improve contractor capability, on-time delivery, higher efficiency, quality output, cost reduction and so forth, APP-China Forestry worked closely with contractors on opportunities in bundled forestry operation contracts, coupled with quality checks and contractors review system to strengthen its existing system for better consistency in services delivery;

5) For the mechanization, more efforts were put into improving the quality and efficiency of harvesting, debarking and log handling operations, reduce labor intensity and logging wastage, ensure forest plantation wood are not left in the harvesting area over extended period and exposing to wood possible theft;6) A trial run with the yarder system in 2010 with encouraging results, there were savings in road construction with reduced manpower and repeated usage. Other mechanical methods adopting a combination of logging machinery with small excavators also demonstrated positive outcome of higher productivity.

Sustainable forest plantation management trainingIn 2010, APP-China Forestry received an invitation from the State Forestry Administration (SFA) to co-organize “The first SFA forest certification auditors training course” together with the Science and Technology Development Center under State Forestry Bureau, Talent Development and Exchange Center and Zhonglin Tianhe (Beijing) Forest Certification Center, in Haikou city, Hainan povince, from April 10 to April 25. APP-China Forestry is responsible to provide its Hainan’s operation and forest plantation for the audit training against Forest Management (FM) and Chain of Custody (CoC) certification standards. More than 40 participants from SFA nation-wide subsidiary units attended the training.

In June 2010, APP-China Forestry launches a sustainable forest management (SFM) training program for all its employees in Hainan, Guangdong and Guangxi regions to promote awareness and better drive its sustainable forest plantation development.

Note 1. TMS means “Total MBOS Solution”, an upgraded version of MBOS.Note 2. 3P is the abbreviation of the Peer Review Team (PRT), Plantation Assessment Team (PAT) and Plantation Inventory Team (PIT) (Please refer to p. 27 of APP-China Sustainability Report 2009). PRT is for quality review and corrective actions of each plantation process. PAT evaluates the survival rate and growth of 3-, 6- and 12-month old forest plantations. PIT indicates Mean Annual Increment (MAI) monitoring and corrective actions for tree stands that are two to six-month old.

Page 26: APP-China Sustainability Report 2010

—25—

Eucalyptus Trees and Eucalyptus Forest PlantationIn March 2010, an article titled “More than 30 Million Mu (equivalent to 2 million hectares) of Eucalyptus Plantations in Yunnan exacerbate ecological catastrophe of the century”, was widely circulated on the internet. It claimed that the continuous droughts in Yunnan and Guangxi provinces were due to the planting of Eucalyptus trees. The argument on the cause of the drought then shifted to the destruction of forest resources to plant Eucalyptus trees in various regions. The past controversy surrounding Eucalyptus trees was rekindled. Local rumors that “Eucalyptus plantation will prevent under storey vegetation growth and hence lack of habitat for fauna”, “Eucalyptus trees will exhaust water and nutrients resources” resurfaced again.

The State Council instructed the SFA and China Meteorological Administration (CMA) to organize a panel of experts specializing in forestry, meteorology and ecology to conduct an investigation on the “causes of extraordinary droughts in southwest China and the effects of Eucalyptus plantation on the drought.” The site study was carried out in the severe drought areas of Yunnan, Guizhou and Guangxi provinces from April 7 to April 10, 2010. The SFA and CMA jointly sent a team of experts to survey the severely drought affected areas in Yunnan and collect data on the Eucalyptus trees. Journalists from China Green Times accompanied the team to conduct interviews along the way. The findings were reported on the front page of China Green Times on June 3rd under the headline titled, “Speaking up on behalf of the “Demonized” Eucalyptus Trees,” which explained that the climate was affected by global ocean current, cyclone and monsoon and the severe drought in Southwestern China was caused by the abnormal atmospheric circulation. Forests can only act as very minor buffer to the climatic change and may at maximum improve microclimate; can hardly affect the global climate or the climate at large scale.

The fast growing Eucalyptus trees contribute positively towards stocking the commodity forest. The fast growing rate gives the misconception that it could extract more water and nutrients from the land. In fact, the amount of water and nutrients taken up by Eucalyptus trees is similar to any other living tree. When Eucalyptus trees are planted on barren and degraded lands, the positive effect outweighs the negative one. In the south region of China where the precipitation is above 1,500mm, the negative impact is very minor. There are about 2.6 million hectares of Eucalyptus plantations in China. Eucalyptus forest plantation in general also reduces pressure on natural virgin forest. It is interesting to note that the biological diversity in Eucalyptus forest plantation is higher than that found in forest plantation of other tree species, namely the Pinus, Acacia and Cunninghamia.

The Eucalyptus forest plantation of APP-China is distributed in the southern region of China with adequate rainfall. The land available to APP-China Forestry to establish Eucalyptus forest plantation is normally degraded lands and in region of sandy soil of low agricultural productivity.

The forest plantations are established to serve a similar purpose as is widely accepted in agricultural production, to create a crop of trees as a means to accommodate the needs and development of the human beings. The adoption of a scientifically sound approach of forest plantation management will prevent land degradation and allows the sustainable use of land. APP-China Forestry is always on the lookout for better

practices to manage its forest plantation, seeking to enhance the quality of the land at the same time promote the productivity of forest plantation and implement measures to protect the health and vitality of ecosystems.

The operation of forest plantation is similar to that of food crop production:

Modern Science and Technology Approach

Plant-Stock Production

Plantation Operations & Activities Overview

REJECTACCEPT

Land Acquisition Process

Planning Process Plantation Operation Procedures

Plantation Operation Procedures

Management PlanPlanting Tending

Protection Montoring & Audits

Harvesting Coppicing/Replanting

Land owners engagement

Pre-acquisition Land Audit

Evaluation & ApprovalLand-Use Contract signing

Plantation Operations & Activities Overview

Land owners engagement

Pre-acquisition Land Audit

REJECTACCEPT

Land Acquisition Process

Evaluation & ApprovalLand-Use Contract Signing

Plant-Stock Production

Planning Process

Management PlanPlanting Tending

Protection Montoring & Audits

Harvesting Coppicing/Replanting

Page 27: APP-China Sustainability Report 2010

—26—

Biological diversity in forest plantationWhen compared to natural forest, forest plantations are potentially weaker in their ecological composition. The forest plantations industry faced challenges of monoculture, negative soil impacts, threat of forest fire from human intervention, pests and diseases susceptibility, and so on. From another perspective, a properly managed forest plantation is an ecosystem on its own with its share of ecological contributions in terms of services and functions. The establishment of forest plantation to some degree may reduce the general pressure on logging of natural forest.

During the second half of the 20th century, the concept of “tree crops” appeared in the forestry industry. Tree crops can be equated with agricultural crops. The objective of tree farm resembles agricultural activities. The common denominator is the limited selection of species, intensive cultivation and high yield. The major objective of a tree farm is to have the highest yield in timbers with the highest quality, which is just the same with hybrid rice and corn for which high yield and nutrition are important. If we treat trees the same as rice and corn, which can provide different products to meet different needs, why should we be steadfast on the notion that forest plantation must contain wide biological diversity? It is by establishing forest plantations to meet the increasing needs of the human being that natural forest, with the biological diversity and biological functions of natural biological system, can exist undisturbed.

APP-China Forestry conducts ongoing scientific research and development on new tree hybrids to improve the productivity of forest plantations. Other studies include ecosystem and biodiversity conservation measures which form an integral part of the forest management policy towards achieving sustainable development.

Utilization of forest plantation resourcesWood is a renewable resource. A well managed forest plantation should also be effective in biological regeneration and recycling. As long as the cycle of the regenerative system is capitalized upon, it can make major contributions towards the environment and the economy. APP-China Forestry attaches great importance to forest plantation land management and the utilizing of by-products generated during the wood production. During the harvesting operations, logs are extracted leaving behind the debris in the form of dried leaves, branches and bark which are then allowed to decompose to increase the organic matter in soil for the next tree growing cycle, functioning as a topsoil preservation cover in reducing topsoil loss from erosion, retaining soil moisture, creating micro-habitats for soil organisms and so on.

High conservation value protectionAll natural habitats possess some inherent values. These would include the presence of rare or endemic species, water origins, sacred sites or historical relics. High Conservation Value (HCV) areas, by definition, are areas where these valuables exist. They could be considered to be of outstanding significance or of critical importance.

By the end of 2010, APP-China Forestry set aside more than 22,000 hectares amounting to 7.4% of the total area of its forest plantation as HCV areas. The HCV found in these forest plantation areas consists of historical and religious sites, cultural relics, community graves, forest plantation land boundaries, buffer zone, riparian zone, wildlife corridor, mountain top, steep mountain slopes and gullies.

For HCV conservation, APP-China Forestry had in 2010 conducted surveys and updates its forest plantation buffer zones maps for the main operational areas in Hainan, Guangdong and

Guangxi province. To enforce protection of rare, threatened and endangered (RTE) species, RTE identification, monitoring, recording and protection trainings were conducted for its staff and site operators. RTE distribution maps were distributed for better protection measure implementation.

Enrichment of forest plantation composition, structure and diversityTo improve on the diversity structure and composition of its forest plantation, APP-China Forestry shall endeavor its continuous effort in development of better sustainable forest plantation models; this includes the research and development on suitable indigenous tree species for pulp and paper industrial use, mixed tree species forest plantation, agro forestry, etc.● APP-China Forestry propagated numerous indigenous tree species under the scientific research project to study their potential as a high-yield species for commercial forest plantation development. It will continue to monitor the result and analyze their suitability as single species or mixed with Eucalyptus species in the forest plantation.● In the Henan region, APP-China Forestry continues to cooperate with the local communities on various agro forestry programs, allowing farmers to intercrop and keep livestock within its poplar forest plantations. The program utilizes a total of 1,614ha (hectares) comprises of 282ha for livestock breeding, 1,016ha for the agricultural produces, 145ha for traditional Chinese medicinal herbs growing and 171ha tea-crop planting. The program not only benefits the company environmentally and socially, it also enhances forest plantation tending quality, and contributes to reducte tending costs by RMB1 per hectare.

Greener fertilizing programsIn 2010, APP-China Forestry continued to reduce the use of chemicals in the forest plantation operations. Since 2009, APP-China Forestry started to promote various greener fertilizing programs to increase soil fertility to maximize the productivity of its forest plantation. They included the promotion of organic fertilizers, composite fertilizers and intercrop of green manure. By the end of 2010, the total area where the three different types of fertilizers were trialed covered 3,054.95 ha, 2.63 ha and 7 ha respectively.

Page 28: APP-China Sustainability Report 2010

—27—

APP-China Forestry promotes mixed organic-inorganic compound fertilizer in its Guangdong forest plantationAs part of its greener fertilizing program, APP-China Forestry had in 2010 set up 36 fertilizing trial plots, totaling 633 hectares in its Guangdong forest plantation to test its new organic-inorganic compound fertilizer formulas. To follow through, it will in 2011 promote and monitor the effect of the organic-inorganic compound fertilizer on the health and growth. At the same time APP-China Forestry planned to include part of the trial plots in its newly commissioned third party environmental monitoring program from 2011.

Pests, diseases and alien invasive species preventionIn 2010, APP-China Forestry continued to strengthen its system in tracking, prevention and eradication of forest plantation pests and diseases. All foresters are equipped with the necessary skills to recognize early signs of impending threat from pests and diseases, and in the case where eradication is applicable, the optimum and more environmentally friendly method will be selected. APP-China Forestry had issued up-to-date instructions to all its operators to avoid using any chemicals listed under the WHO1A and 1B type chemicals list and only select eco-friendly chemicals with low toxicity to prevent collateral damages to the ecosystem. Hopefully this will help avoid pests and diseases mutate into more chemical resistant strains. In the protection of biodiversity and mitigation of alien invasive species, it has set up procedures and guideline to manage its nursery and forest plantation operation in the importance of planting materials for propagation and the introduction of biological control agent for pest eradication. On the ground, APP-China Forestry staff are kept posted of any new alien invasive species that surface in China, according to the report issued by the Ministry of Environmental Protection.

In 2010, the total area of forest plantation recorded for pests and diseases infection was 459.23 hectares and the total area of fully recovered after treatment was 458.54 hectares, with the rest still at recovering state, under close surveillance.

Impact assessment and monitoringAPP-China Forestry attached emphasis on the implementation, continuous improvement and supervision of the environment and social management plan. It also conducted regular impact assessment and monitoring of the progress throughout 2010 to provide a scientific basis for management decision-making.

● Impact assessment: APP-China Forestry business subunits in Hainan, Guangdong and Guangxi completed

compilation of the Work Instruction Manual to Conduct Social Impact Assessment in October 2010. In conjunction with the existing environmental impact assessment guide, they began to conduct the environmental and social impact survey among the staff, villagers, village committee, rural laborers, contractors and government officials in November and December. The findings will be ready by the beginning of 2011 to provide a reference for the improvement of APP-China Forestry management and corporate social responsibility.

● Monitoring programs:Third-party monitoring programs: APP-China Forestry has commissioned third parties to conduct ecosystem impact monitoring of its forest plantation activities. In Hainan, it partnered with the Chinese Academy of Forestry; in Guangxi, the Forest College of Guangxi University and in Yunnan the Chinese Academy of Forestry Southwest Ecological Centre. The monitoring covers resource productivity, biological diversity, soil fertility, hill slope hydrology, surface and underground hydrology quality, pests and diseases, carbon sequestration and the aesthetic value of forestry landscaping. At the end of 2010, APP-China Forestry approach Guangdong Academy of Forestry to negotiate a new ecosystem monitoring program for its forest plantation to commence in early 2011.

In-house monitoring programs: To improve the operations management, APP-China Forestry carries out internal monitoring and checks at regular intervals. Site personnel was trained to watch out for abnormal conditions, monitor and track forest resources inventory, pests and diseases monitoring, and conduct environmental impact surveys. All its subunits expected to produce a quarterly environmental performance evaluation report to be used for continuous improvement, information and knowledge sharing and supporting materials for decision making.

