From Russia with Transparency - Axel Springer AG

From Russia…
with Transparency
Sustainability in the Wood Supply Chain
Project Report for Phase I
September 2005
Axel Springer
The Random House Group UK
Time Inc.
Russkiy Les
Stora Enso
With Critical Reviews by
Karelian Research Centre, Institute of Economics
Transparency International

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PROJECT TEAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.1 PROJECT INITIATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.2 PROJECT PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 PROJECT OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.4 TIKHVIN DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 SUSTAINABILITY AS A CONCEPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2 THE PROJECT’S PRIORITY AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 UNDERLYING PRINCIPLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 LABOUR ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 LEGALITY OF WOOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 COMMUNITY INVOLVEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3 RUSSIA AS A BUSINESS ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 FORESTRY IN RUSSIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 LABOUR CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 LEGAL FRAMEWORK RELATED TO BUSINESS PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 RISKS AND POTENTIAL OF RUSSIAN INVESTMENT ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4 SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 SUSTAINABILITY IN THE SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 PROJECT PARTNERS IN THE SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 SUPPLY CHAIN MANAGEMENT AT STORA ENSO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 ANJALA AND KOTKA MILLS IN THE SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 SUPPLY CHAIN CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.6 LEGALITY RISKS IN THE SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5 SUSTAINABILITY AT RUSSKIY LES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 CHALLENGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 FOREST ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4 LEGALITY OF WOOD AND RELATED BUSINESS PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 ENVIRONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 COMMUNITY INVOLVEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 HEALTH AND SAFETY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.8 EMPLOYMENT, REMUNERATION AND WORKING HOURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6 SUSTAINABILITY AT STORA ENSO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2 POLICIES AND PRINCIPLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 WOOD SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 INTEGRATING ENVIRONMENTAL AND CSR ASPECTS INTO OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 STORA ENSO AND RUSSIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7 SUSTAINABILITY AT AXEL SPRINGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.1 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 UNDERLYING PHILOSOPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 CSR AND THE PAPER CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 PAPER FROM RUSSIAN WOOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 PAPER SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6 AXEL SPRINGER AND THE TIKHVIN PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 2

8 SUSTAINABILITY AT THE RANDOM HOUSE GROUP UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3 PAPER PROCUREMENT POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4 SUPPLIERS POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 ENVIRONMENTAL POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 ETHICS POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 EMPLOYEE POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.8 HEALTH AND SAFETY POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.9 RANDOM HOUSE GROUP UK AND THE TIKHVIN PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9 SUSTAINABILITY AT TIME INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 ENVIRONMENTAL INITIATIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.4 PAPER SUPPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.5 TIME INC. AND THE TIKHVIN PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10 EXTERNAL REVIEWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1 OBJECTIVES OF THE REVIEWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 TRANSPARENCY INTERNATIONAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.3 THE KARELIAN RESEARCH CENTRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11 RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.1 GAP ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2 DEVELOPMENT TASKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 3

EXECUTIVE SUMMARY
From Russia… with Transparency – Phase I
This report is the outcome of a joint project, hereafter referred
to as the Tikhvin Project, which was implemented
between Stora Enso, Axel Springer, The Random House
Group UK, Time Inc. and a Russian wood supplier Russkiy
Les, a subsidiary of Stora Enso. Russkiy Les replaced the
original Russian partner, Tikhvinsky KLPKh, which departed
the project due to ownership changes in spring 2005.
These companies together analysed the social responsibility
in a wood and paper supply chain from Russian forests into
printed paper products consumed in various market areas.
The Tikhvin Project’s goal is to improve social responsibility
management and transparency in the wood supply
chain from Russia. The Tikhvin Project was designed to analyse
how corporate social responsibility can best be integrated
into wood supply management from the forest to
the mill, and further on to the customer, and how this can
be communicated in a transparent way.
Russia’s importance is growing for Stora Enso and other
Finnish forestry companies, in terms of wood procurement,
investments and market potential. Stora Enso’s strategy in
wood procurement is to have a strong and active presence
in Russia. This gives Stora Enso a unique position to work
together with its partners along the supply chain in order
to achieve common goals.
The Tikhvin Project is a good example of such an approach.
It focuses on labour issues, legality of the wood
and community involvement, as well as environmental responsibility.
The project partners considered these issues to
be in the core of the sustainability agenda, due to the rapid
rate of their development in Russia and the high level of
their public scrutiny in the markets.
Four Priority Areas
Labour issues were chosen as the first priority area. The
project team discovered that in particular working conditions,
health and safety, working hours and remuneration
(e.g. minimum wages) are strictly regulated by legislation.
The Labour Code and related normative regulation set a
clear framework for the management of labour issues in
companies. Company responsibilities, instructions, monitoring
and management systems must comply and be developed
in line with laws and regulations. However, the
high share of manual work and old-fashioned techniques,
which are still applied in the area’s forests, represent challenges
regarding worker safety. Another challenge comes
from the attitude to working conditions, which should
highlight the importance of every employee’s and managerial
staff’s personal contribution to the company’s overall
safety culture.
Legality of wood and verification of its origin was chosen
as the second priority area. The strict expectations of
the demanding European market regarding the legality of
wood (e.g. harvesting rights, tax issues, corruption) were
clearly recognised by the harvesting companies. The real
challenge lies in law enforcement and therefore the importance
of the verification of wood origin is highlighted in
the supply chain management and third-party-verified
traceability system of Stora Enso. Control for the origin
of wood and auditing the related documents is a routine
practice since 1997 in Stora Enso.
Community involvement was chosen as the third focal
area. In Russia the logging companies have a direct impact
on the welfare of the local community and the economic
development of the region by being an important employer
and taxpayer, and as a contributor to local infrastructure
such as roads. Many of the company’s obligations such as
road building, offering traineeships and grants to local
schools are included in the forest lease agreements as an
obligatory precondition for being able to lease forest areas.
Environment was chosen as the fourth priority area. The
project team especially addressed forest certification and
the development of environmental management systems
as they also have important linkages to social performance.
An ISO 14001-based environmental management system,
which Stora Enso widely uses, and which is also at an early
development stage in the newly acquired Russkiy Les, offer
a systematic model for development and implementation
which could be extended to the social responsibility policies
and practices as well. One of the main challenges in
the future will be the expansion of forest certification.
Russkiy Les has started its FSC forest certification programme
as part of Stora Enso’s forest certification programme.
Innovative Reporting and Development Work
The four areas of sustainability described above were analysed
by the project group. The legal and company framework
were described, bottlenecks and proposed goals and
milestones were identified along the supply chain. The
project findings will be used by the project partners as they
develop their own sustainability performance and supply
chain management.
This project report was also reviewed by two external
reviewers. Transparency International, the leading international
NGO devoted to combating corruption, focused on
legality issues, and the Karelian Research Centre on the social
sphere and working conditions. The reviews and the
discussions with the reviewers provided invaluable insights,
which will be taken into account in the further
development of these two core areas.
The project will also contribute to improved sustainability
reporting along the wood supply chain. The results
of the work are available on website www.tikhvinproject.ru,
which will represent a model for transparent social responsibility
communication among Russian forest enterprises.
From Russia… with Transparency – Phase II
The Tikhvin Project will continue. Phase II will run from
October 2005 to December 2006 and focus on the development
needs as specified in Phase I. Another independent
wood supplier will be engaged in the project in Phase II.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 4

PROJECT TEAM
Axel Springer
Florian Nehm, Corporate Sustainability Officer
Tel. +49 30 259 179 370
email: florian.nehm@axelspringer.de
Tuija Suur-Hamari/Marjaana Luttinen, Vice President,
Stora Enso Environment
Kaisa Tarna, Manager, Corporate Social Responsibility
Contact information for Stora Enso: Pirjetta Soikkeli
Tel. +358 2046 21294, +358 40 750 0093,
email: pirjetta.soikkeli@storaenso.com
The Random House Group UK
Stephen Esson, Group Production Director
Tel. +44 207 840 8502
email: SEsson@randomhouse.co.uk
Time Inc.
David Refkin, Director of Sustainable Development
Tel. +1 212 522 3356
email: david_refkin@timeinc.com
Russkiy Les
Vladimir Fast, General Director
Tel +7 813 675 2044
vladimir.fast@storaenso.com
External specialists
Dr. Yuri Gerasimov, Finnish Forest Research Institute
(METLA)
Tel. + 358 10 211 3253
email: yuri.gerasimov@metla.fi
Dr. Valentin Strakhov, Russian Institute for Forest Resources
(ARICFR)
Tel. + 7 095 3325338
email: strakhov@mtu.net.ru
Dr. Reinier de Man, consultant
Tel. +31 65 315 5441
email: Reinier.de.Man@planet.nl
Stora Enso
Helena Jantunen, Sustainability Manager,
Wood Supply Russia
Anna-Liisa Myllynen, Director, Forest Environment,
Wood Supply
Kauko Parviainen, Senior Vice President,
Wood Supply Russia
Olga Rogozina, Environmental Manager,
Wood Supply Russia
Vladimir Semenov, Quality Manager,
Wood Supply Western Russia
Pirjetta Soikkeli, Communications Director, Sustainability,
Wood Supply
External reviews
Kenneth Rosenbaum, Forest Integrity Network of
Transparency International
Tel. +1 703 333 5315
email: kenro@syenco.com
Galina Kozyreva, Senior Researcher, Institute of Economic
Studies, Karelian Research Centre of Russian Academy of
Sciences
Tel +7 814 2 785402
email: kozyreva@krc.karelia.ru
Project meeting in Hamburg. From left: Florian Nehm, Anna-Liisa Myllynen, Pirjetta Soikkeli, Helena Jantunen, David Refkin,
Vladimir Fast and Vladimir Semenov.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 5

1 INTRODUCTION
1.1 Project Initiative
This pilot project was initiated by Stora Enso, Axel Springer
and Tikhvinsky KLPKh in 2003. The aim was to increase
the market acceptability of Russian wood by enhancing
transparency regarding corporate social responsibility (CSR)
and environmental issues along the entire supply chain.
Following the initial discussions, Time Inc. and the
Random House Group UK were invited to join the project.
Due to ownership changes, Tikhvinsky KLPKh departed
from the project in 2005. Another Tikhvin-based logging
company, Russkiy Les, a subsidiary of Stora Enso, was invited
to join the project. The partnership companies represent
different links in the paper supply chain from the Russian
forest, via Finnish paper mills to German, British and
North American readers.
The acceptability of fibre from Russia in different market
areas is particularly important. Russia is an important
supplier of wood to several Finnish paper mills, who export
to various markets in Europe and North America. Also, increasing
amounts of paper for export markets are being
produced in Russia. There are considerable opportunities in
Russia to create a secure fibre supply to satisfy increasing
worldwide demand for paper. However, environmental and
social issues could in the future hinder the supply of wood
from Russia to the most demanding markets if they are not
dealt with in the same professional way as in countries
such as Sweden, Norway or Finland. This pilot project
shows that this can be done in Russia, not in the distant
future, but today.
The project is one step in the continuous effort to
maintain and improve the perceived quality of paper,
which is directly dependent on the acceptability of its major
raw material: wood. The acceptability of wood is related
to its ecological and social history in the entire supply
chain. Relevant issues include sustainable forest management,
working conditions and the legality of wood.
1.2 Project Partners
Russkiy Les is a logging company based in the town of
Tikhvin in the Leningrad Region. Russkiy Les is a recently
acquired subsidiary of Stora Enso. Russkiy Les supplies sawlogs
to Stora Enso sawmills in Russia and pulpwood to
Stora Enso mills in Finland. In 2004 the harvesting volume
totalled 264,900 m 3 . Russkiy Les provides forest management,
harvesting and regeneration services in its forest
lease areas. For more information, see Chapter 5.
Stora Enso is an integrated paper, packaging and forest
products company producing publication and fine papers,
packaging boards and wood products, areas in which the
Group is a global market leader. For more information, see
Chapter 6.
Axel Springer is the biggest newspaper publisher in Germany
and one of the leading international media enterprises.
The core business of Axel Springer AG is newspapers,
magazines and digital distribution channels. For more information,
see Chapter 7.
The Random House Group UK is the leading consumer
books publisher in the UK, with subsidiary companies in
Australia, New Zealand and South Africa. It is part of the
worldwide Random House Publishing Group, the largest
English language book publisher in the world. Random
House Publishing Group is a division of Bertelsmann AG,
an international media corporation. For more information,
see Chapter 8.
Time Inc. is the publishing unit of Time Warner, a global
media corporation with headquarters in New York City.
With about 135 magazines, including Time, Fortune and
People, Time Inc. is the world’s largest magazine publisher
and a major book publisher. Additionally, with its ownership
of IPC, Time Inc. is the largest magazine publisher in
the UK. For more information, see Chapter 9.
Tikhvinsky KLPKh was the original Russian wood harvesting
company in the Tikhvin Project but departed from the
project in 2005 due to ownership changes. Tikhvinsky
KLPKh is an exporter of wood and sawn materials, based in
the town of Tikhvin in the Leningrad Region.
The partners share common values and interests, which
are drivers for the Tikhvin Project:
Vladimir and his 400 colleagues are the first link in the international
wood and paper supply chain.
• Axel Springer, The Random House Group UK and Time
Inc. want to verify and confirm that their sustainability
principles and practices have been implemented and
are evolving over time in line with their expectations
in the paper supply chain.
• For Stora Enso, Russia is of key importance in its fibre
supply strategy and as an area for investment and marketing
of products. Constructive partnership with Russian
business partners, combined with transparent
communication on social and environmental issues, is
the best way to demonstrate responsibility in the whole
supply chain.
• Russkiy Les, like several exporting Russian companies,
has an interest in being seen as an example of a socially
and environmentally responsible player in Russia and in
showing the real situation in Russia in a transparent way.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 6

1.3 Project Objectives
The following objectives for Phase I were agreed between
the partners:
Improving sustainability performance
• to enable a Russian logging company to integrate customer
expectations better into its sustainability approach
• to enable Stora Enso, Axel Springer, The Random House
Group UK and Time Inc. to develop the sustainability
approach in their supply chains
• to demonstrate that social responsibility can be integrated
into the Russian wood supply chain.
1.4 Tikhvin District
The project group chose Tikhvin district as the geographical
scope of the Phase I. Tikhvin is situated in the Leningrad
Region and has a history of being at crossroads of different
cultures. It lies on an ancient water way, which more
than a thousand years ago connected the Greeks and the
Slavs. Later it became the crossroads for Scandinavians on
their route to Moscow and Novgorod. Tikhvin’s network
was further enhanced in the early 1800s when the canals
connecting towns from Vologda to St. Petersburg were
completed.
Promoting transparency
• to display in a transparent way how sustainability issues
are managed in the supply chain
• to explain how the regulatory framework, company
policies and management systems govern wood procurement
in Russia
• to identify the performance level and possible gaps in
the systems
• to demonstrate an Internet-based reporting and communication
technique that can be applied in environmental
and social responsibility reporting in Russia.
Tikhvin town is the capital of Tikhvin district with some 66,000
inhabitants. An additional 15,000 live in the surrounding countryside.
The results of Phase I will be utilised for further development
in critical sustainability issues and integrated into
future management systems of the participating companies.
The Tikhvin Project Phase II will concentrate on the
identified development needs. A new independent logging
company will be integrated into the project Phase II.
Industry is the most important source of employment accounting
for 44% of jobs.
Anjala Kotka
Tikhvin
Helsinki
St.Petersburg
Moscow
London
Berlin
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 7

Today the district is most often remembered for the
Icon of the Holy Mother. A superb piece of religious art,
which was re-discovered in the USA from the turmoil of
the Second World War, was returned to Tikhvin in summer
2004. It was a momentous event for the town, which got
prepared for the great day by carrying out extensive renovations
in the monastery and all around the town. The
first reference to the icon dates back to 1383, when it first
appeared in the town.
• Corporate Social Responsibility (CSR) involves identifying
and managing the social impacts of the company’s
operations. CSR covers issues such as human rights
(especially labour rights), ethical business practices
and community involvement.
Sustainability
(Corporate Responsibility)
Economic
Social
(SCR)
Environmental
Accountability: Transparency, Stakeholder dialogue
Stora Enso’s sustainability approach
June 9 is the town’s day in Tikhvin as well as the Day of the Apparition
of the Icon of the Holy Mother. The Icon was returned to
Tikhvin from many decades long exile in summer 2004.
Accountability means being accountable for the impacts
of all the operations of the company. Accountability
can be addressed through transparency (open communication
and reporting) and stakeholder dialogue. Transparency
includes regular third-party verified sustainability reporting,
and responsible and pro-active communications.
Stakeholder dialogue means engaging in open dialogue
with different stakeholders and also being responsible for
the issues identified through these dialogues.
In the last few years, the economy of Tikhvin has followed
a course of diversification: along with traditionally
strong machine-building and forestry, the number of other
industrial enterprises is constantly increasing and small
business is actively developing.
Several logging and woodworking companies operate
in the township and the surroundings of Tikhvin.
The largest logging companies are ZAO Tikhvinsky KLPKh,
OOO Russkiy Les, Swedwood, OOO Stroiles and OOO Lesoprodukt.
Some companies have their own sawmill, such as
ZAO Tikhvinsky KLPKh, or other type of woodworking.
1.5 Sustainability as a Concept
Sustainability – also referred to as corporate responsibility
– involves balancing economic, environmental and social
issues in business operations. Sustainability consists of
three pillars:
• Economic Responsibility involves improving financial
results through growth, developing employment opportunities
and creating value for shareholders while
also taking into account the wider socio-economic impacts
of the company’s operations on stakeholders and
society as a whole.
• Environmental Responsibility involves identifying and
managing the environmental impacts of the operations
of a company, including minimising impacts related to
emissions and the use of natural resources.
2 THE PROJECT’S
PRIORITY AREAS
2.1 Underlying Principles
Stora Enso’s Principles for Corporate Social Responsibility
provide the basis for the project (see section 6.2). These
principles refer to business practice, communication, community
involvement, responsible reduction of the workforce
when necessary and respect for human rights. They
show a high level of compatibility with the CSR principles
of Axel Springer (see Chapter 7), The Random House Group
UK (see Chapter 8) and Time Inc. (see Chapter 9).
Sustainability topics were selected for this project on
the basis of their priority in the Russian context. The
project partners identified a number of issues related to the
four priority areas: labour issues, legality of wood, community
involvement and the environment.
2.2 Labour Issues
One of the most critical labour issues of Russian forestry is
employee safety because of the large amount of manual
work in logging, transportation and sawmilling. The manual
working methods have the advantage of being labour intensive
and offering plenty of job opportunities to local
people, but there is an increased risk of accidents and physical
burden. Employee safety, remuneration, working hours
and many other labour issues are currently well regulated
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 8

y legislation. The real challenges are law enforcement and
implementation of the regulations and long-term development
of the company’s safety culture in a way that ensures
the well-being and satisfaction of the employees.
2.3 Legality of Wood
Concerns related to illegal logging have recently been
raised by many stakeholders in connection with Russian
wood. Estimates of the magnitude of the problem vary, but
it is clearly one of the key sustainability challenges for the
Russian forest industry. Legality of wood, including related
business practices, was thus included as one of the key topics
for this project.
In line with Stora Enso’s position, legal wood is defined
as wood that is harvested in line with national laws, including
state laws. However, other aspects of legality along
the supply chain are equally important. The project partners
recognize that risks of illegality in Russia can be related
to failures in the following areas:
• implementing the forest law: harvesting forests without
tenure rights, harvesting in conservation areas, no forest
regeneration;
• implementing ecological legislation: poor waste management,
biodiversity losses;
• the economic system: banking, customs or taxation
system, corruption and theft;
• implementing social legislation; employee safety and
working conditions, minimum wages, social payments.
2.4 Community Involvement
In Russia, companies have traditionally played significant
roles in community development. Today, forest lease contracts
of logging companies impose several community obligations
on leaseholders. In stringent economic and social
conditions it is required that companies co-operate and
contribute to the neighbourhood and the local community.
By contributing to the local welfare and infrastructure,
the company can maintain its own employee base in conditions
where people tend to move from rural and distant
communities into cities. In the future, this will be even
more important when the companies will have to increase
their production efficiency and recruit qualified labour.
2.5 Environment
As a renewable and recyclable raw material, wood creates a
good basis for long-term sustainability of operations. At the
same time logging operations can have negative impacts
on biodiversity, soil and water if not properly managed. In
this report, we describe the legislative framework of forestry
and the forest lease mechanism that set the framework
for the development of sustainable forestry. The role of forest
certification as an instrument for voluntary verification
and communicating that forestry practices are sustainable
are analysed. An important issue is how forest certification
will develop in the future and how forestry enterprises see
its potential as a marketing tool.
Environmental management systems based on the ISO
14001 standard are a voluntary company-based tool for
systematic recognition of environmental impacts, development,
reporting and verification of the company’s environmental
results. The ISO 14001 model has been chosen as
the basis of Stora Enso’s and Russkiy Les’ environmental
management.
3 RUSSIA AS A
BUSINESS
ENVIRONMENT
3.1 Forestry in Russia
The Russian forest sector includes both the private-sector
forest products industry and management of the publicsector
forests. The Russian forest products industry employs
over 1.1 million people and currently comprises over
20,000 enterprises, including more than 3,000 large and
medium-scale enterprises that are mainly joint-stock companies.
In the Leningrad Region, the industry accounted for altogether
23% of total industrial output in 2003. The forest
sector of Leningrad Region comprises over 770 enterprises,
including 80 large and medium-scale logging enterprises,
over 20 sawmills, about 20 furniture factories, three integrated
pulp and paper mills, and five board and paper
mills. The total use of wood of these enterprises is more
than 7 million m 3 per year.
The crucial issues for development of the Russian forest
sector are:
• increasing demand for Russia’s forest products
• tenure system of publicly owned forests
• review of the Forest Code and law enforcement, and
• forest certification
The total area of Russia’s forests available for industrial
use is more than twice the total area of forests in all the rest
of Europe. Forests cover about 69% of Russia’s area, including
inland water. However, because of inadequate infrastructure
and permafrost soils, only half of the forest area is
accessible.
The general decline in living standards as a result of the
transition from a planned to a market economy was accompanied
by a fall in the domestic consumption of wood
from 1993 to 1999. In the 1990s there was a steady increase
in the gross annual increment of forests in Russia combined
with a gradual reduction of the allowable cut and a
sharp decline in the volumes actually harvested. The volume
currently harvested in Russia is only one-fifth of the
annual growth of the forests and less than one-half of the
sustainable utilisation of forest resources allowed by the
forest authority. In the Leningrad Region one-half of the
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 9

