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S U S T A I N A B I L I T Y R E P O R T 2 0 0 5

C R O W N V A N G E L D E R N . V .

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The mill situated at the North Sea Canal.

T A B L E O F C O N T E N T S

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1 C E O S t a t e m e n t 5

2 P r o f i l e o f t h e C o m p a n y 9

2.1 Company Profile 9

2.2 Mission Statement 11

2.3 Policy Statement on Sustainable Development 12

2.4 Corporate Governance and Risk Management 12

3 R e p o r t S c o p e a n d K e y P e r f o r m a n c e I n d i c a t o r s 14

3.1 Report Scope and Principles 14

3.2 Key Performance Indicators and Targets 14

3.3 Stakeholder Dialogue 15

4 E n v i r o n m e n t a l P e r f o r m a n c e 18

4.1 Production Process from Pulp to Paper 18

4.2 Policy in relation to the Environmental Aspects 20

4.3 Environmental Action Plan 22

4.3.1 Action Scheme 23

4.3.2 Sustainably Managed Forests 25

4.3.3 Energy Efficiency Index 26

4.4 Non-compliance 26

4.4.1 Notification of Environmental Incidents 26

4.4.2 Environmental Complaints 27

5 E c o n o m i c P e r f o r m a n c e 29

5.1 Customers and Products 29

5.2 Employees 32

5.3 Suppliers 32

5.4 Capital Providers 33

5.5 Investments 34

5.6 Taxes 34

5.7 Action Scheme 35

6 S o c i a l P e r f o r m a n c e 37

6.1 Work Force 37

6.2 Health and Safety 37

6.3 Human Resource Development 38

6.4 Competence Management 39

6.5 Local Community 39

6.6 Works Council 41

6.7 Other Social Affairs 41

6.8 Action Scheme 43

7 G R I I n d e x 44

8 A b b r e v i a t i o n s a n d E x p l a n a t i o n o f T e r m i n o l o g y 48

C R O W N V A N G E L D E R N . V .S U S T A I N A B I L I T Y R E P O R T 2 0 0 5

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The delivery of bleached pulp at the nearby quay will reduce the nuisance to the local community.

C E O S T A T E M E N T1

I N T R O D U C T I O N

This is the third consecutive year that Crown Van Gelder is presenting a separate Sustainability

Report along with the Annual Report. The Sustainability Report has largely adhered to the Global

Reporting Initiative (GRI). GRI components that fall outside the scope of our business operations

were left out of consideration.

Crown Van Gelder is an independent, Euronext-Amsterdam listed paper company with two paper

machines in Velsen, west of Amsterdam (see www.cvg.nl). In 2005, turnover was EUR 142 million

with a net profit of EUR 8.1 million. An average of 296 people were actively employed, 176 of whom

in shift work.

Crown Van Gelder produces and sells high-quality industrial and graphical specialty products in the

woodfree uncoated and single-coated paper sector.

We have received responses from various parties, many from the reply cards that we included in last

year's report. We are grateful for the reactions, and have used them to add new elements to the

2005 report.

Chapter 3, which presents the Key Performance Indicators and Targets, explains why Crown Van

Gelder has restricted itself to these targets. The Key Performance Indicators have been modified to

the new goals of the company which stem from our 'Mission 2010'.

2 0 0 5 R E S U L T S

C o m p a n y r e s u l t

The company's net profit for the year 2005 was strongly influenced by the fierce price competition

in the second half year and by input cost increases, including higher energy costs, as well as the

consequences of the new International Financial Reporting Standards (IFRS) from changes in the

company's pension scheme, which had a one-off effect on the company's financial results. As a

result of the fierce competition it was not possible to pass on the higher costs to the selling price.

The ROCE for 2005 was 9.1% and consequently below the 11% target.

Other features of 2005 were the major upgrade of paper machine 1 (PM 1), modifications to paper

machine 2 (PM 2) and replacement of the gas turbine and control system of the power plant (CHP).

These investments mark the conclusion of Crown Van Gelder's Investment Multi-Year Plan II (IMP II).

The objective of these substantial investments was to increase production capacity to approximately

215,000 ton a year, to reduce energy use and to improve the quality of our products.

C o r p o r a t e G o v e r n a n c e

Corporate Governance was an important agenda item for the Annual General Meeting of

Shareholders (AGM) of May 2005. The company made proposals to bring the Articles of Association,

the Regulations and the company structure in line with the Corporate Governance Code.

The shareholders approved the company's proposals. The company's new Articles of Association

went into effect on the 13th of July 2005. The new Articles of Association have been placed on the

company's website, along with all the other information for investors and other interested parties.


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C E O S T A T E M E N T

H e a l t h a n d S a f e t y

The joint initiatives of the Dutch paper and board industry to improve health and safety levels in

the framework of the Dutch Covenant on Working Conditions, Safety & Health (Arbocovenant) also

proved to be very successful in 2005. The encouraging results led to extending the scope of the

covenant in an 'Arboplus' Covenant. The targets for this covenant are the reduction of the average

sickness rate and improvement of the reintegration of disablement benefit recipients.

Crown Van Gelder is one of the signatories to this covenant.

Absence through illness at Crown Van Gelder was 4.5%. This means we met our objective for

2005 and the declining trend of the previous years continued. The number of industrial accidents

at Crown Van Gelder was nil in 2005 which is considerably lower than in 2004 (19.7 per 1,000

employees). The company's management system on working conditions was certified in 2005

according to the OHSAS 18001 standard which underlines Crown Van Gelder's intention to create

a safe and healthy working environment for all concerned.

S u s t a i n a b i l i t y a n d e n e r g y

There was significant progress in 2005 in the realisation of one of the company's goals, namely the

use of sustainable raw materials. Crown Van Gelder received both the FSC and PEFC chain of custody

certificate this year for the use of bleached pulp after verification of the accredited SKAL Institute.

Our energy supply is based on the conversion of natural gas into steam and electricity. As long as

there are no practical alternatives to natural gas, sustainability requires us to be as economical as

possible in its use.

Crown Van Gelder was allocated tradeable rights of 205,000 allowances of CO2 per year until 2008.

This leaves sufficient room for the planned production growth to 230,000 ton in 2010.

The investment in a new gas turbine means that Crown Van Gelder meets the IPPC guidelines for

NOx emissions and also represents savings in natural gas.

Investments in the past three years have resulted in a 12% reduction of energy use per produced

ton of paper.

C o m m u n i t y

Crown Van Gelder is pleased with the positive policy change of the Velsen College of Mayor and

Aldermen concerning the zoning of the nearby industrial site and docks. This new policy will allow

for effective use of the available space to create additional industrial employment. If this new policy

is endorsed by the Municipal Council of Velsen, it will also make it possible to arrange for another

means of transporting the bleached pulp which will reduce the nuisance to the local population of

transport through the residential area.

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C E O S T A T E M E N T


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The Ministry of Economic Affairs has commissioned two institutes to compare the sustainability

reports of 179 companies, 100 of which are listed on the stock exchange, and to test them according

to a transparency benchmark. The objective of this benchmark was to create insight into the degree

of responsibility with which Dutch companies are dealing with their sustainability policy.

Crown Van Gelder rose from place 22 in 2004 to 15 in 2005. A considerable improvement in the

score can be achieved through external verification of the results of the report. Due to the cost aspect,

Crown Van Gelder chooses not to take such an approach as of yet.

O B J E C T I V E S F O R 2 0 0 6

The company developed a mission policy in 2005 for the years 2006-2010. The details of this mission

can be found on the company's website and in Chapter 2. The objectives for 2006 have been

formulated on the basis of this strategic direction.

Conditions in Crown Van Gelder's traditional markets were weak early 2006, but there are signs of

recovery. However, the present overcapacity is putting pressure on selling prices and margins.

The production capacity increase towards 210,000 ton in 2006 will have a positive impact on 2006

profits but not sufficient to counterbalance the considerably higher energy prices. Pushing back

energy consumption is becoming a major target for the company. Crown Van Gelder will develop

and market new products in the field of industrial application and devote much attention in 2006 to

optimise the operational efficiency.

Detailed information on the specific targets can be found in Chapters 4, 5 and 6.

The means to achieve a profitable growth to a production volume of 230,000 ton in the coming

2006-2010 policy period will be studied in the coming two years. Profitable growth is the best basis

to assure the continuity and thereby the sustainable character of the company.

We hope that you will read this report with interest. If you have any comments or questions,

please contact us at [email protected].

Mees Hartvelt, CEO

P R O F I L E O F T H E C O M P A N Y


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2 . 1 C O M P A N Y P R O F I L E

The Velsen paper mill originates from 1896, when Pieter Smidt van Gelder established a newsprint

mill next to the newly completed North Sea Canal. In 1961, a new paper mill was constructed on the

Velsen site for the production of heavy duty paper for tabulating (computer)cards. The new plant,

which was built in cooperation with Crown Zellerbach Corporation of San Francisco (USA), became

Crown Van Gelder Papierfabrieken N.V. Following the dissolution of the parent company Van Gelder

Papier and the closure of the newsprint mill in 1981, this plant has operated as an independent

company, with a completely new product range compared to that in 1961. The plant is situated on

a 10 ha site which is leased from the Municipality of Velsen.

Woodfree paper is based on bleached pulp only and does not (usually) contain recycled fibre. The

company operates two paper machines, with a current maximum capacity of approximately 215,000

ton. For the description of the various steps of the paper making process we refer to the website.