Page 29: APP-China Sustainability Report 2010

—28—

Building Harmony within Communities

In the process of scientific development of its forest plantation, ensuring continuous improvement and minimizing negative ecological impacts, APP-China Forestry also strives to identify and manage environmental risks, as an effort to reduce social impacts and promote harmonious relationship with local communities where it operates.

Fire prevention and controlIn 2010, due to severe drought, numerous forest plantation of APP-China Forestry faced high fire risks. In October of the same year, 93 out of 109 counties, districts and cities in Guangxi province were affected by drought of varying degree.

The national forest fire protection headquarters placed the drought area of Hunan, Guangdong and Guangxi province under high alert on November 2 and 19. In the face of the severe challenges, APP-China Forestry took the initiative to support government efforts in intensifying forest fire protection and firefighting drill and training. Within the forest plantation area, APP-China Forestry engaged the local communities to undertake fire prevention measures. To co-operate with the government, the company staff and local communities took preemptive actions, the area impacted by fire in 2010 was reduced by 49% than that of the 2009 figure.

Illegal logging preventionIn managing issues of illegal logging, APP-China Forestry continued to working closely with the local government and local community arbitration coordinators on mitigation of illegal activities in its forest plantation. APP-China Forestry has put in place an illegal logging control mechanism which includes joining forces with the local governments and the communities to control and prevent pilferage. In Hainan province, APP-China solicited the support from the local police to organize a forest protection security team. In areas such as Danzhou City, more members are recruited for the team. In 2011, APP-China Forestry plans to introduce the fire protection security team in central and southeast Hainan. In Guangxi, APP-China Forestry is in discussion with the municipal, county governments and Forestry Administration to introduce forest protection security networks in 70 counties and districts.

Building social cohesion, harmony and securityTo further enhance the harmonious relationship network, APP-China Forestry had in 2010 formed a team dedicated to community engagement and relationship building with the villages, towns, counties and provinces where it operates. The team members represent APP-China Forestry to promote its plantation management and environmental policies, raise awareness on fire and illegal logging prevention, as well as work closely with influential local stakeholders, such as villagers, village cadres, township party committee, and local government, the chief of police and forestry stations on local affairs. Other functions include monitoring forest land rental payment and the forest protection coordination. In 2010 APP-China Forestry, through the effort in fighting drought, relief work and providing relief aid to the needy in turn contributed to the development of surrounding communities.

In 2010, APP-China Forestry furthered its environmental management system, making ecosystem conservation an integral part of its new environmental and plantation management policies, for better enforcement in its daily operations, reinforcing building harmony within communities with the revisions of related policies and contracts and so on.

Aligned with development trends, APP-China Forestry will continue to invest more resources to drive its environmental and social performance, providing the company a stable and secure conditions for sustainable development.

Legal compliance & working with the government

Strengthen community communications & improve harmonious relations

Community care & support

Campaigns & communications activities

Cooperate with research institutions &

actively improve industry developmentImprove & promote

stakeholder engagement

ContractorsCapacity building

Environmental risk management & community security

fire prevention & control

pest & disease prevention

illegal loggingprevention

frost, flood & wind damage

Building harmony within communities

Page 30: APP-China Sustainability Report 2010

Sustainable Pulp and Paper Production

Page 31: APP-China Sustainability Report 2010

—30—Sustainable Pulp and Paper Production

In 2010, APP-China adhered to its PCwC commitment and the principle of “Reuse, Reduce and Recycle”, actively pursuing energy conservation and emissions reduction throughout the product life cycle ( Please refer to the APP-China 2010 Performance Map of Sustainable Plantation-Pulp-Paper Integration to take a snapshot of its raw material input, product output, emissions and waste management.).

In paper production operation, the raw materials are pulp, water, energy and chemicals etc. Energy in the form of electricity and steam are also required and reused in the manufacturing process. APP-China practices strict procurement policies and vendor appraisal procedures for it’s continuous improvements of fiber and wood chip sourcing. This is to ensure that APP-China prohibits the use of raw materials obtained from the destruction of high conservation value forest and minimizes its impact on the environment. APP-China continuously advances the technology to constantly reduce the consumptions of water, energy and chemicals and lower per unit of emissions and waste output. With its relentless efforts in the use of recycled paper from urban waste paper and production by-products, in 2010, the ratio of recycled pulp of Ningbo Zhonghua and Ningbo Asia accounted for 33% and 50% of the production, which not only saves lots of natural resources, i.e., wood, pulp and coal but also reduces waste.

In 2010, APP-China’s annual output of paper was 4.8 million tons and pulp, 1,216 million tons, for the operations within the scope of this report. In addition to producing pulp and paper, APP-China also makes the most of its power plants to provide additional capacity of electricity and stream for local communities and many enterprises to optimize the utilization

China’s paper industry faces complex challenges of increasing paper demand and environmental and resource constraints. During the National Twelfth Five Year Plan, more stringent regulations on energy saving and emissions reduction will be rolled out to raise the bar for the whole industry to improve its cleaner production.

As one of the world’s leading pulp and paper producers, APP-China continues to advocate circular economy, to maximize economic output and to reduce resources consumption from the product life cycle perspective. In this regard, APP-China promotes the sustainability concept to the whole industry chain from environmental certification, green procurement, reclaimed water, finished products to recollection and reuse of waste paper, the goal is to build a low-carbon emission, environmentally friendly and sustainable paper-making industry.

Overviewrate of equipment and energy.

In line with safe treatment of waste management, APP-China spares no efforts to convert waste into resources, which results in renewable economic model and lower per unit of discharge. Major mills under APP-China introduced white water filtering treatment, incineration of solid waste and recollection facilities of alkali recovery systems. For instance, the alkali recovery system recycles most of the alkali and heat generated in the manufacturing process. The reclaimed water is reused and turned into raw materials for the production process. Sludge and waste dregs and grit are incinerated to generate electricity. Other processes can absorb CO2 to produce Calcium Carbonate for paper making. All of the actions taken combine to balance environmental accountability and economic performance.

APP-China continuously develops its green solution to perfect the environmental management system and advance sustainable development, including setting up a three-level network in wastewater and energy saving, an environmental inspector system and an energy auditing system. By the end of 2010, the major pulp and paper mills under APP-China are ISO14001 certified for its environmental management system, except for Hainan Gold Hongye and Hainan Gold Shengpu (Hainan Gold Hongye was under preliminary review in October, 2010. As a newly-built mill, Hainan Gold Shengpu has not yet obtained certification). APP-China endeavors to improve its cleaner production and performance management. Future achievements include heat collection which will create another extension of the effective management of wastewater and emissions to air in 2010.

Page 32: APP-China Sustainability Report 2010

APP-China 2010 Performance Map of Sustainable Plantation-Pulp-Paper Integration

APP-managed & jointly-managed forest plantation478,643 m3 10.33% Transported to the pulp mill Pulp & paper production

indicates Input

indicates Output

indicates Energy

indicates Raw materials i.e., forest plantation wood & pulp

indicates Water

APP-China (air dried ton)For sale (air dried ton)

clean condensate water8,000 10,000 tons/day

Light black liquorWhite liquor

Absorb CO2 tomake CalciumCarbonate

Recirculation

within the process

Recirculation

outside the process Reclaimed waterreuse rate 20%

Steam

Operation units in the pulp millElectricity and Steam

Incineration utilizationvolume 275,129 tons

Incineration utilizationvolume 10,275 tons

Collect & resue

Long circulation of white water

Short circulationof white water

white water6.3 tons/air dried ton

Sustainable forestplantation management

Alkali recoverysystem

Procurement of forest plantation wood & forest plantation wood chips4,154,802 tons, 89.67%

Water consumption77,175,173 tons

Coal 672,628,191 GJGasoline 268,102 GJDiesel 3,585,354 GJFuel oil 7,548,686 GJNatural Gas 71,395,113 GJLPG 796,925 GJBio-fuel 385,811,768 GJPurchased Electricity 10,838 (10 MWh)

Outsourcing pulp 295.93 (10,000 ton)Mechanical Pulp 53.62 (10,000 ton)Chemical Pulp 219.59 (10,000 ton)

Chemicals 1,122,986 tons Lime stone Starch Mirabilite Hydrogen peroxide Industry grade salt

Wastewater discharge 54.11 million tonsCOD emissions 0.3684 tons

Sulfur Dioxideemissions 7,235 tons

Sold volume222,103 tons

Go to the airTotal volume622,574 tons

Producing pulp w

ithrecycled w

aste paper

Electricity (GJ)Steam (GJ)

Industrial paper(10,000 ton)Household paper(10,000 ton)Fine art paper(10,000 ton)

Note: “ * ”data and information refer to the pulp and paper

mills specified in the scope of report of APP-China

Sustainability Report 2010: Gold East Paper, Gold

Huasheng, Suzhou Gold Hongye, Ningbo Zhonghua,

Ningbo Asia, Hainan Gold Hongye, Hainan Gold Shengpu

and Hainan Jinhai Pulp and Paper.

Recycled waste paper 57.85 (10,000 ton)

Forest plantationwood preparation

Screening & washingCooking Pulp dryer

Market pulp

Power plant

Repulping

Paper machinescreening

Back to thepulp mill

Pulpsqueezer

Pulpcleaning

Pulprefinery

BlendChest Paper making

White water system

Rewinder

ConvertingFan

pump

Bleaching

Wastewater Sludge Noise Dregs & gritEmissionsto air

Additionalheat

Page 33: APP-China Sustainability Report 2010

APP-China 2010 Performance Map of Sustainable Plantation-Pulp-Paper Integration

APP-managed & jointly-managed forest plantation478,643 m3 10.33% Transported to the pulp mill Pulp & paper production

indicates Input

indicates Output

indicates Energy

indicates Raw materials i.e., forest plantation wood & pulp

indicates Water

APP-China (air dried ton)For sale (air dried ton)

clean condensate water8,000 10,000 tons/day

Light black liquorWhite liquor

Absorb CO2 tomake CalciumCarbonate

Recirculation

within the process

Recirculation

outside the process Reclaimed waterreuse rate 20%

Steam

Operation units in the pulp millElectricity and Steam

Incineration utilizationvolume 275,129 tons

Incineration utilizationvolume 10,275 tons

Collect & resue

Long circulation of white water

Short circulationof white water

white water6.3 tons/air dried ton

Sustainable forestplantation management

Alkali recoverysystem

Procurement of forest plantation wood & forest plantation wood chips4,154,802 tons, 89.67%

Water consumption77,175,173 tons

Coal 672,628,191 GJGasoline 268,102 GJDiesel 3,585,354 GJFuel oil 7,548,686 GJNatural Gas 71,395,113 GJLPG 796,925 GJBio-fuel 385,811,768 GJPurchased Electricity 10,838 (10 MWh)

Outsourcing pulp 295.93 (10,000 ton)Mechanical Pulp 53.62 (10,000 ton)Chemical Pulp 219.59 (10,000 ton)

Chemicals 1,122,986 tons Lime stone Starch Mirabilite Hydrogen peroxide Industry grade salt

Wastewater discharge 54.11 million tonsCOD emissions 0.3684 tons

Sulfur Dioxideemissions 7,235 tons

Sold volume222,103 tons

Go to the airTotal volume622,574 tons

Producing pulp w

ithrecycled w

aste paper

Electricity (GJ)Steam (GJ)

Industrial paper(10,000 ton)Household paper(10,000 ton)Fine art paper(10,000 ton)

Note: “ * ”data and information refer to the pulp and paper

mills specified in the scope of report of APP-China

Sustainability Report 2010: Gold East Paper, Gold

Huasheng, Suzhou Gold Hongye, Ningbo Zhonghua,

Ningbo Asia, Hainan Gold Hongye, Hainan Gold Shengpu

and Hainan Jinhai Pulp and Paper.

Recycled waste paper 57.85 (10,000 ton)

Forest plantationwood preparation

Screening & washingCooking Pulp dryer

Market pulp

Power plant

Repulping

Paper machinescreening

Back to thepulp mill

Pulpsqueezer

Pulpcleaning

Pulprefinery

BlendChest Paper making

White water system

Rewinder

ConvertingFan

pump

Bleaching

Wastewater Sludge Noise Dregs & gritEmissionsto air

Additionalheat

Page 34: APP-China Sustainability Report 2010

—31—

In the PCwC manifesto issued in June, 2008, APP-China committed to cleaner production and set clear targets of environmental indicators with respect to water consumption/wastewater discharge/COD emissions per unit of pulp/paper. The results are listed in the table below:

Promised data

≤10

≤9

≤0.61

≤28

≤17

≤2.16

National standard

/

20

2*

/

80

16*

2008

9.27

8.47

0.58

28.58

16.05

1.61

2009

9.14

7.67

0.47

25.38

16.22

1.51

2010*

9.00

7.28

0.42

24.34

15.78

1.39

International level

12-18

/

/

35-41

/

/

Item

Water usage / ton of paper

Wastewater discharge / ton of paper

COD emissions / ton of paper

Water usage / ton of pulp

Wastewater discharge / ton of pulp

COD emissions / ton of pulp

Unit

ton of water/ ton of paper

ton of water/ ton of paper

Kg/ ton of paper

Ton of water/ton of pulp

Ton of water/ton of pulp

Kg/ ton of pulp

Note: The national standard is the Discharge Standard of Water Pollutants for Paper Industry (GB3544-2008) effective May 1st, 2009; .The data of the International level are derived from the European Integrated Pollution Prevention and Control (IPPC2001).“*” indicates 2010 data which include the average value of Hainan Gold Hongye and Hainan Gold Shengpu, the new scope of this report.

Note1: The data is the average of water consumption for all the paper mills in the scope of the reportNote2: International level data is from the European Integrated Pollution Prevention and Control (IPPC2001).

Note: “*” The national standard is effective May 1st, 2009. Source: GB3544-2008 Discharge Standards of Water Pollutants for Pulp and Paper Industry.

Note1: The data is the average of water consumption for the pulp mill in the scope of the reportNote2: International level data is from the European Integrated Pollution Prevention and Control (IPPC2001).

