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November 15, 2002
Staples Commits to Recycled Paper
    by William Baue

Spurred by social investors and environmental groups, Staples announces an environment-friendly paper procurement policy.

This week the office supplies retailer Staples (ticker: SPLS) announced a new environmental paper procurement policy that sets a precedent for environmental stewardship in its sector. The policy calls for Staples to increase the proportion of post-consumer-waste (PCW) and alternative fiber content in the paper it sells to 30 percent. The policy also calls for phasing out of paper derived from endangered forests and greater support of well-managed forests.

The policy implementation ends a two-year campaign by environmental and religious groups as well as socially responsible investment (SRI) organizations to raise Staples' environmental commitment.

"In developing the policy, we took a collaborative approach with shareholder groups, our suppliers and environmental groups," said Staples Public Relations Manager Owen Davis. Staples generated $11 billion in revenues last year through its 1,400-plus superstores.

In 2001, US Bancorp Piper Jaffray's Philanthropic and Social Investment Consulting (PSIC) worked together with the Calvert Group on filing a shareowner resolution with Staples. The proposal, which asked Staples to perform a feasibility study on implementing the kinds of environmental reforms encompassed in the new policy, was withdrawn after dialogue resulted in Staples' agreement to perform the study. PSIC and Calvert then worked with Staples to draft the policy. Trillium Asset Management, another SRI firm, also engaged in dialogue with Staples independently.

This shareowner action complemented separate activities conducted by environmental organizations operating as a coalition called the Paper Campaign, which continued to lobby Staples to adopt better environmental practices and policies. Asheville, North Carolina-based Dogwood Alliance and San Francisco-based ForestEthics, who spearheaded the Paper Campaign, organized more than 600 protests at Staples stores. As well, the Paper Campaign enlisted the rock band REM to support the use of recycled paper in commercials. As recently as September, ForestEthics published a report entitled The Credibility Gap at Staples: Destroying Old Growth Forests, Misleading Customers that documented Staples' continuing sale of paper from endangered forests.

The Paper Campaign applauded Staples' new policy that promises to decrease deforestation, particularly in the southern U.S. According to the U.S. Forest Service, the southern U.S. is home to more endangered forests than anywhere in the nation. There, the paper industry annually logs about 5 million acres, an area the size of New Jersey. According to the Dogwood Alliance, a shift of 30 percent from wood fiber to recycled fiber by all southern paper mills would save about 15 million acres, an area comparable to all the forests in Tennessee, over the next decade. The policy has positive ramifications for the protection of forests elsewhere as well, as Staples sources its paper from throughout the world.

"Staples' new policy is the beginning of the end of the practice of destroying endangered Southern forests to make paper," said Paper Campaign Director Danna Smith of the Dogwood Alliance. "If Staples' competitors, such as Office Max, Office Depot, and Corporate Express, do the right thing and follow Staples' example, our forests can be protected for future generations."

Indeed, when the Home Depot (HD) reacted to a similar campaign by agreeing to stop selling old-growth lumber, Lowe's (LOW) and a number of smaller competitors followed suit within weeks. However, Home Depot's deadline for phasing out old-growth by the end of 2002 is fast approaching, and it is unclear whether the building supplies retailer will meet its goal.

Unfortunately, Staples' policy does not specify a clear deadline for reaching its goal of selling 30 percent PCW and alternative fiber paper across its product lines.

"Staples' policy doesn't say whether it is going to hit 30 percent post-consumer content in the next two years or five years," PSIC Senior Social Researcher Conrad MacKerron told Mr. MacKerron also pointed out that Staples left its options open as to which certification protocol it would choose to verify that its paper products originated from well-managed forests. While the industry's Sustainable Forestry Initiative (SFI) program is getting better, the Forest Stewardship Council (FSC) certification program is much preferable, according to Mr. MacKerron.

"There are a few areas where investors and environmental groups need to watch to make sure that Staples lives up to the spirit as well as the letter of its policy," observed Mr. MacKerron.


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