K e y F i g u r e s

2005 2004 2003 2002 2001

Net turnover1 EUR million 142.2 139.3 139.6 150.6 152.5

Operating profit1 EUR million 11.1 12.1 11.4 14.1 12.3

Net profit1 EUR million 8.1 8.3 7.9 9.8 8.2

Sales volume ton 200,400 190,400 181,300 185,000 174,700

Production volume ton 197,000 184,000 188,300 184,000 179,500

Number of employees - 296 303 311 310 318

1 From 2004 onwards financial figures are based on IFRS.

The specialty products include base paper for self-adhesive materials, paper for digital colour printing,

base paper for direct thermal printing, board for tickets, paper suitable for optical character reading

(OCR), rotary offset paper and continuous stationery for laser and inkjet printers. The weights of

these paper products vary from 50 to 170 g/m2 and they are mainly distributed in Western Europe.

Crown Van Gelder has anchored quality, health, safety and environment in the organisation by

means of the QHSE management system. This system is certified in accordance with ISO 9001 (since

1993), ISO 14001 (since 1997) and OHSAS 18001 (since 2005). The QHSE management system is an

integral part of our operations that helps us achieve our objectives. Crown Van Gelder views the

Sustainability Report as a formal management review of the QHSE management system, since it

provides a complete overview of our results. Our external auditor BVQI endorses this point of view.

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Miklas Dronkers Mees Hartvelt Henk van der Zwaag Trudie Swart Arthur Snel

Operations CEO Finance HRM Sales

The Management Board and Management Team

2 . 2 M I S S I O N S T A T E M E N T

• Crown Van Gelder wishes to be known in the market as a reliable supplier of quality products in

the segment of woodfree uncoated and single-coated paper;

• Crown Van Gelder aims to provide value to customers and shareholders;

• Crown Van Gelder strives to be an attractive company to its employees.

The following principles will be taken into account:

• continuity of the paper mill in Velsen;

• continuous improvement in quality and efficiency;

• good governance for all stakeholders within the framework of prevailing law and covenants;

• attractive working conditions;

• sustainable operations.

S t r a t e g y

Crown Van Gelder intends to continue to strengthen its position as an independent, internationally

active, listed company, unless the continuity of the company is better served by entering into a

strategic alliance within the paper industry.

The complex and competitive markets and new technological developments require the company

to adopt a customer-oriented, flexible and efficient approach. The company intends to distinguish

itself in its markets by supplying products with high added value for both customers and itself.

In 2005 Crown Van Gelder drew up a policy plan for the 2006-2010 period, which can be found on

the company's website (Mission 2010). This policy plan consists of 10 strategic objectives and covers

the main targets of the company to create higher returns for our customers, shareholders and

employees in order to secure the continuity of the company.

Crown Van Gelder intends to develop new products with a higher added value in the segment of

industrial applications, increase total production capacity to 230,000 ton and increase the pay-out

ratio to a level of 50-60% of the net result, avoiding major dividend fluctuations.




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ManagementBoard

Secretariat

Human Resource& Development Finance

Purchasing &Materials Supply

Finance & Control

LogisticsOperations

Production Engineering &MaintenanceTechnology

Management Team

Sales

InformationTechnology

O r g a n i s a t i o n C h a r t

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2 . 3 P O L I C Y S T A T E M E N T O N S U S T A I N A B L E D E V E L O P M E N T

E n v i r o n m e n t a l

Crown Van Gelder takes into account the impact on the environment in all its activities and assesses

whether these hinder sustainable development (Brundtland definition). We continuously strive to

reduce and prevent adverse impact on the environment. Our primary objectives are to meet all

applicable legislation and other requirements agreed under the covenants made by the Royal

Netherlands' Paper and Board Association (VNP) and the government. Crown Van Gelder endorses

the policy direction of the Confederation of European Paper Industries (CEPI) towards the usage of

legally logged wood for the production of bleached pulp.

E c o n o m i c

Crown Van Gelder strives to provide a good long-term return to shareholders and holders of depository

receipts of share by a sustainable dividend payment, averaged over the economic cycle in the paper

industry. To ensure long-term profitability, annual capital expenditures will be scheduled to roughly

equal the total level of annual depreciation. On an ongoing basis the company will evaluate if

additional investments are necessary to stay competitive or to exploit opportunities in the market.

Crown Van Gelder recognises that the company's success depends on the continuing satisfaction

and loyalty of its customers and is committed to work in close cooperation to develop and supply

high-quality products and services. Crown Van Gelder aims to be a reliable partner observing all

principles of fair trade and fair competition.

S o c i a l

The Crown Van Gelder policy is to deploy, train and retrain employees and encourage their personal

growth in such a way that they make a solid contribution to achieving the company's strategic targets.

The company does so by offering favourable, competitive employment terms and safe working

conditions. Employees should be offered challenges that enable them to grow as individuals and to

create for them new opportunities. Crown Van Gelder subscribes the fundamental rights laid down

by the International Labour Organization. We are aware that much of the company's success depends

on the dedication and commitment of all our employees. We therefore wish to communicate openly

with all of them.

2 . 4 C O R P O R A T E G O V E R N A N C E A N D R I S K M A N A G E M E N T

The company's policy is to publish all relevant corporate information as quickly and completely as

possible on the website. This applies to all the financial and legal information that must be published

by virtue of legal requirements or imposed by Euronext Amsterdam. In addition, the company

endeavours to publish all basic documentation and current corporate information on the website

on a continuous basis.

A concise description of the existing governance structure of Crown Van Gelder N.V. is given in the

Corporate Governance section of the website and the 2005 Annual Report. The Articles of Association,

Regulations, Trust Conditions, et cetera, are available at the company's offices or can be downloaded

from the website.


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The website also includes full details of the Code of Conduct and the whistleblower rules.

The Code of Conduct offers management, staff and other corporate officers at Crown Van Gelder

a set of guidelines for carrying out their work. Crown Van Gelder expects all employees to be

aware of this Code and to comply with all of its provisions.

The risk management and control system of Crown Van Gelder has been tailored to the type and

size of the organisation. The respective elements of the company's risk management and control

system are in line with those of the COSO framework (Committee of Sponsoring Organizations of

the Treadway Commission).

As far as financial reporting risks are concerned, management declares that the risk management

and control system provides reasonable assurance that the financial reporting does not contain any

material inaccuracies and that the risk management and control system worked properly in 2005.

We refer to the 2005 Annual Report for the description of strategic, operational and compliance

risks. Risks and opportunities for a sustainable operation refer mainly to current overcapacity, and

consequently to the fierce price competition, combined with a strong increase in energy costs.

Crown Van Gelder has a solid financial position and strives to add value for its stakeholders by

expanding its range of industrial specialties.


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R E P O R T S C O P E A N DK E Y P E R F O R M A N C E I N D I C A T O R S

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3 . 1 R E P O R T S C O P E A N D P R I N C I P L E S

This is Crown Van Gelder's third Sustainability Report, providing an overview of its relevant

environmental, economic and social aspects. This report is meant to inform and to stimulate

discussions with our stakeholders and other interested parties.

Crown Van Gelder is a single location company and has a 82% controlling interest in the company

Inkoopcombinatie De Eendragt B.V., located in Zaandam. This company is responsible for the

purchase of bleached pulp and fillers as raw materials. Only the performance of Crown Van Gelder

is covered in this report.

To the best of our knowledge the GRI G2 guidelines have been applied. A cross reference table

can be found in Chapter 7. This table shows that Crown Van Gelder is in this stage not yet in full

compliance with GRI G2 guidelines. This report has not been verified by an independent auditor,

because of the costs involved. This may be reconsidered in the future in case verification should

be required by third parties.

This report refers to our website far more than earlier Sustainability Reports which is done to

improve the readability of the report and because the website provides more complete and up

to date information about certain aspects, for example company policy, permits, emissions,

including definitions and measuring methods.

The Sustainability Report is available in English both in printed form and on the website.

A brief summary is available in Dutch. Additional information on the reports can be obtained

at Crown Van Gelder, Miklas Dronkers, Chief Operating Officer, at [email protected].

3 . 2 K E Y P E R F O R M A N C E I N D I C A T O R S A N D T A R G E T S

Crown Van Gelder has defined ten key performance indicators as a way of explaining to its

stakeholders the standards that the company wishes to uphold, and has set corresponding targets.

We have specifically chosen these indicators since they are an extension of the company's strategic

objectives and they reflect the major areas of performance that are relevant to the majority of

our stakeholders and for which we take responsibility. We consider our stakeholder groups to

be our customers, shareholders and other investors, employees and local community,

government and NGOs.

In 2005, after a careful study of market development and trends, Crown Van Gelder defined a

thorough long-term strategy, called 'Mission 2010'. Based on this strategy the key performance

indicators have been examined and updated or changed.

The key performance indicators have been clustered according to three areas in which our

organisation has an impact: the environment (planet), economics (profit) and society (people).

The table below gives the definition, target and 2005 performance of each indicator. Chapters 4, 5

and 6 describe, analyse and offer action schemes for the environmental, economic and social

performance of Crown Van Gelder. The key performance indicators are the central elements of

these chapters and are explained in greater detail.