Note: “*” The national standard is effective May 1st, 2009. Source: GB3544-2008 Discharge Standards of Water Pollutants for Pulp and Paper Industry.

Annual average water consumption per ton of paper

2

02008

9.2728.58

25.3824.349.14 9.00

20102009

6

4

10

8

12

10

12

APP commitment(Since June, 2008)

International level

APP commitment(Since June, 2008)

International level

Annual average water consumption per ton of pulp

5

02008 2009 2010

15

10

30

20

35

28

35

25

4

02008 2009 2010

8.470 7.6697.28

12

8

16

20

9

20*

02008 2009 2010

16.05 16.22 15.78

40

20

60

80

17

80*

Annual average wastewater discharge per ton of paper Annual average wastewater discharge per ton of pulp

APP commitment(Since June, 2008)

International level

APP commitment(Since June, 2008)

International level

4

02008 2009 2010

8.470 7.6697.28

12

8

16

20

9

20*

02008 2009 2010

16.05 16.22 15.78

40

20

60

80

17

80*

Annual average wastewater discharge per ton of paper Annual average wastewater discharge per ton of pulp

APP commitment(Since June, 2008)

International level

APP commitment(Since June, 2008)

International level

Annual average water consumption per ton of paper

2

02008

9.2728.58

25.3824.349.14 9.00

20102009

6

4

10

8

12

10

12

APP commitment(Since June, 2008)

International level

APP commitment(Since June, 2008)

International level

Annual average water consumption per ton of pulp

5

02008 2009 2010

15

10

30

20

35

28

35

25

Page 35: APP-China Sustainability Report 2010

—32—

In 2010, APP-China fulfilled its commitment to ensure all used raw materials were legally sourced fibers originating from forest plantations. APP-China prohibits the use of raw materials obtained from the destruction of high conservation value forests. The organization only purchases legal raw materials from home and abroad and strictly adheres to national and international timber trading laws and regulations. These laws and regulations include but not limited to Forest Law, Regulation on Plant Quarantine, and Administration of Timber Operation and Transportation. Moreover, APP-China supervises and monitors its supply chain to ensure the legality and traceability of procured

raw materials.

APP-China will continue to manage and scrutinize the pulp and paper suppliers and set priority to select those whose raw materials are certified from legal and certified sources and properly managed forest plantations. APP-China endeavors to encourage the pulp and paper suppliers to increase the ratio of their raw materials procurement that has been certified by sustainable forest management (SFM). This is to contribute to the promotion of sustainable development of the global forest.

Green Procurement

Total amount of wood fiber from forest plantations

439.33

543.04

605.21

Total amount of PEFC-certified wood fiber

-

104.76

59.16

Unit (10,000 ton)

2008

2009

2010

Total use of wood fiber

507.34

454.00

566.75

2008 - 2010 APP-China overview of wood fiber procurement and consumption

Wood procurementIn 2010, APP-China strictly implemented its procurement policy to source 100% of its wood fiber from forest plantations. The wood fiber used in APP-China's pulp and paper production comprises of wood originated from China, Vietnam, Australia and so on, and the certified wood used originated Australia and Indonesia.

To meet customer's demand in 2010, APP-China had increased its purchase of wood fiber from Vietnam and other parts of Asia and significantly reduced its wood fiber source from Australia. The ratio of certified wood fiber purchased had decreased in 2010.

2008 - 2010 APP-China overview of wood fiber procurement

(10,000 ton)

100

02008 2009 2010

71.8%

66.1%70.8%

300

200

400

500

50

250

150

350

450

Import

China29.2%

33.9% 28.2%

Page 36: APP-China Sustainability Report 2010

With a strict supplier survey audit, evaluation and improvement, APP-China enables and guarantees the legal and sustainable

supply of the raw materials. In 2010 twelve business entities under APP-China received PEFC-CoC certification.

Certificate No.

SGS-PEFC/CoC-0249

SGS-PEFC/CoC-0263

SGS-PEFC/CoC-0328

SGS-PEFC/CoC00334

SGS-PEFC/CoC-0360

SGS-PEFC/CoC-0462

SGS-PEFC/CoC-0533

SGS-PEFC/CoC-0339

SGS-PEFC/CoC-0352

SGS-PEFC/CoC-0628

SGS-PEFC/CoC-0805

SGS-PEFC/CoC-0787

Scope of Certification

Sales

Printing paper

Fine art paper

Packaging paper

Packaging paper

Household paper

Photocopy paper, stock forms and carbonless paper

Sales

Sales

Food packaging paper

Pulp and coated paper

Notebook, paper bag

No.

1

2

3

4

5

6

7

8

9

10

11

12

APP-China Companies

Gold East Trading (Hong Kong) Company Ltd.

Gold East Paper (Jiangsu) Co., Ltd.

Gold Huasheng Paper (Suzhou Industrial Park) Co., Ltd.

Ningbo Zhonghua Paper Co., Ltd.

Ningbo Asia Pulp and Paper Co., Ltd.

Gold Hongye Paper (Suzhou Industrial Park) Co., Ltd.

Gold Shengpu Paper Products (Suzhou Industrial Park) Co. Ltd.

China Union (Macao Commercial Offshore) Co., Ltd.

Top Harvest Asia Co., Ltd.

Jin Fengyuan Paper (Shanghai) Co., Ltd.

Hainan Jinhai Pulp and Paper Co., Ltd.

Yalong Paper Products (Kunshan) Co., Ltd.

APP-China PEFC-CoC certified companies

—33—

Pulp procurementThere are purchased pulp and recollected pulp for mills within the scope of this report for APP-China. For the purchased pulp, it is divided into pulp purchased from Hainan Jinhai Pulp and Paper (internally sourced) and outsourced pulp.

In 2010, seven paper mills listed in this report purchased a total of 2,959,300 tons of pulp. Hainai Jinhai Pulp and Paper contributed about 862,500 tons and the remaining (2,096,800 tons) were purchased from other sources. Regarding the pulp type, 80% is chemical pulp and 20% is mechanical pulp. PEFC-

certified pulp made up 14% of the total. Except for Hainan Gold Hongye and Hainan Gold Shenpu, pulp procurement in 2010 increased by 40% compared to that of 2009, mainly due to increase by Gold East Paper. In 2010, the pulp produced from recollected paper accounted for about 16.4% at 579,900 tons.

In 2010 APP-China imported 1.9994 million tons which accounted for 67.56%, mainly from Canada, Brazil, Chile and other Southeast Asian countries.

24.37%16.39%

59.24%

2010 overview of APP-China pulp sourcing

1.4%

1.7%

0.8%

2010 overview of APP-China pulp sourcing regions

35.4%

9.8% 18.5%

32.4% China

Other Asian countries

Europe

South America

North America

Oceania

Others

Hainan Jinhai Pulp and Paper

Outsourced pulp

Recollected Pulp

24.37%16.39%

59.24%

2010 overview of APP-China pulp sourcing

1.4%

1.7%

0.8%

2010 overview of APP-China pulp sourcing regions

35.4%

9.8% 18.5%

32.4% China

Other Asian countries

Europe

South America

North America

Oceania

Others

Hainan Jinhai Pulp and Paper

Outsourced pulp

Recollected Pulp

Page 37: APP-China Sustainability Report 2010

—34—

Forest Certification

A forest certification logo or product labeling provides organizations (governments, private sector, non-government organizations (NGOs), communities, and customers) with traceable evidence that timber (and non-timber) products are produced legally and sustainably.

There are two types of forest certification:

● Forest Management (FM) FM certifies that the forest in which the timber is sourced and managed in a sustainable way, balancing economic, social and environmental needs.

● Chain of Custody (CoC) Certifies that the management systems adopted by the production and sales units help ensure its final products are manufactured using raw material sourced from certified sustainable forest.

PEFC and LEI: PEFC is a global forest certification scheme and LEI is national system in Indonesia. Both of them have FM and CoC certifications.

● The Programme for the Endorsement of Forest Certification (PEFC) is an international non-profit NGO dedicated to promoting sustainable forest management through independent third-party certification. PEFC works throughout the entire forest supply chain to promote good practice in the forest and to ensure that timber and non-timber forest products are produced with respect for the highest ecological, social and ethical standards. Thanks to its eco-label, customers and consumers are able to identify products from sustainably managed forests. Established in 1999, PEFC is the world's largest forest certification system nowadays.● Lembaga Ekolabel Indonesia (LEI) was established in 1998. It consists of community organizations, NGOs, private enterprises and academic institutions, LEI incorporates governmental and non-government perspectives and ensures the development of sustainable forest management.

Forest Management

Conversion Facility eg Sawmill, Pulpmill

Product Manufacturing eg Fumiture, Paper

Forest Management Certification

Chain of Custody CertificationTracks flow of wood & fiber in production processes

Haulage

Dealers

Page 38: APP-China Sustainability Report 2010

—35—

Hainan Jinhai Pulp & Paper

33,996,310

24.34

94.98

Gold East Paper

16,205,772

7.01

96.50

Suzhou Gold Hongye

1,718,310

11.49

97.70

Gold Huasheng

5,717,748

9.22

96.70

Ningbo Zhonghua

7,284,839

12.43

93.27

Hainan Gold Hongye

744,405

6.04

98.50

Hainan Gold Shengpu

531,330

5.45

98.50

Total water consumption (ton)

Water reuse rate (%)

2010 APP-China overview of water utilization

Hainan Jinhai Pulp & Paper

28.58

25.38

24.34

Gold East Paper

7.19

7.00

7.01

Suzhou Gold Hongye

12.62

11.58

11.49

Gold Huasheng

8.94

9.06

9.22

Ningbo Asia

12.54

12.38

11.49

Ningbo Zhonghua

11.66

12.01

12.43

Hainan Gold Hongye

-

-

6.04

Hainan Gold Shengpu

-

-

5.45

Unit (ton)

2008

2009

2010

2008 - 2010 APP-China overview of average wastewater consumption per ton of paper/pulp of major mills

Hainan Jinhai Pulp & Paper

94.90

94.93

94.98

Gold East Paper

95.90

96.20

96.50

Suzhou Gold Hongye

97.67

98.86

97.70

Gold Huasheng

96.54

97.20

96.70

Ningbo Asia

91.80

92.05

92.58

Ningbo Zhonghua

92.30

92.75

93.27

Hainan Gold Hongye

-

-

98.50

Hainan Gold Shengpu

-

-

98.50

Unit (%)

2008

2009

2010

2008 - 2010 APP-China water reuse rate of major mills

Annual average water consumption per ton of paper/pulp (ton)

Ningbo Asia

10,976,459

11.49

92.58

MBOS reduces the procurement cost and boosts environmental performanceIn 2010 , APP-Ch ina ’s p rocurement was faced w i th unprecedented pressure due to an increase in commodity prices. To meet these challenges, the procurement department liaised with the production and the R&D departments initiating an MBOS campaign, Mega Project, to develop alternative solutions. The project made great achievements, saving millions of US dollars for the group during 2010. For example, biological latex and bio-fuel have been used to replace petroleum and other resources and reduce emissions of carbon dioxide, creating the economic and ecological benefits.

Localization in procurementIn 2010, APP-China’s localization procurement rate reached 94.16%, including spending in complementary materials, spare parts, equipment and related maintenance and services. The priority was set to select local suppliers with qualified credentials, when purchasing new machines or processing lines, which not only gives more opportunities for local vendors, but also saving the logistics costs, transportation resources and minimizing the negative impact on the environment.

Maximizing water utilization ratesWater is much needed in the pulp and paper-making process. To maximize water utilization rates, APP-China adopted state-of-the-art production equipment and advanced technologies at its major mills. Manufacturing processes and equipment were constantly upgraded to improve efficiency and reduce the consumption of water and steam through recirculation and reuse. On one hand, APP-China increased reuse rates of water resources. On the other hand, average wastewater consumption per ton of paper/pulp decreases gradually among major mills.

In 2010 the total amount of wastewater consumption accounted for 77.175 million tons and reclaimed water reuse rate reached 95.9%. Among them, annual average wastewater consumption per ton of paper of Gold Huasheng and Ningbo Zhonghua increased slightly. This is because both mills used clean water to replace certain amount of white water in the recirculation process to ensure product quality in hot summer.