annual growth of forests is actually harvested. The collapse
of the harvesting sector since the early 1990s has in many
traditional forestry regions led to a situation that young
people have moved away to cities in search of better employment
prospects. Attracting young labour is becoming a
challenge for companies, who plan to widen and modernise
their forestry and harvesting operations.
Gross annual increment, annual allowable harvest and
actual volume harvested in Russia from 1965 to 2003
Million m 3
1 000
900
800
700
600
500
400
300
200
100
0
Increment
Allowable
Actual
1965 1970 1975 1980 1985 1990 1993 1996 1998 2001 2002 2003
The forest industry ranks fifth among the branches of
Russia’s economy for share of GDP and fourth for exports.
Production of forest products instead of export of wood
would provide more employment for the local people in
the future, if investment in manufacturing could be made
more attractive. Furthermore, introduction of new harvesting
technology to replace currently largely manual logging
and alternative ways of forest management, especially
more thinning and intermediate cuttings would both contribute
to the development of a more profitable harvesting
sector. Consequently, there would be more resources to
build roads and maintain other infrastructure; both of
these two are tasks that have been largely neglected over
the past 15 years.
Tenure System of Publicly Owned Forests
Harvesting volumes have increased in recent years, mainly
in the increasing forest lease areas. In January 2004 a total
of 3,302 forest areas covering 89 million hectares were
leased. The dynamics of forest leasing are shown in figure
below.
Number and area of forest lease areas in 1993–2003
Number of leased forest plots
Number of
plots
Plot area,
million ha
3,500
3,000
2,500
2,000
1,500
1;000
500
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Area of leased forest
plots, million hectares
100.0
80.0
60.0
40.0
20.0
0.0
The annual allowable cut in the leased forests is 23% of
the total allowable cut in Russia. Utilisation of the allowable
cut in the leased forests is still relatively low, averaging
60%, but up to 70% in the north and northwest of European
Russia, in Central Russia and in the Far East, and 50%
or less in the Asian part of Russia.
Public forest management is improving its ability to organise
fair tendering for forest leases and handle competitive
tendering. In some regions the low number of logging
enterprises and thus lack of competition has distorted
tendering. This is certainly not the case in the Leningrad
Region, where more than 170 enterprises lease forest
areas.
One of the challenges related to forest leases is their
proper management and infrastructure development. Currently,
45% of the leased forests have officially endorsed
felling plans and operational plans, and such plans are being
prepared for 36% of the leased forests. Urgent development
of proper forest management planning is essential for
sustainable utilisation of the leased areas, especially where
most silvicultural and forest regeneration obligations are
transferred by lease contracts to the forest leaseholder.
Review of the Forest Code and Law Enforcement
A draft new federal forest law, the Forest Code, was created
between September and October 2004. At the same time, a
number of amendments were made to the existing Forest
Code. The following points are of interest in the new draft
Forest Code:
• Development of long-term forest leases will continue
instead of privatisation of forests.
• Forest and land are separately classified as “forest resources”
and “land” in the new draft Forest Code. The
forest resources will be managed according to a management
plan envisaged by the Forest Code, whereas
land will be managed according to the Land Code.
• Development of the Forest Code has been accompanied
by renewal of forest management. Federal and Regional
Forestry Agencies have been reorganised. Reform of local
forest management units is underway. Separation of
the administrative functions of forest management
units from forest management, protection, conservation
and restoration of forests is proposed.
During its preparation, the existing Forest Code from
1997 was internationally assessed as a feasible starting
point for development of the forest sector. The real challenge,
however, lies in enforcement of the law and related
legal acts. This work intertwines with the review of effectiveness
and cost efficiency.
Forest Certification
Forest certification is a voluntary tool to verify and communicate
that the forests are well and sustainably managed.
Currently, FSC certification (Forest Stewardship
Council) is available through its international principles
and some regional standards (Siberia and northwest) in
Russia. At the end of 2004, 3.85 million hectares were
FSC certified in Russia.
PEFC certification (Programme for the Endorsement of
Forest Certification Schemes) is also developing, with the
drafting of a national Russian standard underway. In 2004,
Russia became a member of the international PEFC Council.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 10

The development of forest certification in Russia will
depend on many factors. Technical, economic and regulatory
factors restrict the development of forest certification
to some extent. However, the international forest products
market would like to see more forests certified and is expressing
its demands more clearly in Russia.
3.2 Labour Code
The Labour Code of the Russian Federation (2001) sets the
legal framework for all the main issues concerning working
conditions and employment. The Labour Code covers issues
such as equal opportunities, labour relations, representatives
of employees and employers, collective negotiations,
contracts and agreements, participation of employees
in management of the organisation, labour contracts,
termination of employment, protection of employees’ personal
data, working hours and rest periods, leave, remuneration,
compensation, disciplinary actions and occupational
health and safety.
Russia has ratified all the International Labour Organization’s
(ILO) core conventions related to non-discrimination,
freedom of association, forced labour and child labour.
Occupational Health and Safety
Occupational health and safety management is regulated
by the Labour Code of the Russian Federation (2001). In
addition, a number of federal and regional laws and other
regulations govern health and safety work, for instance:
• Russian Federation’s Law on Safety in High Risk Production
• Russian Federation’s Law on Sanitary-Epidemiological
Health of Population
According to the law, the employer is responsible for
providing a healthy and safe workplace, personal protective
equipment, occupational health and safety training and
guidance, and development of employee safety in co-operation
with the trade union committee. In addition, the employer
is responsible for not allowing any employee who
has not attended the safety training and necessary medical
tests to work.
The responsibilities of employees include complying
with the requirements and instructions related to employee
safety, using personal protective equipment provided by
the employer, attending safety training organised by the
employer and informing the employer of any potential
health and safety risk identified by the employee.
The forest sector is also covered by a large number of
sector-specific regulations, such as:
• Regulation of Labour Safety in Forest Harvesting,
Woodworking and Forestry (1997)
• Regulation of the Technical Construction and Safe
Usage of Lifting Cranes (2000)
• Criteria for the Assessment and Classification of
Hygiene of Working Conditions (1999)
• Regulation of Sector-Specific Accident Investigation
(2002)
Employment, Remuneration and Working Hours
The monthly minimum wage has been increased in the
new Labour Code to the monthly official subsistence level
of USD 60, previously USD 14. However, the average
monthly wage in Russia is USD 141. The Labour Code stipulates
a standard working week of 40 hours with at least
one 24-hour rest period and requires a premium for overtime
work and work on holidays.
The right to freedom of association and collective bargaining
is provided by the Labour Code. Approximately
56% of the workforce is currently unionised. Collective
bargaining agreements, which set the general terms of
employment, are registered by 16–18% of the enterprises.
3.3 Legal Framework Related to Business Practices
Business practices, management, planning, bookkeeping
and accounting are regulated by the Russian Federation’s
Law on Bookkeeping (1996), the Tax Code of the Russian
Federation and related guidelines and recommendations.
The law sets clear rules for bookkeeping, accounting
and reporting of financial results, as well as for their public
monitoring.
3.4 Risks and Potential of Russian Investment
Environment
Section 3.4 is based on information from Dr Yuri Gerasimov
of the Finnish Forest Research Institute (Metla).
To operate successfully, it is important for a company
to be aware of and recognise the risks related to its working
environment. This is especially crucial in new markets and
new investments. On the other hand, for the Russian forest
industry creating a normal investment climate for potential
domestic and foreign investors should be a priority, as
the amount of investment estimated to be required to
maintain current production capacities is well over USD
2 billion per year. Over the past few years the actual rate
of investment in these industries has been about USD 100
million per year, only less than 10% of the estimated requirement.
New capacity is naturally even more capital
intensive. No new pulp mills have been built in Russia for
over twenty years.
Investors’ risk assessments should cover all spheres
of the sustainability agenda in a holistic way:
• legislational
• political
• social
• criminal
• financial
• economic
• ecological
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 11

Similarly, the potential and strengths that may compensate
for the risks must be recognised:
• natural resources
• financial
• innovational
• consumer
• institutional
• manufacturing
• infrastructure
• labour
In addition to companies’ own analyses, some references
are available to the public, especially those planning
new investments. For instance, the Russian rating company
‘Expert RA’ (www.expert.ru) has been publishing its ratings
of Russian regions since 1995. For the evaluated regions,
the survey covers the risks and potential for investors listed
above. The latest published rating is for 2003–04. Compared
with the previous rating, the newest indicates a general
tendency of growing risk in many regions.
According to Expert RA, in 2003–04 none of the Russian
regions was ranked in the categories with minimum
risk: 1A with maximum potential and minimum risk, 2A
with medium potential and minimum risk, 3A with low
potential and minimum risk.
The best-ranked regions were in category 1B with high
potential and moderate risk. These regions were Moscow
Region, Moscow City, St. Petersburg City, Sverdlovsk Region
and Khanty-Mansi Autonomous Area.
The rating of Leningrad Region was category 2B with
medium potential and moderate risk. A total of 16 regions
were included in this category, topped by Leningrad Region.
Most of the neighbouring regions were ranked in
lower categories, mostly owing to their low potential.
4 SUPPLY CHAIN
very concrete manner – at the level of a Russian harvesting
company.
Today’s sustainability agenda is broader than just ecological
issues. The demand that products are responsibly
produced covers social and economic responsibility as
well. The Tikhvin Project has therefore focused explicitly
on a number of selected social and environmental issues
in order to explore the current situation and create a more
systematic approach to this area.
4.2 Project Partners in the Supply Chain
The figure below shows how the project partners relate to
each other in the supply chain. Wood from the leased forest
areas is harvested by Russkiy Les and delivered to Stora
Enso mills in Russia and Finland. Axel Springer, The Random
House Group UK and Time Inc. use the paper produced
in Finland in one or more printed items.
Project Partners in the Supply Chain
Axel Springer
(newsprint)
Russkiy Les
logging company
Stora Enso
mills
Time Inc.
(magazine paper)
4.3 Supply Chain Management at Stora Enso
Turning Policies into Actions
The Random House
Group UK
(book paper)
The social, economic and environmental dimensions of
sustainability cannot be separated from each other – the
aim is that they are integrated into all Stora Enso’s operations
in a holistic way. To achieve the Group’s aim of superior
performance in all areas of sustainability, the policy
commitments need to be turned into concrete actions.
Stora Enso’s core expectations of its wood suppliers in
Russia are:
4.1 Sustainability in the Supply Chain
Fibre from Russia is a strategic resource for the paper industry.
It is in the interest of the entire supply chain to stimulate
the development of a sustainable and long-term forest
industry in Russia. This is important to secure continuous
reliable supply of wood through mitigating risks and to ensure
products do not lose their acceptability to customers
in the most demanding markets.
Knowledge of the circumstances in Russia is often insufficient
in key market areas for paper, which leaves a lot
of room for prejudice. The partners feel that sweeping generalisations
present a serious risk to the image of fibre supply
and forest products from Russia. All the partners will
therefore benefit from an analysis that clearly identifies the
development requirements and bottlenecks still needing to
be solved in Russia. In the Tikhvin Project this is done in a
• Verification of legality of all wood sources
• No wood accepted from confirmed or planned protection
areas or potential old-growth forest (as defined by
Russian NGOs) areas unless in line with conservation
plans
• Compliance with national laws such as forest law,
labour laws and environmental laws
Annually, a determined number of suppliers are audited
against the requirements and ranked according to their
performance, especially regarding origin of wood, forest
certification status, environmental management system
status and employee safety. As a result of these audits, numerous
development programmes have been initiated,
e.g. joint regional training events with suppliers on forest
certification and environmental management issues.
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Stora Enso’s approach in managing sustainability is
based on understanding the sustainability impacts of Stora
Enso’s operations throughout the whole value chain – from
sourcing of the raw materials to the end product.
Securing fibre in line with company policies and principles
is a challenge as regards both environmental and social
(CSR) aspects, especially for new, emerging markets and
new suppliers. Environmental matters have a long tradition
as a part of the wood supply chain management. As regards
CSR-related issues, legality and occupational health and
safety are already integrated into the supply chain in most
locations, including Russia. A more comprehensive and holistic
CSR approach concerning the wood supply chain is
under development in Russia and is one of the goals of this
project. Wood supply units are determining their social responsibility
priority areas, goals and action plans.
A Third-Party-Verified Traceability System
The traceability system is Stora Enso’s primary tool for
managing the wood supply chain. Traceability covers wood
procurement all the way from the cutting area until the
wood first comes into Stora Enso’s possession. It enables
verification of the origin of the wood and integration of
the corporate policies and goals into supply chain management.
In addition, it enables higher ecological and social
demands than required by legislation to be set when ever
considered necessary. Regional and country-specific targets
can also be set through the traceability system. Operationally,
Stora Enso Wood Supply holds the key position between
wood sources and production plants for verifying
compliance of fibre sources with company policies.
Stora Enso’s Traceability System
C. Auditing
Internal audits are undertaken in line with ISO 14001
standard for management and monitoring purposes, and to
improve the systems. Supplier audits are undertaken for
verification and to improve suppliers’ environmental performance.
Annually, 30–35% of the contracts are audited in
Russia. For new areas and new suppliers intensified auditing
takes place.
Field audits, always in co-operation with the supplier,
are used to verify the data on wood origin and to give an
opportunity to verify forestry practices, environmental
values and legal documents.
D. Third-Party Verification
To increase transparency, third-party verification and certification
of Stora Enso’s traceability system is in place in
Russia as a part of Wood Supply Finland’s certification: ISO
14001 and ISO 9002 since 1998 and EMAS registration
since 2001 (pre-registration in 1999). Third-party verification
of the traceability systems increases their credibility
and helps recognise development needs that may not have
been noticed otherwise.
Results of Traceability
The traceability system and audits sometimes reveal that
the performance of a supplier or characteristics of a harvesting
site do not comply with company policies. In the
case of system or supplier failure, corrective action is demanded.
Training of own personnel and suppliers is offered
if required. In serious cases, deliveries from suppliers may
be halted. If repeated failures occur or corrective actions by
a supplier are inadequate, contract clauses permit termination
of the contract.
A
Contrats
B
Wood origin data
C
Auditing
D
External audits
A. Contract Clauses
Environmental and wood origin clauses are included in
wood purchasing contracts to ensure the supplier’s commitment
to Stora Enso policies and practices. In Russia,
Stora Enso requires:
• logging and procurement according to national legislation
and regulatory framework
• no wood from protected areas and areas planned for
protection unless in line with conservation plans
• no wood from other agreed restriction areas (e.g. potential
old-growth areas)
• identification of the origin of the wood
• the right for Stora Enso to audit its suppliers.
B. Wood Origin Data
Wood origin data on every harvesting area are collected in
Stora Enso’s database.
Supporting Tools
Stora Enso uses advanced technical tools to facilitate the required
flow, recording and reporting of information. Stora
Enso Wood Supply Russia’s GIS mapping system contains
information on forest management structures and existing
and planned forest conservation areas, their protection status,
allowed forestry practices and the potentially valuable
old growth forest areas identified by Russian NGOs.
4.4 Anjala and Kotka Mills in the Supply Chain
Stora Enso’s Anjala and Kotka mills are integral links in the
supply chain from a Russian forest to customers. Both mills
are located in the southern part of Finland, relatively near
the Russian border.
Kotka Mill is located in the town of Kotka. It forms a
modern integrated forest products industry complex comprising
a sawmill, a paper mill with two paper machines
and further processing plants. Kotka Mill’s production capacity
is 330,000 tonnes of publication and laminating papers
per year. The wood consumption of the paper mill is
1.1 million m 3 per year, less than 10% of which comes
from Russia.
Anjala Mill is part of Stora Enso’s Anjalankoski Mill
complex, and is one of the world’s largest producers of
book paper made from mechanical pulp. It specialises in
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white printing paper. The mill’s three machines produce
book paper, coated papers and specialised papers. The mill’s
capacity is 515,000 tonnes of paper per year. The wood
consumption of Anjala Mill is 1.3 million m 3 per year, less
than 20% of which comes from Russia.
The origin of all wood used by the Kotka and Anjala
mills is carefully monitored as part of the wood supply
traceability systems.
4.5 Supply Chain Controls
The figure below shows the supply chain from Russkiy Les
to Stora Enso’s mills schematically. The physical supply
chain and the document flow go down the middle. The
column on the left symbolises public control functions and
the different databases used by Stora Enso are indicated on
the right.
4.6 Legality Risks in the Supply Chain
Legality of Russian wood has been a major concern for
many stakeholders. Estimates of the magnitude of the
problem vary, but it is clearly one of the key sustainability
challenges for those operating in the Russian forest industry.
Legality of wood, including related business practices,
was thus included as one of the key topics for this project.
In line with Stora Enso’s position, legal wood is defined
as wood that is harvested in compliance with national
laws, including state laws. However, other aspects of legality
along the supply chain are equally important. The
potential legality risks related to the wood supply chain
and the ways and responsibilities of mitigating those risks
are described in the table on the next page.
Wood Supply Chain from Russkiy Les to Stora Enso
Mills and Related Control Systems
PUBLIC
CONTROL
ACTION IN
SUPPLY CHAIN
DOCUMENTS
STORA ENSO’S
DATABASE
Public forest
management
unit (leskhoz)
Russkiy Les
forest lease
Lease contract
Harvesting
licence
Measuring
documents
Bank,
customs etc:
contract
registration
Stora Enso
wood
purchases from
Russkiy Les
Contract incl.
ecological
clauses and
appendix for
wood origin
etc.
Contract files
Origin of wood
declarations by
Russkiy Les to
Stora Enso
Wood origin
declaration
Wood origin
files
Supplier and
field audits by
Stora Enso
Auditing
reports
Auditing files
GIS maps
Customs:
control
Wood
transportation
from Russkiy Les
to Stora Enso
Transportation
documents
Customs
documents
Purchasing files
Wood received
at border, mill
or storage
Receipt
documents
Invoice from
Russkiy Les to
Stora Enso
Invoice
Invoice files
Third party
audits
Auditing
documents, List
of corrective
actions,
Certificate for
traceability
(ISO 14001, ISO
9002, EMAS)
Auditing and
corrective
actions files
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 14

