In 2008, the global economy and business community saw unprecedented volatility and the beginning of a worldwide recession. We suffered wide-ranging fluctuations in commodity prices and exchange rates, and cost inflation was nearly double our forecast. We also saw signs of reduced demand for some products and in some regions.

Our history of financial strength, good governance and social responsibility will enable us to continue providing products and jobs that improve people’s lives. We continue to focus on our strategy for sustainable growth, having long recognized that only companies that build sustainability into the way they do business will enjoy long-term success. K-C makes a major contribution to sustainability by providing products that significantly improve health, hygiene and safety worldwide.

The economic downturn has only strengthened the business case for sustainability. Customers and consumers continue to show an interest in sustainable products and operations. Our efforts to conserve resources also increase operational efficiency and provide considerable cost savings. We are confident that sustainability generates competitive advantage, improves business results and helps fulfill our responsibilities as a global company. Indeed, our sustainability efforts and social contributions have been recognized by governments, customers and organizations from China to Australia, Brazil to South Africa, and across Europe and North America.

We know there is much more we can do. In 2008, our businesses each strengthened their approaches to reducing the environmental impacts of our products and operations, enhancing the benefits our products bring, contributing to local communities, and engaging employees in the development of a more sustainable company.

To improve product sustainability, we incorporate insights from customers and consumers and apply the principles of Design for Environment during product development. For example, our U.K. business has tested the Carbon Trust’s methodology for calculating a product’s carbon footprint on Andrex and Huggies. We remain committed to responsible fiber use by purchasing from certified suppliers and using recycled fiber where appropriate. In 2008, 98 percent of the virgin fiber we purchased came from suppliers or forestlands certified to a recognized sustainable forestry scheme.

We continue to improve operational efficiency and conserve natural resources such as energy, water and raw materials through our Environmental Vision program. Two of our facilities installed combined heat and power systems in 2008 , and our Dallas headquarters and Beech Island facility in South Carolina both use landfill gas to at least partly meet their energy needs.

We are proud of our people’s commitment to improving health, hygiene and well-being worldwide. They do this through innovation to enhance our products and improve our operations, and through charitable work in their local communities. In 2008, Kimberly-Clark and our employees donated $22.7million in cash and product.

We truly appreciate and celebrate our sustainability successes to date … but we know our work is not complete. We know that we must continue building our company in a world of increasingly scarce resources and a vulnerable ecosystem. Because sustainability is a core value at Kimberly-Clark, we know that making better choices for the environment and society can many times mean making better choices for our business.

Tom Falk
Chairman and CEO
April 2009

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