Energy Saving and Resources/Emissions Reduction

Hainan Jinhai Pulp & Paper

33,996,310

24.34

94.98

Gold East Paper

16,205,772

7.01

96.50

Suzhou Gold Hongye

1,718,310

11.49

97.70

Gold Huasheng

5,717,748

9.22

96.70

Ningbo Zhonghua

7,284,839

12.43

93.27

Hainan Gold Hongye

744,405

6.04

98.50

Hainan Gold Shengpu

531,330

5.45

98.50

Total water consumption (ton)

Water reuse rate (%)

2010 APP-China overview of water utilization

Hainan Jinhai Pulp & Paper

28.58

25.38

24.34

Gold East Paper

7.19

7.00

7.01

Suzhou Gold Hongye

12.62

11.58

11.49

Gold Huasheng

8.94

9.06

9.22

Ningbo Asia

12.54

12.38

11.49

Ningbo Zhonghua

11.66

12.01

12.43

Hainan Gold Hongye

-

-

6.04

Hainan Gold Shengpu

-

-

5.45

Unit (ton)

2008

2009

2010

2008 - 2010 APP-China overview of average wastewater consumption per ton of paper/pulp of major mills

Hainan Jinhai Pulp & Paper

94.90

94.93

94.98

Gold East Paper

95.90

96.20

96.50

Suzhou Gold Hongye

97.67

98.86

97.70

Gold Huasheng

96.54

97.20

96.70

Ningbo Asia

91.80

92.05

92.58

Ningbo Zhonghua

92.30

92.75

93.27

Hainan Gold Hongye

-

-

98.50

Hainan Gold Shengpu

-

-

98.50

Unit (%)

2008

2009

2010

2008 - 2010 APP-China water reuse rate of major mills

Annual average water consumption per ton of paper/pulp (ton)

Ningbo Asia

10,976,459

11.49

92.58

Hainan Jinhai Pulp & Paper

33,996,310

24.34

94.98

Gold East Paper

16,205,772

7.01

96.50

Suzhou Gold Hongye

1,718,310

11.49

97.70

Gold Huasheng

5,717,748

9.22

96.70

Ningbo Zhonghua

7,284,839

12.43

93.27

Hainan Gold Hongye

744,405

6.04

98.50

Hainan Gold Shengpu

531,330

5.45

98.50

Total water consumption (ton)

Water reuse rate (%)

2010 APP-China overview of water utilization

Hainan Jinhai Pulp & Paper

28.58

25.38

24.34

Gold East Paper

7.19

7.00

7.01

Suzhou Gold Hongye

12.62

11.58

11.49

Gold Huasheng

8.94

9.06

9.22

Ningbo Asia

12.54

12.38

11.49

Ningbo Zhonghua

11.66

12.01

12.43

Hainan Gold Hongye

-

-

6.04

Hainan Gold Shengpu

-

-

5.45

Unit (ton)

2008

2009

2010

2008 - 2010 APP-China overview of average wastewater consumption per ton of paper/pulp of major mills

Hainan Jinhai Pulp & Paper

94.90

94.93

94.98

Gold East Paper

95.90

96.20

96.50

Suzhou Gold Hongye

97.67

98.86

97.70

Gold Huasheng

96.54

97.20

96.70

Ningbo Asia

91.80

92.05

92.58

Ningbo Zhonghua

92.30

92.75

93.27

Hainan Gold Hongye

-

-

98.50

Hainan Gold Shengpu

-

-

98.50

Unit (%)

2008

2009

2010

2008 - 2010 APP-China water reuse rate of major mills

Annual average water consumption per ton of paper/pulp (ton)

Ningbo Asia

10,976,459

11.49

92.58

Page 39: APP-China Sustainability Report 2010

—36—

Hainan Gold Hongye/Hainan Gold Shengpu carried out the water balance analysis, which defined the water consumption at each manufacturing process and developed a customized approach to improve water efficiency, steam recycling and reclaimed water recycling in an hope to accomplish the goals of “zero discharge”.

Energy efficiencyIn 2010, APP-China furthered its efforts on energy efficiency in a number of projects, including additional heat utilization, electricity saving and lighting improvement, refrigeration equipment upgrade, condensate water recycling as well as

enhanced operation of Energy Saving Committee. Moreover, Gold Huasheng initiated the first pilot project of Energy Management System (GB/T23331) at APP-China. This is to transform a technical improvement program into a system.

In 2010 Gold Huasheng set up a three-level water saving mechanism step by step. A water saving committee comprised of many department heads to formulate the strategy and action plans. For instance, the Energy Department launched the boiler blowdown and wastewater and air heater condensate recycling project. This is to reduce wastewater consumption per ton of paper and expenditure of energy consumption per ten thousand RMB output value to 5 tons and 10 tons respectively. In 2010, Gold Huasheng undertook 42 water saving measures to save about 4703.5 tons of water each day.

Water Management System

Measurement Management System

Water Usage Record System

Meeting Follow-op and Implementation

Define the role and responsibility of Water Saving Committee and water saving guidelines.

Formulate the rules and regulations for the water measure-ment

Record and monitor the water usage of each department

Hold regular meetings to review water usage and track status of technical improvement programs

Gold Huasheng water saving mechanism

Wet pulp LBKP0.4 million tons of water

Steam system 0.324 million tons of water

Evaporation inthe dryer

0.35 million tons of water

10,000 tons ofwater contained

of 180,000 tons ofpaper

0.21 million tonsto be reused to

the pulp mill

Plant irrigation0.1 million tons

Cleaning andwaste discharge0.6 million tons

Water treatmentsystem

0.6 million tons

Pulping & pulp washing(under planning) 0.5 million tons

Recycling water ratetargets at 98.5%

Steam system 0.324 million tons of water

Dry pulp NBKP 50,000 tons of water

Clean water supply0.72 million tons

The minimized water with a target of zero discharge system

Papermaking Process

Water balance analysis conceptual diagram of Hainan Gold Hongye/Hainan Gold Shengpu

Page 40: APP-China Sustainability Report 2010

—37—

Gold Huasheng was awarded the “Energy Efficiency Star”Gold Huasheng took part in the Suzhou City “Energy Efficiency Star” campaign promoted by the local government. To improve its energy saving performance, the mill not only made an investment in improving the efficiency of power plant, boilers and paper machines, but also boosted its energy measurement management to initiate the first energy management system in the industry and further reduce the average energy consumption per ton of paper.

In 2010, Gold Huasheng invested RMB9.6865 million to upgrade several systems or programs, including the load allocation of turbine boilers, coal management, variable frequency conversion of power plant and the reduction of the frequency and time of

In 2010, the consumption of black liquor and biofuel increased by 19% and the consumption of natural gas increased by 48.9%. Consequently, this decreased coal and LPG consumption and reduced the emissions of carbon dioxide.

The increase of purchased electricity of Ningbo Zhonghua and

Ningbo Asia was primarily due to the management making the most of the additional electricity from the local power plant during the off-peak periods. This action reduced the waste of electricity by the local energy producer and contributed to the effective overall use of energy.

Coal

688,710,254

680,296,798

672,628,191

Gasoline

236,322

217,385

268,102

Diesel

3,399,520

3,383,711

3,585,354

Fuel oil

5,497,467

6,586,964

7,548,686

Pulp making black

liquor & biofuel

254,064,888

324,245,244

385,811,768

Natural gas

44,419,381

47,963,834

71,395,113

LPG

4,010,063

3,101,855

796,925

Purchased electricity

(10 MWh)

13,685

6,777

10,838

Unit

(GJ)

2008

2009

2010

2008 - 2010 APP-China overview of energy utilization for eight mills

Gold East Paper

273,111,452

66,281

1,896,265

0

277,908

23,428,698

655,921

0

Suzhou Gold Hongye

35,394,196

30,401

146,525

0

0

3,251,897

96,549

0

Gold Huasheng

101,190,143

43,769

426,880

0

0

2,694,042

38,934

0

Ningbo Zhonghua

75,698,982

29,480

217,518

0

73,473

0

0

3,511

Ningbo Asia

110,293,938

18,362

402,144

489,225

27,214

190,516

5,520

7,327

Hainan Gold Hongye

0

1,400

32,000

0

0

6,224,265

0

0

Hainan Gold Shengpu

0

486

3,100

0

0

4,192,985

0

0

Unit (GJ)

Coal

Gasoline

Diesel

Fuel oil

Pulp making black liquor & biofuel

Natural gas

LPG

Purchased electricity(10 MWh)

2010 APP-China breakdown of energy utilization for eight mills

Hainan Jinhai Pulp & Paper

76,939,480

77,923

460,922

7,059,461

385,433,173

31,412,709

0

0

Coal

688,710,254

680,296,798

672,628,191

Gasoline

236,322

217,385

268,102

Diesel

3,399,520

3,383,711

3,585,354

Fuel oil

5,497,467

6,586,964

7,548,686

Pulp making black

liquor & biofuel

254,064,888

324,245,244

385,811,768

Natural gas

44,419,381

47,963,834

71,395,113

LPG

4,010,063

3,101,855

796,925

Purchased electricity

(10 MWh)

13,685

6,777

10,838

Unit

(GJ)

2008

2009

2010

2008 - 2010 APP-China overview of energy utilization for eight mills

Gold East Paper

273,111,452

66,281

1,896,265

0

277,908

23,428,698

655,921

0

Suzhou Gold Hongye

35,394,196

30,401

146,525

0

0

3,251,897

96,549

0

Gold Huasheng

101,190,143

43,769

426,880

0

0

2,694,042

38,934

0

Ningbo Zhonghua

75,698,982

29,480

217,518

0

73,473

0

0

3,511

Ningbo Asia

110,293,938

18,362

402,144

489,225

27,214

190,516

5,520

7,327

Hainan Gold Hongye

0

1,400

32,000

0

0

6,224,265

0

0

Hainan Gold Shengpu

0

486

3,100

0

0

4,192,985

0

0

Unit (GJ)

Coal

Gasoline

Diesel

Fuel oil

Pulp making black liquor & biofuel

Natural gas

LPG

Purchased electricity(10 MWh)

2010 APP-China breakdown of energy utilization for eight mills

Hainan Jinhai Pulp & Paper

76,939,480

77,923

460,922

7,059,461

385,433,173

31,412,709

0

0Note: Hainan Jinhai Pulp & Paper offered electricity for Hainan Gold Hongye and Hainan Gold Shengpu, 13,269 MWh and 10,772 MWh respectively.

2008 - 2010 APP-China overview of energy sold

2,000,000

02008 2009 2010

6,000,000

4,000,000

7,000,000

1,000,000

5,000,000

3,000,000

Steam

Electricity

Unit (GJ)

Page 41: APP-China Sustainability Report 2010

—38—

Ningbo Zhonghua and Ningbo Asia optimized their energy management system and three-level energy saving supervision network to ensure the systematic management and work procedures. Both mills stipulated KPIs and standard operating procedures (SOP) in coal consumption reduction, electricity utilization, water consumption for power generation and gasoline consumption to set clear targets for any post and by each staff. In 2010, Ningbo Zhonghua invested RMB 3.07 million and saved 2,564 ton standard coal. Ningbo Asia reduced its integrated energy consumption by 1.44%, from 253.46 kg ce/t (kg standard coal per ton) to 249.81 kg ce/t (kg standard coal per ton), meeting the target set by Ningbo municipal government.

Waste management and reduction● WastewaterIn 2010, major mills of APP-China further improved their wastewater treatment systems, achieving the wastewater discharge per ton of paper less than one half of the national

standard. Meanwhile they have been advancing the reclaimed water recycling through three-level wastewater treatment system.

Total water discharge

56,677,882

52,671,699

54,110,253

Wastewater treated

65,602,741

63,198,510

67,641,260

Reclaimed water reuse

8,924,859

10,526,811

13,530,247

Reclaimed water reuse rate (%)

13.60

16.66

20.00

BOD

414

448

504.65

COD

4,420

3,729

3,684

Suspended solids (SS)

1,619

1,576

1,400

Unit (ton)

2008

2009

2010

2008 - 2010 APP-China overview of wastewater discharge, other major pollutants & reclaimed water reuse

Hainan Jinhai Pulp & Paper

19,187,405

19,248,294

60,889

0.32

Gold East Paper

12,340,450

15,081,210

2,740,000

18.17

Gold Huasheng / Suzhou Gold Hongye

5,621,552

7,166,688

1,545,136

21.56

Ningbo Zhonghua

7,584,023

11,598,486

4,014,463

34.61

Hainan Gold Hongye

58,182

584,362

526,180

90.04

Hainan Gold Shengpu

61,740

423,139

361,399

85.41

Unit (ton)

Total water discharge

Wastewater treated

Reclaimed water reuse

Reclaimed water reuse rate (%)

2010 APP-China wastewater discharge/reclaimed water reuse for eight mills

Hainan Jinhai

Pulp & Paper

15

≤30

287.8

88

≤100

1,688.5

41

≤70

786.7

Gold East

Paper

6

30

74

50

100

617

22

50

271

Gold Huasheng /

Suzhou Gold Hongye

5.27

20*

29.6

49.4

60

277.7

22.2

30*

125

Hainan Gold

Hongye

15

30

0.9

88

100

5.1

41

100

2.4

Hainan Gold

Shengpu

15

30

-

88

100

5.43

41

100

2.53

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

BO

Dem

issionsC

OD

emissions

Suspended

solids (SS

)

2010 APP-China overview of wastewater major pollutants for eight mills

Unit (mg/L)Ningbo

Zhonghua

9.4

30

70.4

73.3

100

550.4

12.6

50

94.6

Ningbo Asia

9,256,901

13,539,081

4,282,180

31.63

Ningbo

Asia

4.55

30

42

58.3

100

540

13

50

118

break for paper machines. The outstanding result saw its integrated energy consumption fall to 574.75kg standard coal/ton of paper, a reduction of 85.54kg standard coal/ton of paper compared with the year of 2005. Exceeding the target of the National Eleventh Five Year Plan, the mill won the honor of the city’s Pioneer of Energy Saving during the Eleventh Five Year Plan.

Gold Huasheng was assessed by the Suzhou Economic and Trade Commission on 76 indicators under four major categories, namely, energy management system, energy efficiency indicators, technology advancement and energy performance. Its performance was highly recognized by the team of experts and Gold Huasheng was awarded the four-star rating of “Energy Efficiency Star,” being only one of the four companies which won the highest recognition in this appraisal.

Hainan Jinhai Pulp & Paper condensate water & additional heat collection system

Water supply to R

ecovery Boiler 1

Heat

exchanger

Heat

exchangerH

eatexchanger

°

°

°

Backflowwater tank

°

Purewater tank

°

Condensatewater tank

°

Backflow water of operational units

Hainan Jinhai Pulp and Paper condensate water and additional heat collectionThe escalation of production volume is set to increase the backflow volume of steam condensate water, the increasing load of condensate collection unit (TG), and the increasing heat loss. Hainan Jinhai Pulp and Paper spared no efforts to improve additional heat collection from the joints of backflow water pipelines of operational units, to proceed with the heat exchange within the water supply of alkali recovery system, to reduce the temperature of condensate water of backflow water tank and decrease flash etc. In 2010 Hainan Jinhai Pulp and Paper expected to collect 46.2 GJ/hour, equivalent to 13,577 ton standard coal/year.

Page 42: APP-China Sustainability Report 2010

—39—

Ningbo Asia adopted a closed white water recollection system. The treated wastewater is recollected and used in the manufacturing process and to reduce the consumption of clean water and the discharge of wastewater. In November 2009, Ningbo Asia invested over RMB32 million in the construction of a Fenton wastewater treatment system, with a designed daily capacity of 40,000m3. When it was fully operational in 2010, the COD emissions were reduced to 58.3 mg/L, lower than the latest national wastewater discharge standard (to be stipulated in 2011) for the paper industry. The annual COD emissions were expected to decrease by more than one third and the quality of reused water will be greatly improved. Meanwhile, the Fenton wastewater treatment plant also reduced the emission of odors, hence alleviating the impact on the neighboring environment.