Legality Risks and Ways of Mitigating the Risks in
the Wood Supply Chain
RISK
Forest lease Tendering according
to the rules of
- lack of harvesting
and tenure rights forest lease
- unsound business
practices (e.g.
returned favours,
bribes) in obtaining
harvesting and
tenure right
Wood harvesting
and transportation
- non-compliance
with national legislation
and customer
requirements
Measuring wood
- unreliable measurement
Wood purchasing
- non-compliance
with laws
- sources not in line
with Stora Enso
policies
Customs control
in export operations
- unreliable customs
declarations
RESPONSIBILITY
Russkiy Les Stora Enso External bodies
Harvesting and
transportation in
line with
- forestry guidelines
- health and safety
regulations
- ecological guidelines
- forest regeneration
- conservation area
rules
Reporting and follow-up
of own performance
- Monthly reporting
of logged volumes
in forest and
in storage
- Annual full inventory
of wood in
storage
Forestry and wood
supplies in line
with laws and Stora
Enso principles
- training,
instruction
- management
systems
- monitoring,
reporting
- development and
corrective actions
According to
Russian customs
regulations
- customs declarations
- fees
Wood received at Auditing of Stora
border, Stora Enso Enso wood reception
mill or storage/
invoicing
- unreliable measurement
- wood received
not in line with
Stora Enso policies
Verification of the
existence of lease
or harvesting
licence
- Contract clauses
- Verification of forestry
practices,
ecology, conservation
areas and employee
safety performance
- Follow-up of noncompliance
and requires
- Requiring corrective
actions
Control volumes
and quality: pulpwood
measured by
external body at
the border and saw
logs measured
electronically at
mill
- Stora Enso Code
of Ethics
- internal audits
- traceability
system
- supplier audits
According to
Finnish/EU regulations
- customs declarations
- fees
Measuring and
quality checks,
checking origin of
wood announcements
Public authorities
- announcement of
forest lease areas
openly
- organise competition
- base decisions on
rules for forest
lease and harvesting
rights
Public authorities
- control of forestry
practices
- ecological inspections
- forest sanitary inspections
- employee safety
inspections
Det Norske Veritas
- verification of
Stora Enso’s traceability
system
Public forest
authority
- control logged
volumes with harvesting
licence’s
predetermined volumes
Russian-Finnish
working group
- auditing of measurement
practices
Det Norske Veritas
- third-party verification
of traceability
system by in line
with ISO 14001
and EMAS standards
Russian customs
verify
- compliance of
loaded volumes
with declared volumes
prior to departure
- stamped declarations
and carriagespecific
waybills
forwarded to bank
- fees
Currency control
agency
- register contracts
- verifiy fees
Tax agency
- registers contracts
and payments
Finnish customs
verify
- compliance with
Finnish/EU regulations;
volumes,
sanitary regulations,
fees
Customs/tax
authorities/bank
Forwarding
company
- measuring wood
at border
Det Norske Veritas
- audit received
wood and documents
5 SUSTAINABILITY
AT RUSSKIY LES
5.1 Company
OOO Russkiy Les is a logging company, which is located in
the town of Tikhvin, 200 km east from St. Petersburg.
Russkiy Les was established in 1989 and acquired by Stora
Enso in 2004. Thus, 2005 is the first full year of operation
as a Stora Enso subsidiary.
The company form, OOO, is a limited liability company
under the Russian Law on Joint-Stock Companies no.
208-FZ of 1996.
Last year Russkiy Les supplied Stora Enso over
250,000 m 3 of wood, out of which more than two-thirds
was pulpwood and less than one-third was sawlogs. This
year their estimated delivery volume will increase to over
300,000 m 3 .
The investment decision made by Stora Enso to buy
Russkiy Les instead of using it as one of outside suppliers
was based on the following strategic considerations:
• enhanced control over the entire supply chain and all
delivered volumes, including better predictability of incoming
wood flows, when deliveries are made by own
subsidiary
• gaining control of the 49-year-long forest lease agreements
held by Russkiy Les, which allows long-term development
of its harvesting operations by e.g. the ongoing
investment project of numerous harvesters and
forwarders
In order to ensure the sustainability of its wood supply,
Stora Enso tries to keep its supply chain from Russia as
short as possible. Gaining control over the immediate harvesting
company and the holder of the cutting licence
presents without doubt a short and transparent supply
chain.
Key figures for year 2004
• Sales 162 million roubles
• Wages paid 56.8 million roubles
• Taxes paid 26 million roubles including
746,000 roubles to the local budget
• Dividends none (due to negative results in year 2004)
• The number of employees 415, including 49 loggers
The Board of Directors has four members and is chaired
by Harri Rantonen, Business Development Manager of Stora
Enso Wood Supply Russia. The other members are: Arto
Lyykorpi, Procurement Manager; Teemu Leckling, Manager,
Operational Internal Inspection; and Sergei Stogov, Legal
Counsel, all from Stora Enso Wood Supply Russia. In addition
to the four Board Members the meetings are attended
by the General Manager of Russkiy Les Mr. Vladimir Fast,
who reports to the Board on the company’s operational
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 15

performance. The Board is responsible for the company’s
strategy, financial planning and financial reports, and its
long-term development. The Board continuously monitors
the company’s compliance in main performance factors
such as business practices, worker safety, financial result
and fulfilment of the production plan.
Russkiy Les Organisation
• Accounting
• HR
Deputy to GD,
A. Stepanov
• Security
The main activities and facilities, where sustainability work
applies at Russkiy Les, are:
• Forest management of lease area
• Logging sites and related storages and forest roads
• Railway terminal for the loading of wood into
railway cars
• Garage for maintenance and repair of machines
• Company office in Tikhvin
5.2 Challenges
General Director,
V. Fast
Deputy to GD,
Production
I. Krutchinin
• Production planning
• Road building
• Road maintenance
• Harvesting
• Transportation
Chief engineer
• Garage
• Power supply
Russkiy Les is a recently acquired company of Stora Enso.
In order to achieve conditions for long-term profitability
the company is in a transition into a more cost-efficient
technology and organisation of work. The Scandinavian
cut-to-length technology was chosen as the basis of the
logging and transportation development, because it is less
labour-intensive than traditional Russian technology and
more cost-efficient when labour costs are rising. Fulfilling
worker safety requirements and ecological requirements is
also easier with cut-to-length technology. However, manual
labour is still used in many logging teams for felling trees,
followed by hauling with forwarders. Improving the company’s
safety culture and continuing the renewal of logging
and transportation technology remains a challenge in the
future, too.
The ecological challenges arise not only from the technology,
but also from the adoption of the current legislation
into technical and economic conditions, stabilising
the long-term forest lease and management practices, forest
certification etc. The tools to improve the ecological performance
will be systematising the environmental management
of the company, training of management and
employees and starting the assessment, monitoring and
reporting of environmental impacts.
Russkiy Les is a relatively young organisation as compared
with the traditional logging companies (lespromkhoz).
It has fewer traditions and no experience with longterm
community involvement. Its relations to the surrounding
community and region are still being formed.
Russkiy Les was formerly a private company with basically
only one strong owner, and the former owner’s policies
and objectives may have an effect in its track record in
its current performance in all four priority areas of the
Tikhvin Project.
The management of Russkiy Les is under pressure, as
the company is in the beginning of a profound restructuring
process of the basic production assets, technologies, finances
and labour. The biggest challenge lies in the change
of company culture in order to comply with Stora Enso approaches
and performance level for instance in worker safety
and environment but also in the establishing a wellfunctioning,
mutually beneficial and credible interaction
with the surrounding community.
However, the first twelve months as part of Stora Enso
have been encouraging. Improvements in its operations
have already borne fruit in the form of awards and diplomas
were given in 2005 to Mr. Vladimir Fast, General
Director of Russkiy Les:
• Logger of Merit for good performance in Ecological
Use of Natural Resources (INTERLES 2005 Exhibition)
• Diploma of Russian Union of Mass Media for good
ecology and technology in logging and forestry
As a result of the new approaches and development
initiatives and its integration to the Tikhvin community,
Russkiy Les received in 2005 a Diploma of Tikhvin District
for Best Performance in Social Responsibility.
5.3 Forest Activities
The company runs logging and transportation of wood
from its own forest lease areas. The lease areas are located
in the forest management units of Tikhvin, Boksitogorsky
and Shugozersky districts. Russkiy Les runs the holistic forest
management of its forest lease areas, including road
building, forest regeneration and silviculture. The 152,000
hectare forest lease areas provide annual allowable cut of
394,000 m 3 .
About 20% of the lease area belongs to different categories
of nature conservation, including buffer zones of water,
wetlands, cultural and recreational sites.
In 2005 the harvest includes 33% birch and aspen
pulpwood, 14% spruce and pine pulpwood, 27% softwood
saw logs and 26% fuel wood. The proportion of fuel wood
is high due to the company’s silvicultural thinning programme,
which is intended to reconstruct the economic
value of formerly neglected young and mid aged stands.
The produced tree assortments are mainly exported to
Stora Enso’s mills in Finland (pulpwood) and saw logs are
used in Stora Enso’s sawmill in Nebolchi, in the Novgorod
Region of Russia.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 16

Lake
Ladoga
100 km
St.Petersburg
Tikhvin
Lease areas of Russkiy Les
Lease Areas of Russkiy Les
The forests of Russkiy Les belong to the national I and
II forest management groups, as do most forests in the Leningrad
Region. This sets special requirements on the forestry
practices, such as intensive regeneration, smaller final
felling areas and the multiple use of forests. The proportion
of silvicultural thinnings is about 15%. The upper limit of
the size of final felling area is mostly set at 20–25 hectares.
Russkiy Les uses tree-assortment technology in logging.
Felling and cross cutting of trees is provided either mechanically
by harvesters or manually by loggers. Trees are
hauled to the landings as tree assortments by forwarders.
5.4 Legality of Wood and Related Business Practices
Management Framework
For Russkiy Les, the year 2005 is the first full year as a Stora
Enso subsidiary. The company’s business practices and
management are being reviewed and developed in line
with the developing legislation. For instance, the Tax Code,
Law on Bookkeeping and Accounting, Labour Code and
Forest Code set the normative framework that the company
must follow in its policies and decisions as well as in accounting
and reporting. In addition to the normative regulation,
public administration also gives economic directions
to private-sector companies. Fines and economic
sanctions follow violations of laws and norms. Positive economic
incentives are not commonly used.
The management of Russkiy Les takes all the necessary
steps to ensure that national laws are being enforced in all
business operations. The company has already defined
clear management responsibilities and structures for dealing
with key sustainability issues. Assignments and training
of responsible persons take place as the sustainability key
challenges have been identified and the main bottlenecks
are being found.
In the future, the company also will have to complete
written policy statements in all key issues, including business
practices. A full set of guidelines is being produced,
business practices and worker safety being addressed most
urgently.
Writing the company’s own business code is not the
only challenge but a full set of criteria and requirements
have to be created for the company’s suppliers. All services
purchased from different suppliers are based on written
agreements with price and responsibilities determined and
reported in the accounting system.
The instructions and guidelines for all functions in the
company are based on legal requirements. Every employee
must have a precise job description with tasks, responsibilities
and rights determined and sign a commitment to the
company rules on starting to work for the company.
The company has established a monitoring system for
changes to laws and adjusts its business code with training
of personnel organised when necessary. The company is
also monitored by the public authorities such as forest, tax,
employee safety, construction and building, and salary and
working term authorities. In addition, the pension funds
have their own controlling mechanisms.
Legality of Wood
Russkiy Les’ wood procurement is based on long-term forest
lease areas. Therefore, the key issue in ensuring legality
of wood is to strictly adhere to the Forest Code and related
rules that apply to forest lease, forest management plan, silviculture
and forest regeneration. Any illegal action not
only results in economic loss due to fines, but eventually
also puts the continuation of the forest lease contracts at
risk.
Russkiy Les does not utilise any other wood than the
wood harvested and transported by the company itself.
All the wood harvested by Russkiy Les is sold to Stora Enso.
It is not therefore subject to the risk of illegal wood from
third parties entering the supply chain.
In 2003, Russkiy Les had unintentionally violated forestry
guidelines and has paid the legally charged fines, as
the table below shows. The non-fulfilment of a harvesting
plan was due to an unexpected change in the Forestry
Code (leaving aspen on the harvesting site was not permitted).
All finalized cutting sites are inspected by the forest
authorities.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 17

Violations by Russkiy Les in 2003
Type of violation Amount Liability Charged fines
1,000 roubles
Non-fulfilment of
harvesting plan
Cutting of seed
trees
Harvesting outside
of site limits
Neglecting postharvest
cleaning
Wood left
unhauled at
harvesting site
Hauled wood left
untransported
Broken harvesting
site marking poles
8,234 m 3 4 x normative
timber price
0.5 m 3 15 x normative
price
4 m 3 10 x normative
price
15.5 m 3 5 x cost of cleaning
work
20.8 m 3 7 x normative
price
338,363
1,530
7,188
51,588
5,603
72 m 3 7 x stumpage fee 4,878
2 pcs 10 x production
cost of marking
poles
It is the responsibility of the management of Russkiy
Les to take all the necessary corrective actions to avoid the
same violations in the future. For this purpose, the amount
and causes of the violations are analysed and corrective actions
are targeted at the bottlenecks. In the young company
culture such as Russkiy Les has, most corrective actions
are related to the setting and review of policies, writing the
missing guidelines and training employees and management
representatives. New expert assignments are made in
order to strengthen the company competence in bottleneck
areas.
Important support and help in recognising legality risks
has been received from the different audits provided by
Stora Enso (CSR, environmental and safety audits), forest
certification consultant and from local and regional authorities.
Immediately after becoming a Stora Enso subsidiary
a wide round of labour safety audit visits was carried
out at Russkiy Les harvesting sites. All employees were provided
with new complete sets of labour safety equipment
and the annual labour safety training rounds for all employees
were started under the supervision of Stora Enso
Wood Supply Russia labour safety and occupational
health manager.
5.5 Environment
Legal Requirements for Forestry
Russkiy Les practices forestry in its own forest lease areas.
In addition, environmental considerations apply to the
railway terminal where wood is loaded to railway cars.
Sustainable management of forest lease areas is the
precondition of obtaining and maintaining forest lease.
The lease contract obliges the forest lease holder to
• Obtain forest management plan and implement it.
• Obtain ecological inspection of the lease.
• Take care of the leased forest area in holistic way including
forest regeneration, tending of young stands,
fire control etc.
• Follow the forestry and ecological guidelines which
concern forestry practices, biodiversity, water protection,
species protection, recreation etc.
• Support the local community through financial aid,
fuel wood, infrastructure, training opportunities, grants
to students and other predetermined means.
1,9
Stora Enso Wood Supply Russia’s
Environmental Manager
Olga Rogozina is responsible
for audits of harvesting sites.
Forest Certification
Forest certification is becoming available in Russia and the
logging companies will have to define their own position
on it. The following aspects have an impact on the progress
of forest certification in Russia:
• The new Forest Code is due to be approved by the State
Duma during 2005, which means it will be effective
from the beginning of 2006. The new Forest Code will
most likely cause important administrative changes
and new conditions for the development of forestry
and forest industries. The new Forest Code will also address
some issue of forest certification and is expected
to have a positive impact on the preconditions of forest
certification.
• Over the next couple of years forest inventory and
management planning of the entire Leningrad Region
will be updated.
• FSC certification is available in Russia at the moment.
RFCS (National Russian Forest Certification Scheme) is
currently being prepared under the umbrella of PEFC,
and Russia has also joined the PEFC Council. Many
Russian forest lessees are waiting for the alternative systems
to gain shape to get an overall picture of the certification
alternatives, their functionality and expected
costs and benefits.
• Substantial human, material and economic inputs are
required by a company for the certification process.
Many other urgent investment needs are competing for
the necessary funding. Replacing obsolete technology,
improvements of the working conditions and inputs
into employees’ social welfare are currently considered
the highest priorities to ensure the normal functioning
and economic viability of the company and retain
qualified employees within the company.
Thus far, most certificates have been implemented as
part of international projects, and integrated international
companies. However, especially exporting companies are
becoming more interested in forest certification.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 18

“WWF Russia welcomes
voluntary forest certification
initiatives of Russian
forest enterprises. The experience
in FSC forest certification
gained by Stora
Enso in the Pskov Model
Forest will be beneficial for
Russkiy Les”, says Elena Kulikova,
WWF Russia’s Forest
Programme Director.
Environmental Management
Russkiy Les is currently in the very beginning of systematising
its environmental policy and environmental management,
monitoring and reporting systems. As part of Stora
Enso, the ISO 14001 type environmental management approach
is being applied. A holistic approach and integrated
environmental, quality and labour safety systems are recommended
by Stora Enso.
The Deputy to General Director, Ivan Krutchinin, is responsible
for production of logging, transportation, road
buildings and reforestation and has overall responsibility
for environmental issues. He is in charge of developing environmental
management systems and forest certification.
Currently, the company policies in sustainability issues
are being defined and their status, performance level and
development needs are being identified. Responsible persons
have been assigned to most urgent tasks such as worker
safety. More assignments will follow as the identification
of issues proceeds.
In environmental management, the following tasks
will be environmental impact analyses and goals settings
for improvements with timelines and responsibilities. A
whole set of environmental guidelines has to be reviewed
and renewed.
The former training practices of the company are being
reviewed and new training courses have been established.
Special seminars regarding forest certification have been arranged
for managers. The education on forest certification
will continue.
Sustainable management of forest lease areas is the precondition
of obtaining and maintaining forest lease”, says Vladimir Fast,
General Director of Russkiy Les.
5.6 Community Involvement
Contributions to Tikhvin Community
and Regional Development
Russkiy Les was established in 1989. The company does
not have a long history but it has nevertheless already established
some practices in its relation to the surrounding
community. The company employs more than 400 people,
mainly from Tikhvin but also from the surrounding rural
communities. Of the amount harvested 54% comes from
Tikhvin district and 46% from Boksitogorsk district.
The taxes allocated to the local budget contribute to
local welfare, as do the roads and other infrastructure that
the company maintains. The total amount of taxes paid in
2004 was 26 million roubles, of which 746,000 roubles
were allocated to the local town budget. Altogether 56.8
million roubles of wages contributed to the welfare of
employees.
Taxes Paid by Russkiy Les in 2001–2003
thousands
of roubles
30000
25000
20000
15000
10000
5000
0
Annual sum of taxes paid by Russkiy Les
2001 2002 2003
Total taxes
Taxes to local
budget
Community Obligations related to
Forest Lease Contracts
The forest lease contract imposes a lot of social responsibilities
on the leaseholder. The requirements extend from forestry
development to community obligations:
• Construction and maintenance of the forest roads
• Maintaining equipment and executing forest fire suppression
and prevention measures
• Annual financial support for local schools
• Support for the social development programmes of the
local administration
• Making firewood available to the community. An estimated
2,000 m 3 of firewood will be provided in 2005.
The firewood price to local inhabitants is lower than
production cost.
• Preferably employing local people in order to promote
employment in the region
• In 2005 a total of 9 students have been working as
trainees at Russkiy Les
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 19

insurances. The overall health and safety co-operation with
the employee representatives is being strengthened. Measures
taken especially to reduce accidents include:
• Influencing attitudes by underlining personal responsibility
on day-to-day safety performance.
• Audits for checking the working methods and instructions
for corrective actions.
Russkiy Les undertakes
forestry in its forest
lease areas.
Forest lease holders also contribute to the multiple use
of forests. Products such as berries and mushrooms make
an important contribution to people’s nutrition. There is
free public access to pick berries and mushrooms, and
hunting and fishing are licensed. The road network that
the company develops and maintains is an important factor
in the multiple use of forests. Forest harvesting itself
has both negative and positive impacts on multiple use by
changing the species dynamics and the coverage of berries
and mushrooms.
Other Contributions
In 2004 Russkiy Les provided round wood to the local communities
of Tikhvin and Boksitogorsk worth of 190,000
roubles for construction purposes. In Boksitogorsk other
contributions totalled 87,000 roubles including support to
the secondary school. In Tikhvin, Russkiy Les built a
bridge, constructed and maintained roads, funded a retirement
society, an orphanage and a kindergarten for a total
of 181,000 roubles.
5.7 Health and Safety
Russkiy Les has started a review of its guidelines, procedures
and control mechanisms for occupational health and
safety. The compliance of the company approaches and
guidelines with legislation is reviewed as well as their effectiveness.
The review process is supported by a labour safety
audit, which was conducted by Stora Enso Corporate
Health and Safety management. This work is continued by
a project group assigned by Wood Supply Russia, which is
looking into labour safety issues at each of Russkiy Les’
working sites and making practical suggestions on how
Russkiy Les can improve their labour health and safety performance.
Typically the recommendations go beyond the
requirements of Russian legislation.
The importance of the occupational health and safety
review is highlighted by the number of accidents, which
took place in 2004 and 2005. Therefore, health and safety
was chosen as the priority development area among the
technological and production assets development.
The overall goal of the company’s health and safety
work is to reduce the number of accidents and improve the
health of employees, and thus minimise absence due to accidents
and sickness. Russkiy Les also provides a special insurance
for all employees in addition to the legally required
A reward system is being developed as part of the
health and safety management. By rewarding employees
for good safety performance the company intends to support
motivation and change of its safety culture. Unfortunately
also negative feedback has to be given in order to
highlight the importance of accountability for safety and
urgency of safety improvements. Sub-standard performance,
indifference or neglect of safety rules is followed by
discussions, additional training courses, follow-ups and/or
disciplinary actions.
Responsibilities
General Director Vladimir Fast has overall responsibility for
occupational health and safety in the company. The Chief
Engineer P.A. Medvedsky and Labour Safety Engineers K.
Egorova and S. Bronskih together with the labour safety
service are responsible for day-to-day occupational health
and safety management in cooperation with all other units
and services within the company. The heads of the units
are responsible for implementing health and safety work in
their unit. Ms. Larisa Vedernikova, Manager of Labour Safety
and Occupational Health at Wood Supply Russia, provides
support and training e.g. on systematic approach,
policies, internal safety audits and choice and distribution
of safety equipment.
Monitoring, Investigation and Reporting
Monitoring, Investigation and Reporting of Labour Safety
issues at Russkiy Les is made in accordance with the requirements
set by the Russian legislation and Stora Enso
Group policies.
The company’s labour safety committee, which consist
of four persons, monitors the health and safety work in the
company. The management and the chairman of the company’s
labour safety committee hold a meeting with staff
every month.
The monitoring is done by the safety engineers and
consists of regular daily, weekly and monthly inspections
of labour safety conditions, preventive measures and sanitary
conditions. In each phase, the findings of the inspection
are recorded and the corrective measures required and
responsibilities for their implementation are agreed.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 20

