2016 Kapstone Sustainability Report

Operating a manufacturing-based company in a consistently sustainable manner means measuring progress, assessing best practices, and continuously reaching higher. That provides the basis for this 2016 report on sustainability at KapStone Paper and Packaging Corporation.

KapStone adheres to standards delineated in the most recent Global Reporting Initiative’s G4 reporting framework, the international template for sustainability policies and practices. We welcome your input and feedback on KapStone’s sustainability performance.

KapStone is committed to staying in compliance with all environmental laws and regulations by daily prioritizing the environmental aspects and impacts of our activities, products, and services as well as pursuing ongoing environmental improvement and employee diligence.

KapStone promotes individual ownership and best practice health and safety initiatives to create an incident-free and injury-free workplace. KapStone Facility Managers regularly report to KapStone corporate management the facility’s compliance status with all applicable environmental regulations, permit conditions and health and safety regulations.

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Progress Toward 2020 Sustainability Goals

In 2010, KapStone established a number of aspirational goals to be achieved by 2020. Progress continues across the board, with some goals already surpassed. The checklist below shows the 2020 goal, and progress made in 2016 toward reaching each.

Injury-Free Workplace

2020 Goal:
Reducing OSHA
recordable incidence
rate by

Chain-of-Custody
Certification

2020 Goal:
Achieve 100% COC
certification

Reduced Energy Use

2020 Goal:
Reduce energy
use MMbtu per
ton by

Reduced Greenhouse
Gas Emissions

2020 Goal:
Reduce GHG
emissions per ton by

Reduced Criteria
Air Emissions

2020 Goal:
Reduce criteria air
emissions per ton by

Reduced Water Use

2020 Goal:
Reduce gallons
per ton water
use by

Leadership Message

About KapStone

KapStone is a leading North American producer of unbleached Kraft paper and corrugated packaging products. Through its North American distributor, Victory Packaging, KapStone specializes in all types of packaging providing unique solutions for its clients with 65 distribution centers across North America.

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Who We Are

KapStone is a manufacturer of paperboard and corrugated packaging, as well as a distributor of all types of packaging materials and supplies through its Victory Packaging division.

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Ethics and Compliance

KapStone endeavors to conduct business in a manner conforming to the highest ethical and business standards. The company is committed to full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations.

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Procurement and
Supply Chain

At KapStone, we believe that keeping a competitive edge means aligning ourselves with suppliers who provide exemplary services to their customers. We engage a procurement process that supports competitive sourcing and allows us to adjust our approach based on market supply dynamics and competitiveness.

Who We Are

KapStone Paper and Packaging Corporation manufactures containerboard and corrugated packaging, high quality kraft papers, uncoated paperboard and lumber products at our three pulp and paper mills, one recycled containerboard mill, one lumber mill, and a coast-to-coast network of 24 converting plants across North America. Through Victory Packaging, our distribution arm, we work with customers to improve and facilitate the various aspects of packaging and distribution, including packaging design, creation, storage, delivery and management. In 2016, the company employed approximately 6,400 people. Please see our 2016 Form 10-K found on the Annual Reports page of our website for more information.

Our eleven-member board of directors provides responsible oversight of management. Board members also participate in the audit, compensation, nominating and corporate governance committees. Our CEO reports to the board and oversees the company’s economic, environmental and social impact, and sets sustainability targets. Our Sustainability Team drives the programs designed to reach those targets.

UPL helps customer serve its end-users

Taking care of our partners

At Mid-Atlantic Packaging, customer demands include containers that are strong, lightweight, easily printed upon, and cost effective. That’s why Mid-Atlantic places so much value on its relationship with KapStone – they know with confidence that they’ll be able to meet those customer demands, driven primarily by KapStone’s proprietary Ultra Performance Linerboard (UPL), which uses leading-edge technology to produce “right weighting” of corrugated packaging to form a lighter, stronger product.

“Fiber for us is the lion’s share of our costs,” said Joe Hodges, operations manager at Mid-Atlantic. “The more fiber we can remove while maintaining strength, the better. KapStone has understood this better than any other supplier we use. KapStone is willing to support what independents like us want. They stay on the proactive side of technology, which has set them apart.

