Nippon Paper Industries : Responsibility for the Sustainable Use of Forest Resources

Sustainable Procurement of Raw Materials

1 Basic Policy

P81 Principles and Basic Policies Concerning Raw Materials Procurement

The Nippon Paper Group revised the "Principles and Basic Policies Concerning Raw Materials Procurement" (hereinafter, "Procurement Policy") in September 2022.

In the process of its revision, the Group repeatedly engaged in dialogue with external experts and reflected the opinions of stakeholders in the revised content.

The Group also communicates the content of the Procurement Policy to suppliers around the world by making both Japanese and English language versions and displaying them on its website.

P83 Wood Resources Procurement Guidelines

To strengthen the procurement system for wood resources, the "Wood Resources Procurement Guidelines" (hereinafter, "Procurement Guidelines") has been newly established, based on the Procurement Policy revised in September 2022.

The Group also communicates the content of the Procurement Guidelines to suppliers around the world by making both Japanese and English language versions and displaying them on its website.

2 Promotion Structure

Nippon Paper Group Raw Materials Committee

Chairperson: General Manager, Raw Materials and Purchasing Division of Nippon Paper Industries

Secretariat: Raw Materials and Purchasing Division of Nippon Paper Industries

The Group has established the Nippon Paper Group Raw Materials Committee, which is chaired by the general manager of the Raw Materials and Purchasing Division at Nippon Paper Industries. This committee discusses key issues related to raw materials procurement for the entire Group, such as policies on raw materials procurement, and reports on these issues to the Board of Directors through the Risk Management Committee.

In FY 2022, the Committee reported to the Board of Directors through the Risk Management Committee on issues and strategies related to raw material procurement.

3 Sustainable Procurement of wood Resources

1. Procurement of wood Resources

The Group procures wood resources in accordance with the following points based on the Procurement Policy and the Procurement Guidelines.

Key points in Nippon Paper Group's procurement of wood resources

1. Sourcing from sustainable forests (sustainability)
2. Clearly identifying the origin of timber (traceability)
3. Maintaining full accountability (accountability)

The Group has formulated and implemented an action plan

P14 for sustainable procurement of wood resources into practice.

The Group uses a forest certification system to confirm that wood resources are being procured appropriately.

All procured wood resources are certified by FSC® or PEFC. (All procured chips have been produced with wood from forests with an FM certification*1 or have undergone a risk assessment for the CoC certification*2.)

*1 FM (Forest Management) certification: Certification of forests with sustainable forest management

*2 CoC (Chain of Custody) certification: Certification of certified materials that are properly distributed and processed

WEB Forest Certification (Japanese only)

https://www.nipponpapergroup.com/csr/forest/sustainability/certification/

Sustainable Procurement of Raw Materials

2. Action Plan for Wood-based Raw Material Procurement

The Group conducts risk minimization and improvement processes by implementing an action plan established based on the Procurement Policy and the Procurement Guidelines. It works with suppliers to build a sustainable supply chain.

In the action plan, following the basic policies for Japanese and overseas resources, the Group conducts 1) confirmation based on a due diligence system for verifying legality under the Clean Wood Act, 2) confirmation of legality and traceability, 3) confirmation of sustainability, and 4) third-party audits.

Number of Implementation of Action Plan (Nippon Paper Industries, FY2022)

Japanese 316 wood chip suppliers, 5 pulp suppliers

resources (Implemented for all suppliers and confirmed compliance with all)

Overseas 22 wood chip suppliers, 13 pulp suppliers

resources (Implemented for all suppliers and confirmed compliance with all)

WEB Action Plan for Wood-based Raw Material Procurement (Japanese only)

https://www.nipponpapergroup.com/csr/forest/sustainability/actionplan/index.html

Before commencing any transactions with new suppliers, the Group conducts on-site inspections and questionnaire surveys to confirm compliance with the Procurement Policies and the Procurement Guidelines and whether there is any risk, the status of acquisition of forest certification, and resource backgrounds.

In the case of existing suppliers, the Group continues to do business with them after confirming whether there is any risk in executing the action plan.

Corrective action is taken in the case of suppliers that are deemed to be high-risk or non-compliant with the action plan. In FY2022, the Company confirmed compliance with the action plan in all domestic and overseas materials suppliers.