Health and Safety Inspections at Russkiy Les
Daily inspections
Status of employees’
health
Usage and condition of
special clothes, boots and
individual safety equipment
Condition of tools,
machines and mechanical
devices
Equipping work places in
accordance with safety
requirements
Fulfilment by the employees
of labour safety
requirements
Fire safety status
of working sites
Operation of air conditioning
and vacuum
transportation, when
applicable
Checked on
a weekly basis
Labour Safety status and
observation of safety rules
at production locations
Sanitary status of production
premises
Fulfilment and needed
corrections to safety
requirements, action on
remarks from previous
checks and evaluations
Air quality at working
places
Checked on
a monthly basis
Technical condition of
trucks, machines and
equipment
Observation of internal
working instructions
Quality of personnel
training at the enterprise
Technical condition of
means of employee transportation
Condition of pressurized/
vacuum tanks
In line with the Labour Code of the Russian Federation,
companies are obliged to report occupational health and
safety statistics to various authorities and investigate all accidents.
Accidents that cause loss of working days must be reported
to the regional body of the state statistical committee
in St. Petersburg. Information to be reported is the type,
time and place of the accident and the number of working
days lost. Stora Enso requires analyses of the statistics and
presenting corrective actions.
If there is a loss of more that three working days, the
company management shall issue an order establishing an
investigation committee. The committee shall investigate
the accident and its causes within three days. A standardised
investigation report (N-1) must be prepared and one
copy provided within three days to the injured person.
According to the Stora Enso corporate guidelines all
accidents and near-misses must be reported to Stora Enso
Corporate Health and Safety Unit which follows up and
benchmarks the safety performance of Russkiy Les. As in
other parts of Stora Enso, fatalities must be reported to
Stora Enso senior management within 24 hours and all
other serious accidents within 48 hours from the incident.
Stora Enso also requires that root causes of the accidents
are analysed and corrective actions are implemented.
Safety Training
Each employee must take part in employee safety training.
In a general annual health and safety training course, the
personnel are updated on all changes in legislation and
company guidelines. The training includes issues such as
legislation on worker safety, the company’s own guidelines
and instructions, responsibilities of the employer and the
employee, rules for travel to work and for behaviour at the
company’s premises and logging sites, general safety rules,
accident and occupational disease prevention, work
hygiene and sanitary conditions, fire safety and first aid.
An introductory training in safety instructions is always
organised when a new employee is recruited. Special
training courses are organised on different topics at regular
intervals.
Safety Statistics
Statistics about the accidents in 1998–2003 are presented
below. Most of the accidents took place in forest work,
especially in logging and cutting of branches.
Number of Accidents in 1998–2003
20
18
16
14
12
10
8
6
4
2
0
4
14
Average Distribution of Accidents among
Different Professions in 1998–2003
18
1998 1999 2000 2001 2002 2003
By profession 1998 1999 2000 2001 2002 2003
Loggers 100% 72% 66% 75% 60% 14%
Machine
and tractor
operators
14% 6%
Technicians 6% 14%
Cutters, assisting
18%
workers
Loading/
unloading
workers
11% 8%
Drivers 14% 11% 17% 40% 14%
Other 40%
By operations
Harvesting 100% 79% 50% 68% 60% 43%
Wood
7% 6% 8%
transportation
Loading of
12% 8%
wagons
Maintenance
14%
work
Other work 14% 32% 16% 40% 43%
Causes of Accidents in 1998–2003
1998 1999 2000 2001 2002 2003
Infringements of labour safety 75% 64% 33% 58% 40% 21%
instructions
Infringements of
9% 7%
transportation/traffic rules
Breaches of technological
11% 8% 20%
practices
Breaches of safe working 25% 7%
methods
Others including 29% 56% 25% 40% 72%
- Burns from campfire spark 20%
- Breaking of traffic rules 58%
- Carelessness of injured
person (not paying attention,
wrong reaction )
7% 34% 20% 7%
- General illness 7%
- Conflict between workers at
7%
change of shift
- Bad weather conditions 7% 11% 17%
- Use of non-production
7%
related equipment
- Ignition from burst of
6%
flames
- Infingement of work
discipline
6% 8%
12
5
14
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 21

Development of Health and Safety
A starting point for further development of labour safety is
an analysis of potential and existing risks and previous accidents.
Stora Enso Health and Safety unit helped Russkiy
Les by performing a profound labour safety audit in spring
2005. The forest certification pre assessment in spring 2005
also covered labour safety in line with the FSC International
Principles and Guidelines.
The labour safety audits covered the company office,
garage, logging sites and railway terminal. The following
items were checked:
• company policies
• guidelines and instructions
• responsibilities
• training programmes
• safety equipment
• signs and signals
• personal protective equipment and
• first aid equipment and medication.
Special attention was paid to the overall health and
safety management system, as well as safety techniques
used and implementation of the given instructions and
storage and handling of fire hazardous lubricants and fuels.
The working conditions were checked, such as the trailers
at logging sites. The main deviations of the company policy
were:
• Management’s safety policy statement has to be written
• Incomplete usage of safety clothes and footwear in
logging work.
• Insufficient signs at the railroad in railway terminal.
Positive findings were also made, such as
• The use of biodegradable oils in chainsaws
• The constructive feedback from company employees
and Tikhvin community.
5.8 Employment, Remuneration and Working Hours
Policies and Responsibilities
Russkiy Les’ HR policy is currently being reviewed. The objectives
of the new management are to organise work in effective
and safe way and thus create conditions for maintaining
the company’s base of qualified employees. Shortages
of qualified labour are typical of the Russian forest
sector, especially in rural and remote communities following
the economic recession of the 1990s. The extremely
low demand and production levels at the end of the 1990s
forced the sector to reduce the number of employees.
When the demand and production started to recover, qualified
workers had moved to other sectors and a large
number of rural people had moved to the cities.
The current modernisation of technology also sets
quite new requirements on the employees and their education.
Wood procurement has become technically demanding.
Recruitment of trained persons and continuous education
are the right response to the challenges. At the same
time, good working conditions and terms of employment,
and employment opportunities to spouses are needed to
retain qualified employees in the company.
The company’s management, General Director and
training manager of Wood Supply Russia are responsible
for developing the company’s human resource policy and
planning actions for retaining enough employees with sufficient
and suitable training.
HR Statistics
All of the 415 employees are employed permanently.
Additionally about 50 persons are hired for reforestation
for 3–4 weeks each spring. From the total number of employees
the share of women is 5% and the share of women
in management is 1%. None of the employees belong to
trade unions.
Number of Employees in 2001–2003
600
500
400
300
200
100
0
Remuneration
Remuneration is based on legislation and employment
contracts. The average monthly wage paid by the company
in 2005 is 11,500 roubles and the lowest monthly wage
paid for a full-time employee 6,000 roubles.
Wages and living costs in 2003
Average monthly wage paid by Russkiy Les in 2003
4,890 roubles
Lowest monthly wage paid by Russkiy Les in 2003
3,000 roubles
Average living costs in the area
2,506 roubles
(estimated by regional government)
Average wage in forestry in Leningrad region 1.11.2003 5,351 roubles
(Lesnaya Gazeta)
Average wage in all spheres in Leningrad region 1.11.2003 5,781 roubles
(Lesnaya Gazeta)
National average wage in forestry 1.11.2003 (Lesnaya Gazeta) 3,145 roubles
National average wage in all spheres 1.11.2003 (Lesnaya Gazeta) 5,550 roubles
For night shifts and overtime Russkiy Les pays a premium.
For overtime work twice the normal salary is paid or
compensated as free time. For weekend work and work on
other free days are compensated as overtime work.
Working Hours
Persons
44 40
395 417
The standard working time per week is 40 hours. In peak
seasons (mainly in November) the workers work 6 days per
week and 7 hours per day. Otherwise the working week includes
two rest days. The number of actual annual working
days in 2004 was 252 days.
26
458
2001 2002 2003
women
men
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 22

Working time in 2002–2003
Working Time 2002 2003
Actual working time 914,457 man hours 964,128 man hours
Annual vacations 361 persons 378 persons
Unpaid vacations 1,792 man hours 840 man hours
Maternity leave 1,600 hours -
Sick leave 28,672 man hours 67,304 man hours
Holidays 36,560 man hours 38,720 man hours
Number of actual working days 251 250
Training
Russkiy Les provides training for its employees as presented
in the table below.
Training in 2004
Training at working place
- loggers 24 persons
- crosscutters 6 persons
Professional training of engineers and technical personnel
- chief engineer 1 person
- loading supervisor 6 persons
- labour safety engineer 1 person
- mechanic of maintenance centre 1 person
- heat supply supervisor 1 person
Training Carried out by Foreign Specialists
Russkiy Les organises continuous training for operators of
forwarders and harvesters together with the companies
providing the equipment. These courses also include training
on protection of the environment, ecology and waste
handling. The garage workers are also trained in repair and
maintenance courses organised by the equipment providers.
During summer 2005 a safety training was arranged for
drivers, and a training seminar for road construction specialists
was also attended by specialists from Finland, Sweden
and Estonia. In addition a two-day quality seminar of
harvested wood was arranged, also with specialists from
Finland attending.
6 SUSTAINABILITY
AT STORA ENSO
6.1 Company
Stora Enso is an integrated paper, packaging and forest
products company producing publication and fine papers,
packaging boards and wood products, areas in which the
Group is a global market leader.
Stora Enso sales totalled EUR 12.4 billion in 2004. The
Group has some 45,000 employees in more than 40 countries
in five continents. Its annual production capacity is
16.4 million tonnes of paper and board and 7.7 million m 3
of sawn wood products, including 3.2 million m 3 of valueadded
products. Stora Enso’s shares are listed in Helsinki,
Stockholm and New York.
Stora Enso serves its mainly business-to-business customers
through its own global sales and marketing network.
A global presence provides local customer service.
Customers are large and small publishers, printing houses
and merchants, as well as the packaging, joinery and construction
industries worldwide. The main markets are
Europe, North America and Asia.
Stora Enso is committed to developing its business towards
ecological, social and economic sustainability. This
commitment is demonstrated through its values and its environmental
and social responsibility policy. Stora Enso is
the only forest products company that has been included
in the Dow Jones Sustainability Index (DJSI World) since
it was launched in 1999. Stora Enso is also included in the
FTSE4Good index.
6.2 Policies and Principles
Sustainability as a Success Factor
“For Stora Enso sustainability is first and foremost a business
case. To maintain profitability in the long term we
must continuously seek balance between economic, social
and environmental aspects of our operations”, says Executive
Vice President Elisabet Salander-Björklund. She heads
Stora Enso Forest products including wood procurement.
The drivers Stora Enso has identified for the whole
company are valid in wood procurement in general and in
emerging markets such as Russia in particular.
Stora Enso believes that responsible behaviour in social,
environmental and economic matters strengthens our
competitive position, addresses the demands of investors
and helps to attract the best employees. Furthermore, responsibility
has been one of Stora Enso’s values since the
company was formed by the merger of Stora and Enso in
1998.
“Managing sustainability issues throughout the supply
chain remains a challenge because there are so many elements
we cannot directly influence. We therefore need
long-term partners along the chain that share our ambitions.
The Tikhvin project is a cutting-edge example of
such co-operation”, says Salander-Björklund.
Superior performance in terms of sustainability is one
of the key success factors set out in Stora Enso’s business
strategy. In a natural resources industry, such as the forest
products industry, sustainability of operations plays an important
role in business success. Full compliance with legal
requirements is only the absolute minimum target as far as
Stora Enso’s operations are concerned. Voluntary commitments
and targets are often needed for aspects of the
Group’s operations that are not yet regulated, in geographical
regions where local legislation is not demanding
enough, or on issues where Stora Enso has special ambitions.
Various tools and methods are used to manage the
Group’s sustainability performance. The starting point for
all the work is the Group’s policies and principles.
Stora Enso’s Code of Ethics statement sets out a code of
fair and ethical conduct to be followed by the management
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 23

and employees of the Stora Enso Group. The Code of Ethics
is based on policies and principles guiding Stora Enso’s
work in the areas of economic, environmental and social
responsibility.
Stora Enso’s Environmental and Social Responsibility
Policy is the starting point for the Group’s environmental
and CSR work. The policy document is supported by sets of
environmental and CSR principles. Stora Enso’s CSR principles
serve also as a starting point to the Tikhvin project.
Stora Enso’s Environmental and
Social Responsibility Policy
Responsible business
Stora Enso is committed to developing its business towards
ecological, social and economic sustainability. These tasks
are recognised as shared responsibilities within Stora Enso
enabling continuous improvement of our operations.
Eco-perspective
Stora Enso’s objective is to supply customers with products
and services that satisfy various needs related to printed
communication, packaging and construction purposes.
These products are mainly produced from renewable raw
materials, and are recyclable and safe to use.The concept of
product life cycle guides our environmental activities and
provides the framework for our efforts. We expect the same
commitment from our suppliers and partners so that at
every stage, from raw material to the end product, the impact
on the environment will be minimised.
Social respect
As an international company, Stora Enso acknowledges its
role as a model company in global, national and local society.
Our attitude shall be characterised by respect for the
cultures, customs and values of individuals and groups in
countries where we operate. When developing our business
to earn credibility, we shall comply with and when necessary
go beyond the requirements of national standards and
legislation.
Transparent interaction
Stora Enso considers open discussion and interaction with
all stakeholders, both governmental and non-governmental,
is fundamental to continuously strengthening our operations
and developing environmental and social issues
in a sustainable way.
Stora Enso’s Principles for
Corporate Social Responsibility
Business practice
• Co-operation between Stora Enso and our stakeholders
shall be open-minded, fair and based on equal terms.
• Practices defined as bribes, kickbacks, price-fixing and
similar behaviour are prohibited.
• Employees must avoid conflicts of interest between
their private financial activities and the conduct of
company business.
• All business transactions on behalf of Stora Enso must
be reflected accurately and fairly in the accounts of the
company.
Communication
Communication is based on credibility, responsibility, proactivity
and interaction. These apply equally to all stakeholders.
We advocate an open dialogue.
Community involvement
We shall be a responsible member of the communities in
which we operate through focused partnerships at local,
national and global levels. We encourage our employees
to take part in local community work.
Reduction in workforce
Any reduction necessary in the workforce shall be carried
out with respect for the individual and proper sensitivity
to employees’ needs.
We support the UN’s Universal Declaration of Human
Rights and the core conventions of the International Labour
Organization (ILO), from which Stora Enso has derived
the following principles:
Working conditions
Our employees are entitled to safe and healthy workplaces.
No employee shall be subject to any physical, psychological
or sexual harassment, punishment or abuse.
Diversity
We recognise diversity as a strength. Discrimination against
any employee in respect of race, ethnic background, gender,
disability, sexual orientation, religion, political opinion,
maternity, social origin or similar characteristic is prohibited.
Freedom of association
Employees have the right to organise, join associations and
bargain collectively, if they wish.
Free choice of employment
Any form of involuntary labour is prohibited.
Child labour
Use of child labour is not permissible. The minimum age
for employment shall be in accordance with the ILO convention
(14 or 15 years) or the age specified by local legislation
if higher. The employment of young persons shall not
jeopardise their education or their development.
Remuneration
Wages shall be paid direct to the employees. Employees
shall be paid at least the minimum legal wage or the wage
specified in an applicable collective labour agreement.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 24

Working hours
Working hours shall not exceed 48 hours and overtime 12
hours per week on average over a year, unless other conditions
are specified in local laws or an applicable collective
labour agreement.Working hours shall not exceed 48 hours
and overtime 12 hours per week on average over a year, unless
other conditions are specified in local laws or an applicable
collective labour agreement.
6.3 Wood Suppliers
Stora Enso’s Principles for Sustainable Wood and Fibre Procurement
and Land Management set out a framework for
implementing, monitoring and developing the environmental
and social responsibility aspects of wood procurement
and forest management.
Stora Enso Principles for Sustainable Wood and
Fibre Procurement and Land Management
These principles have been developed in line with leading
multilateral environmental agreements, such as the Convention
on Biological Diversity, and international processes
to develop standards for sustainable forest management.
These principles are anchored to Stora Enso’s Mission, Vision
and Values and comply with Stora Enso’s:
• Environmental and Social Responsibility Policy
• Principles of Corporate Social Responsibility
• Position on Forest Certification
• Position on Legality of Wood
• GMO principle
Application
From April 2005 Stora Enso will apply these principles in
all its wood and fibre procurement operations including:
• Wood purchases and exchanges including imports
and exports
• Company owned or managed forests
• Company owned or managed tree plantations
• External pulp purchases and exchanges
The principles set out a framework for implementing,
monitoring and improving environmental and social responsibility
in wood and fibre procurement and forest
management. We actively develop monitoring, reporting
and third-party verification of performance related to these
principles wherever this is relevant.
In emerging markets Stora Enso will establish realistic
timelines to meet the performance level indicated in these
principles.
General principles for wood procurement
We meet the requirements of all applicable policy, legal
and regulatory obligations in the host jurisdiction.
We implement environmental management systems,
occupational health and safety systems, and technologies
that enable us to recognize and assess the impacts of our
operations and continuously improve our sustainability
performance.
We support sustainable forest management and promote
forest certification on all land used to supply us with
wood and fibre so as to protect, verify and communicate a
wide range of economic, social and environmental values.
We utilize traceability systems as the means to enable
us to ensure all wood and fibre originate from legal sources
and strive for third party verification of these systems
through ISO, EMAS or Chain of Custody.
We refrain from any commercial use of controversial
genetic engineering techniques on trees or any other organisms.
We efficiently harvest, transport and process wood and
fibre to minimize waste.
We maintain or enhance the long term health, well-being
and diversity of employees through pro-active workplace
safety and personnel development programmes and,
whenever possible, offer training opportunities.
We contribute to the improvement of economic conditions
and create opportunities to participate in economic
and social benefits in communities where we operate.
We recognize the unique economic and cultural needs
of indigenous people and promote wood and fibre procurement
and forest management practices that respect their
traditional uses of forests.
We implement an active dialogue with all stakeholders
locally, nationally and internationally, and regularly issue
public sustainability reports. We provide opportunities for
stakeholders and the public to receive information in a
transparent manner.
We do not purchase wood and fibre from protected areas
or areas in the official process of designation for protection,
old growth forests and high conservation value forests
defined in national stakeholder processes unless the purchases
are clearly in line with the national conservation
regulations.
We promote the sustainability of our wood and fibre
sources by ethical purchasing practices and providing training
and long term partnership to our suppliers and forest
owners.
Principles for land and ecosystem management
On areas managed by Stora Enso:
We practice sustainable forest and land management that
conserves biodiversity, soil and water resources, and safeguards
the health and ecological functions of ecosystems.
We work under long-term planning horizons based on
ecological landscape planning methods to provide a sustainable
wood and fibre supply while ensuring conservation
and restoration of vital ecological features and ecosystem
services. We manage the landscape-level spatial and
temporal variability of ecosystems, including diversity, mature
forest habitats, old growth forests, natural forest community
types and wildlife habitat diversity.
We have systems in place to recognize and ensure that
high conservation value forests are protected and co-operate
with environmental NGOs and other stakeholders in
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 25