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K e y p e r f o r m a n c e i n d i c a t o r s a n d t a r g e t s

ENVIRONMENTAL INDICATORS DEFINIT ION TARGET RESULT REFERENCEIN 2005

1. Sourcing of certified bleached Sourcing of bleached pulp with >50% in 2010 15% Section 4.3.2pulp as raw material chain of custody certificates

2. Energy efficiency index Energy consumption for the <80 in 2010 83.3 Section 4.3.3production of 1 ton of paper as index (1998 = 100)

ECONOMIC INDICATORS

3. Customer satisfaction level Assessment given by the >7 out of 10 7.8 Section 5.1customers every 2 years

4. Development of industrial Percentage of industrial 50% in 2010 44% Section 5.1specialty grades specialties of sales volume

per year

5. Production volume Total saleable paper per year 230,000 ton 197,000 ton Section 5.2in 2010

6. Return on capital employed Operating profit as percentage 11% as an 9.1% Section 5.4(ROCE) of capital employed average over

the paper industry cycle

7. Dividend pay-out ratio Dividend in cash as a percentage 50-60% 54% Section 5.4of net profit

SOCIAL INDICATORS

8. Level of employee satisfaction The Dutch Employee Satisfaction Match the index - Section 6.1Index, see of thewww.tevredenheidsindex.nl industry sector

9. Absence through illness Percentage of absence for all <4% in 2010 4.5% Section 6.2employees per year

10. Industrial accidents Number of accidents per As low as possible, 0 Section 6.21,000 employees per year but max. 10

3 . 3 S T A K E H O L D E R D I A L O G U E

Crown Van Gelder strives to promote the interests of four different groups of stakeholders and has

designed its policy to ensure that the interests of all four groups are consistently taken into account.

The groups of stakeholders are:

C u s t o m e r s

The key performance indicators that are important to our customers are the following:

customer satisfaction level, development of industrial specialty grades and sourcing of certified

bleached pulp as raw material.

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Crown Van Gelder aims at long-term customer relationships. Therefore, continuous dialogue with

our customers is a prerequisite, supported by bi-annual surveys. The most recent customer

satisfaction survey among a selected group of twenty strategically important customers, our Key

Accounts, was conducted during the last quarter of 2005. The general outcome and individual

results are shared with our customers and translated into clear actions for improvement in 2006.

For more details see Section 5.1.

The sourcing of bleached pulp from proven sustainably managed forests has been a key issue for

NGOs and a few of our customers for years. In 2005 one type of paper was put on the market that

is completely based on FSC-CoC bleached pulp.

S h a r e h o l d e r s a n d i n v e s t o r r e l a t i o n s

The following key performance indicators are important to these stakeholders: ROCE, dividend

pay-out ratio and development of industrial specialty grades.

Discussions are held several times a year with analysts, shareholders and other capital providers.

We keep all these parties informed of any developments through press releases and presentations

which are also available on our website.

The Sustainability Report is sent together with the Annual Report to our shareholders. A reply card

was enclosed for the first time with the 2004 Sustainability Report of which 28 cards were returned;

the response indicated a qualification of excellent to good and there were few suggestions for

improvement, aside from various requests for the report to be issued in Dutch. Crown Van Gelder

uses English as its official language, because this is a requirement of Euronext. To produce the

reports in two languages would require considerable effort and extra costs for our company.

A number of topics from our Sustainability Report are available in Dutch on our website.

E m p l o y e e s

The following key performance indicators are of direct importance to our employees: production

volume, level of employee satisfaction, absence through illness and industrial accidents.

Stakeholder dialogue takes place in the usual forms of consultation including work consultation.

The Management Board meets regularly with the Works Council (see Section 6.5), and the 2004

Sustainability Report was discussed in a meeting with the Works Council.

A summary of the Sustainability Report in Dutch was distributed to all employees as well as our

company information magazine, the Paper Clip, which is produced five times a year.

On the basis of results of the PAGO (Periodic Labour Health Check-up), held in 2004 among the

Technical Services employees, steps have been undertaken in cooperation with the Health and

Safety Service to improve the contact and communication in this department. The Works Council

was also closely involved in this process.

In 2006 the Dutch summary of the 2005 Sustainability Report will be brought out in newspaper form

to make it even more accessible. 'Mission 2010' will be discussed with our employees during a large

number of presentations in the departments.


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L o c a l c o m m u n i t y , g o v e r n m e n t a n d N G O s

The key performance indicators that are important to this group are certified bleached pulp, energy

efficiency and industrial accidents.

We maintain good contact with the local and provincial authorities (see Chapter 5), and,

where possible and relevant, with residents in the vicinity of the plant. Crown Van Gelder sponsors

several local initiatives. Crown Van Gelder distributed 3,000 copies of the summary of the 2005

Sustainability Report in Dutch to the residents of the houses surrounding the mill.

A few hundred copies of the 2005 Sustainability Report were also sent to other interested

organisations and individuals, with reply cards of which 9 cards were returned. The report was

judged to be good, open and honest. There was contact with various NGOs and consultancy

companies, including SiRi Company and the Transparency Benchmark research group, to improve

the quality of this report.

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COMBINED HEAT AND POWER PLANT

INPUT

EMISSIONS

OUTPUT

PRODUCTION PROCESS FROM PULP TO PAPER

WASTE WATER TREATMENT PLANT

Power to paper machines 137,828 MWhPower to public grid 73,446 MWhSteam to PMs (7 bar) max. 90 ton/h

Processed waste water 3.02 million m3

COD 283 tonTotal phosphorus 4.8 tonTotal nitrogen 17 tonSludge 3,120 ton

EMISSIONS INTO WATER

RAW MATERIALS

Bleached pulp 132,971 tonFiller 44,917 tonAdditives 11,168 tonDeliveries 7,776 trucksFresh water 3.56 million m3

RAW MATERIALS

POWER AND STEAM GENERATION

Natural gas 78.4 million m3

Power 6,739 MWh

EMISSIONS INTO AIR

LEGENDA

CO2 138,000 ton

CO 444 tonNO

X 187 ton

SO2 0 ton

CxH

y 119 ton

REUSED PROCESS WATER

USED WATER

Details, explanations and historic trends of the production, energy and emission data are found on our website / sustainability in table 1 to 7.


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E N V I R O N M E N T A L P E R F O R M A N C E

The production of paper generates economic activity, social benefits (for employees and consumers)

and also affects the environment. The industrial nature of this activity means that the environmental

impact is significant.

4 . 1 P R O D U C T I O N P R O C E S S F R O M P U L P T O P A P E R

The core business of Crown Van Gelder is the production of high-quality paper. A schematic

overview can be found on our website. Basically, paper production can be distinguished in three

main sections, each with its own environmental impact.

In the stock preparation all raw materials and additives are received, stored and prepared for use

on the paper machines. This involves the use of raw materials, additives and water and emissions

due to transport, spills and rejects. Paper is formed, dried and treated on the paper machine.

Water and energy are the main inputs, and waste water, waste products and heat the main emissions.

In paper conversion and transport the main inputs are packaging materials and energy, the main

output is our product paper on reels, and emissions are packaging waste and fuel combustion

emissions from transport.

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Wastepaper and board 743 tonSteel and non-ferrous 583 tonOther 138 ton

WASTE PRODUCTS

E n v i r o n m e n t a l A s p e c t s o f o u r P a p e r a n d E n e r g y P r o d u c t i o n i n 2 0 0 5

Paper on reels 197,000 tonShipments 12.279 trucks

PAPER SPECIALTIES

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The total energy consumption within the mill is generated by our own combined heat and power

plant. The main inputs are natural gas and water, the main products are steam and electricity and

the main emissions combustion gases (CO2 and NOx).

Some of the environmental impacts may not be that obvious, hence a short explanation:

• Nitrogen oxides (NOx) emissions in the air contribute to what is known as 'acid rain'. High levels

can cause damage to trees, soil and water quality. Limiting these emissions enables natural

processes to neutralise the effects before they cause any harm.

• Chemical Oxygen Demand (COD) is a general term for decomposable organic components in

waste water. Nitrogen and phosphorus are nutrients for micro-organisms in surface water.

High amounts of these nutrients will provoke strong growth of micro-organisms, depletion

of oxygen in the water and ultimately cause fish to die.

• Waste deposits largely consist of sludge from the waste water treatment plant and steel wire from

the pulp bales. Both materials are recycled.

Based on the above and on other various environmental aspects that relate to input, the production

process and output, Crown Van Gelder has implemented specific policies aimed at reducing the

possible impact on the environment (see Section 4.2). Compliance with these policies is monitored

through internal and external audits. We continuously update our action plans to fulfil our policies

and to act on changes in legislation. The relevant legislative changes, the achievements of 2005 and

the actions for 2006 are explained in Section 4.3.

Crown Van Gelder selected two environmental key indicators of global significance: the use of certified

bleached pulp as our raw material (Section 4.3.2) and our energy efficiency index (Section 4.3.3).

Crown Van Gelder has several permits that cover the different environmental aspects (see table 9 of

the production, emissions and other data on the website for details). Section 4.4 lists the deviations

from and incidents related to the permits, as well as any environmental complaints received.

4 . 2 P O L I C Y I N R E L A T I O N T O T H E E N V I R O N M E N T A L A S P E C T S

Crown Van Gelder's policy is aimed at supporting sustainable development and at controlling the

direct and indirect environmental aspects. The environmental aspects have been categorised under

input, the three production processes on site (paper production, energy production and waste

water treatment) and output. Our policies for managing upstream and downstream impacts,

including product stewardship, can be found in the categories under input and output.