Overview of Action Plan

1. Confirmation based on a due diligence system for verifying legality under the Clean Wood Act

Nippon Paper Industries, Nippon Paper Papylia and Nippon Paper Crecia have established a Legality Certification Due Diligence System (hereinafter, Legality Certification DDS) manual based on the Clean Wood Act P15 for the purpose of verifying the legality of the wood resources that they procure.

The companies use the Legality Certification DDS to conduct due diligence on all wood raw materials procured in Japan and overseas.

Policy

Principles and

Basic Policies

Concerning

Raw Materials

Procurement

Wood Resources

Procurement

Guidelines

Action Plan

Basic Policy and Scheme

Japanese Resources

Based on the "certification method for businesses to be certified by organizations related to forests, forestry and wood industry" specified in the "Guidelines for Certification of Legality and Sustainability of Timber and Timber Products" established by Japan's Forest Agency

Overseas Resources

Respond to the "certification method by individual company's own efforts" specified in the "Guidelines for Certification of Legality and Sustainability of Timber and Timber Products" established by Japan's Forest Agency

Based on the Japan Paper Association's guidelines for measures against illegal logging

Implementation Content

1. Confirmation based on a due diligence system for verifying legality under the Clean Wood Act
2. Confirmation of Legality and Traceability
3. Confirmation of sustainability (target : Import chip, domestic and import pulp)
4. Third-PartyAudits

Third Party Certification

Utilization of forest certification system

WEB Legality Certification Due Diligence System Manual (Japanese only)

https://www.nipponpapergroup.com/csr/DDmanual.pdf

1. Confirmation of legality and traceability (eradicating illegal logging)
   For Japanese resources, in addition to Legality Certification DDS, traceability is assured. Compliance with laws and regulations related to forestry operations, as well as other basic information such as tree species and whether or not forest certification has been acquired, are confirmed in accordance with the Forestry Agency's "Guideline for Verification of Legality and Sustainability of Wood and Wood Products."

For overseas resources, in addition to the Legality Certification DDS, checks are performed on related documents on a ship-by-ship basis to ensure that the logging areas and suppliers are in compliance with relevant laws and regulations and that shipments do not contain illegally harvested wood and staff assigned to local offices conduct questionnaire surveys and local interviews (to confirm basic information such as laws and regulations related to forestry operations and compliance with these, tree species, and whether forest certification has been obtained, thereby enhancing traceability).

• In FY2022, it was determined, based on questionnaire responses and shipping and other documents provided by each supplier, that no illegally logged wood chips or pulp were procured from overseas suppliers.

Confirmation of legality is carried out for new business partners at the start of transactions and regularly on an annual basis for existing business partners.

3) Confirmation of sustainability

The Group confirms sustainabilit y through supplier questionnaire surveys* (once a year) and local interviews.

* target: Import chip, domestic and import pulp

The Group disseminates the Procurement Policies and the Procurement Guidelines in its supplier questionnaires in Japanese and English.

Contents of Supplier Questionnaire Survey (Excerpt)

1. • Confirmation of the Procurement Policies and the Procurement Guidelines.
   • Policies or systems have been established for addressing human rights and labor matters.
     (Workers' collective bargaining rights and free association rights, No forced labor, No child labor or discrimination, Being protected in health and safety, Considering the rights of indigenous peoples)
   • Fair transactions have been conducted.
   • Social contribution initiatives have been undertaken to improve relations with local communities.
   • The environment has been considered.
     (Response to climate change issues, reduction of environmental impact, effective use of resources, consideration for water resources)
   • Logging and forest management activities that are considered to protect biodiversity have been conducted.
   • Biodiversity surveys have been conducted.
   • Forest certification has been obtained.
2. Third-partyaudits

All procured wood resources are audited annually by the Japan Paper Association's "Illegal Logging Monitoring Project," and assessed for risks by the due diligence system of forest certification PEFC.

3. Response to the Clean Wood Act

Nippon Paper Industries, Nippon Paper Papylia, Nippon Paper Crecia and Nippon Paper Lumber completed their registrations as both a Type 1 and Type 2 Wood-related Businesses under the Act on Promotion of the Distribution and Use of Legally Harvested Wood (the Clean Wood Act). In compliance with this law, the companies confirm the legality of the covered items they handle.

Registration Details

4 Employee Training and Education

Raw Material Procurement Related Training Sessions (FY2022)

5 Nippon Paper Group Raw Materials Procurement

1. Major Raw Materials for Paper Products

The main raw materials for the Group's paper products are pulp derived from wood resources and used paper/recycled pulp.

