It all begins with paper.®

                Open         TO SUSTAINABILITY

                                 SUSTAINABLE GROWTH
                                       STATUS REPORT
CHECK OUT                                                                      ENVIRONMENTAL

                                                                               1)	    Conduct	seven	environmental	compliance	audits	at	our	facilities	in	2008
                                                                                      COMPLETED – To ensure that our facilities stay in compliance with applicable

                                                                                      environmental regulations and implement sound environmental management
                                                                                      practices, we audited seven facilities in 2008.

                                                                               2)	    Double	the	amount	of	Forest	Stewardship	Council	(FSC)	certified	fiber	procured	
                                                                                      by	 2011	 as	 part	 of	 an	 overall	 strategy	 to	 increase	 the	 procurement	 of	 third-party	
                                                                                      certified	fiber
                                                                                      ONGOING – Procurement of FSC certified fiber increased to 20.5% in 2008 from
                                                                                      12.9% in 2007.
2007-2008 was a time of consolidation, as the com-
pany completed the integration of assets following                             3)	    Achieve	 ISO	 14001	 certification	 for	 all	 pulp	 and	 paper	 mills	 and	 offsite	 conver-	
the transaction that combined Domtar Inc. with                                        ting	centers	by	the	end	of	2009
                                                                                      DELAYED – Achievement of this target has been postponed until 2010 due to the
the fine paper business of Weyerhaeuser Company.                                      difficult economic conditions prevailing throughout North America. That said, we
During this period, our sustainability performance                                    continue the implementation of ISO 14001 environmental management systems,
remained relatively stable for all major indicators,                                  and all mills that are not certified will conduct an ISO 14001 gap analysis as part of
                                                                                      our audit program.
reflecting Domtar’s continuing commitment to ful-
filling its economic, environmental and social respon-                         4)	    Continue	 to	 participate	 in	 the	 development	 of	 Life	 Cycle	 Management	 (LCA)	
sibilities.                                                                           tools	and	apply	these	tools	to	our	decision-making	process	regarding	the	use	of	
                                                                                      recycled	fiber	in	our	processes
We are proud of our achievements, while recognizing that sustainability               ONGOING – We are taking part in the LCA of various grades of paper in conjunction
is an open road with a moving destination. That is why we have identified             with the National Council for Air and Stream Improvement (completion date: 2010).
ambitious new targets for 2009 that we will strive to achieve in our ongoing          We have also submitted a Natural Sciences and Engineering Research Council grant
quest for continuous improvement. We will report extensively on these                 application, in collaboration with École Polytechnique de Montréal, for an LCA of bio-
new targets in our next full report.                                                  refinery options. Pending grant approval, the project should be completed in 2012.

SOCIAL                                                                         ECONOMIC
1)	   Complete	16	safety	audits	in	2008
      COMPLETED – To ensure that our facilities comply with applicable         1)     Achieve $250 million in synergies by the end of 2008
      safety regulations, implement strong safety management systems,                 EXCEEDED – Over 650 projects were completed following the March 7, 2007 trans-
      build a strong safety culture and promote the sharing of best                   action that combined Domtar Inc. and the fine baper business of Weyerhaeuser
      practices, we audited 16 facilities in 2008.                                    Company. These projects included streamlining corporate structure, merging sup-
                                                                                      ply chains and applying best practices, which allowed Domtar to realize promised
2)	   Achieve	a	total	incident	frequency	rate	of	1.99	in	2008                         synergies of $250 million (run-rate) by the end of 2008.
      EXCEEDED – We achieved a total incident frequency rate of 1.98 for
      the year. We are hoping for further improvement during 2009, and         2)	    Continue	to	grow	the	Domtar	EarthChoice®	product	line*
      year-to-date results are promising.                                             ONGOING – The range of EarthChoice products continues to grow and remains the
                                                                                      largest family of environmentally and socially responsible papers ever assembled.
                                                                                      Using FSC-certified EarthChoice products is the simplest way for companies to
                                                                                      make an environmental statement. Well-known printing papers like Cougar® and
                                                                                      Lynx® Opaque are part of the line, and EarthChoice Office Paper, First Choice®,
                                                                                      HOTS® and Domtar Multi-System Ultra are ideal choices for the green office. A
                                                                                      variety of publishing, converting and specialty EarthChoice products are available
                                                                                      as well – all you have to do is ask.