21


INPUT ENVIRONMENTAL ASPECT POLICY

Bleached pulp Raw material selection To use a raw material for paper that is renewable, recyclable and non-toxic

Sustainable forestry To buy bleached pulp originating from sustainably managed forests (see Section 4.3.2)

Emissions during production and To buy from ISO 14001/EMAS certified suppliersbleaching of pulp To buy only (elemental) chlorine-free bleached pulp

Filler (CaCO3) Emissions during mining of material To buy from ISO 14001/EMAS certified suppliers

Additives Emissions during production of additives To buy from ISO 14001/EMAS certified suppliers

Emissions of additives to surface water To select readily degradable or harmless additives that do not inhibit respiration in the waste water treatment plant and surface waterNot to use EU black-listed additives

Natural gas Use of fossil fuel To use natural gas as the cleanest source of fossil fuel

Clarified surface Fresh water sourcing Not to use ground water(Rhine) water

Fresh water consumption To minimise the consumption per ton of paper

Cooling water from Emissions from used cooling water To keep heat content of returned cooling waterthe North Sea Canal below agreed levels

To add only the minimum required amount of active chlorine to cooling water

Mill supplier Activities of suppliers To check suppliers against ISO 14001 requirements(including contractor) To allow only suppliers who observeselection Crown Van Gelder health & safety rules

PROCESS ENVIRONMENTAL ASPECT POLICY

Paper production Energy consumption To maximise efficiency of energy use in processes

Water consumption To minimise fresh water input and maximise recycling of process water in the paper mill's water systems before processing in the waste water treatment plant

Soil contamination To resolve past contamination incidents responsiblyTo eliminate risks of new contamination incidents

Energy production Emissions of CO2, waste heat in combustion To utilise maximum energy potential by gas and cooling water cogeneration in own power plant (yield is up to

83%), in combination with the supply of excess electricity to the public electricity grid (about 35%of total electricity generated)

Emissions of NOx To limit the NOx emission of our power plant below permitted levels using dry low NOx

technology

22


PROCESS ENVIRONMENTAL ASPECT POLICY

Waste water treatment Waste water discharge to surface water To achieve a better physico-chemical and biological waste water purification performance than required in the permitTo safeguard surface water by using a buffer tank in case of emergencies

Odour emissions To use a neutral papermaking process to eliminate emission of sulphurous compounds and limit odour hindrance

Production of sludge To reutilise sludge with the best available techniques (no landfill)

OUTPUT ENVIRONMENTAL ASPECT POLICY

Product safety Potential toxicity of product composition To inform customers of limitations in product use and to test and certify products in specific cases

Safety of roll handling To safely wrap and transport products

Product development Product recyclability Not to use additives that limit recyclingand design of the product as secondary fibre material

Investments Investments may enhance or endanger the To authorise investments only if a checklist hassustainable development approach been completed on the effects on working

conditions, safety, environment, energy use and company economics

Packaging Packaging waste To promote and invest in raw material supply in bulk and returnable packaging, eliminating packaging waste

Transportation of Fossil fuel consumption, noise To combine several smaller deliveries in singleproducts products transports

4 . 3 E N V I R O N M E N T A L A C T I O N P L A N

The EU Integrated Pollution Prevention and Control (IPPC) directive of 1996 is forcing changes on

national environmental legislation. In practice this means immediate implementation of stricter

environmental measures in new installations. Existing plants and installations must fulfil the

requirements by the end of 2007. It is obvious that stricter limits for emission levels to water and air

require significant investments in existing installations, as well as in new or upgraded installations.

End of pipe solutions need to be cleaner, such as pollutants in waste water. Most of the effort,

however, goes into smarter and more efficient operation of the production process and consequently

a more efficient use of energy, raw materials and water. Crown Van Gelder has invested heavily in

installations, automation and training to improve its environmental and economical performance.

This is reflected in the fact that already most of the requirements connected to IPPC are met.

Details are found on the website in table 7 of the production, emissions and other data. A few

highlights in 2005 and focus points for 2006 will be mentioned here.


23


The major investment in the power plant in December 2005, with a new dry low NOx gas turbine in

place, has resulted in the reduction of NOx emissions by half compared to the old installation.

This state of the art technology enables Crown Van Gelder to perform better than the most stringent

emission levels.

The total flow of treated waste water (effluent) has decreased considerably since November 2005,

with approximately 1500 m3 per day, by reusing super filtered process water on PM 1. This will result

in an effluent discharge within the IPPC requirements.

The level of biodegradable organic matter and the level of phosphorus are still above IPPC requirements.

In 2006 tests will be done to conserve more of the biodegradable matter in our process (prevention).

The use of phosphor-containing nutrient in the biological waste water treatment will be carefully

minimised, within limits that do not disturb the effectiveness of the treatment.

4 . 3 . 1 A C T I O N S C H E M E

A substantial list of measures has been completed in recent years. Information on these points is

available in our previous Environmental and Sustainability Reports on our website. The measures

taken in 2005 and the programme for 2006 are shown in the following table.

ENVIRONMENTAL ASPECT MEASURE PROGRESS IN 2005 PROGRAMME FOR 2006

I n p u t

Sustainable forestry Implementing a Chain Applied for and awarded To promote CoC certified(see Section 4.3.2) of Custody for bleached FSC and PEFC CoC products and substantially

pulp sourcing certificates increase the sourcing of CoC certified pulp

Transport movements Reducing transport Pilot tests for bleached pulp To initiate regular deliveriesmovements of raw delivery by ship to quay by ship to quaymaterial through Velsen near mill

P r o c e s s

Energy consumption Investment Further reduction of steam To optimise the drying curves(see Section 4.3.3) Multi-Year Plan II consumption on PM 2 on PM 1

(2003-2005) by 10% on PM 2

New covers in press section To implement results ofof PM 1, increasing dry refiner optimisation project,content by 1 to 1.5% after in cooperation with thepress section University of Wageningen

Water consumption Reducing fresh water New stock and water To investigate possibilities to consumption by further recovery system PM 1 reduce fresh water consumptionclosing of water system installed and further of sealing water of the vacuum

process water reuse pumps PM 2installed, decreasing fresh water use on PM 1 by To investigate ways to reduce1500 m3/day. fresh water use during

machine stops

Soil contamination Pollution risk assessment To perform a new risk assessment study

24


ENVIRONMENTAL ASPECT MEASURE PROGRESS IN 2005 PROGRAMME FOR 2006

P r o c e s s

CO2 emissions Future configuration of New gas turbine installed,power plant eliminating need for steam

injection; less fuel needed

CO2 trade CO2 trade and monitoring To discuss emission allowancesprotocol started for Kyoto period 2008-2012

NOx emissions Reducing NOx emissions New gas turbine installed To install a low NOx

through technical measures with dry low NOx burner in an oiltechnology, reducing heater installationemissions by 50%

NOx trade NOx monitoring To await allocation ofprotocol approved NOx allowances

Waste water discharge to Eliminating use of organic To await final approval ofsurface water biocides for slime reduction investigated system by the

in process Commissie Toelating Bestrijdingsmiddelen

Reducing phosphate To investigate impact of reducedemissions phosphate addition on

performance biologicalwaste water treatment

Reducing BOD emissions See next aspect

Raw material and additive Reducing starch losses To test the use of other starchlosses for paper surface treatment

Reducing fibre and filler To implement early warning losses systems in waste water system

Odour emissions Reducing odour impact to Odour impact reduced To investigate reduction ofpersonnel and local by using covered sulphur sources in our community during sludge transport containers waste water treatmentremoval on our premises

Production of sludge Searching for alternative Sludge supplied to the To supply sludge in mixedoutlet for water treatment CDEM installation in or separated form forsludge (instead of landfill) Duiven (for production agricultural use or supply

of mineral binder and green partly to CDEM,electricity), but temporarily partly for agricultural uses stopped due to difficulties at this installation

O u t p u t

Packaging waste Participating in national Packaging waste reduction To investigate possibilitiessurveys according to programme halted, only together with suppliers ofPackaging Covenant III preliminary work done materials and wrapping papers


25


4 . 3 . 2 S U S T A I N A B L Y M A N A G E D F O R E S T S

Deforestation and loss of biodiversity are high on the agenda for NGOs and the pulp and paper

industry alike. Illegally logged wood is one of the focus points in this area. These issues are

addressed by our sector, because sustainable use of forests is vital to our industry and to the

community at large. Crown Van Gelder endorses the CEPI declaration in opposing illegal logging

(www.cepi.org). The definition of what sustainably managed forestry really is still raises controversy

and debate. The definition of terms that are used vary according to the context, and what might be

true with respect to tropical forests is not necessarily so for non-tropical forests.

There are two major international certification schemes, FSC (Forest Stewardship Council) and PEFC

(Programme for the Endorsement of Forest Certification schemes), as well as several smaller ones.

CEPI has shown that the differences between the schemes are far less than some want us to believe

(www.forestrycertification.info). Crown Van Gelder believes it is far better to actively support the

different schemes than to qualify between them, as this will be more beneficial to sustainable

forestry. The only qualification that does make a significant difference is the incorporation of a chain

of custody (track and trace) system.

Crown Van Gelder aims to use only bleached pulp from proven sustainably managed forests.

We undertake four steps:

• obtaining confirmation from bleached pulp suppliers that they source their wood legally;

• sourcing from ISO 14001 or EMAS certified suppliers;

• increasing the use of bleached pulp associated with a forest certification scheme;

• increasing the use of bleached pulp with a chain of custody certificate to 50% in 2010.

As part of this long-term view we have successfully applied for FSC (August 2005) and PEFC

(December 2005) chain of custody certification. This enables us to give accountable figures of our

sustainable sourcing and when needed, to supply certified products to the market.

