Environment

DS Smith makes a major contribution to conserving resources and reducing landfill waste through its position as the leading UK collector of waste paper for recycling and the UK's largest producer of recycled paper. For more information on DS Smith's recycling activities Click Here.

The Group's corrugated and plastic packaging products are made from recycled raw materials wherever it is practicable; 78% of the paper used by the Group's corrugated packaging operations in 2009/10 was recycled paper.

Corrugated packaging is fully recyclable and approximately 80% of corrugated packaging used in the UK is recycled. For more information on corrugated packaging and its recyclability Click Here.

The Group's packaging businesses work with their customers and retailers to optimise the use of resources and reduce waste in their supply chains. For more information on the subject of packaging and the environment Click Here.

Spicers' businesses offer their customers ranges of products with environmentally friendly features such as: products made from recycled or sustainably produced materials; products that are readily recyclable; cleaning products that are safe and biodegradable; electronic products that have low energy consumption.

Environmental Performance

Our businesses continue to take action and invest in order to reduce their environmental impact. During the year, we again employed independent consultants, Bureau Veritas, to review our environmental data collection and reporting process in order to ensure the robustness and accuracy of the Group's environmental performance indicators. This review concluded that overall there was a good level of process control and reporting at the sites but identified some areas for improvement, particularly in relation to the conversion factors being used for converting energy usage into carbon emissions. The recommendations of Bureau Veritas have been implemented. The Group's overall environmental performance in 2009/10 is shown in the table below. To view the Verification Statement from Bureau Vertias UK Ltd Click Here.

The Group consumed 0.5% more energy in 2009/10 compared with the previous year. This increase was principally due to higher activity levels at the speciality paper mills in the UK and the recommissioning of a CHP plant at one of the mills. The Group's paper mills reduced their energy usage per tonne of paper produced by 0.8%, partly due to the closure of a less energy-efficient paper machine in early 2009. The increase in own use of energy was offset by a reduction in energy purchased by the Group, such that a reduction of 1.5% in total emissions of CO2 was achieved in the year. The Group's total water usage was 4.5% lower than in 2008/09, principally as a result of the closure of the paper machine mentioned above. The total amount of waste generated by our businesses increased by 8.9% partly due to an increase in the proportion of more complex corrugated boxes which give rise to more off-cut waste. Waste sent to landfill was 1.4% lower and the proportion of waste sent to landfill fell to 15% compared with 16% in the previous year.

Energy Efficiency

Our two largest paper mills, at Kemsley in the UK and Kaysersberg in France, which account for approximately 65% of the Group's energy usage, have on-site CHP plants. These CHP facilities provide energy more efficiently, with lower carbon dioxide (CO2) emissions and at significantly lower cost than if it were to be sourced from the external grid. In addition, Kemsley Mill recycles, in the form of energy recovery, a substantial proportion of the reject material, such as plastic and polystyrene, which enters its process mixed in with the waste paper and is separated out during paper manufacture; the mill's own waste-to-energy plant efficiently recovers the energy to produce steam for use in the mill's operations. We are investigating the potential for installing a sustainable energy plant at Kemsley Mill to reduce the mill's reliance on fossil fuels and applied for planning permission for this in April 2010. The proposed fuel for this plant is hard-to-recycle materials, sourced and pre-treated offsite, which might otherwise go to landfill.

DS Smith Packaging, which in 2008 became the first UK corrugated packaging producer to be accredited under the UK's Energy Efficiency Accreditation Scheme, lowered its energy usage per square metre by 1.4%. This was achieved through its division-wide energy management system and a wide range of energy reduction projects. Both DS Smith Packaging and DS Smith Kaysersberg have achieved substantial improvements in their energy efficiency through programmes of process improvements on their corrugator machines.

Environmental Performance Indicators

Methodology: The Group aims to collect and report its environmental data in accordance with the guidelines specified by the Global Reporting Initiative and the Greenhouse Gas Protocol (GHGP), to the extent that this is currently practicable. The figures reported above include data from all of the Group's wholly-owned or majority-owned operations and sites worldwide. The methodology used is consistent for 2008/09 and 2009/10.

1 The energy figures relate to the usage of all fuels used on the Group's sites, plus diesel fuel used for freight transport.

2 The CO2 emissions have been calculated using the energy data, as defined above. The factors used for converting gas, coal, fuel oil and diesel usage into CO2 emissions are the latest factors for each year as published by the UK Department for the Environment and Rural Affairs (DEFRA) in the Guidelines to DEFRA's GHG Conversion Factors; the factor used for converting gas usage changed from 0.19 tonnes of CO2 per megawatt hour in 2008/09 to 0.18 tonnes of CO2 per megawatt hour in 2009/10. The factors used for converting electricity usage are the national figures for each country in which the Group operates sourced from the International Energy Agency Data Services via the UK Carbon Trust; these factors therefore reflect the mix of fuels used for electricity generation in each country. As required by the GHGP, Scope 1 and Scope 2 CO2 emissions are reported separately. Scope 1 (direct) emissions are those arising from combustion of fuel in installations or vehicles owned by the Group; Scope 2 (indirect) emissions are those arising from bought-in energy (ie electricity or steam) where the combustion has been carried out by another company. The 2009/10 Scope 1 emissions included 57,000 tonnes (2008/09: 61,000 tonnes) of CO2 which were associated with the production of electricity which was sold to the grid from one of our CHP plants. Scope 3 emissions from sources external to DS Smith but involved in the supply chains for the Group's products and services are not included.

