Managing Our Supply Chain Risk

International Paper believes in conducting business with honesty and integrity. We are committed to treating all people with dignity and respect, supporting our communities and honoring the laws, regulations and treaties of the countries in which we operate. In selecting our suppliers, International Paper chooses reputable business partners who conduct their business in a manner that also shows commitment to regulatory compliance, high ethical standards, safe and healthy working environments and protection of human rights and the environment.

Our Supplier Code of Conduct outlines the expectations regarding workplace standards and business practices of our suppliers, along with their parent entities, subsidiaries, affiliates, subcontractors and others who are within their supply chain. The code is focused on principles that uphold consistent compliance obligations throughout our global operations, including:

• Business Conduct & Ethics;
• Health, Safety & Environment;
• Workplace, Labor & Human Rights; and
• Accountability & Compliance.

In early 2013, we distributed the Supplier Code of Conduct to more than 40,000 U.S. suppliers and included terms in our U.S. sourcing and procurement agreements requiring our supplier/vendors and those within their supply chain to comply with our Supplier Code of Conduct. We have translated the Supplier Code of Conduct into 15 languages in preparation for global distribution. We are developing processes and procedures that identify potential risk of non-compliance with our Supplier Code of Conduct and address and respond to any incidents of non-compliance discovered. We plan to have initial implementation of these processes and procedures in place globally by 2015.

Because we have a vast number of suppliers and engage people of multiple languages, cultures and customs, we recognize that the launch of our Supplier Code of Conduct must be dealt with at a manageable pace. We plan a continued review and deliberate improvements to maintain a strong supply-chain risk management process.

This work will build upon our current robust processes, which include:

• Formal sourcing agreements that include a supplier’s commitment to the Supplier Code of Conduct;
• Supplier Risk Assessment Matrix screening that captures supply disruption, financial stability, alternative supply sources, and material substitution;
• Supplier Safety Performance reviews that confirm safety records for suppliers/contractors working on-site at International Paper facilities; and
• Fiber supplier audits and checks performed by three separate groups: International Paper’s Global Sourcing Fiber Supply and EHS&S departments, and the international third-party auditor, Bureau Veritas.

Capturing Value Through Improved Collaborations

We are working to identify total cost of ownership opportunities and improve dialogue with key stakeholders about economic, environmental and social impacts. This will increase visibility and transparency into our supply chain and allow more informed decision-making while aligning with our 2020 Sustainability Goals.

In 2013, we launched a sustainability survey evaluating 24 key suppliers that represent almost 10 percent of our global spend. The 40-question survey focused on social, environmental, governance and supply-chain factors. We will assess the results of the survey and determine next steps in early 2014.