improving the science base to identify and safeguard such
forests.
We utilize the forest management methods most appropriate
to each ecodistrict and site, including natural disturbance
regimes such as regeneration cutting, controlled
fires and selective harvesting.
We, through appropriate silvicultural practices and ensuring
forest regeneration, maintain or increase sustainable
harvest levels and forest product quality and quantity. We
use intensive forestry practices such as exotic tree species
and fertilizer only after careful planning to ensure that biodiversity
is not harmed at the landscape level.
We strive for continuous improvement by monitoring
forest condition, forest product yields and the results of
management activities and research.
We respect traditional and multiple uses of forests such
as fishing, hunting, picking wild berries and mushrooms,
and preserve each area’s natural, historical and cultural heritage.
We strive to minimize risks to forests from damaging
agents such as wild fire, insects and disease. We do not use
persistent biocides, and strive to minimize the use of other
biocides.
We provide opportunities for stakeholders and the public
to provide input to forest management planning and
practices in a transparent and constructive manner.
Principles for tree plantations
Stora Enso’s tree plantations are intensively managed, primarily
for specific commercial purposes. In our view, sustainably
managed plantations are economically profitable,
enhance local welfare and have an important role in the
conservation of native ecosystems.
We recognize the increasingly significant role of tree
plantations in global industrial wood production and actively
promote sustainable plantation development.
We apply a holistic approach in establishment, development
and management of tree plantations.
We design and manage plantations in a landscape context
by recognizing them as part of local land use.
We do not convert natural forests, protected areas or areas
in the official process of designation for protection into
plantations unless that is clearly in line with the conservation
regulations.
We recognize indigenous peoples’ legitimate rights to
traditional land and land use.
We use environmental and social impact assessments
and other participatory tools in seeking sound land-use decisions.
We consider an open dialogue with all stakeholders as
fundamental.
External pulp purchases and exchanges
We require our external pulp suppliers to follow similar
principles in their wood procurement and to have timelines
in place for attaining the performance level required,
and audit this through questionnaires and certification
documentation.
6.4 Integrating Environmental and
CSR Aspects into Operations
Systematic environmental management is an integral part
of Stora Enso’s operations. The environmental management
systems are used as primary tools for continuous improvement.
Most of Stora Enso’s pulp, paper and board
production capacity and wood supply operations are now
covered by third-party-verified ISO 14001 and/or EMAS environmental
management systems.
Systematic CSR management is less mature than environmental
management. The Group’s Principles for Corporate
Social Responsibility were approved at the end of 2001,
and since then systematic implementation work has started.
However, many CSR issues such as occupational health and
safety management were already integral to Stora Enso’s
operations.
Stora Enso has begun to integrate CSR into all relevant
business processes and operations of each unit. One of the
main objectives concerns unit implementation: each unit
is to identify the significant social aspects of its operations,
develop related action plans and define key performance
indicators by 2006.
Reporting
Third-party-verified sustainability reporting forms an important
part of Stora Enso’s overall sustainability approach
and accountability. Stora Enso has produced annual environmental
reports since the merger of Stora and Enso in
1998, continuing the tradition of both Stora and Enso in
environmental reporting. The first Corporate Social Responsibility
report was published for the reporting year
2002 and the first Sustainability report, combining environmental
and social issues for the first time into an integrated
Sustainability report, for the calendar year 2003.
Stora Enso’s reporting follows the Global Reporting Initiative
(GRI) as far as it is appropriate and applicable to Stora
Enso. The reporting also serves as a tool for communication
on progress related to the Group’s commitment to the
United Nations Global Compact and its ten principles.
In addition to Group-Level reporting, Stora Enso also
publishes 53 product-unit-specific EMAS statements (Eco
Management and Auditing Scheme regulated by the European
Union). The Group’s Sustainability report and EMAS
statements are verified by an independent third party. For
more info see www.storaenso.com/sustainability.
6.5 Stora Enso and Russia
Strategy Based on Strong Presence
Stora Enso has chosen the strategy of creating its own local
wood procurement organisation in Russia and growth
through investments to production. The strong presence
helps Stora Enso to control the quality of wood sources, as
Senior Vice President Kauko Parviainen, head of Stora Enso
Wood Supply Russia, points out: “Successful implementation
of the corporate policies and principles requires local
adaptation. In Russia we need to have a firm grip on wood
sources to ensure compliance with our quality principles –
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 26

including sustainability aspects. We are aware that there
are some areas where we still need to work hard and create
clear roadmaps to reach our targets.”
“The strengthening of the organisation reflects our
conviction that a strong presence in Russia through our
own wood procurement is essential. For us, it has been a
natural target to grow through Russian local know-how
and expertise. This has proved to be a very good tactic in
building an efficient organisation”.
He stresses the importance of short supply chains as a
means of reinforcing quality control of wood sources. “We
foster long-standing partnerships with selected suppliers
that have shown they comply with Stora Enso’s wood procurement
principles. We co-operate with them in environmental
and employee safety training, for instance.”
Leasing forest areas and own harvesting operations
makes it possible to implement and develop cutting-edge
practices and technologies.
“Seen from many of our main market areas, Russia may
seem like a mysterious country and a complex business environment.
In my own experience that is not true. Most of
our work is very down to earth and practical. To understand
the dynamics of the communities and the whole society,
we foster stakeholder dialogue, carry out risk analyses
and monitor the changes in legislation. This helps Stora
Enso to recognise and tackle critical environmental and social
issues in a proactive manner”, Parviainen concludes.
Wood Flows and Other Key Facts
Stora Enso uses about 50 million m 3 of wood in Europe per
year, including about 7 million m 3 procured in Russia,
most of it birch pulpwood (about 4 million m 3 ). The wood
procured in Russia is used by Stora Enso’s mills mostly in
Finland, but also in Sweden and the Baltic States, and increasingly
in Russia. The birch reserves are enormous, especially
in the European part of Russia, but local demand is
low. For Stora Enso, Russian birch reserves are essential, because
of shortages in European markets.
However, Stora Enso’s recent investments in Russia will
increase the amount of spruce used locally. Its new corrugated
packaging mills at Balabanovo and Arzamas have given
Stora Enso a strong presence in Russia. The Impilahti
Sawmill in Russian Karelia started up in 2003 and the
Nebolchi Sawmill in Novgorod Region in 2004. Both
sawmills have an annual capacity of 100,000 m 3 of sawn
softwood.
Imatra,
Forest Office
KARELIAN REGION
Petrozavodsk
Ladenso
Arkhangelsk
NORTHERN REGION
St.Petersburg
Russkiy Les
Kingisepp
Vologda
KLPP
Novgorod
STF Gdov
Kostroma
STF Strug
Tver
Pskov
Nizhniy Novgorod
Moscow
WESTERN REGION
Stora Enso Wood Supply Russia’s procurement regions and offices.
The main office is located in St. Petersburg.
Legality and Forest Certification Key Issues
in Wood Procurement
One of the main goals of Stora Enso’s wood supply policies
and principles is to ensure the legality of all sources of
wood and fibre along the whole supply chain. Business
strategies, practices and verifying the origin of wood all
support this goal. It is Stora Enso’s aim to ensure through
country-specific strategies and management tools that the
demands of national legislation are fulfilled in wood procurement.
The importance of choosing committed partners cannot
be overestimated. Stora Enso chooses its suppliers carefully
and will avoid sources of wood whenever the associated
risk is too high. Stora Enso actively helps its suppliers
improve their practices by offering training and joint
projects.
Forest certification is one tool for verification and communication
of the economic, social and ecological sustainability
of forest management and forestry. Stora Enso promotes
forest certification wherever it operates. Stora Enso’s
subsidiary company in the Pskov Region, STF Strug, obtained
FSC certification in autumn 2003 and forest certification
processes have started in the other lease areas. However,
the main challenge is the certification of external
suppliers’ forest areas. Auditing, ranking and training of
suppliers are the tools for promoting forest certification
among the Group’s suppliers.
Stora Enso also promotes mutual recognition between
forest certification systems. For this purpose, there is double
certification according to two different systems in several
wood procurement areas.
“Strong presence in Russia
through our own wood
procurement is essential”,
says Kauko Parviainen,
Senior Vice President of
Wood Supply Russia.
Co-operation in the Pskov Model Forest
The Pskov Model Forest is a joint project between WWF,
Stora Enso and Swedish International Development Agency
(SIDA) and co-ordinated by WWF Russia. The Model Forest
project has brought together local people, forestry authorities,
researchers, company and NGOs to jointly develop
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 27

new forestry model with large public participation and
landscape ecological planning.
During 2000–2008, the Pskov Model Forest develops a
model of ecologically, socially and economically balanced
forestry in northwest Russia. The area received an FSC certificate
in 2003.
“FSC offers an international
scheme for
those willing to certify
their forests in Russia”,
says Andrey
Ptichnikov, Director
of FSC Russia.
The Pskov Model Forest will disseminate the results
into other regions of Russia. Also Stora Enso’s partners benefit
from the experience gained by forest certification in
Pskov.
7.2 Underlying Philosophy
Axel Springer and Sustainability
Economic success is a key fundamental prerequisite for a
company’s independence. Furthermore, modern companies
distinguish themselves by also focusing their attention
on the social and ecological conditions where their added
value is created – be this domestically or internationally.
What is now understood as sustainability derives from this
triad.
For Axel Springer, this is also a matter of credibility.
Every day, Axel Springer’s newspapers and magazines deal
with the topics of economic, social and ecological sustainability.
They inform, they enlighten, they scrutinise.
Axel Springer’s corporate culture is based on creativity,
enterprise and integrity. As a media company it bears a
dual responsibility. It not only wants to lead by example in
its role as journalist and publisher, but also as an employer,
as a printer, as a paper purchaser – simply as a member of
society in general.
Accepting responsibility for the future of the planet is
something customers expect of Axel Springer, it is what talented
journalists and business administration experts who
consider working for Axel Springer expect, and not least,
it is something the shareholders expect.
7 SUSTAINABILITY
AT AXEL SPRINGER
7.1 Company
Established in 1946, Axel Springer is the biggest newspaper
publisher in Germany and one of the leading international
media enterprises. The company has its registered office in
Berlin and other main offices in Hamburg and Munich.
The core business of Axel Springer AG is newspapers, magazines
and digital distribution channels, supported by stateof-the-art
printing works and efficient marketing organisations.
Outside Germany, Axel Springer’s newspaper and
magazine business in Western Europe is concentrated in
France, Spain and Switzerland, and in Eastern Europe in
Poland, Hungary, the Czech Republic and Russia. A diversity
of strong brands and committed staff in publishing
houses, editorial departments and printing facilities represent
a tradition of creativity, market leadership and profitability.
The average number of employees was 11,694 in 2003.
Axel Springer is increasingly active in foreign countries. In
2003 there were 1,185 employees working in foreign subsidiaries,
the most important being in Hungary, Poland and
France.
Why is “Transparency of Standards” Important
to Axel Springer?
Over the past decade, the forces of economic globalisation,
political transition and technical innovation have created
new opportunities for improving the living standards of
millions of people. However, there are widespread concerns
that this potential is not being realised, that many people
are still facing high levels of insecurity as well as environmental
decline.
In this context, responsible companies along complex
global supply chains need to work together to ensure that
sustainable benefits of globalisation are shared more widely.
Only then will the free social market economy enjoy the
popular support it deserves.
The process of profound transformation in the business,
social and environmental conditions in the forest sector
of the Russian Federation is expected to continue. Ongoing
efforts and the advances achieved in modernisation
need continuous support and visualisation. Demanding
but co-operative business partners – such as Axel Springer –
can play an important role in this positive evolution.
Axel Springer’s printing operations in Germany are
counted among the ecological pioneers. They were the first
in Europe to be validated according to the voluntary European
ecological audit in 1995.
Since the beginning of the 1990s, Axel Springer has
been intensively involved in protection of the environment
in every link in its production chain – from the forest
via the paper machines to the newsstands and paper recycling.
It is in contact with social and environmental organisations;
it is surveying the forest right where the timber is
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 28

harvested for our printing paper. Axel Springer continues
to learn, to minimise risks and to optimise its processes.
Axel Springer’s 2003 Sustainability Report follows the
2002 “in accordance” Guidelines of the Global Reporting
Initiative GRI. The GRI Guidelines aim at creating an internationally
recognised and comparable framework for voluntary
reporting by companies on economic, social and
ecological performance criteria.
7.3 CSR and the Paper Chain
Corporate Principles and Corporate Culture
Axel Springer is the only independent media company to
have had a corporate constitution since 1967. The five preambles
serve as the fundamentals for publishing activities.
The company has also defined values that distinguish Axel
Springer’s specific corporate culture. Guidelines for safeguarding
journalistic independence at Axel Springer were
added in August 2003. The Social Standards published in
July 2004 are a binding guideline for social integrity and
apply to all the company’s activities throughout the world.
Axel Springer AG attaches great importance to good
corporate governance in the management and control of
the enterprise. With its first Environmental Report in 1994,
the company also published a four-point Environmental
Guideline. Details of Axel Springer’s corporate principles
are documented on the company’s website
www.axelspringer.com.
Axel Springer International Social Policy
1. Human Rights: Axel Springer acknowledges and supports the United
Nations’ “Universal Declaration of Human Rights” and does not tolerate any
behaviour that disregards it.
2. Compliance with the Law: Axel Springer observes the laws and ordinances
of countries in which the company operates as well as the principles of its
International Social Policy.
3. Child Protection: Axel Springer does not accept illegal employment of children
or young people – either within its own company or by its business associates.
The legal employment of children and young people must also not
be detrimental to their physical and mental development.
4. Treatment of Employees: Axel Springer is committed to treating every employee
with dignity and respect and to ensuring that he/she can work in an
environment that is free from physical restrictions and sexual, psychological
or verbal harassment. All indications of infringements will be investigated –
subject to the protection of the interests of victims and witnesses.
5. Equality of Opportunity: Axel Springer offers equality of opportunity to every
member of staff. In this connection ethnic origin, skin colour, sex, age, marital
status, disability, religion, nationality, sexual orientation or social background
is immaterial. We expect our staff to declare their belief in democratic
principles and to tolerate people with differing opinions.
6. Right of Association: Axel Springer respects the right of its employees to create
an association to represent their rights and to join this and participate in
it actively. The company works with the employees’ associations fairly, constructively
and in a spirit of trust.
7. Health and Safety: At all its places of work, Axel Springer will take such
measures as required to avoid accidents and damage to health. The company
expects its staff to comply with the rules on health and safety at work.
8. Wages and Welfare Benefits: Axel Springer pays wages and salaries and
grants welfare benefits that at least match the relevant national statutory
minimum standards.
9. Employee Qualification: Within the context of its operational requirements,
Axel Springer assists in developing the professional capabilities of its employees
through suitable education and training measures.
10. Work/Family Balance: Within the context of its operational requirements,
Axel Springer supports its staff in balancing their professional and private interests
and, in particular, in achieving an appropriate work/family balance,
and complies with statutory requirements.
11. Co-operation based on Trust: Axel Springer expects integrity, loyalty and cooperation
based on trust from its staff. Our actions are characterised by respect
for the opinion of others and fairness in dealing with each other.
12. Expectations of our Business Associates: Axel Springer expects its suppliers to
comply with the principles 1–8 described above.
International Social Policy
In view of the company’s growing international presence,
Axel Springer AG has adopted a catalogue of social standards.
This International Social Policy is a binding guideline
for social integrity and applies to all the company’s activities
throughout the world.
Implementing Principle 12
Axel Springer has defined a number of principles for its international
social policy, which are listed in the table
above. For the present project, principle 12 (Expectations
of our Business Associates) is particularly relevant. Not only
does Axel Springer expect its paper suppliers, in this case
Stora Enso, to follow these principles, it also expects its paper
suppliers to do the same vis-a-vis their wood suppliers,
in this case Russkiy Les (Russia), and to create transparency
along the entire supply chain.
7.4 Paper from Russian Wood
Paper Supply
In 2003, Axel Springer bought some 450,000 tonnes of
printing paper from 60 paper mills in 15 different countries.
Germany, Finland, Sweden and Norway are among
the most important countries of origin. The paper suppliers
are chosen not only for product quality, supply reliability
and market prices but also for compliance with environmental
requirements. Axel Springer’s publishes a list of its
paper suppliers on the Internet (www.axelspringer.com).
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 29

Origin of press paper for Axel Springer in 2003
(selected countries)
Country Tonnes Percentage
Germany 184,213 39%
Sweden 121,767 22%
Finland 72,792 16%
Russia 9,372 2%
Other* 21%
Total 468 388 100%
France 8%, Canada 5%, Austria 4%, Norway 3%.
Russia
Russia is not a very important source of paper yet: only 2%,
all of it newsprint. There is more Russian wood in Axel
Springer’s paper than the table above directly suggests. As
some companies in Finland use up to 25% Russian timber,
another 2.5% of indirect ‘Russian’ paper could be added to
this table. At the moment, Finland may be a more important
source of ‘Russian’ paper than Russia, but this may
change in the future owing to:
• improvements in the quality of Russian paper
• investments by large international paper companies
in Russia
• shortage of timber in Scandinavia and Finland
• The information refers to sustainable forestry, including
environmental aspects and social aspects such as
safety of forestry workers.
• The information is not only available to managers in
the supply chain, but easily accessible to all relevant
stakeholders, such as paper customers, end consumers,
concerned citizens, social and environmental NGOs,
governmental institutions.
• The information flow should be reliable as a result of
clear criteria, good management systems and independent
verification procedures.
• This transparency is not a goal in itself but is needed
for contributing to environmental and social sustainability
of forestry and forestry-based products; for securing
important supply markets for sustainable forestry
products such as paper in the future.
Axel Springer was awarded an international distinction
for “Sustained Partnerships” in August 2002 at the World
Summit for Sustainable Development in Johannesburg.
Under the title “Newspapers that know their Trees”, the
publishing house had brought together three of the above
projects: the OPTI project, the Tracing Russian Wood Imports
project and the early phase of a Russian project on
CSR issues.
7.5 Paper Supply Chain
Optimisation
Axel Springer is systematically working on optimisation of
the paper chain. About half of the paper used in printing is
recycled paper. Contracts with suppliers contain provisions
regarding environmental and forest management. On-thejob
accident prevention in the forestry industry is another
of the social issues pursued with paper suppliers.
Transparency
Axel Springer is systematically developing transparency and
sustainability in its paper supply chain in close co-operation
with its suppliers. Major projects are listed in the table below.
Paper supply chain projects by Axel Springer
1995 Development of the Axel Springer Forestry Standards
1998 Life Cycle Analysis of Newspapers and Magazines, with Stora Enso
and Canfor
1998–1999 Optimisation of the Paper Chain (OPTI), a co-operation with Otto
Versand, Norske Skog and 8900 Norwegian forest owners
1999 User-friendly Environmental Data for Paper Rolls, with UPM
2001–2002 Tracing Russian Wood Imports, with Otto Versand, UPM-Kymmene
2003–2004 Transparency on CSR issues in the Russian wood supply chain
(including the project reported here: Tikhvin)
There is one common denominator in these projects –
to increase transparency on sustainability issues in the entire
supply chain:
• Sustainability information on the history of the raw
material (wood) flows from the forest until the printed
end-product.
Integrity of the Russian Supply Chain
Axel Springer has set the following framework for supply
chain integrity for paper from Russian wood:
• For paper from Russian wood, produced in Russia or
in other countries, Axel Springer expects its suppliers
to satisfy the ecological criteria defined in the Axel
Springer forestry standards.
• Axel Springer encourages the use of timber from certified
sources (FSC, PEFC).
• Axel Springer expects its suppliers to have full control
over the origin of Russian wood through the use of
appropriate systems for traceability from paper mill
to logging sites.
• Axel Springer encourages its Russian and its non-Russian
suppliers that source their wood from Russia actively
to engage in dialogue with non-governmental organisations
and promote principles of good governance
of such processes.
7.6 Axel Springer and the Tikhvin Project
Goals
For Axel Springer, the Tikhvin Project is a logical next step
after its earlier projects. In the OPTI project with Norske
Skog and Norwegian forest owners, the principles of supply
chain transparency were implemented in a relatively simple
and stable setting. The emphasis was on a set of selected
ecological criteria only. In the following projects, the
complexity increased and the criteria were no longer limited
to ecological criteria only. Russia is a more complex environment
than Norway. Experience of Russian conditions
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 30

was gathered in the ‘Tracing Russian Wood’ project, but
still with the emphasis on ecology only.
The Tikhvin Project now combines the complex Russian
environment and the broadening of criteria beyond
ecology. In the definition stage, Axel Springer defined three
project goals:
Goal I: To create a reference model with benchmarking
value regarding a) the traceability of imported wood, b) information
on worker safety and forest ecology, c) online
and stakeholder-friendly availability of relevant data;
Goal II: To strengthen the transparency and credibility
of wood imports, publication paper and printed media;
Goal III: To contribute to the sustainable success of the
forest industry sector in the Russian Federation; to support
the access of Russian forest products to demanding markets;
to contribute to the vitalisation of corporate governance
and responsible free and social market economy practices.
8 SUSTAINABILITY
AT THE RANDOM
HOUSE GROUP UK
8.1 Company
The Random House Group UK is the leading consumer
books publisher in the UK, with subsidiary companies in
Australia, New Zealand and South Africa. It is part of the
worldwide Random House Publishing Group, the largest
English language publisher in the world. Random House
Publishing Group is a division of Bertelsmann AG, an international
media corporation.
The Random House Group Values inform what we do
and how we work:
These goals are still valid. Goal I is broader now and refers
to a broader set of CSR criteria. Centrally important remains
the project’s benchmarking value. It should become
the benchmark for all future projects.
“The readers of our magazines
and newspapers are
environmentally and socially
aware, and they want to be
sure the newspaper they are
reading is produced in a sustainable
way”, says Florian
Nehm, Corporate Sustainability
Officer of Axel Springer.
Legality and Corruption
One of the most important issues in Russia is exclusion of
illegally harvested wood. Axel Springer expects its suppliers
to put management systems in place to exclude ‘illegal
wood’, which is wood harvested contrary to the law and
regulations, or wood supplies that might have been obtained
through various forms of corruption. Axel Springer
expects its suppliers to work with governmental and nongovernmental
organisations in Russia with the objective of
systematically reducing the possible incidence of corruption.
• Creative publishing that enriches everyone’s life
• To be Britain’s leading publisher, the publisher of
choice for authors, agents, booksellers and staff
• To be a profitable publisher, consistently growing turnover
and profitability.
• Creative integrity and autonomy – the independence of
our publishing divisions and imprints
• Creative diversity – we publish a unique range of books
across our four divisions and 33 imprints
• We love our heritage but we back new writers too. We
encourage a love of reading in new generations
• Above all we value innovation and creative risk taking
8.2 CSR
Responsibilities
We acknowledge that our ethical, environmental and social
conduct impacts on our reputation as a corporate entity.
We take our corporate social responsibilities (CSR) seriously
and are committed to developing our policies to ensure
that we address all aspects of CSR that are relevant to our
business; these include good ethical behaviour, employees,
health and safety, business partners, care for the environment
and community involvement.
Communication
We understand that it is important to maintain a productive
and open dialogue with all those who have an interest
in our activities, including our customers, suppliers and
employees. We encourage feedback and welcome communication
from all interested parties.
Purpose
The purpose of of the policy is to communicate what we
mean by corporate social responsibility and to provide a reference
point to guide employees and business partners on
the values that drive the conduct of our business and relationships
with the world in which we operate. The policy includes
the following summary statements on key CSR issues:
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 31