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UPL helps customer serve its end-users

Taking care of our partners

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Ethics and Compliance

A key component of the Global Reporting Initiative (GRI) list of standards includes operating in an ethical manner and complying with all identified environmental and ethical laws, rules, and regulations. We adhere to all domestic and international labor and human rights standards and expect our management, board of directors, and all employees to do the same. The KapStone Code of Conduct and Ethics contains more information about the company’s values, principles and standards.

Product stewardship means that every party involved in the lifespan of a product takes responsibility to reduce that product’s environmental, health and safety impacts. A number of global regulations impact our paper products and their end-uses, so every KapStone product complies with U.S. Food and Drug Administration and European Union regulations. Documents detailing KapStone’s regulatory performance include:

  • Food Safety Declaration (per FDA, EU and BfR requirements);
  • CONEG/heavy metals compliance;
  • U.S. Lacey Act and European Union Timber Regulation (EUTR);
  • EU REACH;
  • Toy Safety Standards;
  • Restriction of Hazardous Substances (RoHS);
  • ISEGA Biodegradability & Compostability;
  • Conflict Mineral Declaration (Dodd-Frank Wall Street Reform and Consumer Protection Act);
  • Safety Data Sheets;
  • California Proposition 65; and
  • California Transparency in Supply Chain Act.
2016 Product Stewardship Highlights

Doing business the right way

Product stewardship means engaging every point in the development and use of products, including supply chain providers and others. It focuses attention on making products safely and efficiently. Product stewardship highlights achieved in 2016 are:

  • Completed product stewardship integration to merge box plants and paper mills into a common system with a unified face to the customer.
  • Completed assessment and developed a plan moving forward to obtain third-party GFSI certification for selected box plants.
  • Consistent compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding conflict materials.
  • Initiated comprehensive chemical approval process including an improved automated SDS management system for the container system.
  • Actively participated in the AF&PA Chemical and Product Stewardship subcommittee meetings and activities, including the development for US Good Manufacturing Practices (GMP).
  • Stayed abreast and current with the dynamic global regulations through Paper Packaging Law seminars and other industry forums.
  • Created a Document Management System for the standardized and streamlined common compliance documentation for ready access, consistency and improved customer satisfaction.
  • Developed annual Food Contact Paper Safety training for all relevant personnel and a system for annual review of the Food Contact Paper Safety processes.

Educational Outreach

Think big, act small

KapStone teams work in some unexpected ways to facilitate education about the forest products industry and how it helps preserve the environment. In 2016, our Fiber Supply group mentored students from Clemson University about the science of forestry and sustainable forest management. Our Engineering group worked with North Carolina State University on a program explaining and offering hands-on experience regarding pulp and paper technology. In addition, we facilitate visits to our plants as part of these and other outreach programs, including hosting students from Yale University.

An important part of KapStone’s outreach includes educating the public on the importance of properly managing our natural resources. That’s the reason behind our involvement and support of programs such as the S.C. Sustainable Forestry Teachers’ Tour and Wood Magic Forest Fair, which teach students and teachers about the impact and importance of forestry in South Carolina.

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2016 Product Stewardship Highlights

Doing business the right way

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Educational Outreach

Think big, act small

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Procurement and Supply Chain

KapStone purposely takes the long-range view in its procurement and supply chain decisions, working to create sustainable forests for generations through active involvement in the Sustainable Forestry Initiative (SFI®), Program for the Endorsement of Forest Certification (PEFC) and Forest Stewardship Council (FSC®). These programs promote healthy forests and enforce standards that companies must adhere to for certification. Standards also address water quality, biodiversity, wildlife habitat, endangered species and forests of exceptional conservation value.

Holding ourselves to these ambitious goals has been the KapStone approach for many years, and we look for that same level of dedication among our suppliers. In managing its overall fiber supply, KapStone purchases timber from landowners and, in a portion of cases, coordinates the harvest of those timber purchases. The purpose is to ensure compliance with forestry best management practices regarding water quality and soil productivity. For other timber purchases where parties other than KapStone coordinate the harvests, we monitor reports by the appropriate state agencies to make sure suppliers have no citations for non-compliance. In 2016, KapStone saw 100% compliance among all timber harvests.