                                                                               3)	    Pursue	FSC	certification	for	all	Domtar-managed	forestlands,	identify	important	areas	
                                                                                      for	protection	on	Domtar-managed	lands,	support/encourage	suppliers	to	pursue	
                                                                                      FSC	certification	and	promote	FSC-certified	environmentally	responsible	papers
                                                                                      ONGOING – Nearly half of the forestlands owned or directly managed by Domtar
                                                                                      are certified under either the FSC, the Sustainable Forestry Initiative (SFI) or the
                                                                                      Canadian Standards Association (CSA). Domtar conducts systematic reviews of
                                                                                      third-party fiber suppliers to ensure that our suppliers meet our standards. We continue
                                                                                      to promote FSC-certified products in the marketplace through our EarthChoice
                                                                                      line of paper products. Because of this commitment, Domtar enjoys the support of
                                                                                      prominent environmental groups such as Rainforest Alliance and WWF-Canada.

                                                                                     * This year, we will reach the significant milestone of one million tons of FSC-certified
                                                                                       EarthChoice products sold.
(AS OF ApRIL 2009)
 Pulp and paper mills               FSC                                       SFI                CSA          ISO 14001    ISO 9000

 Ashdown                            Chain of Custody                          Wood Procurement   —            Since 2003   9002 (since 1993) 9001 (since 2003)

 Columbus                           Chain of Custody*                         Wood Procurement   —            —            —

 Dryden                             Chain of Custody                          —                  Since 2003   Since 2002   9001 (since 2000)

 Espanola                           Chain of Custody                          —                  —            Since 1998   9002 (since 1995) 9001 (since 2003)

 Hawesville                         Chain of Custody*                         Wood Procurement   —            —            —

 Johnsonburg                        Chain of Custody                          Wood Procurement   —            —            —

 Kamloops                           Chain of Custody, Controlled Wood         —                  Since 2005   Since 2000   9001 (since 1998)

 Kingsport                          Chain of Custody*                         Wood Procurement   —            —            —

 Marlboro                           Chain of Custody*                         Wood Procurement   —            —            —

 Nekoosa                            Chain of Custody                          Wood Procurement   —            Since 2004   9002 (in 1995)

 Plymouth                            Target 2009                              Wood Procurement   —            —            9001 (since 2006)

 Port Huron                         Chain of Custody                          —                  —            Since 2003   9001 (in 1994)

 Rothschild                         Chain of Custody                          Wood Procurement   —            —            —

 Windsor                            Chain of Custody                          Wood Procurement   —            —            9001 (in 1994)

 Woodland                           Chain of Custody                          Wood Procurement   —            Since 2002   9001 (in 1994)

 Domtar Distribution Group          FSC                                       SFI and PEFC**     CSA          ISO 14001    ISO 9000

 Buntin Reid                        Chain of Custody                          Chain of Custody   —            —            —

 JBR La Maison du Papier            Chain of Custody                          Chain of Custody   —            —            —

 The Paper House                    Chain of Custody                          Chain of Custody   —            —            —

 Ris the Paper House                Chain of Custody                          Chain of Custody   —            —            —

* New FSC certifications since last reporting period
** Programme for the Endorsement of Forest Certification schemes

                                    FSC                                    SFI                         CSA                       TOTAL

 Pulp and paper mills                14.6%                                 11.7%                       5.2%                      31.5%

 Sawmills                            57.2%                                 0.1%                        2.0%                      59.3%

 TOTAL DOmTAr                        20.5%                                 10.1%                       4.8%                      35.4%