Standards of Business Conduct: Ethics and Customers
We are committed to ensuring that our business practice
reflects rigorous ethical, professional and legal standards.
Our goal is to provide our customers with a quality
service characterised by care, professionalism and integrity.
Three things are clear:
• As a publisher of books the selection of the right paper
for our titles is of vital importance from an environmental
as well as a commercial perspective.
Employees
We aim to attract, retain and motivate the highest calibre
of employees and encourage individuality and initiative.
We aim to be the employer of choice and are committed to
providing equality of opportunity without unlawful or unfair
discrimination.
Suppliers
Our suppliers are our partners and we work with them to
help us achieve our requirements for the delivery of our
products and services.
Environment
We are committed to a programme of management, continuous
improvement and reporting of our direct and indirect
impacts to minimise the influence that we have on the
environment.
Community
We strive to be a good corporate citizen recognising our responsibility
to work in partnership with the communities
in which we operate. Our policy is to support charities and
local community initiatives, especially those relating to
children and literacy.
Health and Safety
Health and safety issues are a priority for all Random House
Group UK business operations. We are committed to providing
a working environment that is safe and fit for the
intended purpose
8.3 Paper Procurement Policy
Environmental Introduction
Environmental issues are important for The Random House
Group. As outlined in our Environmental Policy, we are
committed to a programme of management, continuous
improvement and reporting of our direct and indirect impacts
to minimize the influence that we have on the environment.
• responsible use of natural resources in the production
and distribution of our books
• environmentally responsible procurement
• the efficient use of energy, water, raw materials and
space
• reduction of waste
• recycling of packaging materials
• prevention of pollution
• As a company we are concerned about forest protection
and want to ensure that we do not contribute to the
destruction of ancient and endangered forests.
• As a buyer of paper we have a responsibility to incorporate
the promotion and continuous improvement of
environmental issues within our purchasing strategy
and to work to ensure that our papers derive from ecologically
sustainable sources.
Paper purchasing guidelines that we have been pursuing
informally have been reviewed and are now published
in this paper procurement policy. However, we appreciate
that action needs to go beyond policy documentation and
so we aim to maintain a close dialogue with all interested
parties and to encourage our suppliers both in the responsible
use of natural resources and in the adoption of the FSC
forest certification scheme (to provide an assurance of legal
and well managed timber).
Paper Procurement – Background Information
In 2004, The Random House Group bought 14,000 tons of
paper directly from four paper mills in three different
countries – Finland and Norway and Germany. This paper
was used on black & white books printed in the UK. We
have full details of the source and certification type of the
fibre used for the manufacture of this paper.
For black & white and colour titles printed elsewhere in
the world, the paper was sourced and supplied by the printers.
These printers are required to provide full details of the
supplying mill plus associated timber certification details.
We currently use two paper grades that are FSC certified.
For direct paper purchases, we are in the process of
applying for FSC chain-of-custody certification.
Paper Procurement – Policy Standards
• We make every effort to ensure that the papers used in
our books are made from trees that have been legally
sourced from well-managed and credibly certified forests.
Our preference is for FSC certified papers.
• Trees from ancient and endangered forests, tropical
hardwood forests, high conservation value forests must
not be used for the manufacture of our papers.
• Papers must be commercially appropriate for our titles.
• The logging and paper manufacturing processes must
conform to the environmental laws and regulations of
the countries of origin.
• Logging and paper manufacturing processes must also
recognise sustainability issues, social and environmental.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 32

• Paper mills must be able to demonstrate viable and audited
systems to ensure “legal” timber and that timber
does not come from ancient and endangered forests.
• We encourage the use of paper with maximised post
consumer recycled content when practically and commercially
viable.
• We support the standards established by the FSC that
promote environmentally responsible, socially beneficial
and economically viable forest management and that
provide an assurance of legal and sustainable timber.
• Paper mills must have EMS/ISO 14001 accreditation.
• We support and encourage the chain-of-custody system
to show that wood comes from FSC certified forests.
• We support initiatives to improve transparency on sustainability
issues in the entire paper supply chain.
• We support The Forest Dialogue and it’s Legitimacy
Thresholds Model, set up by The World Business Council
for Sustainable Development (WBCSD), to find a
constructive means to accommodate the various certification
systems.
• We support all on-going forest protection discussions
that seek consensus resolution through dialogue with
all stakeholders.
• These standards will be reviewed annually
Key Initiatives in 2005
• FSC chain-of-custody certification
• WWF-UK Forest & Trade Network membership
• Work with existing paper suppliers to increase the volume
of FSC grades available.
• Develop FSC implementation plan
• Review grades and sources of papers supplied by our
printers with the priority to phase out those grades
manufactured from controversial sources.
• Review the environmental impact of effluents and
emissions from mills that supply our papers.
8.4 Suppliers Policy
Policy Overview and Summary
Our Suppliers Policy has been developed to ensure that our
suppliers are able to help us achieve our requirements for
the delivery of our products and services and that they
share many of our CSR values and standards. Our interaction
with our suppliers is conducted in adherence with the
ethical and legal principles outlined in The Random House
Group Ethics Policy.
• We aim to develop long-standing partnerships with our
suppliers and seek ways to ensure that the relationship
is suitably robust, flexible and commercial viable to
adapt to changing business requirements.
• We endeavour to maintain a close liaison with all
suppliers.
• We endeavour to pay on time.
• We regularly undertake joint reviews of existing and
future business practices and requirements.
• The Random House Group is part of PRELIMS (Publishers
Resolution for Ethical International Manufacturing
Standards), a UK group set-up to work for the adoption
of a uniform social accountability standard to help ensure
that books and book-plus products are ethically
produced. This is a standard against which one can assess
and audit the compliance of our suppliers in terms
of, for example, working conditions, health and safety,
remuneration, working hours and prohibition of the
use of child or forced labour. The standard is the CARE
Process originally developed by the International
Council of Toy Industries (ICTI).
• We ensure that for all products the manufacturing
processes conform to the environmental regulations
of the country of origin.
Key Initiatives in 2005
• Adopt the social accountability standard (as detailed
above in the section relating to our involvement with
PRELIMS) against which we will assess and audit the
compliance of all suppliers, not just those involved in
book and book-plus manufacture.
• As part of our Environmental Policy, we shall be commencing
an initiative to encourage all key printing and
paper suppliers to implement ISO 14001 or EMAS certification
plus a continuous improvement programme to
reduce emissions, effluents and wastes.
• Implement, with our paper suppliers, FSC and PEFC
‘chain of custody’ mechanisms used in certification systems
in the supply chain so that print runs can be
tracked back to the source forests.
• Join one of our key paper suppliers, Stora Enso in a pilot
project that also includes Axel Springer, Time Inc.
and Russkiy Les. The project aim is to enhance the acceptability
of Russian wood through CSR, environmental
transparency along the supply chain and a move
towards FSC certification.
8.5 Environmental Policy
Responsibility for the Environment
Environmental protection is an integral part of The Random
House Group’s corporate social responsibility and
operating philosophy.
We have had a third party environmental audit of all
aspects of our business and are developing a structured approach
to minimise the impact that we have on the environment
by seeking:
• responsible use of natural resources in the production
and distribution of our books
• environmentally responsible procurement
• the efficient use of energy, water, raw materials and
space
• reduction of waste
• recycling of packaging materials
• prevention of pollution
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 33

Environmental Regulation and Review
We make every effort to understand and adhere to existing
environmental regulation and approved codes of practice.
We aim to regularly review and improve our performance
by setting revised objectives and targets.
Involvement of Employees and Suppliers
We acknowledge that active involvement of our employees
and suppliers is an important pre-condition for high environmental
performance. We seek to raise awareness and encourage
participation amongst our employees in environmental
matters and expect similar environmental standards
and compliance from all suppliers and contractors.
Paper Procurement – Background Information
In 2004, The Random House Group bought 14,000 tons of
paper directly from four paper mills in three different
countries – Finland and Norway and Germany. This paper
was used on black & white books printed in the UK.
For black & white and colour titles printed elsewhere in
the world, the paper was sourced and supplied by the printers.
These printers are required to provide full details of the
supplying mill plus associated timber certification details.
Full policy standards are detailed in our UK Paper Procurement
Policy statement.
Current Status
• Formalise our paper procurement guidelines into a formal
policy document
• Review Group energy arrangements including consideration
of renewable options
Information
The Random House Group will issue regular updates to
keep our employees, customers and other interested stakeholders
informed about our environmental activities.
8.6 Ethics Policy
Policy Overview
Our Ethics Policy has been developed to ensure that our
business is conducted in adherence with high ethical and
legal principles and sets standards of professionalism and
integrity for all employees and operations worldwide.
Summary
An ethics policy cannot cover every circumstance where
employees may need to consider their conduct.
If an employee is in any doubt regarding any ethical
matter then they are encouraged to immediately seek
advice either from their line manager or from the Human
Resources Department.
The Random House Group’s Ethics Policy comprises
the following key points:
• Office waste is recycled
• We have paper procurement guidelines
• Cardboard packaging is made of part recycled material
• All warehouse waste and pulped books are recycled
• Our energy arrangements provide “green power” and
avoid any carbon burning surcharge
• We have a good mix of lighting using timers, individual
controls and zonal lighting
• We have a rolling 4-year replacement programme for
IT equipment
• Print cartridges are recycled
Key Initiatives in 2005
• “Plant a tree” project – 1,000 trees to be planted in tandem
with Woodland Trust and Anjala paper mill, Stora
Enso Group.
• Encourage all key printing and paper suppliers to implement
ISO 14001 or EMAS certification plus a continuous
improvement programme to reduce emissions, effluents
and wastes.
• Implement, with our paper suppliers, FSC and PEFC
‘chain of custody’ mechanisms used in certification systems
in the supply chain so that print runs can be
tracked back to the source forests.
• Increase office waste recycling targets
• Aim to implement default for in-house printing to twosided
printing on recycled paper
• Move cardboard packaging onto 100% recycled cardboard
• All employees have the right and responsibility to ensure
that The Random House Group’s business is conducted
in adherence with high ethical and legal principles.
• Our policy is to operate within applicable laws.
• Discrimination or harassment of any kind will not be
tolerated.
• No bribes can be given or received.
• We should not knowingly make misrepresentations.
• Conflicts of interest must be avoided and in all cases
must be reported.
• We aim to be a responsible partner within our local
communities.
• Employees are encouraged to report any suspected
wrongdoings.
• Discrimination and persecution of employees who
raise genuine concerns will not be tolerated under any
circumstances.
• As a matter of policy, we do not make political
donations.
• Any employee who violates our Ethics Policy will be
liable to disciplinary action that could include termination
of employment.
In summary, we are committed to ensuring that our
business practice reflects rigorous ethical, professional and
legal standards.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 34

Key Initiatives in 2005
Key Initiatives in 2005
• Review “whistle blowing” procedures
• Review and update our Discrimination, Harassment
and Grievance policies
• Adopt the social accountability standard (detailed in
our Suppliers Policy) against which we will assess and
audit the compliance of all suppliers, not just those involved
in book and book-plus manufacture.
8.7 Employee Policy
Policy Overview
Our Employee Policy has been developed to ensure that
our business is committed to a safe and healthy workplace
where each person is treated with dignity and fairness.
Summary
An employee policy cannot anticipate or address every circumstance
that may affect The Random House Group’s employees
and so more general guidelines are offered as our
business, and the legal and financial environment in which
we work, constantly changes.
If an employee is in any doubt regarding any employment
matter then they are encouraged to immediately seek
advice either from their line manager or from the Human
Resources Department.
The Random House Group’s Employee Policy comprises
of the following key points:
• We are committed to a safe and healthy workplace
where each person is treated with dignity and fairness.
• The Company is committed to equal opportunity in
employment regardless of employees’ sex, marital or
parental status, age, race, nationality, ethnic or national
origins, religious or political belief, sexual orientation,
disability (this is not an exhaustive list). This principle
will apply in respect of all conditions of work including
pay, hours of work, job security, holiday entitlement,
sick pay, recruitment, training, and promotion.
• Everyone in the workforce has the right to perform his
or her job free of any kind of bias.
• We aim to attract, retain and motivate the highest calibre
of employees and encourage creativity, individuality
and initiative.
• We aim to provide job-related learning and development
opportunities as well as appropriate opportunities
for advancement.
• We encourage diversity in the workforce to be an
important business objective.
In summary, we are committed to ensuring that our
business practice reflects ethical, professional and legal
standards.
• Review “whistle blowing” procedures
• Review and update policies covering discrimination,
harassment, diversity and equal opportunities
• Introduce monitoring of ethnicity and disability to enable
us to assess our progress
• Ensure that managers receive adequate training to enable
them to meet their obligations in supporting the
above
• Take active part in and support industry initiatives, to
increase diversity in publishing e.g. Arts Council Traineeship,
Diversity in Publishing Network
• Review recruitment and selection practices to ensure
that they promote equal opportunity
8.8 Health and Safety Policy
Policy Overview
Our Health and Safety Policy has been developed to ensure
that we deliver on our commitment to providing a working
environment that is safe and fit for the intended purpose,
ensuring the safety of all our stakeholders including employees,
visitors and customers.
This will be achieved through all operating companies
having adequate structures in place to ensure compliance
with all relevant legislation and through having a Health and
Safety action plan which will achieve continuously improving
measurable results in Health and Safety performance.
The Corporate Social Responsibility Committee will
regularly review the activities of these structures to ensure
they are complying with this policy.
Effective Health and Safety is the responsibility of all
staff. All managers in the business will ensure that Health
and Safety is continuously reflected in their own objectives
and those of their staff.
Summary
The Health and Safety action plans for each company
focus on:
• Providing a safe place of work for all employees
• Reducing employee illness and injury rates
• Improving the awareness of all employees of their responsibilities
for Health and Safety through communication
and training
• Ensuring suitable risk assessments and resultant safe
systems of working are in place for all tasks that are required
to be carried out
Key Initiatives in 2005
Our major initiative is to review the way that we manage
Health and Safety at our various sites. Key features include:
• A Health and Safety Policy/Action Plan for each operating
company/operating location that will reflect the
particular business activities and local specific factors.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 35

This plan will clearly define the roles and responsibilities
for Health and Safety at the location.
• Set-up a Health and Safety Committee for each location
or group of locations which will include representatives
from all relevant areas and will meet as often as is required
• Health and safety representatives drawn from all levels
within the business
• Health and Safety representatives who are properly
trained in the carrying out of their duties
• Each site will have a nominated senior manager responsible
for delivering the Health and Safety action
plan for that site
• The responsible senior manager will chair the Health
and Safety Committee
• The senior manager on each site will regularly review
the activities of the Health and Safety Committee to
ensure it remains relevant and meaningful
• A Competent Person for each location whose responsibility
will be to ensure that senior management and
the Health and Safety Committee are kept fully up to
date with changes to legislation affecting this area.
• Establish a bi-monthly (at least during VBR refurbishment)
Health and Safety Committee covering Vauxhall
Bridge Road and Ealing chaired by the Board member
(Mark Gardiner) responsible for Health and Safety
• Review illness/injury measures across the Group
• Review training of Health and Safety representatives
8.9 Random House Group UK and the Tikhvin Project
The Random House Group is excited to be involved in the
Tikhvin project. We have identified the following opportunities:
• To learn more about Russian forestry and its interaction
with its paper partners.
• To contribute to the sustainable success of Russian forestry.
• To enhance the acceptability of Russian wood through
increased transparency of CSR and environmental issues
along the supply chain.
• To help allay current market fears regarding real and/or
perceived illegal and environmentally damaging practices
in Russia by local forest companies and their Nordic
paper partners.
• To assist in opening up, for the first time, the relevant
documentation along the supply chain to a wide range
of interested parties.
• To encourage the certification of Russian wood.
• To encourage the increased use of appropriate systems
for traceability from forest to mill.
• To encourage the exclusion of illegally harvested wood.
“Our aim is to assist in opening
up, for the first time, the
relevant documentation along
the supply chain to a wide
range of interested parties”,
says Stephen Esson, Group
Production Director of The
Random House Group UK.
9 SUSTAINABILITY
AT TIME INC.
9.1 Company
Time Inc. is the publishing unit of Time Warner, a global
media conglomerate with headquarters in New York City.
With about 135 titles, including Time, Fortune and People,
Time Inc. is the world’s largest magazine publisher, as well
as the largest magazine publisher in the UK as the owner
of IPC Media. The company is also a major book publisher,
with titles put out by Time Inc. Home Entertainment,
Warner Books and Little Brown.
9.2 CSR
So far Time Inc. has focused primarily on the environmental
aspects of sustainability. But several of the company’s
initiatives have had important social benefits. For example,
Time’s promotion of sustainable forestry in Maine has
helped preserve vulnerable logging jobs in that state.
Time’s promotion of magazine recycling in Boston, Maryland
and Greater Milwaukee in the USA has created jobs
and helped local governments reduce garbage disposal
costs and increase revenues from recycling companies.
With its work on the Paper Working Group organized by
Metafore and other projects, Time hopes to help establish
benchmarks for corporate responsibility that go beyond
the environmental arena.
9.3 Environmental Initiatives
Background
In magazines such as Time and Fortune, Time Inc. has a
long record of putting editorial emphasis on the importance
of protecting the environment. In 1989 Time varied
its traditional “Man of the Year” format to publish “Planet
of the Year: Endangered Earth,” which highlighted such
global problems as climate change and deforestation. Since
then the magazine has devoted two special issues and dozens
of cover stories to environmental topics. These messages
resonated not only with readers but also with the com-
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 36

pany’s own executives — in part because reader surveys
showed that customers expected the company to practice
what it preached editorially.
Thus Time Inc. was receptive in 1992 when the Environmental
Defense Fund approached the company with
the idea to study how to reduce the impact of paper use on
the environment. Over the next three years Time and EDF,
in partnership with Duke University and three other American
companies (Johnson & Johnson, McDonald’s and Prudential
Insurance), sponsored research on every environmental
aspect of the paper business, from forest to landfill.
The result was the 1995 “Paper Task Force Recommendations
for Purchasing and Using Environmentally Preferable
Paper,” a 245-page report with 22 recommendations. The
study delivered three main messages to the paper industry:
Use forests but conserve them wisely, use fewer resources
and less energy, and minimize the impact of manufacturing
methods. To big paper customers like Time, the report
had similar advice: Use less paper (while meeting essential
needs), buy from responsible producers and recycle as
much as you can.
Over the past decade Time has been putting these recommendations
into practice — and reaped economic as
well as environmental benefits in several areas.
Resource Conservation
In 2000 the company created a lighter paper for Time, People
and Sports Illustrated that seems the same as the old
paper to readers but is made from fewer trees and saves
Time 4 million US dollars annually. For several glossy magazines,
the company found a European paper that uses
50% fewer trees and reduces paper costs by 5% to 8% annually.
For the book divisions, a Canadian supplier developed
a paper made from wood pulp derived from trees primarily
by mechanical rather than chemical processes. The
paper is substantially less expensive than what the company
was using, takes fewer chemical and resources to manufacture
and saves millions of dollars each year.
Pollution Control
Time has encouraged its paper suppliers to reduce sharply
the amount of hazardous material such as dioxins released
into rivers by paper mills. With the substitution of chlorine
dioxide for chlorine in the pulp bleaching process, the release
of dioxins is cut to undetectable levels. Since 1997
none of the paper used by Time has been bleached with
chlorine gas. In recent years, with encouragement from
Time, more and more pulp mills have adopted enhanced
techniques that reduce even the amount of chlorine dioxide
used and in some cases eliminate it altogether.
Sustainable Forestry
A forest is “sustainable” only if trees grow back (or are replanted)
at the same pace at which they are cut down.
Moreover, loggers should harvest trees selectively and carefully
so that wildlife is not endangered and denuded lands
do not create erosion problems that further damage the ecosystem.
With these objectives in mind, Time is rapidly increasing
the proportion of paper it buys that comes from
forests that are certified as sustainably managed by independent
organizations such as the Forest Stewardship
Council. Current goals call for Time’s European suppliers to
get 80% of their pulp from certified forests by the end of
2005 and for North American suppliers to meet the 80%
mark by the end of 2006.
An obstacle to this process is that small landowners
that sell wood to pulp mills cannot generally afford to go
through the certification process. For that reason, Time has
encouraged the development of “master logger” programmes
in which loggers themselves are certified to use
sustainable methods. Thus, by hiring master loggers, small
landowners can achieve certification for their wood. The
state of Maine, to cite just one example, has been a leader
in implementing a master logger programme and increasing
the percentage of its forests that are sustainably managed.
Time has rewarded that leadership by boosting its
purchase of paper made from Maine pulp from 12% of the
company’s total supply to about 17%.
Recycling
Time recognizes that its responsibility does not end when
its customers are finished using its products. Dissatisfied
with the amount of magazine recycling in the USA, Time
teamed with International Paper, a global paper supplier
based in Connecticut, and the National Recycling Coalition,
a non-profit group based in Washington, D.C., to
sponsor two pilot projects to promote magazine and catalogue
recycling. The projects are underway in Boston,
Prince Georges County, Maryland and Milwaukee,
Wisconsin. In Boston, the project partners have promoted
recycling by sponsoring public-service ads in TIME magazine
and 33 other publications, which reach an audience of
USD 40 million. In Maryland, the partners and sponsored
ads in magazines and community newspapers and ads on
cable TV. In April 2005 the campaign was launched in Milwaukee
with ads running on cable TV. In total the partners
have run ads worht over USD 2.5 million and reached an
audience of 68 million.The results indicate that the increase
in recycling vary but in general are up by double
digits. Results will be published later in 2005. Further,
the partners paln to sponsor ReMix in three other cities.
Climate Change
Making paper is among the most energy-intensive manufacturing
businesses in the world. And since burning fossil
fuels such as coal and oil releases carbon into the atmosphere
and promotes global warming, Time sees a responsibility
to enlist in the global effort to minimise climate
change. For that reason, Time joined with Stora Enso,
Home Depot (an American retailer) and Canfor (a Canadian
pulp supplier) to sponsor a yearlong study of the “carbon
footprint” of the magazine business. Led by ecology
professor Tom Gower of the University of Wisconsin, with
help from the Washington, D.C.-based Heinz Center for
Science, Economics and Environment, the researchers have
examined carbon emissions at every stage of a magazine’s
life, from logging trucks to garbage trucks.
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 37