Total water discharge

56,677,882

52,671,699

54,110,253

Wastewater treated

65,602,741

63,198,510

67,641,260

Reclaimed water reuse

8,924,859

10,526,811

13,530,247

Reclaimed water reuse rate (%)

13.60

16.66

20.00

BOD

414

448

504.65

COD

4,420

3,729

3,684

Suspended solids (SS)

1,619

1,576

1,400

Unit (ton)

2008

2009

2010

2008 - 2010 APP-China overview of wastewater discharge, other major pollutants & reclaimed water reuse

Hainan Jinhai Pulp & Paper

19,187,405

19,248,294

60,889

0.32

Gold East Paper

12,340,450

15,081,210

2,740,000

18.17

Gold Huasheng / Suzhou Gold Hongye

5,621,552

7,166,688

1,545,136

21.56

Ningbo Zhonghua

7,584,023

11,598,486

4,014,463

34.61

Hainan Gold Hongye

58,182

584,362

526,180

90.04

Hainan Gold Shengpu

61,740

423,139

361,399

85.41

Unit (ton)

Total water discharge

Wastewater treated

Reclaimed water reuse

Reclaimed water reuse rate (%)

2010 APP-China wastewater discharge/reclaimed water reuse for eight mills

Hainan Jinhai

Pulp & Paper

15

≤30

287.8

88

≤100

1,688.5

41

≤70

786.7

Gold East

Paper

6

30

74

50

100

617

22

50

271

Gold Huasheng /

Suzhou Gold Hongye

5.27

20*

29.6

49.4

60

277.7

22.2

30*

125

Hainan Gold

Hongye

15

30

0.9

88

100

5.1

41

100

2.4

Hainan Gold

Shengpu

15

30

-

88

100

5.43

41

100

2.53

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

BO

Dem

issionsC

OD

emissions

Suspended

solids (SS

)

2010 APP-China overview of wastewater major pollutants for eight mills

Unit (mg/L)Ningbo

Zhonghua

9.4

30

70.4

73.3

100

550.4

12.6

50

94.6

Ningbo Asia

9,256,901

13,539,081

4,282,180

31.63

Ningbo

Asia

4.55

30

42

58.3

100

540

13

50

118

Note: “ * ” data source: Jiangsu Provincial Government Environmental Protection Bureau (2004) No.75 Document.

Total water discharge

56,677,882

52,671,699

54,110,253

Wastewater treated

65,602,741

63,198,510

67,641,260

Reclaimed water reuse

8,924,859

10,526,811

13,530,247

Reclaimed water reuse rate (%)

13.60

16.66

20.00

BOD

414

448

504.65

COD

4,420

3,729

3,684

Suspended solids (SS)

1,619

1,576

1,400

Unit (ton)

2008

2009

2010

2008 - 2010 APP-China overview of wastewater discharge, other major pollutants & reclaimed water reuse

Hainan Jinhai Pulp & Paper

19,187,405

19,248,294

60,889

0.32

Gold East Paper

12,340,450

15,081,210

2,740,000

18.17

Gold Huasheng / Suzhou Gold Hongye

5,621,552

7,166,688

1,545,136

21.56

Ningbo Zhonghua

7,584,023

11,598,486

4,014,463

34.61

Hainan Gold Hongye

58,182

584,362

526,180

90.04

Hainan Gold Shengpu

61,740

423,139

361,399

85.41

Unit (ton)

Total water discharge

Wastewater treated

Reclaimed water reuse

Reclaimed water reuse rate (%)

2010 APP-China wastewater discharge/reclaimed water reuse for eight mills

Hainan Jinhai

Pulp & Paper

15

≤30

287.8

88

≤100

1,688.5

41

≤70

786.7

Gold East

Paper

6

30

74

50

100

617

22

50

271

Gold Huasheng /

Suzhou Gold Hongye

5.27

20*

29.6

49.4

60

277.7

22.2

30*

125

Hainan Gold

Hongye

15

30

0.9

88

100

5.1

41

100

2.4

Hainan Gold

Shengpu

15

30

-

88

100

5.43

41

100

2.53

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

BO

Dem

issionsC

OD

emissions

Suspended

solids (SS

)

2010 APP-China overview of wastewater major pollutants for eight mills

Unit (mg/L)Ningbo

Zhonghua

9.4

30

70.4

73.3

100

550.4

12.6

50

94.6

Ningbo Asia

9,256,901

13,539,081

4,282,180

31.63

Ningbo

Asia

4.55

30

42

58.3

100

540

13

50

118

Page 43: APP-China Sustainability Report 2010

—40—

In response to the energy saving and emissions reduction policy in the National Eleventh Five Year Plan and to improve the reuse rate of industrial water, Gold Huasheng invested nearly RMB 28 million in a 7000m3/day reclaimed water reuse system in 2009. The system was put into test operation in March, 2010. The trial run produced 810,000 tons of clean water. It is expected to save 2.56 million tons of clean water and reduce COD emissions by 126.72 tons and SS by 48 tons annually.

Meanwhile, Gold Huasheng also expanded its biological wastewater treatment system from 30,000 tons/day to 36,000-40,000 tons/day, relieving the load of the wastewater treatment system. By means of pure-oxygen aeration, the biological wastewater treatment system will reduce emissions of Volatile Organic Compounds (VOC) from the aeration tank and eliminate the impact of its odors on the neighboring environment.

Environmental Inspector SystemIn 2010, Ningbo Zhonghua initiated an Environmental Inspector System, which deployed a dedicated team to perform 24-hour patrol and inspections with pictures and files on record.

● Emissions to airIn 2010, APP-China continued to reduce its emissions to air, including the odors produced from the alkali recovery boiler was chemically treated; the emissions to air comes from the bleaching of pulp and in preparation of chemicals; the soot

generated by the boiler and lime kiln were screened by the electrostatic precipitator before emitting from the smoke stacks. All measures ensure the emissions to air were below the national standards.

2008

8,725.74

5,328.23

2009

8,117.08

6,350.95

2010

7,235.00

5,403.50

Unit (ton)

Sulfur Dioxide

Nitrogen Oxide

2008 - 2010 APP-China emissions to air for eight mills

Hainan Jinhai

Pulp & Paper

75

≤1,200

1,147

157.41

≤650

2,402

26.74

≤200

Gold East

Paper

545/306

1,200/400

3,718

170/169

1,100/450

1,325

67/32

200/50

Gold Huasheng /

Suzhou Gold Hongye

211/198

400

461/462

98.6/119.1

250

215.5/278

66.7/58.5

200

Ningbo

Asia

98

400

436

178

450

824

18

50

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

Total emissions volume (ton)

Average annual discharge concentration

Standard limit

SulfurDioxide(SO2)

Nitrogen Oxide(NO2)

Particles

2010 APP-China emissions to air for eight mills

Unit (mg/m3)Ningbo

Zhonghua

298

1,200

1,011

123.5

-

359

82

250

Such endeavors not only reduced the incidents of abnormal discharge and leakage, but also relieved the load on wastewater management and lowering the treatment costs.

Page 44: APP-China Sustainability Report 2010

—41—

Note: The solid waste of Suzhou Gold Hongye is treated by Gold Huasheng; the solid waste of Hainan Gold Hongye and Hainan Gold Shengpu is treated by Hainan Jinhai Pulp and Paper.

2008

705,008

709,131

253,016

578

2009

597,566

781,663

231,608

500

2010

622,574

747,735

222,699

698

Unit (ton)

Sludge

Fly ash

Dregs and grit

Hazardous waste

2008 - 2010 APP-China overview of solid waste for major mills

Hainan Jinhai Pulp & Paper

56,248

0

85,475

0

60,836

Gold East Paper

17,803

50,666

311,500

3,620

70,342

Gold Huasheng

14,286

0

106,771

0

57,320

Sold volume

Sold volume

Sold volume

Sludge

Fly ash

Dregs & grit

2010 APP-China solid waste disposal volume

Ningbo Zhonghua

38,628

59,477

111,364

6,655

9,679

Unit (ton) Ningbo Asia

148,164

55,097

132,625

0

23,926

Incineration forpower generation

Incineration forpower generation

● Solid WasteThe solid waste generated by papermaking includes fly ash, dregs and grit, hazardous waste and sludge generated from wastewater treatment. Major mills under APP-China reduced the solid waste by burning them as the fuel in the boilers and calcinated in the lime kiln for the recollection of the lime mud and sludge. All

mills do their best to avoid using landfill sites. As an alternative approach, they strive for the maximized utilization. The solid waste was sold to qualified organizations to be raw materials, to turn it into products and minimize its impact on the environment.

2008

705,008

709,131

253,016

578

2009

597,566

781,663

231,608

500

2010

622,574

747,735

222,699

698

Unit (ton)

Sludge

Fly ash

Dregs and grit

Hazardous waste

2008 - 2010 APP-China overview of solid waste for major mills

Hainan Jinhai Pulp & Paper

56,248

0

85,475

0

60,836

Gold East Paper

17,803

50,666

311,500

3,620

70,342

Gold Huasheng

14,286

0

106,771

0

57,320

Sold volume

Sold volume

Sold volume

Sludge

Fly ash

Dregs & grit

2010 APP-China solid waste disposal volume

Ningbo Zhonghua

38,628

59,477

111,364

6,655

9,679

Unit (ton) Ningbo Asia

148,164

55,097

132,625

0

23,926

Incineration forpower generation

Incineration forpower generation

Gold East Paper has been utilizing the emissions to air with the latest equipment and technologies from the beginning of the project. The mill used the CO2 from the boiler as raw materials to make the precipitated calcium carbonate, reducing 0.57 billion m3 of flue gas emissions along with 208.9 tons of SO2 and 92,000 tons of CO2 in 2010.

In 2010, 100% of Gold Huasheng’s sludge was burned to generate electricity with effective use of 14,286 tons of sludge, reducing the coal consumption by 1,457 tons and lime stone, 3,940 tons. It is a win-win solution for economic and environmental performance. Meanwhile, Gold Huasheng produced organic fertilizer from sludge, a high-end paper made from physical-chemical sludge, and used slurry to make packaging cardboard etc. In doing so, it significantly reduced the waste discharge and emissions.

In 2010 Gold East Paper’s power plant produced about 332,500 tons of solid waste such as fly ash, dregs and grit. The byproducts were sold to Zhenjiang Fly Ash Utilization and Development Co., Ltd. to turn into block bricks. The quality of the bricks was assessed by provincial-level experts and is highly recommended by Zhenjiang Wall Material Reform Office. The quality and price of the block bricks are more competitive than those of the traditional ocher fired bricks.

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Recollect and recycle paperTo recollect and recycle paper significantly lowers the use of wood fiber and chemicals, upgrades efficiency and effectiveness of resources, reduces hard-to-process black liquor, a by-product

of wood pulp making, and comparatively minimizes pollution and impact on the environment during production. It is meaningful both for environmental protection and sustainable development.

2008 - 2010 APP-China overview of recollected waste paper volume & origions of import

0.00

39.39

Japan USA Europe

40.00

20.00

50.00

10.00

30.00

China

37.16

47.93

15.92

5.53 6.50 5.23 3.79 2.83 4.444.650.25

Unit (10,000 ton)

The expertise of Ningbo Zhonghua and Ningbo Asia is to collect and recycle waste paper to produce industrial paper. With the increasing demand and people’s awareness of environmental protection, the waste paper collection and recycling has a bright future. The collection rate of waste paper was over 70% in

APP-China will continue with its sustainabilty efforts to improve cleaner production, emissions reduction and waste management through the state-of-the-art technologies and management to optimize resource utilization and minimize its impact on the environment. APP-China endeavors to balance its performance in environmental, economic and social development with sustainable forest plantation management, sustainable pulp and paper production and green papermaking.

the developed countries and it was only 33% in China. There was huge room for growth. With advanced technology and management, APP-China will further its efforts in waste paper collection and recycling to play its part for the sustainable development.

Having been one of the largest industrial paper manufacturers in China, APP-China has two business entities with the collection and recycling paper capacity, namely Ningbo Zhonghua and Ningbo Asia. In 2008 they were also the first PEFC-certified paper manufacturers using recollected paper in China.

From 2007 to 2010, the two mills collected 2.37 million tons of waste paper, which saved 40.29 million trees or an equivalent of

30,666 hectares of forest plantations as raw materials of paper-making. Other resources such as water and coal were also saved. In 2010, Ningbo Zhonghua and Ningbo Asia collected 578,500 tons of waste paper, mainly imported from Japan. The ratio of collected paper pulp to be the raw materials of papermaking for Ningbo Zhonghua and Ningbo Asia was 33% and 50% respectively.

Page 46: APP-China Sustainability Report 2010

Corporate Responsibility

Page 47: APP-China Sustainability Report 2010

Corporate R

esponsibility—44—

APP-China is committed to balancing environmental, economic and social development. APP-China respects our role as a corporate citizen, maximizes its contribution and minimizes the negative impact of our operations on the environment. APP-China strives to understand the expectations of our stakeholders and respect our employees, customers and consumers. Our social responsibility is evidenced by taking proactive measures to drive industry development, support social welfare initiatives, and contribute to local communities.

materials used in pulp production and papermaking. In addition to providing strong technical support to the production division, the laboratory works well to expand the scope and accuracy of inspection to ensure product quality and safety.

Ningbo Zhonghua and Ningbo Asia carried out independent quality inspection and customer complaint analysis for each paper machine to track and measure the quality indexes for different product requirements. For customer complaints, the Quality Control division is in charge of assessment and follow-up as an on-going process for product quality and customer satisfaction improvement.