* The majority of certified wood originates from Domtar owned and directly licensed lands.
Domtar has implemented a number of processes and                                                                        MAXIMIzING REsOuRCEs
                                                                                                                        By making paper using more renewable energy – and less energy overall – Domtar
practices to help reduce the impact of its operations on
                                                                                                                        mills will also use less water in their processes and less fossil fuels. At the same
the environment.                                                                                                        time, it will better utilize its precious raw material, wood fiber. The result: a paper
                                                                                                                        that is both less costly to manufacture and better for the environment.
The average Domtar pulp and paper facility draws about 77% of its thermal en-                                           Because parameters such as water use and GHG are so closely related to en-
ergy (energy required to make steam) from renewable fuels such as biomass and                                           ergy use, Domtar has decided to set aggressive energy reduction targets for its
spent cooking liquor. The remaining energy comes primarily from fossil fuels                                            facilities. And our results speak volumes about the effectiveness of this strategy.
(natural gas, fuel oil, coal). Our facilities are becoming less dependent on the elec-                                  Since 2000, Domtar pulp and paper mills have reduced their GHG emissions by
trical grid by producing electricity from steam through cogeneration – a process                                        22.3% and their GHG intensity by over 15%. These reductions are more than three
that is more energy efficient, hence more beneficial to the environment than                                            times the requirements of the Kyoto Protocol.
conventional electricity generation methods.
                                                                                                                        ChICAGO CLIMATE EXChANGE®
The great majority of utility companies in North America rely heavily on fossil                                         In 2008, Domtar joined the Chicago Climate Exchange (CCX), entering a legally
fuels to generate electricity. Therefore, by using the renewable energy produced                                        binding agreement to reduce its total GHG emissions by 2010. Joining CCX
on site to make electricity, Domtar helps significantly reduce emissions of green-                                      reinforces our leadership position in sustainable manufacturing and makes a
house gases (GHG) that are not directly related to its processes. Through the                                           broader commitment to sustainable practices and continuous improvement. It
implementation of energy efficiency programs at all of our facilities, and the use                                      also underscores how our quest for excellence in energy efficiency and the reduc-
of techniques such as thermal and water pinch analyses, Domtar is working dili-                                         tion of our environmental footprint are both integral parts of Domtar’s sustain-
gently at improving the sustainability of its operations for all stakeholders.                                          ability agenda.

                                                           Evolution of GHG Emissions from Continuing Operations – 1990 to 2008

                                                                                          4,500,000                                                                                                                         900
          Total GHG emissions
                                                                                          4,000,000                                                                                                                         800
          GHG emissions intensity

                                                                                                                                                                                                                                       GHG Emissions Intensity (kg/tonne)
                                                                                          3,500,000                                                                                                                         700
                                                          GHG Emissions (Tonnes CO2 eq)

          Kyoto commitment (due in 2012)
                                                                                          3,000,000                                                                                                                         600

                                                                                          2,500,000                                                                                                                         500

                                                                                                                                                                                               15.5% below Kyoto in 2008
                                                                                          2,000,000                                                                                                                         400

                                                                                          1,500,000                                                                                                                         300

                                                                                          1,000,000                                                                                                                         200

                                                                                           500,000                                                                                                                          100

                                                                                                 0                                                                                                                                 0
                                                                                                      1990                2002       2003       2004        2005        2006      2007       2008

                                                          Pulp and paper mills
                                                          Use of Thermal Energy – 2002 to 2008

          Non-renewable energy                                                            30.0

          Renewable energy




    From                                                                                  15.0
    2002 to 2008
    Renewable energy                                                                      10.0
    12.5% increase
    Non-renewable energy                                                                   5.0
    22.0% decrease
    Total energy
    3.6% decrease                                                                          0.0
                                                                                                      2002     2003                2004            2005            2006            2007                                    2008
A well-managed forest provides renewable resources,                                  ROOM fOR bOTh
                                                                                     Domtar maintains that both recycled and virgin fibers have their purpose and
respects biodiversity and brings a wealth of socio-economic
                                                                                     justification. In fact, we support optimizing the collection and use of recycled
benefits to its neighboring communities, including the                               fiber, especially for ideally suited paper applications such as tissue, newsprint
potential for employment and recreational activities.                                and containerboard.

Third-party certification, which guarantees that the virgin fiber used to make       We believe it is important that we all put more science into our sustainability
wood products and paper originates from sustainable forests, is the best way to      models to ensure that we take informed positions. That is why we favor the use of
ensure that sound forest management practices are implemented and that all           life cycle management (see back cover) concepts to determine where and when
environmental and social aspects of forest use are considered.                       it is appropriate to use recycled fiber in the papermaking process.