The percentage of purchased bleached pulp in 2005, originating from forests that are fully certified

according to a forest certification scheme, increased from 48% in 2004 to 70% in 2005. Chain of

Custody pulp amounted to 15% of our total procurement. This percentage will rise, especially now

PEFC-CoC pulp can be included. The following table shows the countries of origin of the bleached

pulp processed by Crown Van Gelder in 2005.

COUNTRY OF ORIGIN GRADE OF BLEACHED PULP TON 1 FORESTRY CERTIF ICATION SCHEMES

United States and Canada softwood, mixed hardwood 54,150 SFI2

Sweden, Brazil, Spain and softwood, eucalyptus 22,200 FSC-CoCSouth AfricaSweden and Finland softwood, birch 26,800 PEFCBrazil and Chile radiata, eucalyptus 20,950 PEFC, Cerflor (B)Portugal and Spain eucalyptus 23,200 PEFC

1 70% is fully certified, including FSC-CoC; the other sources are partly certified. 2 Sustainable Forestry Initiative.

26


4 . 3 . 3 E N E R G Y E F F I C I E N C Y I N D E X

As part of the Kyoto protocol, the Netherlands are committed to reducing CO2 emissions (further

explanation in the 2004 Sustainability Report, Section 7.3.3). In the Energy Efficiency Benchmark

Covenant the Dutch industry has agreed to match energy efficiency levels of a peer group of top

ranking companies worldwide and the Energy Efficiency Index (EEI) was introduced as an indicator.

In the Dutch paper and board industry the EEI indicates the total energy consumption per ton of

saleable paper produced; the reference year (1998) was set at 100. The report of the covenant

results over the year 2003 shows that Crown Van Gelder achieved an energy use in that year that is

2.3% lower than the top-ten best performing companies in the fine paper sector.

In 2005, the Energy Efficiency Index of Crown Van Gelder's paper production strongly improved to

83.3, from 92.1 in 2004. We succeeded in further utilising the energy savings potential of the 2004

rebuilding of the dryer section of PM 2. Highlights of this rebuild were the total renewal of the dryer

hood and ventilation system with a triple heat recovery system.

Because of this considerable improvement Crown Van Gelder changed its target to an EEI of 80 in

2010 (former target: EEI of 92 in 2012).

In 2004, the Royal Netherlands' Paper and Board Association started the project Energy Transition,

which sets the target of achieving a 50% energy savings for the paper production chain by 2020.

This challenging transition objective includes not only the application of best practices but also

innovation projects sponsored by the Dutch Government.

4 . 4 N O N - C O M P L I A N C E

4 . 4 . 1 N O T I F I C A T I O N O F E N V I R O N M E N T A L I N C I D E N T S

Crown Van Gelder is obliged to report to the authorities any deviations from normal operations,

as well as the environmental impact and the measures taken to prevent recurrence. The number

of reports filed is as follows.

110

105

100

95

90

85

80

75

2000 2001 2002 2003 2004 2005

E n e r g y E f f i c i e n c y I n d e x ( 1 9 9 8 = 1 0 0 )

t a r g e t 8 0 i n 2 0 1 0

99.6 101.0

95.693.2 92.1

83.3


27



DEVIATION UNIT 2005 2004 2003 2002 2001

Waste water discharge level number 3 2 6 5 3Steam injection failures (NOx control) number 1 6 1 0 1Odour (from waste water plant) number 0 1 0 0 0Other reports number 1 0 3 0 1

We had two instances of mechanical failure of the water treatment separator due to sudden and

high losses of fibre material. This was just before the rebuild in November 2005 and during start-up

of one paper machine after the rebuild. Repair took a few days in both cases, resulting in emissions

of impurified waste water. In 2006 we will investigate possibilities to detect fibre losses faster and to

make the separator less vulnerable.

A connection of the storage tank for hydrochloric acid (used for regeneration of the demineralised

water installation of the power plant) was apparently damaged during removal of scaffolding.

All spills were captured in the safety reservoir of this tank and in co-operation with the fire brigade

of Velsen the spills were removed in a controlled way. The tank and supports were repaired and

renewed.

Some starch powder was spilled during filling because of a poor seal in the connection of the filling

tube. Most of the starch was cleaned up. The remainder had to be flushed to the waste water

treatment, resulting in some emission to the North Sea Canal. The incident was discussed with

the supplier with the aim of avoiding a recurrence of this incident.

Crown Van Gelder had one planned stoppage of the steam injection last year. This was necessary

to do maintenance work on the power transformer for the public grid. During the eight hours

maintenance the power plant only supplied electricity to the mill and the gas turbine throttled

back to lower power generation than steam injection permits. Steam injection is no longer used

in the rebuilt power plant.

4 . 4 . 2 E N V I R O N M E N T A L C O M P L A I N T S

Inspectors from the Directorate-General for Public Works and Water Management visited

Crown Van Gelder on twelve occasions in 2005 to take samples of the effluent and cooling water.

No deviations were reported.

The following complaints were received by Crown Van Gelder from external parties:

HINDRANCE UNIT 2005 2004 2003 2002 2001

Odour number 1 5 2 1 2Noise number 0 0 0 0 0Other number 0 0 1 0 0

The odour complaints were successfully minimised by using covered containers for the removal of

sludge from our premises.

28

The wide range of consumer products made of Crown Van Gelder's base papers.

E C O N O M I C P E R F O R M A N C E


29

This chapter describes the economic performance of Crown Van Gelder in relation to its stakeholders,

such as customers, employees, suppliers, capital providers and the community.

5 . 1 C U S T O M E R S A N D P R O D U C T S

N e t T u r n o v e r

The year 2005 was still dominated by overcapacity in the European paper industry. Vehement attempts

to raise selling prices met with fierce resistance and price erosion continued, though at a lower pace

than in previous years.

The traditional slack during the summer period was counterbalanced by a strike of more than six

weeks of the Finnish paper industry lasting from May 18th to July 1st. After the end of the labour

dispute, Finnish paper producers re-entered the market in July. After filling the order pipeline and

stock build-up to normal levels, Finnish paper producers tried to regain their market share. This was

again accompanied by strong price competition. Crown Van Gelder's selling prices fell by an average

of 2.4% in 2005 compared to 2004.

The order volume of the European woodfree uncoated paper market was up 1% over 2004 and

woodfree uncoated paper sales by European producers in 2005 to European customers were up 2%

over 2004. Crown Van Gelder has been able to outperform the market, with a year-on-year sales

increase of 10,000 ton or 5.2%. On balance net turnover increased from EUR 139 million in 2004 to

EUR 142 million in 2005.

The upgrade of both paper machines in November 2005 were very successful and will further

increase Crown Van Gelder's product quality and competitive position.

P r o d u c t s D i s t r i b u t i o n

The company continues to focus on extending its range of specialty products. In 2005 the share of

turnover derived from industrial specialty products was stable on 44% in volume. The sales volume

of technical specialty products grew by 4% due to a stronger position in the self-adhesive label

market and an increase of market share in the OCR market. The rebuild of our paper machines

influenced the sales of industrial specialties to a lesser degree than the sales of the graphical products.

The New Business Development (NBD) process was redefined and implemented at Crown Van Gelder

in 2005. NBD is used as the guideline for targeted and profit-supporting product and business

development and is based upon a stage gate process in which opportunities are recognised and

developed in a swift and structural way. In NBD, dialogue and co-operation with our customers

and suppliers are crucial for successful market introductions in 2006 and the realisation of our

ambitious target of 50% industrial specialties on a volume of 230,000 ton products sold in 2010.

5

G e o g r a p h i c D i s t r i b u t i o n

Constraints related to transport costs mean that Crown Van Gelder's main market area is Western

Europe. Cost-effective transportation by container per rail makes it possible for Crown Van Gelder

to compete profitably on the Italian market. The geographic distribution of paper sales is as follows

(in percentages of the total).

C u s t o m e r S a t i s f a c t i o n S u r v e y

Crown Van Gelder has carried out a customer satisfaction survey during the latter part of 2005.

Unlike the approach of our earlier customer satisfaction surveys in 2001 and 2003, it was decided to

focus the survey on our strategically most important customers, the so-called Key Accounts.

Instead of sending out questionnaires, the Key Accounts have now been personally visited for a

face-to-face interview.


30

30%

20%

10%

0%

12%

23%

17%15% 15%

4%

14%

P a p e r S a l e s b y G e o g r a p h i c A r e a

Netherlands Belgium/ Germany United Kingdom France Other OtherLuxembourg European Countries

countries

52%

50%

48%

46%

44%

42%

52%

50%

48%

46%

44%

42%

130,000

115,000

100,000

85,000

70,000

55,000

2003 2004 2005

44.4%

80,50044.6% 44.2%

88,50085,000

I n d u s t r i a l S p e c i a l t y G r a d e s

t a r g e t 5 0 % i n 2 0 1 0

ton



31

The objectives for this survey were threefold. The first goal was to measure the quality of our

products and services as perceived by our customers during the last two years. Secondly,

we focused on areas of improvement. From the survey results, action points were distilled for

performance improvement both on corporate and customer level. Finally, Crown Van Gelder valued

the continuous improvement of long-term strategic business relations with its Key Accounts.

Continuous improvement on all levels of management pays off in terms of sustained advantage

over the competition.

The overall average satisfaction level as expressed by our Key Accounts was valued at 7.8 out of 10,

which is a slight improvement compared to 2003 (7.7).