Our insistence on Chain of Custody Certification translates into ensuring that as many landowners as possible supply materials to KapStone from similarly certified properties. Our customers value these certifications, which has helped KapStone grow its market share across specific market segments in 2016.

KapStone works with roughly 6,000 suppliers, from small businesses to major corporations. About nine out of 10 are based the U.S., most near our facilities. We expect all members in the supply chain to operate by high ethical, legal, and integrity standards, including full compliance with all national and state employment laws. We also insist on compliance with our Supplier Code of Conduct and Business Ethics, which also covers mistreatment of employees in any form.

Forestry Management Assistance

Taking care of our partners

KapStone has earned a reputation for taking a proactive approach in supporting the long-term planning and management of sustainable forests through the KapStone Forest Management (KFM) program. KapStone Foresters assist landowners with multiple forestry activities to enhance the health and vigor of their forests. This includes a responsibly managed program of planned harvests and reforestation. The company works diligently to support healthy forests. “The general public may see an over-mature forest and believe it should be protected. However, a forestry professional would recognize an unhealthy forest susceptible to disease or forest pests,” said Eric Smith, Forest Certification Manager at KapStone. “We not only see the forests as they are today, but have the knowledge to know what they can be in the future. This long-term philosophy helps our landowners create sustainable forests that benefit everyone.”

In fact, this way of doing business is so beneficial that at times KapStone Foresters have worked with landowners to establish a new forest on areas they have already harvested two other times. KapStone provides a vital market for fiber and forestry expertise to landowners, which encourages them to maintain healthy and productive forests. These efforts help support the claim by the U.S. Department of Agriculture that “there are more trees on U.S. land today than there were 100 years ago.”

Minimizing Environmental Impact

Think big, act small

In order to conduct our business with confidence and a clear conscience, respect for the environment must always be present and actively engaged. That approach manifests itself in the following:

  • Our primary raw material comes from sustainable and renewable sources.
  • We produce environmentally friendly products.
  • We recycle chemicals, water, heat and fuel throughout our manufacturing processes.
  • We recycle waste wherever we can.
  • We deliver our products to customers in ways that minimize environmental impacts.

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Forestry Management

Taking care of our partners

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Minimizing Environmental Impact

Think big, act small

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2020 Sustainability Goals

When most people hear the term “sustainability,” they likely think first of environmental polices and practices. At KapStone, achieving peak environmental performance remains a top priority. In 2016, we achieved another year of steady progress toward an established set of sustainability goals – most of which are environmentally related – to be achieved by 2020.

Safety

70%

SAFETY

Reduce OSHA recordable incident rate by 70%

Chain of Command

100%

CHAIN-OF-CUSTODY CERTIFICATION

Achieve 100% Chain-of Custody Certification

Energy

10%

ENERGY

Reduce energy
use MMbtu per ton
by 10%

Greenhouse Gas

15%

GREENHOUSE GAS

Reduce GHG emission per ton
by 15%

Air Quality

25%

AIR EMISSIONS

Reduce criteria air emissions per ton
by 25%

Water

10%

WATER

Reduce water use gallons/ton by 10%

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Safety

70%

INJURY-FREE WORKPLACE

2020 Goal:
Reducing OSHA recordable incidence rate by 70%

Injury-Free Workplace

2016 Progress:
  • Completed baseline Corporate Safety & Health Audits at all KapStone Manufacturing Locations
  • Initiated the presentation of Safety Leadership Training for all Managers & Supervisors
  • Published numerous safety procedures at the corporate level to provide additional guidelines to local facilities
  • Began the integration of Victory Packaging into the KapStone Safety & Health Management System
2017 Management Plan:
  • Publish additional safety procedures at the corporate level to provide additional guidance to local facilities.
  • Roll out a 2½-day Safety Boot Camp for Managers and Supervisors at selected locations.
  • Initiate a focused project to prevent Serious Injuries and Fatalities (SIFs).
  • Roll out a process to review the status of targeted Corrective Actions on a quarterly basis at all locations.
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Chain of Command

100%

CHAIN-OF-CUSTODY CERTIFICATION

2020 Goal:
Achieve 100% Chain‑of‑Custody Certification at our Mills

Chain-of-Custody Certification

2016 result:

KapStone Mill System achieved 100% chain-of-custody certification in 2014 and plans to maintain this.