In North America, more than                                                          We recognize and respect that some will attribute more value to a specific ap-
half of the trees harvested                                                          proach to sustainability (e.g. forest certification, recycling, climate change, etc.).
are used to make wood prod-                                                          But to take the position that recycled fiber is “better” than virgin is both unscien-
ucts, including lumber and                                                           tific and inaccurate because it does not take into account the entire life cycle of
furniture. The by-products of                                                        paper and how each step in this cycle can impact the environment.
this process are used to make
paper.                                                                               Domtar will continue to participate in the development of management tools
                                                                                     that will take all these factors into account, and will apply these tools, as they
LIMITATIONs Of RECYCLED                                                              become available, to its decision-making process regarding the use of recycled
fIbER                                                                                fiber in its papers.
Paper is a versatile product
and can be reprocessed into
raw material and reused. Sta-
tistics show that 57% of the
paper consumed in America in 2007 was recovered for recycling. However, not all
papers can be recycled. And those that can, may only be recycled between five
and seven times before the fibre is no longer viable.

A recent Paper Life Cycle study carried out by Metafore showed that if all print-
ing and writing grades, such as those manufactured by Domtar, were to be made
exclusively of recycled fibers, production would cease due to a lack of fiber in a
matter of weeks. This period is extended for grades such as newsprint or tissue,
but is still measured in months, not years. This independent assessment demon-
strates that making paper from 100% recycled fiber, while technically feasible in
the very short-term, is not sustainable.

The input of virgin fiber into the paper stream is essential.
It’s simply a question of balance.

                                                          To learn more about Domtar’s environmental performance, we invite you to consult the Sustainability
                                                          section of our website at
                                                          We invite you to give us your feedback on this Status Report by writing to

                                                          Guy Boucher, Vice-President, Sustainability
                                                          pascal Bossé, Vice-President, Communications and Investor Relations
                                                          Lewis Fix, Vice-President, Brand Management and Sustainable Product Development
Every product has a “life cycle”, and every stage in this cycle can have
environmental and socio-economic impacts. The paper life cycle begins
in the forest with virgin fiber and continues thereafter: production at
pulp and paper mills, delivery of products to customers, recovery of
paper after end-use, and recycling to produce… more fiber.

The diagram below illustrates the links between Domtar’s processes and products, as well as their
ties to the North American pulp and paper industry.

                                                                             Did you know…
                                                                             In North America, the                                     Did you know…
                                                                             majority of trees harvested                               Dimensional lumber (2 4’s, etc.)
                                                                             are used to make lumber                                   is actually a carbon sink, which
             Did you know…                                                   and other wood products ,                                 means that it stores atmospheric
                                                                             such as houses furniture,                                 carbon (the CO that trees absorb)
             Certifying forestry                                               re logs, etc.                                           in a stable product: wood.
             operations to third-party
             standards, such as FSC,
             is the best way to ensure                                      SAWMILLS                                                  DIMEN-
             that the forest                                                                                                          SIONAL
             will be productive                                                                                                       LUMBER
             for generations
             to come.

                                                                                                                            Did you know…
                           RAW MATERIAL                                     RECYCLING                         PULP
                           (FOREST)                                                                           AND           A typical pulp mill uses over 90% of the
                                                                                                              PAPER         wood it consumes: half is for making pulp,
                                                                                                              MILLS         the other half for process energy.
                                                                                                                            A typical pulp mill (Kraft) is 70% energy
                                                                Did you know…                                               self suf cient thanks to the use of
                                                                In 2007, 56% of the paper consumed in                       renewable energy.
                                                                America was recovered for recycling.*                       If we were to rely exclusively on recycled ber
                                                                Recycling one ton of paper to make                          to make paper, we would run out
                                                                printing-grade paper generates 0.77 tons                    of ber in about 45 days.
                                                                of ber and up to 0.9 tons of wet waste
        END                              PRODUCT                material that must be disposed of.            TRANSPOR-
        OF LIFE                          USE                    * Source: American Forest and                 TATION
                                                                  Paper Association.

        Did you know…                                                                                         Did you know…
        Methane from                     Did you know…                                                        E orts are currently underway
        land ll sites is now             Paper weights are                                                    to minimize GHG emissions caused
        being recovered to               being reduced to use                                                 by transportation by optimizing
        produce energy.                  less ber for the                                                     loads and distances.
                                         same end use.
                                                                             Did you know…
                                                                             Excess paper (cuttings,
                                                                             over-runs, etc.) from printing
                                                                             and converting operations
                                                                             are recycled.

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