For the first time in 2007, we sought an external assessment of our sustainability reporting from experienced and independent observers. We asked two members of our newly formed Sustainability Advisory Board to read a draft of the report and comment on its strengths, weaknesses and gaps.

This is their assessment, followed by our response to their comments.

Tim Smith, Senior Vice President, Director of Socially Responsible Investing, Walden Asset Management

Kimberly-Clark’s 2007 Sustainability Report starts quite properly with a view from the top of the company. Tom Falk’s letter sets the tone, makes the business case and issues the challenge that Kimberly-Clark is not simply going to REPORT on sustainability but strive to BE sustainable on a wide range of issues.

The report then moves from an exhortation to a description of how Kimberly-Clark plans, promotes and puts sustainability into effect, moving it from theory to reality.

This is Kimberly-Clark’s fifth Sustainability Report and it is a process of continuous improvement, building on past learnings, present achievements and identifying future challenges. The breadth of the issues covered in the report is impressive. One of the strengths of the report and the program is that it isn’t defensive and is open to ideas for improvement.

Let me list a couple of examples of where the report could go deeper.

• The Employee section rightly identifies employees “as our most valued resource” and diversity as “an asset to our business.” The report gives a few impressive statistics about the Board and workforce but inclusion of more detailed numbers of women and minorities on the job ladder is needed for a full picture. Many leadership companies include the EEO-1 form for the last three years in their diversity reporting. Without more information we have an incomplete picture of how diversity is improving.
• Supply chain responsibility – commendably Kimberly-Clark steps up and takes shared responsibility for the corporate responsibility of its supply chain especially related to sustainable forestry. However, the lack of any meaningful description of the labor issue and how suppliers are held accountable to respecting labor rights is distressing. Ironically, a product could be environmentally responsible but produced overseas by grossly underpaid and exploited employees. How does KC evaluate whether suppliers are treating employees fairly? This is a vitally important area to beef up, in terms of disclosure, company policy and monitoring.

The 2007 Sustainability Report continues to highlight exciting progress as well as pointing to areas where even more can be and must be done.

K-C’s response

We appreciate the recognition that our reporting reflects genuine efforts within our company to become a more sustainable business.

At present, we do not publish our complete EE0-1 data set in any setting, but rather choose relevant data. We have improved our reporting on diversity statistics since 2006 by including all U.S. employees in our figures and by including select EEO-1 statistics which we think are most appropriate for this report.

We also recognize the need to strengthen our supply chain responsibility program. We are confident that our fiber procurement policy and performance lead our industry and we are considering ways to further promote appropriate labor standards in our supply chain.

Roger Cotton LL.B., LL.M, Barrister and Solicitor, Corporate Governance in Environment, Health & Safety

Overall, the 2007 Report easily exceeds the standard of content and organization of similar reports. It includes thorough discussions of the most forward issues (climate change, sustainable forestry), as well as providing the expected data and information on issues under the sustainability umbrella. I also took the opportunity to compare the 2007 Report to the four previous reports, and am impressed with the substantive strides made in a relatively short time.

The introduction by Tom Falk (particularly the leading paragraphs) is an excellent reflection on sustainability as an issue integral to the company. The report highlights that building sustainability into the way Kimberly-Clark does business is the preferred approach, and sustainability is not just an add-on or cost of doing business. The list of new achievements and initiatives in 2007 is impressive, and most of them flowed naturally from the 2006 report. While some were, of necessity, short on specifics in the introduction, in almost all cases one could readily find the specifics in the text to follow.

A few comments for consideration:

• One area where other companies’ reports have moved forward is to set goals for the next year (at least). There are many references to Vision 2010, and it may be worth considering adding a 2008 column in each table of longer-term targets. This is especially true when some of the trend data is static or negative. In light of the workforce reduction, one might ask how the status quo can be maintained, much less progress achieved, without specific targets to work toward.
• There is a strong commitment to "life-cycle thinking" in the introduction, so specific targets might be warranted. Unlike carbon footprinting (which is in its infancy, and a cautious approach is reasonable), life-cycle assessment is a bit further down the road, and the company may well be able to select the next target(s) for assessment.
• There are a number of issues regarding employees that could be strengthened. Employee diversity statistics are for the U.S. only (a record-keeping issue likely, but more could be read into it). There could be a discussion of employee working conditions, i.e. a standard of care and respect that is a corporate standard. Global workplace issues are difficult, but are currently very much the focus for many companies.
• Environmental performance is dealt with strongly as an external stakeholder issue, and less so as a workplace issue. In the employee section, it is difficult to identify environmental initiatives in the workplace, i.e. recycling, use of alternative fuel company vehicles, cycling and transit subsidies.

KC's Response

Our Vision 2010 targets are not annual targets, but those we hope to reach by 2010. Our goal is to make sustainable improvements over the long term. Our business units may set individual annual targets to reach their long-term goals.

We are still considering how to best use life-cycle assessments more widely in our business. As our business units develop their sustainability strategies, they may set goals relating to life cycle or design for environment.

Currently, K-C is not able to efficiently gather global diversity statistics because we do not have a global information system which tracks the data. As we develop diversity goals, there will be a global component.

Regarding working conditions, our Code of Conduct and employment policies apply at all our operations worldwide. Our Corporate Policy, Instruction on Human Rights in Employment, includes a provision as follows:

"Kimberly-Clark does not employ child, prison, indentured, or bonded labor, nor use corporal punishment or other forms of mental or physical coercion as a form of discipline in any of its global operations. Further, Kimberly-Clark will not knowingly conduct business with vendors that engage in any of these practices. (In the absence of any national or local law, Kimberly-Clark will define "child" as less than 15 years of age. If local minimum age law is set below 15 years of age, but is in accordance with developing country exceptions under the International Labor Organization (ILO) Convention 138, the lower age will apply.)"

As part of our 2008 sustainability strategy development and roll-out, employee engagement will play an important role. At a variety of office and operational locations, environmental initiatives are put in place and practiced by our teams (e.g., recycling, alternate transportation). Our 2008 Sustainability Report will strive to showcase some of those initiatives.