One important finding of the Gower study is that the
biggest source of carbon emissions from the magazine production
is not the transportation of materials and products,
as one might expect in a global enter- prise, but the use of
energy in the paper manufacturing process. This was confirmed
in a separate study done by UPM, one of Time’s European
paper suppliers. That study, for example, found that
less carbon emission resulted if Time bought paper from a
particular mill in Scotland and shipped it to a printing
plant in New York state than if Time used the same amount
of paper bought from closer mills in New Brunswick Canada
or Minnesota. The Scottish mill was preferable because
it was more efficient and had less-polluting energy sources.
Time intends to use this kind of information in an ongoing
effort to reduce its carbon footprint. In recent
months Time executives have begun to meet with power
companies to express Time’s desire to have it and its suppliers
buy power that is both economical and generated with
the least possible carbon emission.
Purchasers’ Alliance
The drive to make the paper industry sustainable will be accelerated
by co-operation with other paper customers as
well as suppliers. Therefore Time has joined a project put
together by Metafore, a Portland, Oregon-based nonprofit,
to promote increased supplies of environmentally preferable
paper. The Paper Working Group now has 20 corporate
members. The original founding members in addition to
Time Inc. are Bank of America, Cenveo, Hewlett Packard,
FedEx Kinko’s, McDonald’s, Nike, Norm Thompson Outfitters,
Staples, Starbucks and Toyota U.S.A. The group has
conducted dialogues with paper suppliers in the US and
Canada. With the help of those discussions, the group
seeks to define the characteristics of environmentally preferable
paper and is developing EPAT (an Environmental Paper
Assessment Tool). EPAT will be a scorecard that will enable
paper buyers to assess whether paper suppliers and
their suppliers are meeting desired sustainability benchmarks.
The five areas that the scorecard will assess include
efficient use and conservation of raw materials, waste minimisation,
conservation of natural systems (e.g. forests),
clean production and corporate responsibility.
9.4 Paper Supply
The company is one of the world’s largest consumers of
coated paper and altogether buys about 600,000 tonnes of
paper a year from mills in the US, Canada, Finland, Scotland
and Germany. As one of the very biggest players in
wood products market, Time recognizes its responsibility to
promote sustainability at every stage of the life cycle of its
magazines and books, from protection of the forests that
supply the pulp to the recycling of discarded magazines.
The company, which is a member of the World Business
Council for Sustainable Development, sees sustainability as
crucial not only to environmental protection, but also to financial
success and social responsibility, since only sustainable
practices can insure a long-term supply of needed raw
materials, continued employment for workers and reliable
returns for shareholders.
9.5 Time Inc. and the Tikhvin Project
In 2001, Time acquired Britain’s IPC Media to become one
of Europe’s top publishers. For its European and US publications
Time buys about 100,000 tons of paper annually
from Finnish mills, which in turn get about 20% of their
pulp from Russian forests. Given the growing importance
of Russian resources in Time’s operations both in Europe
and in the USA. The company is pleased to join with Random
House UK, Axel Springer, Stora Enso and Russkiy Les
in this project to promote the transparency and sustainability
of Russian wood. Time sees this project as an opportunity
to help encourage sustainability in a part of the
world that has long faced difficult environmental and social
challenges. Time’s suppliers have gone a long way to
insure that they know the sources of their Russian wood,
making the supply chain much more transparent than in
the past. The task now is to make that supply chain sustainable
and to make this project a model for the publishing
industry, producers of paper and purchasers of Russian
fibre.
“I see this project as an opportunity
to help encourage sustainability
in a part of the
world that has long faced difficult
environmental and social
challenges”, says David Refkin,
Director of Sustainable
Development of Time Inc.
10 EXTERNAL REVIEWS
10.1 Objectives of the Reviews
The project was evaluated by two expert bodies: Transparency
International Forest Integrity Network and The Karelian
Research Centre of the Russian Academy of Sciences.
The reviews were undertaken as desk studies based on this
report. The objectives of the reviews were:
• To assess the ability of the supply chain to address the
critical sustainability issues and deliver information in
a transparent way
• To assess the chosen sustainability approach of the
project partners
• To identify gaps in the adopted sustainability approach
in the value chain
10.2 Transparency International
By Kenneth L. Rosenbaum
The Forest Integrity Network, a Project under the Aegis of
Transparency International
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 38

Conclusions in Brief
Russkiy Les, Stora Enso, Axel Springer, The Random House
Group UK, and Time, Inc. deserve congratulations for addressing
the issue of legality and business ethics in the forest
sector. They deserve credit, too, for seeking improvement
through transparency.
Many businesses in the forest sector have spoken out
against illegal logging. This report recognizes that part of the
solution to illegal logging lies in better corporate management.
More specifically, effective business ethics and corporate
anti-corruption programs can help prevent illegal activity.
The program described here, however, is in an early
stage. It identifies unethical and corrupt actions as threats
but offers few specifics on how to address those threats.
This document contains much more on environmental
and safety management than on anti-corruption management.
Regarding anti-corruption management, it presents
more a declaration of intent than a concrete plan.
For that reason, although the participants deserve our
encouragement and support, they also deserve our scrutiny.
We must watch to see that they turn their good intentions
into effective action.
The Problems of Illegal Logging and Corruption
Crime in the forest sector is a concern around the world.
The World Bank has estimated that governments lose on
the order of 10 billion US dollars per year to illegal logging
and related activity. The harm done to private business, the
environment, and forest-dependent communities has never
been quantified.
Corruption by its nature is clandestine, and getting a
clear picture of its role in illegal logging is difficult. However,
corrupt practices like bribery, cronyism, and kickbacks
often go hand-in-hand will illegal logging and trade in forest
products.
Modern forest laws aim at sustainable use of the resource.
So do forest certification systems. Corruption can
undo good laws and good systems. If the proper paperwork
for harvest and export is available for a price, buyers can
never be sure that forest products have been legally sourced.
Transparency International (TI) has established indexes
reflecting the perceived corruption levels in various countries
(the Corruption Perceptions Index or CPI) and the
reputation of companies based in various nations to pay
bribes when doing business in other nations (the Bribe Payers
Index or BPI). The TI CPI shows that this project will
operate in countries with diverse reputations for honest
practices. Of the 145 nations covered in TI’s 2004 index,
Finland heads the list with the reputation for being least
corrupt. The UK ranks 11th, Germany 15th, USA 17th, and
Russia 90th. Complete results are on the Internet at http://
www.transparency.org/cpi/2004/cpi2004.en.html#cpi2004.
The TI 2002 BPI ranks the overall reputations of 21
countries for the willingness of their businesses to pay
bribes. Finland was not rated. UK businesses came in 8th,
German business 9 th , US businesses 13 th , and Russian businesses
21 st . Complete results are at http://www.transparency.org/cpi/2002/bpi2002.en.html#bpi.
It would be wrong to read these indexes and jump to
conclusions about specific activities in Tikhvin or, for that
matter, Helsinki. If anything, the lesson from the indexes is
this: that corruption is a pervasive threat, and prudent companies
will take steps to avoid becoming part of the problem.
Steps Against Illegal Logging in the Proposed Project
Some of the project participants have experience with efforts
to suppress illegal logging. For example, the project
document describes Stora Enso’s holistic approach to supply
chain control. Understanding a little about this approach,
including its potential and its limits, is a first step
towards designing even stronger approaches.
Stora Enso’s basic tool is information. Contractual
agreements with suppliers require both a promise to act legally
and a promise to allow Stora Enso access to key information
to help verify that legality. In particular, Stora-Enso
collects data on wood origin and can track the origin of the
wood it processes. The company audits the environmental
performance of its suppliers, and it also uses third-party
verification to reduce the chance of overlooking problems.
Though actual statistics are scarce, it is widely accepted
that these approaches deter illegal acts. When implemented
well, supply chain controls make it difficult to “launder”
wood (pass off illegal wood as coming from a legal operation)
or otherwise disguise wood origin. Knowing the
wood’s origin, an auditor can go to the field and verify the
quality of forest planning, management, and harvest. The
participants should be congratulated for making supply
chain control part of their program.
However, supply chain control and environmental
management audits typically focus on physical forest products
and associated management and production documents.
These can only tell an auditor certain things. Perhaps
the harvesting company got its license only after it
hired the chief public forester’s brother-in-law as an expensive
consultant. Perhaps the processing company got its
transit permits, which it deserved, only after paying a local
official a small gratuity to speed the paperwork along. Perhaps
someone has even bribed the auditor to overlook an
inconsistency or two! These things are unlikely to show
up in an audit report.
Corruption as a Management Issue
Preventing corrupt practices and the larger issue of improving
corporate social responsibility involve more than tracking
wood, setting goals about business ethics, and making
promises. They involve motivating people to act. Moving
from goals to action is a matter of management.
Below is a list of suggested actions to take. The list reflects
management concepts from quality assurance and
environmental management programs as well as concepts
from the Business Principles for Countering Bribery developed
through TI and Social Accountability International.
(See http://www.transparency.org/building_coalitions/
private_sector/business_principles.html for a copy of the
Business Principles and guidance in applying them.)
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 39

Actions to Take
The participants will want to decide on the definition of
corruption and the scope of their effort.
They will want to be sure that the effort to arrive at a
definition involves all partners. It may be practical also
to involve relevant trade unions, the forest regulators,
and the larger Tikhvin community. See Business Principle
for Countering Bribery (BPCB) 4 & BPCB 5.
They will want to decide whether the business ethics
programs should go beyond bribery to cover other
forms of corruption (discussed further below under
“Special Issues”) and illegal practices such as fraud and
tax evasion.
The participants should design a basic program modeled
on quality control programs. Their program should include
these points:
• Have a written corporate business ethics and anti-corruption
policy, adopted at the highest level within each
participating company. See BPCB 6.1.
• Have a goal of no corruption or illegal acts, and a commitment
to constant improvement if the company fails
to reach the goal.
• Apply the program to agents, contractors, and other
third parties where possible. See BPCB 6.2.
• Communicate the policy to employees, and let them
know that every employee is responsible for achieving
the goal, and that employee advancement depends in
part on avoiding corrupt acts. See BPCB 6.3 and 6.4.
• Encourage people to report problems, provide routes
for anonymous reporting, investigate problems in ways
that protect the innocent, and guarantee protection to
whistleblowers. See BPCB 6.5.
• When problems emerge, seek out their causes and track
on paper the attempt to resolve them. (Some of the results
of internal investigations could be embarrassing to
the companies or even expose them to prosecution.
Participants may want to consider adopting guidance
on when and how the results of internal investigations
should become public or should be shared with prosecutors.
They may want to try to seek prior agreement
with government prosecutors that investigations originated
voluntarily by a company, pursued in good faith,
and made public will not be used to bring charges
against the company.)
• Encourage suppliers, contractors, and regulators to join
the effort against corruption. Invite them to adopt
codes of ethics. See BPCB 6.2 and 6.4.2.
• Have a program of audits of corruption control efforts,
see BPCB 6.7 and 6.8, ideally including third party
audits.
• Have a policy of learning from mistakes and constantly
improving the anti-corruption program. See BPCB
6.7.2.
• Keep the community informed about the anti-corruption
effort. See BPCB 6.6.
The participants may wish to decide whether some
anti-corruption efforts should be phased in. It may not be
practical to put everything in place at once. In that case,
the participants should agree on a schedule of step-by-step
adoption of the program.
The participants should recognize that some people depend
on corrupt activities for their livelihood, and that
these people may resist any anti-corruption program. The
participants must plan how to deal with such people. How
will participants identify them? Will they be offered an amnesty?
Can participants find ways to make people agree
voluntarily to abandon corrupt practices?
The participants will want to determine whether some
anti-corruption activities can be combined with environmental
and social activities. For example, can participants
tighten controls on fraud in log scaling at the same time
that they institute log tracking for environmental control
purposes? Can they eliminate inflated salaries, excessive
perks, and ghost employees at the same time as they review
wages for fairness?
The participants should establish a program to encourage
the community to become more active in promoting
honest governance and business practices. A recent Forest
Integrity Network study, http://www.profor.info/governance/FINReport.htm,
explored how civil society can support
anti-corruption efforts using tools developed by TI.
The participants could adapt some of these tools to their effort.
For example
• The participants could invite community members to
join advisory boards overseeing the effort. One such an
advisory board could include residents of Tikhvin and
local NGOs and trade unions. Another board, at the
other end of the supply chain, could include wholesalers,
booksellers, authors, book purchasers, and international
NGOs.
• The participants could encourage the public to support
governmental reforms to reduce corruption. This does
not need to be an angry, finger-pointing exercise. It can
be an educational effort explaining how corruption
harms the environment, the economy, and society in
general and how citizens can make their voices heard
against corruption.
• The participants could educate the press about their
program and the larger issue of corruption. An alert
and educated press will recognize corruption as an issue
worth covering, will educate the general public about
the problem, and will hold the participants to their
promise to fight corruption.
• The participants can invite governments and competing
businesses to join in integrity pacts. These are mutual
promises to abstain from bribery and other corrupt acts
in concessions, export, law enforcement, and other dealings
between business and government. Usually, these
include provision for third party verification of the pact.
• The participants can commission surveys and opinion
polls regarding the reputation for honest dealing in
their supply chain compared with elsewhere in the for-
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 40

est sector. They could also invite low- and mid-level employees,
civil society organizations, and others to anonymously
grade the success of the anti-corruption program.
By making the results public, they would give the
community a way to judge the progress of their efforts.
• The participants can post relevant facts about their program
on publicly available Internet sites. The posting
could describe the basic policy and program that the
participants have promised to adopt and could report
on their successes and setbacks.
Special Issues
Two issues deserve more detailed mention because they
will determine the scope and effectiveness of the program.
The first issue is determining the definition of corruption,
and the second is determining how to measure the progress
of anti-corruption efforts.
TI defines corruption as abuse of power for private gain.
That may include cronyism, kickbacks, fraud, and other
unwanted activities. The civil society tools paper cited
above describes some of the forms that corruption takes in
the forest sector. In particular, as the project participants
work out a definition of corruption, participants may want
to discuss these forms of corruption that go beyond the
narrow notion of corruption as bribery of government
officials:
Ghost employees: Putting people on the payroll who
actually do little or no work. The hiring person benefits
either indirectly, such as when the person hired is a
family member or the friend of a friend, or the hiring
person benefits directly, such as when the ghost must
kick back a portion of the salary to keep the job. This
can be a tricky area: it may be socially responsible to
hire extra laborers from the community, but irresponsible
to choose the laborers through favoritism.
Excessive salaries or benefits: When people with the
power to set their own level of compensation set it very
high or include extravagant benefits.
Preferential procurement: Obtaining supplies for the
company from sources that benefit the procurement officer.
The benefit may be direct (a kickback) or indirect
(business for a friend or relative).
Collusion in timber scaling: This is prevalent around
the world, in rich and poor countries. Whoever measures
the timber being cut is in a position of power. A
small payment or favor to that person may encourage
the measurement to swing up or down.
“Grease” payments: These are payments made to encourage
a government employee to comply with the
law. An example would be a bribe paid to secure faster
service. Some programs exclude these payments from
the definition of corruption.
TI considers all of the above practices to be corrupt acts.
Even after the participants decide what “corruption”
means, applying the definition to real situations can be difficult.
There are areas of black and white, but there are also
many gray areas.
For example, it is corrupt for a business to give a government
official a bribe. Is it corrupt to give him a large
lunch when he comes to inspect a site? To give him a birthday
present or holiday gift? To give a birthday gift to his
child, who happens to be a friend of your child? Is it corrupt
to pay his expenses to attend a meeting in Berlin to
discuss improving corporate responsibility? Is it corrupt to
pay his tuition and expenses to attend a local workshop on
forest corruption?
TI urges the participants to adopt a strong definition of
corruption that discourages even the appearance of corrupt
behavior.
Addressing the specifics of corrupt behavior can be difficult
without going into great detail. Even then, it is hard
to anticipate all the creative ways people can invent to
abuse power. A beginning is to require people to meet all
requirements set out in law. In environmental management,
the legal requirements are the floor, not the ceiling.
The same should be true in ethical management. Participants
should aim to go beyond the legal minimums.
In some areas, the participants will want to develop
specific guidelines reflecting local norms. For example, they
may wish to develop guidelines for giving and accepting
hospitality and similar gifts from business associates and
regulators.
In other cases, participants may find the best substitute
for specific standards is transparency. For example, if they
cannot come up with good guidelines for gifts, they may
simply want to require employees to report each quarter
on the gifts that they give and receive.
They may also want to adopt some general catch-all
standards: that the companies approach their dealings with
honesty and good faith, and that they do nothing to bring
discredit on the program. These standards may be so general
as to be unenforceable in the ordinary course of things,
but if someone comes up with an outrageous new way to
abuse power, a broad standard can serve as a way to challenge
that abuse.
The second special issue of concern is the manner of
tracking the success of anti-corruption efforts. Corruption
is clandestine. It defies being inventoried or tabulated. If
you cannot quantify corruption, how can you judge
whether you are making progress? Is it enough just to have
an anti-corruption program in place, or do participants
need to find a way to measure whether they are actually
reducing corruption?
Participants will have to devise indicators of progress.
These indicators may have to be indirect or qualitative,
rather than the preferred direct and quantitative measures.
As suggested above, perhaps the participants can commission
periodic surveys of the perception of corruption within
the Tikhvin community. At the least they can track milestones
in program implementation, such as the establish-
FROM RUSSIA… WITH TRANSPARENCY – PHASE I 41

