It all begins with paper.® Open TO SUSTAINABILITY 2008 SUSTAINABLE GROWTH STATUS REPORT CHECK OUT ENVIRONMENTAL our TARGETS 1) Conduct seven environmental compliance audits at our facilities in 2008 COMPLETED – To ensure that our facilities stay in compliance with applicable progress 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 TARGETS 1) Complete 16 safety audits in 2008 TARGETS 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. OUR FSC CERTIFICATIONS (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 DELIVERY OF WOOD FROM CERTIFIED FORESTS (GREEN SHORT TONS)* 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. CLIMATE CHANGE DOING OUR pART TO REDUCE GHG EMISSIONS 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. REsPONsIbLE ENERGY MANAGEMENT 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. GHG EMISSIONS 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 25.0 79.5% 79.3% 77.9% 74.2% 75.1% 75.6% 20.0 73.4% Gj/tonne 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 VIRGIN VS. RECYCLED FIBER AN UNNECESSARY BATTLE 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 www.domtar.com/en/sustainability. We invite you to give us your feedback on this Status Report by writing to email@example.com. Contacts Guy Boucher, Vice-President, Sustainability pascal Bossé, Vice-President, Communications and Investor Relations Lewis Fix, Vice-President, Brand Management and Sustainable Product Development THE LIFE CYCLE OF pApER 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 PRINTING land ll sites is now Paper weights are to minimize GHG emissions caused AND being recovered to being reduced to use by transportation by optimizing CONVERTING 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.