Furthermore, Ningbo Zhonghua and Ningbo Asia have established nationally accredited laboratory systems and are authorized to conduct tests on 4 categories of paper and packaging board, pulp, coal and calcium carbonate covering a total of 53 items. The laboratory system was accredited with China National Accreditation Service for Conformity Assessment (CNAS) in May 2008. In March 2011, both laboratories will undergo system reassessment as well as apply for pre-assessment on expanded product range. This will significantly strengthen the mills’ product and raw materials testing capability and in turn further product quality and safety.

“Customer satisfaction is the ultimate goal. APP-China’s business philosophy and common practice are to adopt a customer driven and market oriented strategy and to develop products and services that create added value for our customers”.

Product quality and safety management systemTo ensure that the benefits of customers and consumers are not compromised, all but one of APP-China’s pulp and paper mills covered in this report are certified with ISO9001 as an added assurance of our quality management system. The only exception is Hainan Gold Shengpu. As a newly established mill, Hainan Gold Shengpu has not yet been certified with any management system.

Every mill has also established its customized product quality and safety measures according to its own production and product features.

Having adhered to ISO9000 series of quality control, in May 2003, Hainan Jinhai Pulp and Paper established a quality assurance laboratory which was approved and certified with ISO17025 for laboratory quality management in August 2008. The laboratory is equipped with the most advanced pulp and paper inspection and testing equipments to analyze and conduct R&D on timber, wood chips and chemical raw

CorporateResponsibility

Responsible for Products

Page 48: APP-China Sustainability Report 2010

—45—

Supervised by a str ingent product qual i ty and safety management system, APP-China continued to receive superior results in product inspections by the government, the customers and independent third parties in 2010. For example:

Hainan Gold Hongye and Hainan Gold Shengpu passed the national random inspection tests in May 2010 and the random inspection of microbes in the production environment by Hainan Province Disease Control Center in August 2010.

APP-China Household Paper Products Group (HPPG) was randomly inspected by provincial and national supervision team on site and in the market place on 5 and 61 occasions respectively. HPPG passed all the tests. Samples submitted to a third party inspection have all passed. Besides, HPPG passed all the third-party customer inspection, including TESCO, JUSCO and BUNZL.

Eco-labeling and certificationIn 2010, the f ive categor ies of products which were manufactured by Gold East Paper, Hainan Jinhai Pulp and Paper, Ningbo Zhonghua, Ningbo Asia, Suzhou Gold Hongye and Gold Huasheng went through the verification process by the Environmental Certification Center of the Ministry of Environmental Protection and were certified under the China Environmental Labeling (II) Certification scheme. They were allowed to use the type II China environmental label. This was the first time that such a label was granted to so many product categories from any large-scale pulp and paper mill in China.

Part of Ningbo Zhonghua and Ningbo Asia’s products obtained ISO14025 certification (China Environmental Labeling (III) in April 2010, awarded after an on-site verification. The design of the label carries a flying ginkgo leaf and a swan symbolizing the importance of protecting environment.

Eco-friendly product designAPP-China communicates our belief in green and sustainable concepts with our customers and consumers by promoting environmentally friendly products.

Suzhou Gold Hongye replaced the plastic wrappings for tissue rolls with highly degradable and recyclable paper. Without compromising product hygiene and safety, the new design has lowered the use of packaging materials and costs. The new packaging design has been applied in global markets and is increasingly gaining local acceptance as consumers become more environmentally-conscious in China

Customer servicesAPP-China is devoted to superior customer services to ensure quality of our products, logistics support and after-sale services. In 2010, APP-China emphasized and improved our customer services capability

Blue sky customer service projectIn the second half of 2008, Gold East Paper launched the “Blue Sky Customer Service Project”. Gold East Paper established a cross-department service team led by senior executives to establish point-to-point contact with personnel of corresponding functions on the customer’s side. Fifty-eight key accounts from all over the country were included in the initiative. The aim of the project was to further the understanding of customer needs and encourage interactions to ensure quality of the products and improved management of customer services.

In 2010, it continued to be strengthened after 1.5 years of implementation to enhance the quality of services. It expanded to 4 teams with 13 groups and more than 90 members. A training program was created to equip the team members with a solid knowledge of customer services. Key accounts were broadened with different types of customers from all over China. Team operations became more practical to focus on customer benefits, value creation and common interest.

Since the launch of the “Blue Sky Customer Service Project”, the teams had visited almost 900 customers, gathered

Page 49: APP-China Sustainability Report 2010

—46—

nearly 1,300 pieces of valuable information and solved nearly a thousand customer related issues. Through face-to-face communications to understand customers’ needs and put forth solution, it succeeded in achieving strategic cooperation and exploring market potential between Gold East Paper and the customers.

Customer satisfactionAPP-China carries out customer satisfaction surveys to obtain feedback. This leads to better communications with the customers and consumers and allows the company to respond in an effective and timely manner. It also allows for gathering market intelligence to assess the performance of the organization and continued improvement. For example:

By different categories of customers, Suzhou Gold Hongye distributed a total of 356 customer satisfaction survey forms to gather information on their perception of its service quality. It made direct contact with the customers via the 800 service hotline, online information feedback and e-mails to upgrade customer satisfaction and customer loyalty. An annual customer satisfaction survey was conducted to

assess its product quality of the current year to establish the quality target for the following year. In 2010, Suzhou Gold Hongye implemented 531 corrective measures in response to customer complaints. The losses attributable to customer complaints accounted for 0.06% of the sales revenue. Customer satisfaction scoring was at 82.09 and the quality target was achieved each month of the year.

Hainan Gold Hongye and Hainan Gold Shengpu conducted monthly customer surveys to understand customers’ satisfaction on the quality of its tissue products and services. Timely feedback was analyzed and reported to top management for developing corresponding improvement measures. For example, both hills stabilized the manufacturing process of the paper machine to improve the elasticity of the paper and to reduce the occurance of any broken and incomplete layers. Both hills made continuous refinement in mixing formula of the pulp and paper to control the thickness of the paper etc. In 2010, on average, the customer satisfaction ranking of Hainan Gold Hongye and Hainan Gold Shengpu reached 88.

Overview of employeesIn 2010, the scope of the report collectively employed a total of 28,552* personnel. The recruitment process followed the provisions of national laws. APP-China does not use child or forced labor.

Employees are APP-China’s most important stakeholder and assets. This section will provide an overview on APP-China’s employee composition, labor relations, salary and welfare, training and development, occupational health and safety and

Responsible for Employees

2008 - 2010 APP-China percentagesof female employees

%

0

25.7

2008 2009 2010

20

40

10

3024.7

33.71

2008 -2010 APP

0.002008 2009 2010

40.00

80.00

20.00

60.0060.88

55.84

2008 - 2010 Number of female employeesin the management level

person

0

359

2008 2009 2010

600

200

400417

533

2008 -2010 APP

2.802008 2009 2010

2.902.88

73.13 2.90 2.90

30 45%30 50 53%50 2%

Fair treatment APP-China respects employees’ rights and upholds fair treatment for all its employees. APP-China adheres to the principle of the same payment for the same work and opposes any forms of discrimination.

Note: The data and information disclosed in the above charts refer to the sum of those entities specified in the scope of the report. Due to the increasing scope of the report in 2010, and the new definitions, units, standards and formulas adopted in both 2009 and 2010, selected data cannot be compared with those in 2008.

the employee satisfaction. This is to demonstrate APP-China’s people first business philosophy and sustainable development in career development.

Page 50: APP-China Sustainability Report 2010

—47—

Labor relationsAPP-China is committed to strengthening its labor union and communications channels (Please refer to Stakeholder Engagement) to establish healthy and harmonious relations with its employees. Examples of this initiative are: APP-China was awarded the “Harmonious Labor Relations Enterprise” by Human Resources and Social Security Bureau of Huangpu district of Shanghai; Gold Huasheng was acknowledged by Suzhou city for its excellent labor relations with A grade of corporate reputation. Ningbo Zhonghua was honored the “Advanced Enterprise of Harmonious Labor Relations, Zhejiang Province”; Ningbo Asia was granted the title of “Harmonious Labor Relations Enterprise in the National Papermaking Industry.”

Human resources appraisal committee systemAPP-China established the Human Resources Appraisal

Hainan Jinhai

Pulp & Paper

9.77

11.44

13.51

ACF

62.06

13.41

8.051

Gold East

Paper

4.24

4.42

4.54

Suzhou Gold

Hongye

29.84

27.75

362

Gold

Huasheng

21.92

10.69

9.311

Ningbo

Asia

20.133

25.433

24.843

Ningbo

Zhonghua

11.38

10.87

16.62

Hainan Gold

Hongye

/

/

31.3%

Hainan Gold

Shengpu

/

/

33.6%

HQ

17.7

8.91

13.63

2008

2009

2010

2008 - 2010 APP-China overview of employee turnover rate

Unit (%)

Note 1: Employee turnover for Gold Huasheng and APP-China Forestry (ACF) declined in 2010. Gold Huasheng increased much entry-level employees’ salary and strengthened training and development for employees. For ACF, new policies coupled with salary adjustment, organizational change and room of individual development contributed to higher retention rate.Note 2: Employee turnover of Suzhou Gold Hongye and Ningbo Zhonghua observed a rising trend in 2010 due to the loss of migrant workers for infrastructure change and seasonal turnover. Both mills adjusted salary ranges and established partnership with local vocational schools for talent bank, in addition to improving working conditions in the hottest weather. Note 3: Since more than 60% of Ningbo Asia’s employees are under age 30, the mill faced a higher turnover rate due to marriage and family reasons. In addition, the Ningbo city is known for its high real estate and living prices, when more than 40% of the mill consists of workers all over China, it poses a challenge to employee retention. Ningbo Asia has been working to improve its manpower structure, increase productivity and boost morale.

2008 percentage of APP-China employees by different age groups

under 30 55.9%30-50 41.7%over 50 2.4%

under 30 50.2%30-50 46.7%over 50 3.1%

2009 percentage of APP-China employees by different age groups

under 30 45%30-50 53%over 50 2%

2010 percentage of APP-China employees by different age groups

Item

Total number of employees

Number of employees for direct employment

Number of employees for indirect employment

Percentage of employees for different age groups (under 30; 30-50: over 50)

Percentage of employees of ethnic minorities

Percentage of gender (male: female)

Number of female employees in the management level

2008

20,367

18,170

2,197

55.9:41.7:2.4

2.9%

74.3:25.7

359

2009

21,332

18,644

2,688

50.2:46.7:3.1

2.9%

75.3:24.7

417

2010

28,552

23,095

5,467

45:53:2

2.9%

67.3:33.7

533

Committee System under the labor union to ensure that fair and reasonable decisions as part of the congenial labor-management relationship practice. The committee consists of members from the Labor Dispute Mediation Committee and four randomly selected representatives from the company.

In the event of an appeal against the decision made by the company’s human resources department concerning an employee, the labor union, human resources department and internal control department will form an investigation team. After the cross-department investigation, the team will communicate its analysis of the situation with the concerned employee. If the employee is still not satisfied with the decision, the case will be brought to the Human Resources Appraisal Committee for deliberation. The committee will review and discuss the issue, take a vote and communicate the decision to the investigation team for final action.

Note: Management indicates deputy section chief and higher at APP-China.

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Salary and welfareSalary and welfare are one of the most discussed issues among the employees.

APP-China contributes to employee insurance policies to include but not limited to endowment, unemployment, medical, personal accident and maternity insurances and housing fund. An incentive system is in place to reward employees with outstanding performances.

In addition to employee social security insurance as a mandate,staff who engage in hazardous assignments are covered with personal accident insurance. Additional medical insurance for employees are available in mills with good performance. For employees required to take frequent business trips are covered with travel insurance.

APP-China adjusts employee salary based on their performance. For example, a salary adjustment of 9% will be made up of 5% for average salary increment and the additional 4% is based on outstanding performance.

Training and developmentAPP-China attached great importance to the training and development of employees to create a healthy career development environment for them. In March 2010, APP-China established APP University (APPU), aimed at instilling a sense of cohesiveness within the group by establishing a platform for skill and talent development. APPU was also intended to promote the corporate culture in line with the values of the group, to grow MBOS leadership and corporate competence. This activity was designed to improve the organizational effectiveness and realize APP-China’s vision and strategic objectives.

Since its establishment, APPU has implemented a number of training initiatives including the Environment and Sustainability Communications Coordinator (ESCC) system. It provides employees with the opportunities to develop and strengthen their skills for further career development. For example:

(1) Provide training and development opportunities to middle and senior management as well as employees with high potential selected to be in the succession plan on topics such as self-leadership, leadership among others, strategic corporate management, and marketing management, etc.(2) Conduct internal training on the group’s corporate culture such as entrepreneurial behavior, culture of appreciation, concept and knowledge about environmental protection, leadership, talent development, marketing management courses.(3) In charge of recruiting and running the group’s management trainee programs with stringent standards and tools which have intensive but flexible approach.

Furthermore, APP-China has established the Talent Development and Coaching Committee. This committee is responsible for assessing, guiding and promoting the development of talents through the implementation of effective policies and providing financial support.

In addition, those business units and major mills have their own employee training and development platform. For example, under the framework of Talent Development and Coaching Committee, Suzhou Gold Hongyehas a talent appraisal team to evaluate candidates according to the established Competency Assessment Guideline. Mentors are appointed to guide the selected individual along a career development path.

Set qualification criteria forkey positions

Committee Members, HR*

Tracking the Progress ofDevelopment Plan

HR*, Mentor

ImplementationPromotion, Talent retention

First selection ofcandidates

Quantitative & Qualitative

Work out personal development plan

Result evaluation. Mentor’s assistance

2nd evaluation of the talentappraisal team on

Competency Assessment Guideline

Mentor

Once everyhalf year

Qualified talents toassign mentor

Identify the gap between the targetposition’s qualifications & that of thecandidates.Develop personaldevelopment plan

Talent Developm

ent andC

oaching Com

mittee

Note: *HR refers to Human Resources department

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—49—

Average training costs per employee (RMB)

Average training time per employee (hour)

2008 - 2010 APP-China overview of employee training & development

Occupational health and safetyFor the management system, APP-China promoted the OHSAS18001 certification for occupational health and safety management procedures at the major mills. By the end of 2010, with the exception of Hainan Gold Hongye and Hainan Gold Shengpu, all those within the scope of the report had been certified with OHSAS18001 (Hainan Gold Hongye is expected to be certified by 2011. As a newly established mill, Hainan Gold Shengpu is not yet certified with any management system).