Based on these interviews and the evaluation of customers, Crown Van Gelder has set clear

objectives in the area of complaint management, for example speed in handling complaints,

prevention of complaints (first-time-right principle), and production employees have visited

customers to examine the effects of quality deviations first hand.

All areas of improvement and action points to increase customer satisfaction will be discussed

with the Key Accounts in question in the first half of 2006.

C u s t o m e r C o m p l a i n t I n d e x

Crown Van Gelder attaches great importance to producing and supplying paper with a high and

constant quality and to rendering services at the same high level. The customer complaint index

compares the number of complaints per ton to those received in the reference year 1999 and the

target is to halve this by 2010.

In 2005, the customer complaint index again decreased to 63. The focus on solving complaints

faster in combination with the increased technological support are highly regarded by our

customers. The Kepner-Tregoe approach to analyse and resolve complaints in a more structured

way is fully implemented at Crown Van Gelder. Also our customers have started to work according

to the same successful approach.

10

8

6

4

2

0

2001 2002 2003 2004 2005

8.07.7 7.8

C u s t o m e r S a t i s f a c t i o n

t a r g e t > 7


32

5 . 2 E M P L O Y E E S

Salaries, wages and wage-related costs dropped by EUR 1.5 million in 2005 to EUR 16.5 million,

mainly due to a non-recurring pre-tax gain of EUR 2.2 million from changes in Crown Van Gelder's

pension scheme. Other staff costs rose by EUR 0.7 million mainly as a result of salary increases and

collective labour arrangements. Labour costs are around 13% of the total costs incurred.

The execution of the Investment Multi-Year Plan II (IMP II), which started spring 2004, has now been

finalised. IMP II aims at further improving product quality, operational efficiency as well as a further

increase in production capacity.

In 2005 production rose by 7% to 197,000 ton and further increases are anticipated to a level of

215,000 ton in 2007 and 230,000 ton in 2010, in accordance with 'Mission 2010' targets. Target in

2006 is a production volume between 207,000 and 210,000 ton.

In 2005 productivity increased strongly to 679 ton/FTE, supported by PM 2's rebuild in 2004 and

despite capacity loss during the PM 1 upgrade in 2005.

Further improvements in operational efficiency will increase productivity to a level of 750 ton/FTE in

2007, in line with the target formulated in previous reports.

5 . 3 S U P P L I E R S

The total raw materials and energy costs in 2005 were EUR 84.1 million, nearly 8% higher than in

2004. These costs amount to around 68% of the total costs incurred.

A large part of the increase in input costs is related to the rise in production volume. The average

bleached pulp price (in EUR) for Crown Van Gelder rose by 2% in 2005. Although oil and gas prices

increased substantially in 2005, energy prices for Crown Van Gelder remained relatively stable due

to fixed price contracts for natural gas running from 2004 till the end of 2005.

2001 2002 2003 2004 2005

179,500 184,000 184,000188,300197,000

ton P r o d u c t i o n V o l u m e

t a r g e t 2 3 0 , 0 0 0 t o n i n 2 0 1 0

250,000

230,000

210,000

190,000

170,000

150,000



33

5 . 4 C A P I T A L P R O V I D E R S

Crown Van Gelder used a part of its credit lines to finance the IMP II programme. Despite major

capital expenditure in 2004 and 2005 (totalling around EUR 45 million) and EUR 13.5 million owed

to financial institutions at year-end 2005, the company retains a strong equity ratio with 77.6% of

the balance sheet total.

The company made a net profit of EUR 8.1 million in 2005, down 3% compared to 2004, which

closed with a profit of EUR 8.3 million. The operating profit dropped from EUR 12.1 million in 2004 to

EUR 11.1 million. Lower selling prices and higher input costs, especially of raw materials and energy

related costs, resulted in further pressure on selling margins. A non-recurring gain from changes in

Crown Van Gelder's pension scheme had a strong positive impact of EUR 1.5 million on net profit.

In 'Mission 2010' Crown Van Gelder has reconfirmed its ROCE (return on capital employed) target of

11% as an average for the entire business cycle. In 2005, the ROCE was 9.1% (2004: 10.4%).

20%

15%

10%

5%

0%

2001 2002 2003 2004 2005

11.5% 12.8%10.2% 10.4% 9.1%

R e t u r n o n C a p i t a l E m p l o y e d

t a r g e t 1 1 %

80%

60%

40%

20%

0%2001 2002 2003 2004 2005

D i v i d e n d P a y - O u t R a t i o

t a r g e t r a n g e 5 0 - 6 0 %

54% 56% 56% 52% 54%


34

Crown Van Gelder has consistently been able to generate a substantial operating cash flow. A high

operating cash flow is imperative for funding profitable investments and for meeting Crown Van

Gelder's high dividend target. In 2005, cash flow from operating activities was EUR 20.8 million

(2004: EUR 15.2 million).

Net profit for 2005 was EUR 1.86 per depository receipt of share (2004: EUR 1.91). A dividend of EUR

1.00 per depository receipt of share is proposed for 2005 (2004: EUR 1.00), equating to a pay-out

ratio of 54% (2004: 52%).

Based on the company's financial position, Crown Van Gelder has reconsidered its dividend policy.

The dividend pay-out will be increased from 40-50% to 50-60% of net profit from 2006 onwards.

5 . 5 I N V E S T M E N T S

Capital expenditure amounted to EUR 21.7 million (2004: EUR 23.1 million). A significant part of

expenditure (EUR 16.8 million) was related to IMP II and the power plant rebuild. More details can be

found in the 2005 Annual Report.

Investments are authorised only after they have been assessed for possible negative effects on

working conditions, safety and health, the environment, energy use and the local community.

Whenever possible, investments are used to simultaneously improve profitability, working conditions,

efficiency, energy use and environmental impact.

5 . 6 T A X E S

In 2005, Crown Van Gelder charged a total of EUR 3.1 million corporate income taxes to profit.

A substantial amount of taxation flows to the public sector through personal income taxes,

which are estimated to represent around one-third of the total wage bill.

A substantial part of the expenditure within the framework of IMP II and the power plant is eligible

for the energy-saving investment allowance (EIA). In 2005, the company was again granted a tax

allowance of EUR 1.0 million and this amount is deductible from the 2005 corporate income tax.


35

5 . 7 A C T I O N S C H E M E

OBJECTIVE MEASURE PROGRESS IN 2005 PROGRAMME FOR 2006

Sustainability Report Reporting on people, Feedback received via To study onaccording to requirements planet and profit reply cards implementation ofof stakeholders issues based on new GRI G3 guidelines

GRI guidelines

IFRS implementation to Adaptation of 2005 financial To continue attentionmeet EU listing financial reporting statements based to further developmentsrequirements systems on IFRS in IFRS interpretations

Corporate Governance Code Study and decide Discussion on To continue attention toto increase company on impact of Code implementation of corporate governancetransparency and improve Corporate Governance Code discussions and relevanceshareholders' involvement with / and approval on for the company

amended articles of association by AGM in May 2005

Implement risk management Formalise and embed Risk management To maintain and strengthenas a structured management risk management into embedded in the risk management andtool the organisation management systems; control system as a

'in control statement' by valuable managementManagement Board issued tool

Exploit subsidy opportunities Structural exploration of Further exploration and To continue awareness of relevant grants exploitation of subsidy subsidy opportunities

opportunities

Reduce the number of Introduction of tools to Further extension of To increase focus oncustomer complaints analyse and solve customer complaint preventive measures,

customer complaints in a database problem solving tasks andmore structured way good housekeeping

New business development Process redefinition and Process redefined and To implement new NBDimplementation coaching by external expert process and realise successful

market introductions

S O C I A L P E R F O R M A N C E6

This chapter is dedicated to the social aspects that contribute to realising Crown Van Gelder's

strategic targets, which are described in Chapter 3. The main activities of the Works Council in 2005

are also described. The activities in 2005 and plans for 2006 are covered in greater detail.

6 . 1 W O R K F O R C E

The average number of active personnel directly employed by the company in 2005 was 296,

compared with 303 in 2004. This reduction has to do with the reorganisation of our power plant

and the outsourcing of the gatekeeper service. The work force will continue to decrease, but at a

slower pace. Further gains in labour productivity will be realised in the coming years through

investments to upgrade our mill.

E m p l o y e e S a t i s f a c t i o n

We consider the involvement, motivation and satisfaction of our employees in their work to be

important which is why it is one of our ten key performance indicators. We want to monitor this

structurally; as a consequence, we intend to conduct a satisfaction survey among our employees

to be carried out by an independent agency. Employee satisfaction will be measured for such things

as work, company policy and communication. The results will be compared to the index of the

industry sector in the National Employee Satisfaction Survey. For further information we refer to

www.tevredenheidsindex.nl.

6 . 2 H E A L T H A N D S A F E T Y

H e a l t h

The rate of absence through illness in 2005 was 4.5%, which is 0.5% lower than 2004, and amply

achieves our objective. Attention points from the past years have a continued effect, although their

decrease per year will be somewhat less spectacular. The Arboplus Covenant to bring absence

through illness in the Dutch paper and board industry to an acceptable level has the motto 'Illness

happens, absence is a choice'. This has been used in Crown Van Gelder too with enthusiasm. It makes

communication between employees and supervisors regarding absence through illness possible, and

brings about a consciousness-raising process between the parties (employee and supervisor).

This topic will be further extended and translated into concrete actions in Crown Van Gelder in 2006.