ment of corporate anti-corruption policies, putting in place
whistleblower protection within the participating companies,
or similar components of the program. Without getting
into more detail, quantification will be a real challenge
to design and implement.
Next Steps
TI and the Forest Integrity Network look forward to watching
and commenting on this program as the participants fill
in its details and begin implementation. The TI Secretariat
has special expertise in application of business principles;
members of the Forest Integrity Network have expertise in
forest sector issues; and the TI national chapter in Russia
has expertise concerning the Russian context. We hope to
continue to give the participants our candid opinions and
suggestions, to the extent our own resources permit.
We would like to see next a set of plans from each participant
describing a specific anti-corruption program and
the steps to put it in place. Such plans should include
schedules for implementation.
We would then look forward to seeing those plans implemented.
We hope to join with the larger Tikhvin and
world community in watching the participants build a transparent
structure to assure the integrity of their business.
The problem of corruption in the forest sector is real.
Responsible corporations like Russkiy Les, Stora Enso, Axel
Springer, The Random House Group UK, and Time, Inc.
must take the problem seriously. Better management is one
of their most potent tools to address corruption. The program
suggested in the participants’ report is indeed promising.
Its success, however, depends on how the participants
fulfill that promise.
Disclosure of interest: Readers should note that some of the
expenses of this outside review were covered by the project participants
through a payment of 3,000 US dollars to the Partnership
for Transparency, which in turn paid an honorarium to the
principal reviewer, Mr. Rosenbaum, an independent consultant.
Mr. Rosenbaum’s work was ultimately reviewed by Transparency
International, which received no compensation from the
project.
10.3 The Karelian Research Centre
By Senior Researcher Galina Kozyreva
Institute of Economic Studies, Karelian Research Centre
of the Russian Academy of Sciences
The Russian forest sector is currently undergoing a
stage of institutional transformation due to the reform
process of the forest legislation. This reform was triggered
by the contradictory rules in the system of forest usage,
whereby the private and state interests appeared to be at
collision course. Privatized forest economy and backward
forestry could not become equal institutional players. In
addition new state initiatives on forest policy must take
into consideration not only business interests, but also the
social effects.
Forestry business in Russia, especially in the near border
territories such as Leningrad Region are mainly oriented
to export of raw wood to the world market, which causes
substantial economic and social losses not only for the
local communities, but for the entire Russian society. To a
great extent such orientation is caused by the disparity of
saw log prices in the domestic market and by clearly lowered
price of forest resources.
Russia is a key supplier of wood raw material for Finnish
companies for their production in Finland and increasingly
in Russia. Recently there has been a positive trend of
increasing paper exports to the EU countries. It must be
stated, though, that such deliveries are mostly indirect:
Russian non-processed wood is used for pulp production at
Finnish mills. Therefore the optimization of forest economic
structures becomes even more acute. A higher degree of
processing is needed, which is rational also from the sustainability
point of view.
Russia is an important link in the supply chain to world
markets, which is also reflected in this project. An emerging
key aspect is how Russian-based raw wood meets the requirements
of progressive world standards. In this context
Stora Enso initiative to present their viewpoint and the necessary
cooperation tools with one of their Russian partners
is a mutually perspective approach for both parties.
Evaluation of the handling of sustainability issues, esp. the
social responsibility in wood supply chain and their open communication
to all stakeholders
Sustainable forest management is an obligatory prerequisite
for exporting of forest products to the world market.
International verification organisations control that wood
raw material has been grown and harvested without ecological,
social and economic infringements. These requirements
are becoming even stricter in future. One sustainability
factor is the social responsibility of forest-based businesses.
In the presented project this is scrutinized by four
aspects: business practices, environmental and community
impacts, and labour relations. Such an approach in this
project structure gives a perfectly good coverage to social
responsibility issues.
These questions also have an indirect reflection in the
project. Business practice is reviewed through the activity
of all project partners. The most important link of the
wood supply chain is the logging enterprise OOO Russkiy
Les. Business practices are dealt with in the context of current
legislation on forestry, labour relations and taxes,
which allow for the reader to get an objective picture of a
Russian company operating according to existing laws.
Russkiy Les’ deliveries of wood are based on the usage of
long-term forest lease areas. The key issue in ensuring legality
of wood is to strictly adhere to the Forest Code and related
rules that apply to forest lease, forest management
plan, silviculture and forest regeneration. Important support
and help in recognising legality risks has been received
from the different audits provided by Stora Enso (environmental
and safety audits), forest certification consultant
and local and regional authorities.
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The company has established a monitoring system for
changes to laws and adjusts its business code with training
of personnel organised when necessary. In order to achieve
conditions for long-term profitability the company is in a
transition into a more cost-efficient technology and organisation
of work.
One of the most important strategical goals of Stora
Enso is to change the culture of Russkiy Les to comply with
the global performance level. Being an integral part of business
practice this culture can be seen in environmental and
occupational safety issues as well as in the establishing of a
well-functioning, mutually beneficial and credible interaction
with the local community.
In addition the other partners are not only following
the existing laws themselves, but also present requirements
to others, as mentioned, for example, in principle no. 12 of
Axel Springer’s policy.
Environmental questions in this project relate to the
principles of ecological management. The project presents
information on how Russkiy Les, being a subsidiary company
of Stora Enso, actively forms it’s ISO 14001-based ecological
management system, which aims at decreasing the
company’s negative environmental impact on both global,
regional and local levels.
The Scandinavian cut-to-length technology was chosen
as the basis of the logging and transportation development,
because it its less labour intensive and more efficient and
environmentally safe.
The results of company’s policy in forming of an environmental
management system were recognized among
the professionals. In 2005 Mr. Vladimir Fast, General Director
of Russkiy Les, was given the following awards:
• Logger of Merit, for good performance in Ecological
Use of Natural Resources (INTERLES 2005 Exhibition)
• Diploma of Russian Union of Mass Media, for good
ecology and technology in logging and forestry
The positive aspect of Russkiy Les’s operation is it’s intention
to operate according to young and mid aged stands
thinning silvicultural programme, which helps to create a
basis for formation of moderate-priced stands. The high
proportion of fuel wood in logging operations indicates
that company follows the principle of multiple and nonexhaustive
use of forest. This will illustrate, how well their
company strategy corresponds to sustainability principles.
In addition the project also provides views on the strategies
of the other partners: Stora Enso and media-companies
Axel Springer, The Random House Group UK and Time
Inc., which prove that they operate according to principles
of sustainability over the entire supply chain – from forest
site to the consumers.
Currently the market for forest certified (FSC, PEFC and
other schemes) products is developing actively. For instance
the forestry principles of FSC contain several aspects,
which have to do with the relations to local inhabitants
and employees’ rights (FSC principles 2, 4, 5), i.e. they
require that forest usage business is run in a socially responsible
manner. These very principles were chosen by
the all the project partners to form the basis of their evaluation
on how well their company strategies comply with
sustainability, namely: business practices, environmental
questions, social impacts and labour relations. In this context
the approach and orientation of all project partners
towards achieving voluntary forest certification will contribute
to their more sustainable mode of operations in
the future.
Community involvement of logging enterprise Russkiy
Les in reviewed from the point of view of it’s social significance
for the local community. Russkiy Les is a relatively
young organisation as compared with the traditional logging
companies (lespromkhoz). It has not formed yet any
traditions of intrasector cooperation on the local community
level and it has no experience of long-term community
involvement. The company however has put among it’s
strategical goals ”the establishing a well-functioning, mutually
beneficial and credible interaction with the surrounding
community”.
As a result of the new approaches and development
initiatives and its integration to the Tikhvin community,
Russkiy Les received in 2005 a Diploma of Tikhvin District
for Best Performance in Social Responsibility. In 2004
Russkiy Les provided round wood to the local communities
of Tikhvin and Boksitogorsk worth of 190,000 roubles for
construction purposes. In Boksitogorsk other contributions
totalled 87,000 roubles including support to the secondary
school. In Tikhvin, Russkiy Les built a bridge, constructed
and maintained roads, funded a retirement society, an orphanage
and a kindergarten for a total of 181,000 roubles.
Russkiy Les acts as a budget forming enterprise: the taxes
allocated to the local budget contribute to local welfare.
The total amount of taxes paid in 2004 was 26 million roubles,
746,000 roubles of which were allocated to the local
budget. In addition Russkiy Les runs the holistic forest
management of its forest lease areas, including road building,
forest regeneration and silviculture. There is free public
access for people to company’s lease areas to pick berries
and mushrooms.
The material gives evidence on how the Russian partner
aims to increase their social role in the local community,
which can be seen as a step towards sustainability.
Labour relations include issues such as employment
rate, remuneration and health and safety of the employees.
This is the most critical social aspect reflecting the sustainability
approach in the strategy of Russkiy Les. The average
salary level in the company exceeds the average local subsistence
minimum, average Leningrad Region forestry sector
salary level, average national level salaries in forestry
sector and average national salary in all spheres. The average
monthly wage paid by the company in 2005 is 11,500
roubles and the lowest monthly wage paid for a full-time
employee 6,000 roubles.
The presented statistics show that work arrangements
in the company comply with all labour legislation norms:
overtime work during weekends is duly compensated. An
important social aspect in the company policies is qualified
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personnel. Modern forestry technologies set new requirements
for employees and their training.
Russkiy Les organises continuous training for operators
of forwarders and harvesters together with the companies
providing the equipment. These courses also include training
on protection of the environment, ecology and waste
utilization. The maintenance centre workers are also
trained in repair and maintenance courses organised by
the equipment providers.
Russkiy Les has started a review of its guidelines, procedures
and control mechanisms for occupational health and
safety. The compliance of the company approaches and
guidelines with legislation is reviewed as well as their effectiveness.
The review process is supported by a labour safety
audit, which was done by Stora Enso Corporate Health and
Safety management.
The overall goal of the company’s health and safety
work is to reduce the number of accidents and improve the
health of employees, and thus minimise absence due to accidents
and sickness. Russkiy Les also provides a special insurance
for all employees in addition to the legally required
insurances.
Monitoring, Investigation and Reporting of Labour Safety
issues at Russkiy Les is made in accordance with the requirements
set by the Russian legislation and Stora Enso
Group policies. The monitoring is done by the safety engineers
and consists of regular daily, weekly and monthly inspections
of labour safety conditions, preventive measures
and sanitary conditions. In each phase, the findings of the
inspection are recorded and the corrective measures required
and responsibilities for their implementation are agreed.
A reward system is being developed as part of the health
and safety management. By rewarding employees for good
safety performance the company intends to support motivation
and change of the company’s safety culture.
Therefore labour issues described in the project testify
that Russkiy Les pursues to reach the level of a socially responsible
company. The transparency of this information
is confirmed by giving access to this data to all partners
and stakeholders.
Evaluation of the project partners’ approach
to solving issues of sustainable development
(social responsibility)
The evaluation of the project partners’ solutions to sustainability
approach is based on the policy of Stora Enso presented
in the report. It consists of environmental and social
responsibility (CSR) principles. These principles were in
fact the starting point of the Tikhvin Project. Stora Enso initiated
to integrate the CSR approach into all their business
processes and operations of their every business unit. A basic
element to Stora Enso policy is to secure legality of origin
of wood over the entire supply chain. This task is met
by adhering to national legislation. In Russia the risk of illegal
wood arises out of possible infringements of forest, ecological
and labour legislation, or from economic malpractice.
Stora Enso has chosen to cope with these Russian risks
by moderate forms of lobbying in favour of implementing
sustainability principles in the initial links of the wood
supply chain.
The project partners have chosen to reach their stakeholder-related
goals by transparency and open exchange of
information. This is confirmed by the data included in the
statistics of Russkiy Les, by the principles communicated
during the project, Stora Enso’s methods of tracing and
control of wood supply, consumer market reports on some
sustainability infringements by Russkiy Les, sharing information
on best practices and company goals with stakeholders,
including through the Internet.
Evaluation of flaws in sustainable development aspects
(social responsibility), appearing in the wood delivery
chain control system
As weaknesses of the project I can list the following. The
project lacks information on the very first link of the wood
delivery chain – the forest harvesting site. At this stage
there is a social question related to the existence or lack of
forest villages in the areas, where logging is going on. There
are no questions, if logging is done as shift work. If the
works are based on a forest worker village, additional questions
arise. What are the living circumstances in the forest
worker village for both the harvesting workers and their
family members? Are the FSC principles 2, 4 and 5 adhered
to? These questions need additional clarification.
In the statistics of Russkiy Les there is information, that
the amount of company’s workers has decreased as compared
with the year 2003. What does it mean? Is it a tendency?
There is nothing said about company’s plans – will
the current number of workers remain or it will decrease.
In addition there is no information of the dynamics of using
heavy manual labour, which also would more reliably
reflect the actual social situation. In the project there are
also no updated statistics on accidents in 2004-2005. So actually
the policy of Stora Enso is not specified.
There is nothing in the project dealing with the mechanism
of employer /employee relations regulation in Russkiy
Les. Is there a collective agreement practice in the company?
How are controversial issues solved?
Conclusion: It remains unclear from the presented material,
what will be Stora Enso’s policy in regard to further
development of Russkiy Les. At present the produced tree
assortments are not only exported to Finland, but also used
in Stora Enso’s sawmill in Nebolchi, in the Novgorod Region
of Russia. However the structure of supplies is not expressed.
What part of raw wood is exported from Russia?
From the local community’s sustainability viewpoint the
company should work out an optimal range of purchased
products consisting of both finished goods and raw wood.
Is the question of developing the company towards additional
wood processing discussed? However, the material
does contain information about the company’s initiatives
to increase processing in other areas, e.g. in Karelia, therefore
it can be assumed that the Tikhvin project will also assume
an identical development line.
In summary it can be stated that all project paragraphs
do not totally reflect the influence of market fluctuations
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for western project partners nor certain local specialities of
Russian forest usage system. Despite the project partners’
attempt of being ecologically and socially responsible, certain
non-transparency in the partners’ actions does not
give the reader total and reliable picture on the origin of
purchased wood. Instead we can in general talk about positive
tendencies that are reflected in this project, which
prove that the partners are making progress towards sustainable
operations.
• Forestry: increasing the amount of certified forest area.
• Employee safety: a challenge in Russia as long as manual
logging methods are widely used, even though legislation
is good and there are some very good performers.
11.2 Development Tasks
Phase II of the Tikhvin Project will concentrate on the development
needs identified by the project team in Phase I.
The main development proposals for the project partners
are listed in tables below. The Tikhvin Project Phase II will
run from October 2005 to December 2006.
11 RESULTS
11.1 Gap Analysis
During the project, the project group was determined to
make a critical review of the level and performance of sustainability
management along the whole supply chain
from the Tikhvin area to Stora Enso’s mills and finally to
the the paper customer. The material produced for the
project by the project partners sets out the policies and status
of sustainability management, measuring and reporting,
with special emphasis on the business practices, legal
framework and working conditions.
The project partners scrutinised their sustainability policies
and practices, including supplier requirements and reporting
on sustainability. The partners had to assess whether
the corporate policies and supplier policies succeed in
addressing the issues along the supply chain most crucial
in Russia. The partners also had to assess whether the reporting,
and especially the indicators used, succeed in capturing
the essence of sustainability factors and possible sustainability
gaps in the wood supply from Russia.
The continuous change in the working environment in
Russia imposes a further requirement on companies committed
to responsible and sustainable practices. The changes
in administrative structures and laws, especially the
change of Forest Code, labour legislation and tax legislation,
require that the companies continuously monitor the
changes, analyse the risks related to the changes and have
the capacity to modify their own policies and practices.
The four components of sustainability that were set as
the main priorities of this project: labour issues, legality of
wood, community involvement and the environment were
analysed in the light of the material produced by the
project.
The main gaps identified during the project include:
Development Proposals for Russkiy Les
Development task
Labour safety project to improve the company’s track record
and to reduce the number of work-related accidents as close
to zero as possible
- 1. Introduce a systematic programme of raising of the professional
skill level of employees (by profession, by operations)
including labour safety training
- 2. Timely provision of special safety clothes, boots and other
personal labour safety equipment
- 3. Improving technological processes and organisation of work.
- 4. Organizing meal services
- 5. Ethical behaviour in company operations (co-operation between
different managerial levels and employees)
- 6. Completing the social operations ’package’
Implement the Stora Enso initiative of certifying forest lease
territories by FSC
- Implement the recommendations given by the consultant during
the pre-assessment in order to proceed with the forest certification
process.
- Training seminar for middle managers responsible of planning
the operations during the third quarter of 2005
- Acquire the necessary amount of sets of formal work clothing
during the third quarter of 2005
- Prepare a set of articles for local press on forest certification
process
- Arrange a training seminar for machine operators on erosion,
minimising effects on the forest during harvesting, on road building
and other mechanical interference and protection of water
resources during the third quarter of 2005
- Additional special training on ecological and technical aspects of
forestry operations for own employees during the fourth quarter
of 2005
- Further development of traceability system for the origin of
wood during the third quarter of 2005
- Secure the necessary preparations for the forest certification
process during the first quarter of 2006
- Carry out forest certification during the second and third quarter
of 2006
- Actions based on the recommendations received during the forest
certification process during the fourth quarter of 2006-2007
Complete the lease of harvesters, forwarders and timber
trucks and provide related training and new guidelines in
order to shift to the modern tree assortment technology
1. Organisational tasks
- forest management and chain of custody certification
- participation in the forestry planning process of forest lease
territories in 2005-2007
- participation in social responsibility and labour safety project
2. Harvesting operations
In 2006 to provide 75% of volumes from machine logging using
harvesters and 25% from manual logging (small scale harvesting
sites, no clear cuttings)
3. Road construction
In 2006 to secure building of 40 km forest roads suitable for
all-year-round usage
4. Transporting of wood
To transport 70% of volumes by KAMAZ and SCANIA trucks
directly from harvesting sites (without intermediate storage)
5. Major repair of harvesters and forwarders
6. Forestry operations
Provide full scale of due forestry operations after harvesting. Soil
preparation for planting of seedlings to be made with TTS-35,
BD-286 cultivators.
Timeline
2005–2007
2005–2007
2005–2007
• Systematic business practices and approach to legality:
all the partners address the issue in their principles and
policies, but none of the partners had finalised a complete
set of detailed definitions of terms, guidelines and
follow-up and reporting mechanisms.
• Supply chain management: need to develop the integration
of social component further.
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Development proposals for Stora Enso
Development task
Corporate:
• Review and update wood and fibre procurement principles
• Sound business practices: Definitions, guidelines, follow-up/enforcement
and reporting
Systematising Stora Enso Wood Supply Russia social responsibility
approach and setting priority areas
Priority area action plans in Wood Supply Russia:
• Sound business practices: Definitions, guidelines, follow-up/enforcement
and reporting March 2006
• Improving occupational health and safety performance
• Certification of own forest lease areas and supporting
suppliers in their certification, including developing a
chain of custody
Upgrading of Wood Supply Russia’s supplier policies and
demands in sustainability, in particular in legality, working
conditions and business practices
Review of Wood Supply Russia’s supplier sustainability
performance ranking system
Development of Wood Supply Russia’s supplier training
module in new requirements
Development of Wood Supply Russia’s personnel training
in line with new requirements
Defining an approach to sustainability reporting in Wood
Supply Russia
Development proposals for Axel Springer
Timeline
2005
2005
2005
2006
2006
2006
2006
2006
- Continue the implementation of the Axel Springer Social
Standards (2004)
- Develop Axel Springer GRI-based reporting of social responsibility
in line with the AS Social Standards
- Suppliers to follow the ecological criteria as defined in the Axel
Springer forestry standards.
- Encourage the use of timber from certified sources (FSC, PEFC).
- Suppliers to have full control over the origin of Russian wood,
through the use of appropriate systems for traceability.
- Encourage suppliers to actively engage in dialogue with nongovernmental
organisations and promote principles of good governance
of such processes.
2005
Development proposals for The Random House UK
- Adopt the social accountability standard against which we will
assess and audit the compliance of suppliers
- Encourage all key printing and paper suppliers to implement ISO
14001 or EMAS certification plus a continuous improvement programme
to reduce emissions, effluents and wastes.
- Implement, with our paper suppliers, FSC and PEFC chain of custody
in the supply chain
- Work with existing paper suppliers to increase the volume of FSC
grades available.
Development proposals for Time Inc.
Continue monitoring of paper suppliers in forest
certification target
Continue contribution to the American Paper
Working Group in order to develop the EPAT
(Environmental Paper Assessment Tool), especially
the Corporate Responsibility indicators
2005
80 % of the European
sources certified by the
end of 2005
80 % of the U.S. sources
certified by the end of
2006
2005
The project partners agreed also on joint efforts.
Russkiy Les is part of a Stora Enso-based training programme
in forest certification. This programme will run in
2005–2006 and it is aimed at implementation of forest certification
in Stora Enso’s forest lease areas in Russia. The
training and consultation are based on the experience
gained by Stora Enso in the Pskov Model Forest project.
The project partners will observe the implementation
of the different tasks of the action plan. A joint follow-up
meeting will take place in spring 2006 as part of the Tikhvin
Project Phase II.
12 CONCLUSION
The Tikhvin Project Phase I has been an encouraging effort.
The project group addressed some of the core issues of sustainability
in the supply chain from forest to paper. From a
curiosity to learn about the current status of the selected issues
in the conditions of Russia, the project group proceeded
to determine that the selected issues continue to be
among the main sustainability challenges also in the future.
At the same time, the project partners were encouraged
by the fact that the selected issues were to most part
already addressed by all members of the project team in a
very same spirit and with similar objectives.
The holistic approach practiced by Stora Enso in the
supplier policies and supply chain management offers the
grounds for the partnership. This project communicated a
specific case with participation of one supplier but in fact
the displayed supplier policies and supply chain techniques
apply to all suppliers in a holistic way. Similarly, new developments
are designed for practical implementation in the
whole field of supplier base.
The project partners undertake a two-step approach in
the development tasks, where the company’s own practices
are under scrutiny but the suppliers are as well expected to
strive for the same goals. In forest certification for instance,
Stora Enso first targeted to certify its own lease areas but in
the same time supports the company’s external suppliers to
follow the same route. In environmental management systems,
Stora Enso’s own ISO 14001- and EMAS-verified traceability
system communicates the core sustainability requirements
and set an example of third party verification
to the suppliers.
The Tikhvin Project Phase I specifically addressed the
techniques that are used to manage environmental and social
requirements in the supply chain. The partners have a
large set of tools available for improving their own and
their suppliers’ performance; binding contract clauses,
training, joint implementation, auditing, ranking of suppliers
etc. These tools offer the basis for further integration of
sustainability requirements and their verification into the
supply chain also in the future.
The work is now shifting from an initial project – Tikhvin
Project Phase I – into processes around the identified
development tasks –Tikhvin Project Phase II. Partners continue
work in order to address the identified development
proposals in their policies, practices and reporting. The
Phase II will run from October 2005 to December 2006 and
will integrate an external Russian wood harvesting company
as a new project partner. The Phase II is expected to produce
company-specific outputs as well as joint communication.
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