The major mills of App-China implemented mill-specific and effective occupational health and safety mechanism according to nature of its equipment and workplace environment.

Hainan Jinhai Pulp and Paper set up an Occupational Health and Safety Committee. The general manager was head of the committee. It established a 3-level safety net to

ensure the implementation of occupational health and safety procedures. Due to the slightly high number of workplace injuries in the previous years, Hainan Jinhai Pulp and Paper carried out a targeted campaign in 2010 and reduced the number of work-related injuries from 13 in 2009 to 6 in 2010.

Those improvements made on the occupational health and safety management system greatly reduced workplace injuries in the recent three years (see table below).

Among them, in 2010, one employee of Ningbo Asia was killed at work while checking an abnormal production situation violating standard operational procedures. To prevent such incidents in the future, Ningbo Asia immediately improved the machine’s safety protection measures and reinforced operational staff safety training.

Number of fatalities at work

Number of work-related injuries

Hours lost per million working hours

(excluding hours lost due to fatality on duty)1

Number of people affected by occupational diseases

Number of people who have taken the occupational health check-up

Number of people suffering from occupational diseases

2008 - 2010 APP-China overview of occupational health & safety

Note 1: 2008 data excluded APP-China Forestry and Hainan Jinhai Pulp and Paper; 2009 data excluded APP-China Forestry. Due to lack of complete statistics, 2008 to 2010 data didn’t include Hainan Gold Hongye and Hainan Gold Shengpu. Besides, data of Gold East Paper excluded subcontracted workers, which will be improved the data collection system in 2011. Note 2: The scope of the report was extended in 2010 to see more growth of the data.

2008 - 2010 APP-China overviewof hours lost per million working hours

02008 2009 2010

4000

8000

2000

6000

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—50—

Employee satisfactionIn 2010, APP-China conducted annual survey of employee satisfaction.

The survey probed into 5 dimensions of employee satisfaction including satisfaction with compensation, working environment, colleagues, management and operations. The questionnaire included 50 questions on three levels. Each business unit

APP-China plays an important role in leading the development of the pulp and paper industry. In addition to driving technological advancement of the industry, APP-China is committed to taking part in accelerating industry growth through actively participating in industry associations and in the exchange of best practices with other key players to further industry chain development.

Promote industry exchangeAPP-China actively involves in various industry associations and also holds important positions in several influential industry associations such as China Paper Association and China Technical Association of Paper Industry.

Moreover, APP-China proactively takes part in the formulation of various industry standards, thereby contributing to the industry development. For instance, Gold Huasheng participated in the drafting of Carbonless Paper - National Standard and Photocopy Paper - National Standard. In 2010 Gold Huasheng also involved in drafting Hectograph Paper - National Standard, Thermal Paper- National Standard, and General Specification for IT Commercial Rolling Thermal Paper - Industry Standard.

APP-China organizes and participates in various industry exchange activities. From January 25th to 27th 2010, APP-China attended the First Annual China Fast-Growing Forest Forum held in Nanning, Guangxi province. At the

Responsible for Industryforum, APP-China introduced the modern forest plantation technology in developing more than 300,000 hectares of fast-growing and high-yield trees while fulfilling ecological conservation. APP-China’s forest plantations consist mainly of Eucalyptus, Poplar, Pinus, Acacia Rachii, Casuarinaceae and Broussonetia papyrifera. This is to meet the increasing demand of raw materials which simultaneously absorb more than 8 million tons of carbon dioxide each year and in turn contribute to fighting global warming.

In August 2010, APP-China invited 27 representatives from the Hong Kong Printing Industry Society, the Society of Publishers in Asia, and Hong Kong Environmental Protection Association to visit APP-China’s nursery, Eucalyptus forest plantations and Hainan Jinhai Pulp & Paper to understand the manufacturing base of plantation-pulp-paper integration.

provided in-depth analysis and solutions. For example:

Suzhou Gold Hongye looked into 10 issues with the lowest satisfaction rating and provided corresponding suggestions, including salary adjustment and improving staff dormitory conditions such as replacing TV sets and adding laundry and entertainment facilities.

Hosted by the China Paper Association, China Business News (CBN) and sponsored by APP-China, the PCwC Sustanability Forum 2010 was held in Nanjing from 29th to 30thJuly, 2010. Nearly one hundred stakeholders including customers, NGOs, industry associations, academia and media representatives gathered to discuss the development of paper industry in a low carbon economy.On December 2nd, 2010, another PCwC forum was held with the theme of “When you use paper, we plant trees – Better Paper Better Life” to discuss the challenges and trends that the tissue industry, including how to provide consumers safe and high quality products and how the sustainability of the paper industry can be implemented. The forum was hosted by China National Household Paper Industry Association (CNHPIA) and the Economics Observer and sponsored by APP-China and other industry players.

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—51—

Responsible for Community

APP-China’s PCwC manifesto clearly indicates that it will “continue with its commitment to community empowerment by promoting economic growth through job creation, building infrastructure and schools in rural areas, and providing job training in the communities where its business operates.”

Guided by this commitment, the scope of the report has actively contributed to community services and when appropriate, incorporating MBOS in their work. As an example, in 2009, Gold East Paper established the Management Guidelines for Employees Volunteer Services included volunteer involvement into employee KPI. APP-China widely popularized this practice and all the mills within the scope of the report support their employees to participate in community services and rolled out service programs based on different development needs within their communities.

The Sinar Mas Print Award held by Gold East Paper has been successfully run for four consecutive years. Its impact has spread from Mainland China, Greater China, Asia Pacific to the globe. The number of works submitted during the 2010 event increased to 2,000 from 1,000 in the past and the number of participating companies increased to nearly 1,000 from over 400 previously.

“The Sinar Mas Print Award has become widely recognized as a highly regarded professional printing competition around the world especially in the Asia Pacific region with increasing influence in the printing and other related industries and contribution to the technology advancement of the industry.”-- Quote from Professor Wang Qiang, A distinguished Professor of Hangzhou University of Electronic Science and Technology, member of Steering Committee of Printing Engineering Teaching Academy of the Ministry of Education and Executive Director of Digital Printing Branch, China Printing Technology Association. --

Taking lead in industry developmentThe plantation-pulp-paper integration is a national policy leading the way to the sustainable development of the pulp and paper industry. As a world leader, APP-China began its investment in China with the plantation-pulp-paper integration in the early 1990s. Currently, APP-China owns over 20 modern pulp and paper companies and high-yield forest plantations. APP-China spearheads the low carbon and sustainable development of

the paper industry through implementing a green cycle of the integrated model and contributing to the transformation and advancement of China’s paper industry.

APP-China also played an active role in driving technological exchange and cooperation with the downstream printing industries:

Gold East Paper took lead in expanding “Harmony in Community” activities into a form of community relations. A special budget is allocated for the initiative. At the end of each year, Gold East Paper assessed the year’s performance to make improvements for the next year. In 2011, Gold East Paper allocated over RMB1.81 million to organize and conduct community activities.

In 2010, Gold East Paper carried out a series of activities in five areas, such as “Holding Hands with Love (an activity to assist the impoverished students and the poor),” “I’m Happy Because I Contribute,” (a volunteer program). The man-hours devoted to the volunteer activities increased from 29,247 in 2009 to 41,040 in 2010, an increase of 40%. This is not only highly recognized by local communities but also marks a milestone for Gold East Paper to be truly part of the communities.

APP-China is committed to minimizing the negative impact on the environment through reducing waste emissions, energy saving, recycling and reuse (please refer to Sustainable Pulp and Paper Production of this report). On the other hand, APP-China maximizes the positive contribution to society by promoting economic growth and cordial community relations.

In 2010, APP-China created a total of 15,943 jobs for the communities where the mills are located and also provided many indirect employment opportunities by promoting the local industries such as in logistics support, thereby contributing to the local economy.

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Hainan Jinhai Pulp and Paper held an annual pubic movie campaign in the rural villages of Hainan province since 2007. About 8,000 movie titles were aired free of charge to 2,500 administrative villages in Hainan’s 18 townships, counties and the Yangpu Economic Development Zone. Within three years a total of 24,000 movies were released for the benefit of over 5.8 million villagers.

This campaign added to the sharing of scientific and cultural knowledge and the village’s social events whilst enriching the cultural life of the villagers. It also allows the teenagers of the communities in rural areas to have the opportunity to enjoy movies, contributing to the harmonious social development of Hainan, including the healthy development of the local teenagers.

In October 2010, Hunan province suffered the worst flood in 60 years. On October 29th, APP-China Forestry head office and representatives of the Hainan area donated RMB20, 000 worth of rice, oil and tissue paper produced by APP-China to 62 families.

The Sixth APP-China Environmental Protection Summer Camp for University Students was held in Guangxi province from August 16th to 18th 2010. The event was to share modern forest plantation management and scientific development in forest plantations with university and college students. The activities include theory, site visits, observation and practices. Twenty teachers and students from five universities, namely the Wuhan Textile University (WTU), Huazhong Agricultural University, Wuhan Institute of Technology, Hubei College of Finance and Economics and International Business and Economics College of WTU were givens a full briefing on APP-China’s green model and best practice of plantation-pulp-paper integration. In July 2010, APP-China's Scientific Development in Forest Plantation- Environmental Protection Summer Camp for University Students was featured for the Typical Case Studies of National Scientific Literacy and Corporate Social Responsibility.

Note: in December 2009, with the support of China Association for Science and Technology (CAST), Chinese Society for Science and Technology Journalism (CSSTJ), China Research Institute for Science Popular Education (CRISP) and Beijing Science International PR Ltd. together rolled out the National Scientific Literacy and Corporate Social Responsibility - Case Study Collection campaign. It focused on the survey, evaluation and promotion of more than 600 domestic and foreign companies. More than 20 scientists and experts participated in the selection of 43 typical cases, and publication titled the Typical Case Studies of National Scientific Literacy and Corporate Social Responsibility.Reference: http://www.uisp.org.cn/2010-07/28/content_3630217.htm

The changes of Yangpu, Hainan, where Hainan Jinhai Pulp& Paper is locatedBefore Hainan Jinhai Pulp and Paper was established in Yangpu in 2003, there were only 3 motorcycles in Gongtang Lower Village. Brick houses were also rare then. The construction and operation of Hainan Jinhai Pulp and Paper improved the living

standard of the people in Gongtang Lower Village tremendously. Now concrete buildings were everywhere and all the families of more than 800 residents in Gongtang Lower Village own motorcycles. Some even bought cars to serve logistics work for Hainan Jinhai Pulp and Paper.

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Apart from paying attention to the local communities where the mills and business units operate, APP-China also cares about the larger community of “China” to actively fulfill its social responsibility on a group level.

The Huang Yicong Foundation (the Foundation) founded by the family of Sinar Mas’ founder was officially registered with the Ministry of Civil Affairs in May 2010 to be an independent legal entity. The Foundation inherits the founder’s family and the company’s belief in philanthropy and social responsibility and will continue with existing philanthropy projects and new initiatives with innovation. In addition, the Foundation’s dedication towards philanthropy invigorates the community services of APP-China.

Contributing to Society

Cultivating university studentsUniversity scholarship and speeches/presentationof circular economySince 2004, APP-China established scholarships in colleges and universities throughout the country and promotes the circular economy each year. From 2010 to 2011, three hundred and fifteen high performing students from 12 universities and colleges were awarded the scholarships.

Since the Foundation took over the scholarship projects in 2008, it began to hold annual discussion sessions with the awarded students to understand issues related to their studies, life and future plans. The Foundation also ran campus activities to promote environmental protection, public services and encourage university students to participate in philanthropic activities and cultivate a sense of social responsibility in addition to their pursuit of excellence in study and integrity.

APP Internships at NPOs (Non-Profit Organizations, NGOs)In June 2010, APP-China introduced “APP Internships at NPOs” campaign. It opened a new window of opportunity for university students by supporting and encouraging them to contribute their time for the NPO internship during summer vacations. It also creates a new direction of cultivating young talents.

In summer 2010, six outstanding students from leading colleges and universities in Shanghai took up the offer and were posted to six NPOs in Shanghai. Through participating in the operations, the students gained in-depth work experience, fast growth in how to deal with daily tasks and a strong sense of fulfillment. The cultivation of such philanthropic personality will benefit the young generation for their life-long journey.

The Foundation plans to expand the scope of the campaign to benefit more students based on the success of the 2010 pilot projects.

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Primary and junior high school educationJoy of Reading ProjectSince 2009, the Foundation began to implement Joy of Reading Project for the primary and junior high schools in remote areas to build and enrich school libraries. By organizing reading campaigns and competitions, it helped the students form a good reading habit to benefit them for life.

In 2010, Joy of Reading Project donated books worth over RMB260,000 to three schools in Luojiang, Fujian province. The Foundation helped promote reading campaigns as well.

Sustainability education/Planet Watch launch and promotionIn October of 2010, the Foundation and the Shanghai Popular Science Press introduced a distinguished book in environmental protection, Planet Watch, originally published by Dorling Kindersley Limited. The Foundation leverages the launch and promotion of the book to roll out the sustainability education. This school-family-community model is to enhance the concept of

sustainability for future generations and promote the community practice in environmental protection.

As of May 2011, twenty-five schools from Shanghai, Jiangsu, Zhejiang, Hainan, Fujian and Gansu provinces participated in this program. More than 10,000 students have benefited and the Foundation aims to expand more cooperation with these schools in the future.