37

10%9%8%7%6%5%4%3%2%1%0%

2001 2002 2003 2004 2005

A b s e n c e t h r o u g h I l l n e s s

7.2

t a r g e t < 4 % i n 2 0 1 0

6.2

5.04.5

7.4

S O C I A L P E R F O R M A N C E

S a f e t y

The health and safety management system was certified in 2005 in conformance with OHSAS 18.001.

This represents the achievement of an important objective to make the working environment of

Crown Van Gelder safer and healthier.

In 2006 we will look into this more deeply and devote attention to behavioural aspects related to

safety at work.

In 2005 there were no accidents leading to absence, which represents an excellent achievement.

Management regards this achievement an exception to the normal incident level. The limit of the

Covenant on Working Conditions, Safety and Health is 30 per 1,000 employees. Nonetheless,

safety at work remains a matter of constant attention for employees and supervisors. That was

the reason for the organisation of various training programmes in 2005: 74 employees took a VCA

training programme, 28 employees a forklift truck course, 75 employees a 'safe hoisting' course

and 5 employees the training course 'working with hazardous substances'.

Our company remains fully committed to reducing the number of industrial accidents.

Just as in 2004, 2005 was a year in which considerable attention was devoted to safety during the

rebuilding projects of both PMs and the power plant. Personnel of our (sub)contractors was much

aware of the importance attached to safety by our company. This is a policy that will be maintained

in the coming years.

6 . 3 H U M A N R E S O U R C E D E V E L O P M E N T

Many training activities in 2005 were related to the upgrade of PM 1 and PM 2 and the power plant.

The staff of the production and maintenance departments underwent a comprehensive training

programme, which involved intensive cooperation between the suppliers and Crown Van Gelder.

Crown Van Gelder seeks to ensure that its personnel is sufficiently well-trained and motivated,

which implies constant attention to personal development on the part of the organisation and

the staff. Consequently, collective and individual training activities will be set up, according to

the following categories.

38

30

25

20

15

10

5

0

2001 2002 2003 2004 2005

I n d u s t r i a l A c c i d e n t s

Number per 1,000 employees

27.725.3

19.7

0

18.5

m a x i m u m l e v e l


• Vocational training (i.e. Vapro basic, A and B), an ongoing activity for a process driven company

such as Crown Van Gelder. In 2005, eleven staff members enrolled in Vapro training courses.

• Practical training for production personnel through competence training courses. Although this is

an internally developed training programme, it nonetheless covers general skills for the sector.

This programme sets out to meet the following objectives: safe operations, uniformity in operation

and effective breakdown analysis and resolution. This training programme was certified by Vapro

Institute in the beginning of 2005. This certification offers Crown Van Gelder the opportunity to

integrate this training programme into the Vapro training programme.

Twelve operators successfully completed the internal training programme in 2005. A total of 35%

of the operators have now completed this training programme.

In 2005, an amount of 24.5 hours per employee was devoted to courses and training, in comparison

to 23.3 hours in 2004.

6 . 4 C O M P E T E N C E M A N A G E M E N T

The aim of competence management is to achieve a perfect fit between employees' skills, work

processes and organisational targets. It starts with an investigation into the available knowledge and

existing behavioural patterns that can be influenced by human resource development instruments,

and thus forms the basis for the successful performance of the individual employee and the

organisation. The performance of Crown Van Gelder is highly dependent on the personal

development of each employee. For this reason, the company is to develop a step-by-step

approach for competence management.

As a first step, five core competences have been defined for the total Crown Van Gelder

organisation.

Competence profiles were set up for the management team members in 2005 on the basis of the

accountability matrix, which were used for development assessments. In 2006 competence profiles

will be established for middle management.

6 . 5 L O C A L C O M M U N I T Y

I n d u s t r i a l S i t e

The Municipality of Velsen became the owner of the industrial site and docks adjacent to

Crown Van Gelder's premises in December 2003. The Municipality's target scenario is to redevelop

most of the area as a business park and to earmark a part of this site for housing.

From the start Crown Van Gelder is intensively involved in the developments of this project, but our

position throughout has been that the existing space allocation should be retained, with a view to

the impending scarcity of industrial sites, especially where quay facilities are concerned.

In 2005 the Velsen College of Mayor and Aldermen made the decision to abandon its target scenario

and to place industrial developments on the site first. In conjunction with this, Crown Van Gelder's

gas pipe was moved to make it easier to distribute the industrial site to new industrial settlements.

This position change is welcomed by the industry, and also by Crown Van Gelder, and will end a

long period of uncertainty.


39


40

Manuel Amaro Pantaleão Klaas Kraaijeveld Remco Aardenburg Gea ten Hoeve

Erwin Otter Marcel Castricum Henk van Oostrom Wil Maijer

The Works Council



41

The Municipal Council of Velsen does not agree with this position and has asked the College of

Mayor and Aldermen to again examine with the Province of North Holland whether housing is still

possible on the eastern section of the site. The current zoning plan, as approved by the Provincial

States, makes these plans impossible.

Crown Van Gelder hopes that clarity will be achieved in 2006 about these plans so that further steps

can be taken to improve the investment climate in Velsen as a home for industry and employment.

S p o n s o r i n g

In 2005, Crown Van Gelder contributed EUR 20,436 to social and cultural activities in the local

community of Velsen.

The employees of Crown Van Gelder set up the project 'Velsen helping Galle', to offer a helping

hand to the victims of the tsunami; it organised many entertaining activities which resulted in an

active contribution to the project. A total of EUR 10,596 was collected. Crown Van Gelder rewarded

the efforts of its employees by meeting the amount that was raised. The sum has been devoted to

a number of worthwhile projects in Galle (Sri Lanka).

6 . 6 W O R K S C O U N C I L

The Works Council met on seven occasions, and consulted with the Managing Director on eight

occasions.

A Works Council representative attended the AGM.

The subjects dealt with by the Works Council in 2005 included the following:

• power plant reorganisation

• outsourcing of the gatekeeping service

• appointment of a member of the Supervisory Board

• Mission 2010

• new organisational structure of the pension insurance company De Eendragt N.V.

In 2005 the Works Council set up a health and safety committee.

6 . 7 O T H E R S O C I A L A F F A I R S

Crown Van Gelder's work force was 291 strong at the end of 2005 (2004: 298). All employees work in

Velsen in the Netherlands. Crown Van Gelder has no sites in other countries. For the structure of the

work force, see our website.

The three employees' organisations together account for a union density of 50%. We are unable to

disclose other details for privacy reasons. The Crown Van Gelder Collective Labour Agreement will

be adopted following agreement between the trade unions and the company.

This agreement contains clauses on the provision of information to and consultation with the trade

unions. Regular consultation takes place twice a year between the trade unions and the company

management, in spring and autumn meetings.

Otherwise, regular consultation takes place with the Crown Van Gelder Works Council, and all the

subjects specified in the Works Councils Act are discussed.

42

The new gas turbine fully complies with the IPPC requirements on NOx emissions.


43

Crown Van Gelder adheres to the Universal Declaration of Human Rights and International Labour

Organization (ILO) treaties. As a consequence, for example, child labour is not permitted and young

employees must not be obstructed in their educational opportunities. Freedom exists to belong to

an association or to negotiate collectively. Forced labour is also prohibited. No form of discrimina-

tion whatsoever on the basis of race, ethnic background, religion, political opinion, or sexual orien-

tation is permitted.

Laws and regulations that influence the organisation are closely monitored, so that any necessary

action can be taken in good time to comply with new requirements.

6 . 8 A C T I O N S C H E M E

OBJECTIVE MEASURE PROGRESS IN 2005 PROGRAMME FOR 2006

Reduce absence due to illness Developing a health policy, Absence due to To maintain current absencebased on prevention, illness reduced to 4.5% due to illness level andfollow-up and reintegration expand the behaviour

component as part of theArboplus Covenant

Change schedule in full shift New shift schedule as To start the trial run of the pilot project for Expedition new scheduledepartment

Decrease industrial accidents Increase company safety OHSAS 18001 certificate achieved in 2005

Influence attitude towards Increased safety awareness To maintain current levelunsafe situations by training programme, and extend it with the

safety observation audits behavioural componentand toolbox meetings

Competence management Define the required level of Establishment of To introduce competencecompetence for coming years the Crown Van Gelder management in the

core competences organisationManagement team Competence profiles willmember competence be set up forprofiles and development middle managementassessments are finished

Level of employee satisfaction In keeping with the National To implement employeeEmployee Satisfaction Index satisfaction survey

Local community Participation in discussions Various engagements with To retain the existingwith local community, representatives of the permits and further developprovincial government and Municipality of Velsen and the adjacent industrial sitethe Municipality of Velsen, local groups to clarify theabout the future use of interests of the industryneighbouring area and and Crown Van Gelderharbour


44

G R I I N D E X

The Global Reporting Initiative (GRI) is an independent body established in collaboration with the

United Nations Environment Programme to define benchmarks for corporate sustainability reporting.

The GRI Index enables report users to:

• determine rapidly and simply where certain information mentioned in the GRI G2 guidelines can

be found;

• obtain a clear view of the extent to which Crown Van Gelder has incorporated the content stated

in the GRI guidelines in its Sustainability Report or Annual Report.

In the interests of accessibility and consistency with the Sustainability Report, the text of various

indicators has been abbreviated and reformulated. Only the core indicators are shown.

The complete GRI Index is available on www.globalreporting.org.

