The inconsistencies reported in January 2008 in the listed and actual content of recycled paper in copy and printer paper products not only betrayed the trust of consumers who thought they were buying environmentally friendly merchandise, but also undermined efforts by those in both the public and private sectors to encourage paper recycling and the purchase of “green” products. As a vendor of such paper products, I am keenly aware of our responsibility in this matter. I wish to offer my sincere apologies and review the facts in details involved in this case.

Fuji Xerox sells nearly 140,000 metric tons of copy and printer paper products each year. Recycled paper accounts for about 50 percent of that total. Twenty-four years ago, Fuji Xerox began planning and developing acid-free paper, recycled paper, and other environmentally friendly paper products and integrated these aspects of our business into our forestry operations. In this context, we have adopted the following basic policy: 1. Since the used paper recovery rate has reached levels nearing the maximum limit, and the fiber in used paper supports recycling up to a limit of three to five times, we use virgin pulp and used paper in a balanced manner. 2. We limit our procurement of virgin pulp to materials from sustainable resources, including plantation forests and other certified forestlands. 3. We explore our social responsibilities in collaboration with pulp and paper producers and nongovernmental organizations.

In keeping with this basic policy, in December 2004, we set up benchmarks for paper procurement and implemented a reporting framework requiring that suppliers of our paper products provide us with annual reports on the materials they use, by unit of raw paper and also by plant facility. However, around September 2007, we received reports from several paper makers that they faced increasing difficulty in acquiring used paper material, but continued to manufacture products containing recycled paper. Hence, we proceeded with preparations to begin marketing recycled paper products with a lower used paper content of 70 percent, down from 100 percent, in the spring of 2008.

To ensure that the sources of raw materials for our copy and printer paper products are selected appropriately and the ratio of recycled paper is controlled properly in accordance with specifications, starting in April 2008, Fuji Xerox sent inspection teams to the plant facilities of the paper makers to which we have outsourced our paper product manufacturing operations. We will conduct strict, twice-yearly on-site inspections of materials management, manufacturing processes, materials traceability, raw material blending or content, and management of environmental materials and chemical substances. Implementing these fundamental checks is the least we can do to meet our obligations as a product vendor.

The revelations of inconsistent content labeling have provided a fresh opportunity to review the issue of paper production and environmental problems throughout Japan. With international demand for paper products escalating particularly in newly-industrializing countries, an intensifying market crunch for used paper seems inescapable. In the interim, no scientifically useful methods for analyzing actual used paper content in paper products have been established. Accordingly, unless dramatic improvements are achieved in the conditions for used paper procurement, the number of times it can be recycled and the technologies used to analyze paper content, the industry's entrenched use of labeling declaring 100 percent used paper content could lead to a second or even third round of allegations of false labeling. The Ministry of Environment has indicated that as part of their green procurement policy, government agencies plan to maintain a principle of 100 percent used paper content in the paper products they consume. That is a commendable public policy and one that we will actively support. However, satisfying demand from the public and private sectors for products with 100 percent used paper content is, unfortunately, going to be difficult, if not impossible, to achieve. I am hopeful that you will understand Fuji Xerox's policy of blending used paper with virgin pulp and acquiring virgin pulp from limited sources (planted forests and certified forests), and I look forward to your continued patronage and support.