  • Sustained Chain of Custody certifications at all mill sites obtaining a perfect audit in 2016 with no non-conformances issued.
  • All KapStone Container facilities maintained SFI Certified Sourcing certification and sourced 99.6% of their supply from SFI certified suppliers.
2017 Management Plan:
  • Revise KapStone’s Certification Program to conform to the FSC Standards in place at the end of 2016.
  • Actively engage in collective efforts to train harvesting professionals and educate forest owners in sustainable principles.
  • Achieve SFI Certified Sourcing certification for the three new container facilities acquired in late 2016 and early 2017.
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Energy

10%

ENERGY

2020 Goal:
Reduce energy use MMbtu per ton
by 10%

Reduce Energy Use

2016 Accomplishment from 2010 Baseline:

6.5% reduction

  • Implemented a number of capital projects aimed at energy reduction and conservation in our mill system.
  • Accomplished significant milestones in energy management program at our largest mill.
  • Implemented energy conservation projects in our mill system.
2017 Management Plan:
  • Continue investigating and investing in capital projects and energy systems to drive energy-use reductions.
  • Continue improving and expanding energy management program.
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Greenhouse Gas

15%

GREENHOUSE GAS

2020 Goal:
Reduce greenhouse gas emissions per ton by 15%

Reduce Greenhouse Gas Emissions

2016 Accomplishment from 2010 Baseline:

13% reduction

  • Improved biomass optimization to increase energy efficiency throughout the mill system.
  • Focused on minimizing fossil fuel use where practical.
  • Reduced GHG emissions through capital projects aimed at energy reduction and conservation.
2017 Management Plan:
  • Work to further optimize use of biomass to increase energy efficiency throughout the mill system.
  • Continue focus on minimizing fossil fuel use while maintaining expected productions levels.
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Air Quality

25%

AIR EMISSIONS

2020 Goal:
Reduce criteria air emissions per ton
by 25%

Reduce Criteria Air Emissions

2016 Accomplishment from 2010 Baseline:

63% reduction

  • Exceeded 2020 goal by 50%.
  • Worked to maintain and improve on reductions of criteria emissions in our mill system.
2017 Management Plan:
  • Sustain reduction in criteria air emissions through initiatives to further improve energy and fuel efficiencies.
  • Work to cost-effectively achieve additional reductions in our mill system, as practical.
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Water

10%

WATER

2020 Goal:
Reduce gallons per ton water use
by 10%

Reduce Water Use

2016 Accomplishment from 2010 Baseline:

3.9% reduction

  • Worked on strategy adjustment to reduce water use in mill system.
  • Formed cross-functional water reduction team at our largest mill to help establish and achieve annual water reduction goals.
2017 Management Plan:
  • Replicate successful approaches across kraft mills to achieve water reduction and benchmark, identify and prioritize areas of greatest opportunity.
  • Continue developing long-term strategy through 2020 and implement readily achievable “quick-win” projects in 2017.

Employees & the Workplace

KapStone loading facility

Instilling KapStone Values

Doing business the right way

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People are our most valuable and valued asset. As such, we believe in providing an environment that fosters long-term career growth through training, competitive compensation, benefits, and a safe work environment. KapStone provides its employees with access to quality healthcare, wellness programs, health screenings, flu shots, and more. In addition, we offer fitness discounts, an Employee Assistance Program, pre-tax reimbursement and health savings accounts to help employees cover out-of-pocket health and childcare expenses, disability benefits, life insurance, supplemental medical insurance, a 401(k) retirement plan, and an employee stock purchase program.

