October 28, 2005

Philosophy and Basic Policy for Raw Materials Procurement
Based on a Dialogue with Stakeholders

Nippon Paper Group, Inc.

Nippon Paper Group, Inc. has defined its Philosophy and Basic Policy regarding the procurement of raw materials (attached). The purpose of this is to proactively institute supply chain management in a way that reflects corporate social responsibility (CSR).
First, the Raw Materials Subcommittee under CSR Committee prepared and disclosed a draft of the Philosophy and Basic Policy, and a broad cross-section of stakeholders was asked for opinions during the preparatory phase, which lasted for about one month. During this period, about two thousand respondents from around the world made helpful contributions. Responding to these opinions, Nippon Paper Group has set out a clear and ideal form of raw materials procurement. The Group is also preparing to post on its website responses to opinions and questions that were frequently voiced.
The pulp and paper industry uses wood, a precious natural resource, as a key raw material. The appropriate management of wood enables continuous use as a resource.
The Nippon Paper Group will proactively strive to practice supply chain management that takes into account diverse stakeholders in a global environment and society, by preparing a more detailed action plan in accordance with the Philosophy and Basic Policy.
Philosophy and Basic Policy Concerning Raw Materials Procurement
Nippon Paper Group
Raw Materials Subcommittee
We are committed to establishing a reliable raw materials procurement system through global supply chain management in consideration of the environment and society.
Basic Policy
1. Environmentally friendly raw materials procurement
(1) We procure woodchips, lumber and pulp from forests under sustainable forest management.*
(2) We use and deal with no illegally logged lumber and we support the eradication of illegal logging.
(3) We make active use of recycled materials to help build a recycling-oriented society.
(4) We make appropriate procurement of chemical substances in compliance with relevant laws and regulations.
(5) We build traceability systems to ensure the above policies are practiced throughout the supply chain.
2. Socially aware raw materials procurement
(1)We pursue fair deals with suppliers on equal terms.
(2)We ensure that the entire supply chain has appropriate human rights and labor practices.
3. Promotion of dialogues with stakeholders
(1) We engage in dialogues with stakeholders to improve the quality of our raw materials procurement in constant consideration of the environment and society.
(2) We proactively disclose information so that our initiatives are better known.
*Sustainable forest management:
Forestry management that not only considers economic rationality, but also environmental and social sustainability.
The Nippon Paper Group defines sustainable forest management as follows:
1) Biological diversity is conserved.
2) The productivity and soundness of the green ecosystem is maintained.
3) Soil and water resources are conserved.
4) Diverse social needs are satisfied.