3. Stable Wood Resources Procurement

The Company procures most of the wood resources as wood chips and some as pulp.

About 65% of wood chips are procured from overseas, and about 35% from Japan.

Countries of origin and tree species for overseas wood chips

procured for paper manufacture (Nippon Paper Industries, FY2022)

Hardwood

Breakdown of major raw materials for paper products

(Consolidated companies in Japan, FY2022)

*Includes purchased wastepaper pulp

2. Stable Wastepaper Procurement

The Group continues to maintain the stable procurement system that it has built over the course of many years in cooperation with the wastepaper industry. (Initiatives for Using Wastepaper P39 )

To ensure stable procurement, sources of wood chip imports are diversified between Asia, Australia, and South America, and other parts of the world.

The Group procures wood resources with proper planning and management.

The Company and overseas plantation subsidiaries have obtained forest certification for all its company-owned forests.

To ensure stable procurement using the Group's own resources, the Group is promoting overseas plantation business P19 and utilizing company-ownedforests in Japan. P17

In the case of external procurement , the Group has strengthened its supply chain management and built a procurement system that traces back to the forests where wood resources are sourced.

Geographic Breakdown of Wood chips for Paper Manufacture (Nippon Paper Industries, FY2022)

Softwood

Amount of used paper and recycled pulp procured* (FY2022)

Overseas 65% (2,313 kt)

Hardwood 60% (2,149 kt)

(Bone dry units, kt=kilotonnes) Softwood 5% (163 kt)

Hardwood Resource Breakdown

Japan 35% (1,251 kt)

Softwood 21% (758 kt)

Hardwood 14% (493 kt)

(2,642 kt)

* Target of aggregation: Consolidated companies in Japan excluding Cresia Kasuga

Softwood Resource Breakdown (921 kt)

Plantation areas

100%

1 Basic Policy

Initiatives with Company-owned Forests in Japan

Forests possess tremendous value to Nippon Paper Group as a management resource. For this reason, the Group nurtures forest resources on its own while also procuring sustainable wood resources from outside sources. The Group will continue to provide diverse value by appropriately managing its 160,000 hectares of forests in Japan and overseas, leveraging the unique

Owns about 400 company-owned forests in Japan with a total area of about 90,000 hectares (The second largest private forest owner in Japan)

Has acquired forest certifications for all company-owned forests which managed by the Company and overseas plantation subsidiaries (as of the end of 2022)

Maintains approximately 20% of company-owned forests as environmental forest areas*

technology and knowledge the Group has cultivated to date.

The Nippon Paper Group Definition of Sustainable Forest Management

1. Biodiversity is preserved.
2. The productivity and soundness of the forest ecosystem are maintained.
3. Soil and water resources are conserved.
4. Diverse social needs are satisfied.

• The Company designates its company-owned forests as either "commercial forest areas" for the production of woody materials or "environmental forest areas," where woody material production is not conducted and the ecological, water catchment, and other environmental functions of forests are protected

Engaged in forest management that takes into preservation biodiversity

Spends approximately 700 million yen a year to improve forests

Shikoku

Tohoku

11 kha

Support the activities of the Association for the Protection of Shirane-aoi

Sugenuma company-owned forest (Gunma Prefecture)

Kyushu 18 kha

1 kha

WEB Representative Company-owned Forests in Japan (Japanese only)

https://www.nipponpapergroup.com/csr/forest/own/japan/

Breakdown of Tree Species in Company-owned Forests (as of the end of 2022)

Forest Certification Status of Company-owned Forests in Japan

Nippon Paper Industries as a company owing forests and utilizing forest resources, aims to enhance the productivity of company- owned forests and carries out balanced and sustainable forest management which can fully demonstrate public interest functions such as forest biodiversity conservation and water source retention.

• Hardwood 1%
• Other softwood 3%
• Japanese larch 3%
• Japanese cypress 6%
• Yezo Spruce - Sakhalin Fir 9%
• Japanese cedar 9%
• Pine 9%

Planted forests 40%

Total 90 kha

Other 5%

Natural forests 55%

Hardwood 43%

Yezo Spruce -

Sakhalin Fir 8%

Other softwood 4%

(Nippon Paper Industries)

* Obtained for Kitayama company-owned forest in Shizuoka Prefecture only in December 2003.