KapStone has an ongoing program to improve productivity and deliver higher quality products to our customers through our Continuous Improvement (CI) program. Our CI program is based on a process improvement approach known as Lean Six Sigma, and KapStone employees are receiving Lean Six Sigma training as the first step in the process of becoming a certified Black or Green Belt and leading CI projects. Participants are trained to use a thorough, data-driven methodology to problem-solving that provides our CI teams with a practical and consistent set of tools. While offering training to help employees stay current with ever-changing technology and prepare them for advancement, we also provide financial support to employees interested in broadening their formal education through the KapStone Tuition Reimbursement Program. In 2016, we awarded $275,000 through the KapStone Scholarship Program to assist a total of 55 employees’ children with their college education. As an Equal Employment Opportunity employer, we select, develop, and promote employees based on the individual’s ability and job performance, providing equal opportunity to all people without regard to race, color, religious creed, national origin, ancestry, sex, marital status, age, disability, sexual orientation, or status as an Armed Services Veteran.

KapStone Way—A Passion for Our Principles, our company newsletter, reports on stories illustrating how we engage our stakeholders based on the three core principles of:

  • We Think Big and Act Small
  • We Take Care of Our Partners
  • We Do Business the Right Way
Instilling KapStone Values

Doing business the right way

For going on 40 years, KapStone’s Charleston, SC, mill has enjoyed a mutually beneficial relationship with college students through its co-op program. Through this program, students are invited and paid to work on-site at the KapStone facility alongside mentors and industry experts while getting hands-on experience relevant to their chosen course of study.

“We have a very well-grounded program, with students engaged in real world projects that make an impact at KapStone.” explained Teresa Herbert, who oversees the co-op effort in Charleston. “By their third semester here, many students have accumulated a unique set of experiences that have help developed their acumen in manufacturing operations.”

An appreciable number of student co-op veterans become full-time employees at KapStone after graduation. “People we’ve hired from the co-op program tend to be very successful additions to KapStone,” Herbert added.

Environmental, Health & Safety

All KapStone manufacturing locations are dedicated to the communities in which we operate and the protection of the environments where we live and work. Providing a safe and healthy work environment for our employees is a core value at KapStone.

Environmental

We are dedicated to the communities in which we operate and the protection of the environment where we live and work.

Health & Safety

Our commitment ensures our employees that we have the leadership, processes, and assessments tools in place to promote healthy lifestyles and create a safe work environment.

Environmental

KapStone is committed to exceeding established environmental, health and safety standards. We also strive to exceed the environmental improvement goals set forth by the American Forest and Paper Association. KapStone maintains a healthy interaction and dialogue with suppliers, customers, and the community to improve and maintain environmentally responsible performance across all of our locations and departments.

Recycling can be found in every part of our company, from trim off of paper machines and clippings from container and converting plants used again in the paper-making process, to bark from chipped trees and waste from pulping and wastewater sludge from plant clarifiers used as fuel in boilers. Also metals, print cartridges, and other materials routinely get recycled – meaning less landfill waste and reduced disposal costs again in 2016.

Pine Seedling Program

Doing business the right way

To ensure an ongoing supply of wood, seedlings must be planted on a regular, scheduled, and controlled basis as mature trees are harvested. KapStone’s Fiber Supply Department launched a Pine Seedling Program in 2012, offering free second-generation, Loblolly Pine seedlings to local landowners that sell timber to KapStone. In addition to providing a valuable, improved seedling, KapStone Foresters have assisted landowners to prepare and plant areas that were harvested. Since the program’s inception, KapStone has provided 10.5 million seedlings, approximately 2.45 million in 2016 alone.

Rescued Manatees Thriving Today

Think big, act small

Five manatees stranded in the Cooper River near the Charleston Mill were successfully rescued and relocated to Florida by a team of partners from S.C. Department of Natural Resources (SCDNR), U.S. Fish and Wildlife Service (USFWS), SeaWorld of Orlando and the National Oceanic and Atmospheric Administration (NOAA). KapStone provided support to these officials to ensure that they had the resources they needed for a safe and successful rescue operation.

Two of the five manatees, both fitted with satellite transmitter tags by the Sea to Shore Alliance (S2S), were dubbed “Kappy” and “Stone” in recognition of KapStone. A representative from S2S reported, “They are doing great, moving between the warm water source and feeding areas.” This story demonstrates cooperation, going beyond the normal responsibilities, and working with multiple internal departments and outside groups in an impressive team effort.

