Suppliers

Characteristics of the Supply Chain

[G4-12]

*Includes corporate amounts.

International Paper operates on a global basis and complies with the laws and treaties of those countries where it maintains a presence. However, certain laws, such as the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and others, specifically apply to the Company’s foreign operations.  Suppliers are also expected to comply with the laws and treaties of the countries where they operate.

The Company’s Center of Excellence (CoE) is responsible for providing the Procurement area with the necessary tools and data, as well as managing its performance, improving its processes and training its people. The procurement management structure is organized as follows:

Regional Office: responsible for managing products and service categories, using the global strategic procurement process.

Procurement Operations: responsible for daily procurement operations from the requisition process through placement of the order to product/service delivery.

Contracting of Suppliers

IP’s supplier contracting process has two vectors, each with its own prospection strategy, as explained in the box below.

Product characteristics and supplier availability are both analyzed. Once the potential suppliers have been identified, their profiles are examined. Initially, this analysis was restricted to their financial information. However, over the years the Company identified the need for a more extensive ratification process and created new forms that included social and environmental issues. This process gives buyers a clearer picture of market trends and the individual situation of each supplier.

Procedures for contracting suppliers

As part of this process, IP prepared a Code of Supplier Conduct, which conveys the Company’s expectations in regard to the     workplace standards and commercial practices of the suppliers, in addition to their parent companies, subsidiaries, affiliates and subcontractors and other associated companies.

Supplier Ratification, consists of registering the suppliers and analyzing the questionnaires on financial health; legal and labor issues; health, safety and the environment; and sustainability, as well as technical qualifications. The supplier ratification pilot project will gain added momentum in 2014 and will gain added momentum, ensuring effective supply chain management.

Percentage of new suppliers that were screened using environmental criteria

[G4-EN32]

All new suppliers must comply with IP’s Code of Supplier Conduct, which states that suppliers must abide by all environmental laws, including those related to hazardous material, wastewater, solid waste and atmospheric emissions. They are also encouraged to reduce their environmental impacts, especially by minimizing or eliminating all types of waste. These efforts include recycling, composting, reusing materials, conserving water and energy, and reducing sources of gaseous emissions.

Supplier ratification is based on a questionnaire filled out by the suppliers, which evaluates if the company has any environmental certifications and how it manages its environmental risks, including: the transportation of hazardous products, solid waste management, effluent management, emission controls, water consumption, leakage controls, and chemical storage controls, among others.

Percentage of new suppliers that were screened using human rights criteria

[G4-HR10]

The Code of Supplier Conduct, which should underpin the activities of all IP’s suppliers, expresses the following definitions in relation to human resources:

Respect and Dignity: Suppliers are expected to maintain their workplace free of harassment, severe treatment, violence, intimidation, corporal punishment, psychological or physical coercion, verbal abuse and discrimination.

Payroll and Benefits: Suppliers must comply with all laws regulating payroll and working hours, including compensation, benefits and overtime.

Freedom of Association: Suppliers must respect their employees’ right to join or not any legal association without fear of retaliation.

Work Qualification and Volunteer Work: Suppliers may only contract employees who have the legal right to work. Child labor and forced labor are prohibited under any circumstances.

Apart from the points already mentioned, the supplier ratification questionnaire also evaluates compliance with employees’ legal rights, guaranteed freedom of association, the existence of a formal policy to support the elimination of child and forced labor, and safety and health management.

Issues related to forced or similar labor permeate the entire company, are addressed within the scope of law and included in the Code of Conduct.

Operations and suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labor

[G4-HR6]

During the process of contracting suppliers, IP carefully analyzes issues related to human resources (including child and forced labor), labor rights, and  compliance with environmental legislation and occupational safety procedures. These issues are also dealt with in the Environmental Qualification Manual, the Safety Qualification Manual and the Code of Supplier Conduct.

In 2013, there were no occurrences of forced or compulsory labor by the Company’s suppliers.