3 Water discharge figures relate only to the Group's paper mills, which account for approximately 95% of the total water usage of the Group. The quantities measured, in accordance with the requirements of the IPPC regulations, are for process water only and do not include cooling water. 73% of the water discharged was to the sea, 17% was to rivers and 10% was to sewers.

4 The waste figures relate to waste generated by our operations; they do not include waste that is collected from external sources for recycling within our paper and plastic packaging operations. The data on waste identifies separately: a) the amount of waste that is conventionally recycled in the manufacture of other products, b) the quantity of waste cellulose fibre, generated in the paper-making operations, which is recycled through agricultural use as landspread, c) the quantity of waste that is used for energy recovery at our waste-to-energy plant, and d) the waste that goes to landfill.

Verification Statement: DS Smith Plc

Objectives

Bureau Veritas UK Ltd has been commissioned by DS Smith Plc (DS Smith or the Group) for a second year to provide verification of the Environmental Performance Indicators presented on page 38 of its Annual Report and in this Corporate Responsibility section of the publicly available DS Smith Plc website. The preparation of the Environmental Performance Indicators is the sole responsibility of DS Smith. The objective of the verification process is to reassure the Group's stakeholders that the data is accurate, reliable and objective.

Responsibilities of the verification provider - Bureau Veritas UK Ltd

The verifier's obligation is to stakeholders of DS Smith and readers of the report and is exclusively responsible for the contents of this verification statement. DS Smith Plc has provided access to the documentation and data required to undertake the verification process and Bureau Veritas is confident that no material has been withheld.

Scope and methodology

The information and data reviewed for this verification relates to the period from 1 May 2009 to 30 April 2010.

The verification process involved document review, and inspection of internal and external records, interrogation of databases and associated management and reporting systems. This process was undertaken at both DS Smith Plc Head Office and at representative operational sites reflecting the different divisions of DS Smith Plc's business activities. The sites visited were Kemsley Mill (St Regis), Higher Kings Mill (St Regis), Leeds Depot (Severnside), Fordham Plant (DS Smith Packaging), Kaysersberg Plastics Factory (DS Smith Kaysersberg), and Kielce Corrugated Factory (DS Smith Kaysersberg).

The integrity and accuracy of aggregated data was tested by tracking sample data back to its source. The methodology for data collection, estimation and aggregation was examined and tested for accuracy and robustness.

Findings

Based on our verification activities it is our opinion that:

• The reported environmental performance indicators provide a fair and accurate representation of environmental performance for the defined period; and
• There are no significant omissions which could affect stakeholders' ability to make informed judgements on DS Smith Plc's environmental performance.

Areas of good practice

Through the process we identified the following areas of good practice:

• A commendable commitment towards collecting and collating all required environmental performance data across the specified range of KPIs at site level; and
• A continuing culture of exploring potential for improvements to data collection and collation processes, and willingness to address external recommendations for improvement.

Recommendations

We provide the following recommendations for consideration by DS Smith Plc

• Initiate a half-yearly process to consolidate all divisional data into Group level KPIs to allow DS Smith to review its progress and identify any issues in a timely manner before the submission of the annual report;
• Assign specific responsibility within the Group to ensure that any changes to relevant emission factors are updated on an annual basis;
• Review the reporting definition for KPIs relating to SO2 and NOx to ensure that emissions from the direct combustion of all fuels are included;
• Use established Environmental Management Systems to document more closely the existing processes used for data collection at each site; and
• Undertake a feasibility study to include Scope 3 CO2e emissions in future reporting, in line with the increasing expectations of stakeholders. In particular, this would include reporting emissions from leased transportation sources

Limitations

Excluded from the scope of our work is information relating to:

• activities outside the defined reporting period;
• any statements of a descriptive or interpretative nature relating to the Environmental KPIs as presented in the Annual Report or website of DS Smith Plc
• statements of commitment to, or intention to, undertake action in the future; and
• statements of opinion, belief and / or aspiration.

Statement of independence, impartiality and competence

Bureau Veritas is an independent professional services company that specialises in quality, health, safety, social and environmental management advice and compliance with over 180 years history in providing independent assurance services. Bureau Veritas has implemented a code of ethics across its business which ensures that all our staff maintains high standards in their day to day business activities. We are particularly vigilant in the prevention of conflicts of interest. We believe our verification assignment did not raise any conflicts of interest.