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Pine Seedling Program

Doing business the right way

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Rescued Manatees Thriving Today

Think big, act small

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Health & Safety

Safety stands at the forefront of our efforts. We strive to be nothing less than the safest company in our industry.

A corporate Safety, Health and Environmental Steering Team of 20 managers from key departments meets monthly to carefully consider and endorse policy and procedures, as guided by seven working teams: safety, safety engineering, risk management, environmental, governance, industrial hygiene, and learning. As these guidelines reach approval and begin to be implemented systemwide, facilities get measured against them during regular safety and health audits. Results provide the basis for detailed action plans that undergo review at the next year’s audit, to ensure continuous improvement. Realizing that roughly 20% of tasks are safety critical risks, a special effort to prevent serious injuries and fatalities (SIFs) began in 2016, as well.

Newly appointed managers in an operations role receive safety training within the first year. Operations managers attend either The KapStone Leadership Safety Training Workshop or an OSHA-focused safety “boot camp.”

In 2016, KapStone installed a new “Industry Safe” system, which will provide the company with an accurate and comprehensive tracking process. This will allow KapStone to see trends and either promote best practices or more effectively address areas of concern. Also, a newly hired corporate director of safety and health process excellence will help to further develop methods to be used across the company.

Twin Falls Reaches Safety Milestone

Doing business the right way

The Twin Falls box plant reached 1 million hours without a recordable incident on July 1, 2016. The facility and its 130 employees worked for nearly four years without a recordable incident, achieving a remarkable safety milestone. The team at Twin Falls keeps its safety training fresh, taking new approaches to discussions and instruction, hosting guest speakers, and more. Employees are encouraged to take their personal protective equipment home and use it there too. This has led to faster adoption and familiarity with the equipment, while helping to prevent incidents at home and at work.

“If we believe that safety incidents are acceptable, then we just see it as normal – that’s not all right,” said Russ Williams, Twin Falls plant manager. “No injuries are acceptable, so we need to strive for that. We all truly believe that in order to maintain our employees’ well-being, our actions need to reflect a mentality of safety.”

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Twin Falls Reaches Safety Milestone

Doing business the right way

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Community & Social Engagement

Community

A History of Alleviating Hunger

Think big, act small

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Employees of KapStone across the country work and live in the communities that surround our facilities. They’re neighbors, just the same as others in their towns. That helps to deepen the KapStone belief that all of our neighbors deserve our best efforts to safeguard our shared environment and to help make our communities vibrant and healthy.

KapStone has long been a participant in the United Way Day of Caring. Each year, the KapStone Charleston team volunteers to help rehabilitate the Park Circle Butterfly Garden by cleaning, painting, planting, and spreading fresh mulch. By improving the habitat this way, more butterflies are attracted to this treasured community space.

The KapStone Employee Charitable Contribution Program, begun by Charleston Mill employees in the early 1950s, collects voluntary payroll deductions to support local charities, with the company matching those totals. This program has raised nearly $400,000 annually over the past two years.

Many more community assistance programs are conducted at KapStone facilities. These include lumber donations to community groups, distribution of “Tree Farmer” books to schools, and even the annual “Squirrel Festival” community fundraising event in Longview, Washington.

A History of Alleviating Hunger

Think big, act small

When a non-profit organization engages more than 750 companies, and makes a difference for a million people a year, but speaks most highly of one corporate partner – that company is special, indeed.

At Move for Hunger, that special partner is Victory Packaging, a division of KapStone. Move for Hunger is a national organization that collects unused non-perishable food from people preparing to move out of a home and donates it to regional food banks. This organization collected enough food last year to feed 1 million people, and has ambitious plans to double that amount. It partners with 750 movers, relocation companies, and realtors nationwide.

“Victory was our very first partner, since Move for Hunger began in 2010,” noted founder Adam Lowy. “Victory employees have donated more than 100,000 pounds of food so far. Victory packaging products are used to collect and ship food, and for our Welcome Kits. Their engineers came up with it, in fact, donating their expertise in a comprehensive way. We wouldn’t be here without Victory.”