Covered in 2005 Sustainability Report (SR) / 2005 Annual Report (AR) / website (www.cvg.nl)

Not covered

1 - V I S I O N A N D S T R A T E G Y

1.1 Vision and strategy regarding contribution to sustainable development SR – Sections 2.2 and 2.3

1.2 Statement from the CEO SR – Chapter 1

2 – P R O F I L E

O r g a n i s a t i o n a l p r o f i l e

2.1 Name of the organisation SR – Cover

2.2 Major products and/or services SR – Section 2.1

2.3 Operational structure SR – Section 2.1

2.4 Description of major divisions, operating companies and subsidiaries SR – Section 3.1

AR – Page 26

2.5 Countries in which operations are located SR – Chapter 1

2.6 Nature of ownership; legal form SR – Cover and Chapter 1

2.7 Nature of markets served SR – Section 2.1

2.8 Scale of organisation SR – Section 2.1

2.9 List of stakeholders SR – Section 3.3

R e p o r t s c o p e

2.10 Contact person(s) for the report SR – Section 3.1

2.11 Reporting period 2005

2.12 Date of most recent previous report 2004

2.13 Boundaries of report Not applicable

2.14 Significant changes in size, structure, products, etc No significant changes

2.15 Basis of report significantly affecting comparability Basis not changed

2.16 Restatements of information provided in earlier reports No restatements

7


45

G R I I N D E X

R e p o r t p r o f i l e

2.17 Decisions not to apply GRI principles or protocols SR – See this overview

2.18 Criteria and definitions used SR – Section 3.2

2.19 Significant changes in measurement methods No significant changes

2.20 Accuracy, completeness and reliability SR – Section 3.1

2.21 Independent assurance for the full report No verification report

2.22 Additional information Website/Sustainability

3 – G O V E R N A N C E S T R U C T U R E A N D M A N A G E M E N T S Y S T E M S

S t r u c t u r e a n d g o v e r n a n c e

3.1 Governance structure of the organisation SR – Section 2.4

Website/Corporate Governance

3.2 Independence of Supervisory Board AR – Page 7

3.3 Determination of expertise of the board members AR – Page 7

3.4 Risk management and internal controls SR – Section 2.4

AR – Pages 16-18

3.5 Performance-linked executive compensation AR – Pages 15 and 47

3.6 Organisational structure for oversight, implementation and audit SR – Section 2.1

3.7 Implementation of policies and codes of conduct SR – Section 2.4

3.8 Mechanisms for shareholders to provide recommendations Website/Corporate Governance

S t a k e h o l d e r s e n g a g e m e n t

3.9 Basis for identification and selection of major stakeholders SR – Section 3.3

3.10 Approaches to stakeholder consultation SR – Section 3.3

3.11 Information generated by stakeholder consultations SR – Section 3.3

3.12 Use of information resulting from stakeholder engagement SR – Section 3.3

O v e r a r c h i n g p o l i c i e s a n d m a n a g e m e n t s y s t e m s

3.13 Precautionary approach or principle SR – Section 4.2

3.14 Externally developed voluntary initiatives Website/Corporate Governance

3.15 Memberships in industry/business associations Website/Sustainability/table 10

3.16 Policies for managing upstream and downstream impacts SR – Sections 4.2 and 4.3

3.17 Managing indirect economic impacts SR – Section 4.2

3.18 Decisions regarding the location of or changes in operations No major changes

3.19 Programmes and procedures pertaining to performance SR – Action schemes

3.20 Status of certification pertaining to management systems SR – Section 2.1

46

4 – E C O N O M I C P E R F O R M A N C E I N D I C A T O R S

EC.1 Net sales SR – Section 5.1

EC.2 Geographic breakdown of markets SR – Section 5.1

EC.3 Costs of all goods, materials and services purchased AR – Page 23

EC.4 Percentage of contracts that were paid in accordance to agreed terms Not inventoried

EC.5 Total payroll and benefits AR – Page 43

EC.6 Interest and dividend payments AR – Pages 23 and 45

EC.7 Increase/decrease in retained earnings at end of period SR – Section 5.4

AR – Page 40

EC.8 Total sum of taxes paid SR – Section 5.6

AR – Pages 44 and 45

EC.9 Subsidies received SR – Section 5.6

AR – Page 12

EC.10 Donations to community, civil society and other groups SR – Section 6.7

5 – E N V I R O N M E N T A L P E R F O R M A N C E I N D I C A T O R S

EN.1 Total materials used Website/Sustainability/table 1

EN.2 Percentage used waste from external sources No materials used

EN.3 Direct energy use segmented by primary source Website/Sustainability/table 2

EN.4 Indirect energy use Not relevant

EN.5 Total water use Website/Sustainability/table 3

EN.6 Land owned in biodiversity habitats Not applicable

EN.7 Impacts on biodiversity SR – Section 4.3.1

EN.8 Greenhouse gas emissions Website/Sustainability/table 5

EN.9 Ozone-depleting substances Website/Sustainability/table 5

EN.10 Nitrogen oxides, sulphur oxides and other significant air emissions Website/Sustainability/table 5

EN.11 Total amount of waste Website/Sustainability/table 4

EN.12 Significant discharges to water Website/Sustainability/table 6

EN.13 Significant spills SR – Section 4.4.1

EN.14 Environmental impacts of products and services SR – Section 4.2

EN.15 Reclaimable product after useful life SR – Section 4.2

EN.16 Incidents and fines SR – Section 4.4

G R I I N D E X

CC RR OO WW NN VV AA NN GG EE LL DD EE RR NN .. VV ..SS UU SS TT AA II NN AA BB II LL II TT YY RR EE PP OO RR TT 22 00 00 55

47

6 – S O C I A L P E R F O R M A N C E I N D I C A T O R S

L a b o u r p r a c t i c e s a n d d e c e n t w o r k

LA.1 Workforce breakdown Website/Sustainability/table 11

LA.2 Net employment creation SR – Section 6.7

LA.3 Employees represented by trade union organisations SR – Section 6.7

LA.4 Policy and procedures relating to consultation with employees SR – Section 6.7

LA.5 Notification of occupational accidents and diseases SR – Section 6.2

LA.6 Joint health and safety committees SR – Section 6.2

LA.7 Injury, lost day and absentee rates SR – Section 6.2

LA.8 Policies and programmes SR – Sections 6.7

Website/ Corporate Governance

LA.9 Average hours of training per year SR – Section 6.4

LA.10 Equal opportunity policies and programmes Website/ Corporate Governance

LA.11 Composition of senior management and corporate governance bodies AR – Pages 63 and 64

H u m a n r i g h t s Website/ Corporate Governance

HR.1 Policies and guidelines dealing with human rights SR– Section 6.7

HR.2 Consideration of human rights impacts as part of investment decisions SR– Section 5.5

HR.3 Policies and procedures to evaluate human rights SR– Section 6.7

HR.4 Global policy preventing discrimination SR– Section 6.7

HR.5 Freedom of association policies SR– Section 6.7

HR.6 Policy excluding child labour SR– Section 6.7

HR.7 Policy to prevent forced and compulsory labour SR– Section 6.7

S o c i a l c o m m u n i t y

SO.1 Policies to manage impacts on communities SR – Sections 4.3 and 5.5

SO.2 Policies to address bribery and corruption SR – Section 2.4

SO.3 Policies to address political lobbying and contributions SR – Section 2.4

P r o d u c t r e s p o n s i b i l i t y

PR.1 Policy for preserving customer health and safety SR – Section 4.2

PR.2 Policy relating to product information and labelling SR – Section 4.2

PR.3 Policy relating to consumer privacy Secured in IT system

G R I I N D E X

48

A B B R E V I A T I O N S A N D D E F I N I T I O N S O F T E R M S

AGM Annual General Meeting of ShareholdersBAT Best Available Techniques BOD5 Biochemical Oxygen Demand after 5 daysBREF Best Available Techniques Reference DocumentBVQI Bureau Veritas Quality InternationalCEPI Confederation of European Paper IndustriesCEPIFINE Confederation of European Fine Paper IndustriesCHP Combined Heat and Power plantCO Carbon monoxideCO2 Carbon dioxideCoC Chain of CustodyCOD Chemical Oxygen DemandCOSO Committee of Sponsoring Organizations of the Treadway CommissionEEI Energy efficiency indexEIA Energy-savings investment allowanceEMAS Eco-Management and Audit SchemeEU European UnionFSC Forest Stewardship CouncilGRI Global Reporting InitiativeIFRS International Financial Reporting StandardsILO International Labour OrganizationIMP II Investment Multi-Year Plan IIIPPC Integrated Pollution Prevention and ControlISO International Standards OrganizationNBD New Business DevelopmentNGO Non-governmental organizationsNOx Nitrogen oxidesOHSAS Occupational Health and Safety Assessment SchemeOCR Optical Character RecognitionPAGO Periodic labour health check-upPEFC Programme for the Endorsement of Forest Certification schemesPM Paper machineQHSE Quality Health Safety & EnvironmentROCE Return on capital employedSFI Sustainable Forestry InitiativeSO2 Sulphur dioxideVapro Organisation for training and development of staff in the processing industryVNP Royal Netherlands' Paper and Board Association

8

E d i t i n g

Barbara Luijken, Overveen

P h o t o g r a p h y

Sander van der Torren, Castricum

Foto Studio Honing, Beverwijk

L a y o u t

M&M creatieve communicatiegroep, Beverwijk

P r i n t i n g

SMIDprinting, Velsen

sustainability report 2005 crown van gelder n.v.€¦ · (ocr), rotary offset paper and continuous...

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