Education sponsorship for Shanyao ethnic group, YunnanIn May of 2010, APP-China and the Foundation donated RMB 1 million through Shanghai Hongkou Education Bureau to the children of Shanyao Ethnic Group in Funing County, Yunnan. The aid not only sponsored and rewarded those students doing well in school study but also benefited all students through the nutrition program of giving one cup of soybean milk and one egg every day.

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Community developmentSanlin Expo Homestead of ShanghaiThe Foundation’s support for the Sanlin Expo Homestead of Shanghai program began in September, 2008. It was in cooperation with the Shanghai Wulixiang Community Service Center. It aims to build a LOHAS community by organizing painting, calligraphy, garbage sorting to exchange green products and low-carbon living style activities. Such activities attracted many other communities in different areas to visit and join the efforts.

APP-China “Shanghai Here We Come!” Expo Summer CampThe Foundation continued to build momentum built on the basis of the “Shanghai Here We Come!” Exp Summer Camp started in 2009. The Foundation organized three 6-day Shanghai Expo Summer Camps to host high-performing teachers and students

Disaster relief and post-disaster re-constructionAfter the earthquake in Yushu, Qinghai province in April 2010, APP-China and the Foundation jointly donated RMB 20 million through the Overseas Chinese Affairs Office under the State Council to support the reconstruction of the No. 3 Wanquan Primary School in Yushu County. The school is expected to be completed by the end of 2011.

The new campus construction of Beijing Chinese Language and Culture College (BCLCC) is expected to be competed by 2011 to 2012. In 2009 APP-China and the Foundation jointly donated RMB 100 million to BCLCC.

to tour Shanghai Expo Park, Oriental Pearl, and the Bund. They also visited Gold Hongye and Gold Huasheng to understand paper making processes and toured the environmental protection park of the factories. A total of 8 teachers and 30 junior high school students of eight schools from six poor and remote regions such as Inner Mongolia, Hebei, Gansu, Sichuan, Guangxi and Fujian were invited for the tour. The students also had the opportunity to interact with students from Beijiao Senior High School of Hongkou district, Shanghai.

The Foundation is more than happy to share its philanthropy, community service experiences and case studies with all the APP-China mills to give back to the society.

The Psychological Counseling Program established in two schools in Sichuan after the Wenchuan earthquake in 2008 has enabled the community to develop a comprehensive local counseling platform and provide counseling training to local

teachers. Another project kicked off in 2008, The Fujian Yicong School Scholarship continued to award teaching to support the development of the school in 2010.

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Employee volunteer servicesIn addition to promoting community programs, The Foundation is also devoted to encourage APP-China’s employees in Shanghai to participate in volunteer services. In 2010, the volunteer activities includes the Shanghai-Fujian Correspondence Volunteer Program, clothing donation, World Expo Summer Camp and "Give Love, Give a Scarf" Project. From 2008 to

In 2010, APP-China and the Foundation’s total charity donation

APP-China is guided by our sustainability pledge, Paper Contract with China, and will continue to be a good corporate citizen to fulfill its social responsibility. APP-China respects and values our employees, customers and consumers and are committed to the advancement and sustainable development of the industry and the society to help boost the industry chain, to support community services and do its part to further sustainable development for the society.

2008

5,608

2009

3,300

2010

4,975

Year

Donation amount (RMB 10,000)

2008 - 2010 total value of charity donation of APP-China and the Foundation

2008 - 2010 overview ofAPP-China’s volunteer services

man-hour

02008

16,311

2009

30,272

2010

45,116

20000

50000

10000

40000

30000

2010, the man-hour of APP-China’s volunteer services saw a great growth: total man-hours of volunteer services at 16,311, 30,272 and 45,166 for the past three years.

There was an emerging atmophere for every staff to enjoy in volunteeer services at APP-China.

amounted to RMB 49.75 million.

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Note 1: The data disclosed in this chart refer to the sum of those entities specified in the scope of the report.Note 2: “Total water discharge” and “Total COD emissions” includes all the entities specified in the scope of the report (including Hainan Jinhai Pulp and Paper, Hainan Gold Hongye and Hainan Gold Shengpu). The same data of APP-China Sustainability Report 2009 covers only paper mills of the scope of the report (except for Hainan Jinhai Pulp and Paper, Hainan Gold Hongye and Hainan Gold Shengpu) .Note 3: Due to the expanded scope of the report in 2010, and the new definitions, units, standards and formulas adopted in 2009 and 2010, some of the data cannot be compared with those of 2008 and 2009.

Facts and Figures

2008

488

599

14,894

25.7

2.9

73.13

343.0

38.4

2

96

6,023.0

4,420

3,631

0

5,608.0

16,311

20.60

14.19

281.81

700.87

2009

647

626

12,986

24.7

2.9

60.88

295.0

33.1

1

84

4,118.3

4,701

4,657

4

3,300.0

30,272

30.12

13.66

258.42

764.46

2010

625

827

15,943

33.6

2.9

55.60

304.1

34.0

1

87

1,215.5

6,645

5,661

1

4,975.4

43,378

25.53

13.73

395.71

987.58

Environmental PerformanceTotal investments in environmental protection (RMB100 million)Total water discharge (ton) Total COD emissions (ton)Total CO2 emissions (ton)Solid waste generation volume (ton)Total Nitrogen Oxide emissions (ton)Reclaimed water reuse rate (%)Energy consumption per ton of paper (100 million joules)Energy consumption per ton of pulp (100 million joules)Annual average water consumption per ton of paper (ton)Annual average water consumption per ton of pulp (ton)Annual average wastewater discharge per ton of paper (ton)Annual average wastewater discharge per ton of pulp (ton)COD emissions per unit of product (kg per ton of paper)COD emissions per unit of product (kg per ton of pulp)Social PerformanceTotal number of employees Number of female employeesNumber of female employees in the management levelEmployees under 30 years oldEmployees from 30 to 50 years oldEmployees over 50 years oldNumber of employees from ethnic minoritiesNumber of local employees Percentage of female employees (%)Percentage of employees from ethnic minorities (%)Percentage of local employees (%)Average training cost per employee (RMB)Average training time per employee (hour)Number of work-related fatalitiesNumber of work- related injuriesLost hours per million working hours (excluding lost hours resulted from work- related fatalities)Number of persons in contact with occupational hazard factorsNumber of persons to take health check-up for occupational diseases Number of persons with occupational diseasesCharity donations (RMB 10,000)Volunteer services (man-hour) Economic PerformanceTotal profits (RMB 100 million)Total taxes paid (RMB 100 million)Sales revenues (RMB 100 million)Total assets (RMB 100 million)

2008

4.6856,677,882.00

4,4208,725.74

1,667,733.455,328.23

13.6139.5364.469.27

28.588.47

16.050.581.61

20,3675,232359

11,3928,487488599

14,89425.72.9

73.13 343

38.39 2

966,022.99

4,4203,631

05,608 16,311

20.6014.19

281.81700.87

2009

3.2752,671,699.00

3,7298,117.081,611,2656,350.95

16.66137.5481.529.14

25.387.67

16.220.471.51

21,3325,262417

10,7189,967647626

12,98624.72.9

60.88 295

33.12 1

844,118.34

4,7014,657

43,300

30,272

30.1213.66

258.42764.46

2010

4.6354,110,253.00

3,6847,235.00

1,593,7065,439.50

20.00137.6672.389.00

24.347.28

15.780.421.39

28,5529,625533

12,73715,190

625827

15,94333.71

2.955.60

304.06 33.28

192

1,237.91 6,6455,661

04,975 45,116

30.0616.41310.11909.9

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Outlook of APP-ChinaSustainable Development for 2011

In 2011, APP-China’smain focuses will be as below:

Management Platform1. Improve the sustainable development management system and further stakeholder engagement, communications and co-operation;2. Strengthen the cross-department/cross-functions/cross-mill information exchange mechanism: ● Adjust new targets continuously and establish the early warning color system of the three-phase target and conduct regular reviews; ● Donate to the annual mutual support programs, this is to increase the number of quarterly mutual support projects; ● Use special projects to resolve difficult issues and intensify the tracking of follow-up and comparison. Stimulate mutual cooperation among companies and encourage them to share and adopt effective measures.3. Evaluate to set up an on-going CSR data/information/case study collection system4. Reinforce core team building to stabilize corporate development

Compliance and Legality

Sustainable Forest Plantation Development

● The pursuit of harmony in the course of forest plantation development;● Continuously improve forest management technology a n d i n c r e a s e t h e l a n d productivity;● E x p a n d t h e s c o p e o f t h e e n v i r o n m e n t a l impac t assessmen t and regular monitoring for the environmental conservation.

Sustainable Pulpand Paper Production

● Adapt to the new emission standards of the National Twelfth Five-Year Plan and follow the committed data of APP-China’s sustainability pledge, Paper Contract with China (PCwC);● Improve manufacturing technologies and escalate improvement pro jec ts to further resources and reuse rates and waste management in water discharge, emissions to air and solid waste; ● Star t water foo tpr in t projects step by step.

Social Responsibility

● Strengthen services for the later phases of product life cycle, increase service items and accelerate service quality;● Improve occupational health and safety management. Cont inue to promote the system verification.● Expand the “Harmony in Community” initiatives and relevant MBOS activities.● Leverage influence to take lead in the sustainable development for the industry.

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ISO26000 Performance Statement

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Assurance Statement

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GRI Index

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1. Strategy and Analysis

2. Corporate Profile

3. Report Parameters

4. Governance,

Commitments and

Engagement

4. Governance,

Commitments and

Engagement

Economic

Performance Indicators

Environmental

Performance

Indicators

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1. Strategy and Analysis

2. Corporate Profile

3. Report Parameters

4. Governance,

Commitments and

Engagement

4. Governance,

Commitments and

Engagement

Economic

Performance Indicators

Environmental

Performance

Indicators

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Environmental

Performance

Indicators

Labor Practices

and Decent

Performance

Indicators

Human Rights

Performance

Indicators

Society

Performance

Indicators

Product

Responsibility

Performance

Indicators

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Environmental

Performance

Indicators

Labor Practices

and Decent

Performance

Indicators

Human Rights

Performance

Indicators

Society

Performance

Indicators

Product

Responsibility

Performance

Indicators

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GlossaryDefinition

Abbreviation for European Integrated Pollution Prevention and Control, which

was miswritten as “IPCC” for APP-China Sustainability Report 2009.

Abbreviation for International Finance Corporation.

Abbreviation for China National Accreditation Service for Conformity

Assessment.

Abbreviation of Key Performance Indicators.

Cultivation of beneficial plants within a forest plantation system to improve soil fertility. Often used as a substitute for

chemical fertilizers. The benefits of green manure intercropping include weed suppression and improved tree growth.

Water screened by the paper machines during the papermaking process

with small/short fibers etc. which give it a white appearance.

Liquid produced from the pulp washing and cooking using kraft and soda. It is black in color and

contains inorganic substances of cooking materials dissolved from login and semi-cellulose of the

raw materials/plant fiber and biodegraded substance and organic acid of cellulose.

Waste water which, after being treated to a certain standard, can be

reused for other purposes.

A series of environmental management standards set up by the Technical Committee

207 (TC207), International Organization for Standardization (ISO), since 1993.

Occupational Safety & Health Management System was an international standard jointly created by

13 organizations including British Standards Institution (BSI) and Det Norske Veritas (DNV), serving as

the basis for organizations to establish occupational safety & health management system and for

companies to carry out internal audit and for certification bodies to implement certified verification.

The amount of strong oxidant used to treat water samples under certain conditions, which

measures the total amount of organic substances susceptible to oxidation and decomposition.

The amount of dissolved oxygen needed by aerobic biological organisms in water to break down organic materials present in a given water sample

at certain temperature over a specific time period. It is used to measure the degree of pollution of the organic substances in the water.

Organic and inorganic particles that are suspended in water and cannot pass through a 0.45

μm filter, such as sludge, clay, organic substances, algae and germs which are insoluble in

water. It is one of the indicators used to measure the degree of water pollution.

Saturated steam pressure of VOCs is more than 133.32 Pa with the boiling point

between 50°C - 205°C. Its toxicity, stimulus and offensive smells may affect the

skin and mucous membranes, potentially causing some harm to human body.

Paper pulp that is produced by mechanically separating fibers from wood, fiber crops or waste paper (raw materials).

Paper pulp that is produced by chemically separating fibers from wood, fiber crops or waste paper (raw materials).

An environmental claim and self-declaration (GB/T 24021-20001) to specify 12 environment-related

self-declarations including production from product raw materials sourcing, disposal treatment, to

process control, i.e., compostable, degradable, biodegradable, decomposition design, extension of

product life recycle, the use of recollected energy, re-circular, containment of recirculation, energy

saving, resource-efficient, water saving, refillable, waste reductions.Type II E-L claims are based on

self-declarations on environment by manufacturers, importers, dealers, retailers or any beneficiary.

(ISO/TR 14025) is a check list of product performance and quantitative data to evaluate the level of the

environmental impacts of the products by Life Cycle Assessment (LCA). Applied by the company and audited,

assessed and certified by a credible independent third party based on international environment standard

ISO14025, type III E-L provides consumers and distributors comparable environmental claims on specific

products and services. It shows the dual product advantages of quality and environmental indicators.

Term

IPPC

IFC

CNAS

KPI

Green Manure

White Water

Black Liquor

Reclaimed Water

ISO14001

OHSAS18001

Chemical Oxygen Demand (COD

Biochemical Oxygen Demand (BOD

Suspended solids (SS

Volatile Organic Compounds (VOCs

Mechanical Pulp

Chemical Pulp

Type II E-Labeling (ISO 14021)

Type III E-Labeling (ISO 14025)

No.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

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Feedback

Dear Readers,

Thank you for reading APP-China Sustainability Report 2010 out of your busy schedule. Your comments and suggestions are

highly appreciated. Please send them to [email protected]

Thank you!

APP-China Sustainability Report 2010 Working Team

November 2011

All photos are shots of APP-China facilities, its products or taken for APP-China activities

Page 72: APP-China Sustainability Report 2010