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Sonoco 2009-2010 Sustainability Annual Report

Sonoco 2010 Sustainability Annual Report 1

Sonoco’s Sustainability Statement of IntentSonoco will be the packaging industry leader in creating, maintaining and enhancing a sustainable future that benefits all of its stakeholders through continuous improvement in operating performance, social responsibility and environmental stewardship.

Sustainability Mission StatementSonoco’s strategic mission statement is to be the low-cost global leader in providing customer-preferred packaging solutions to selected value-added segments, where we expect to be either number one or two in market share. Shareholder return, customer and employee satisfaction, commitment to excellence, integrity, environmental stewardship and a safe workplace will be the hallmarks of our culture.

The Company’s focus on sustainability is directly linked to and in support of its mission statement. We believe that initiatives

around enhancing our reputation, being a strong corporate citizen, providing a good

place to work and being a good steward of our environmental

resources will make us a stronger, more competitive company,

better able to support and satisfy our broad customer base and provide shareholders with sustainable returns.

Sonoco 2009-2010 Sustainability Annual Report

1 introduction

2 letter to stakeholders

4 sustainability scorecard

5 environmental stewardship

9 sonoco recycling inc. 11 economic performance

12 sonoco at a glance

14 true blue™ products

16 social responsibility

19 sustainability oversight

In today’s competitive global marketplace, the issues relevant to supporting sustainability are directly linked to Sonoco’s long-term profitability and viability. We believe that sustainability and business success are not only compatible but are inextricably linked and that by embracing both, we will benefit our shareholders for the long term.

About the coverThe photos on the cover illustrate how Sonoco is setting the standard for sustainability in the packaging industry. As shown on the cover from left: Sonoco is helping customers meet their need for more environmentally friendly packaging through its new True Blue™ line of sustainable products and services, which includes the high-performance composite can Sonoco pro-duces for Kraft Foods’ popular Maxwell House coffee. At Sonoco’s service center in Wroclaw, Poland, an employee pre-pares a customer’s product for distribution. Sonoco’s service centers, which provide just-in-time product packaging, create sustainable value for customers by helping them reduce unnec-essary inventory, improve customer service, eliminate obsoles-cence and reduce costs. Sonoco is one of the largest producers of uncoated recycled paperboard, manufacturing approxi-mately 1.8 million tons annually at its 21 global mills. Recovered plastic bottles are readied for processing at Sonoco’s expanded recycling center in Charlotte, N.C.

Sonoco 2010 Sustainability Annual Report2

2009 was one the most difficult, and yet, one of the more reward-ing years for sonoco. The continua-tion of the deepest global recession in decades significantly impacted consumers and many businesses, including Sonoco. Yet our com-mitment to pursuing the “triple bottom line” of sustainability did not change. Our efforts to integrate environmental stewardship, social responsibility and economic performance into our business strategies have made Sonoco more competitive and better prepared to meet economic and other challenges.

Reducing our carbon footprintDespite tough operating conditions, Sonoco made significant progress in reducing our carbon footprint by cutting greenhouse gas (GHG) emissions. Last year, we committed to reducing GHG emissions from our uncoated recycled papermills in the United States and Canada by approximately 15% by 2013. I am pleased to report that our efforts in 2009 led to an approximate 13% reduction of GHG emissions from these mills.

In addition in 2009, we implemented a global Web-based envi-ronmental management system to collect GHG emissions data from all of our international manufacturing facilities. We have taken this new global data, established 2008 as our baseline year, and set a goal of reducing GHG emissions from our more than 300 manufacturing facilities by 15% by 2014. Further-more, we have submitted our global data for participation in the Carbon Disclosure Project and are working to expand our GHG tracking to include global mobile sources.

The significant progress we made in 2009 toward reducing GHG emissions has come from decreasing energy consump-tion and by converting steam boilers at some of our paperboard mills to less carbon-intensive fuels.

Over the past decade, Sonoco’s global manufacturing opera-tions have been focused on reducing energy consumption by an average of about 2% per year. In 2009, our North American paperboard mills exceeded this goal by reducing overall energy consumption by 3.3%, which saved the Company approxi-

mately $2.2 million and reduced GHG and other emissions. During the past 10 years, we have reduced total energy consumption at our mills by 18%, saving approxi-mately $15 million, and sig-nificantly reducing emissions.

Some of these energy-use reductions have been achieved by using variable-frequency drives on equipment to lower horsepower usage and by

installing lower wattage lighting with motion sensors. Additionally, thermal energy reductions have been achieved with waste-heat-recovery systems that capture energy typically lost through boiler stacks, effluent streams and other sources. We are reusing this captured heat in other capacities in our mills. Finally, to squeeze even more energy out of our system, we have implemented office energy conservation programs focused on better managing lighting, heating and cooling systems.

At our Menasha, Wis., paper-board mill, we switched from purchasing steam produced from a local coal-fired utility in late 2009 to generating steam with natural gas-fired boilers at the plant. This con-version reduced energy costs and GHG emissions. In the third quarter of 2010, we will make a similar switch involv-ing an investment of $2.8 mil-lion on the installation of two high-efficiency, natural gas-fired boilers that will supply steam for our Holyoke, Mass., mill.

In Europe, we are investing approximately $4 million in our paperboard mills in Cirie, Italy, and Kilkis, Greece, to improve energy efficiency and environmental controls as well as product range and cost competitiveness.

To Sonoco Stakeholders

Harris E. DeLoach Jr., Chairman, President and Chief Executive Officer

DOMESTIC AND CANADIAN MILLS

GREENHOUSE GAS REDUCTION TARGETS

(thousand metric tons co2e)

1600

1200

800

400

15%

13%

891 774 1405 1288 1194

08 09 08 09 14PGLOBAL

OPERATIONS


Creating sustainable value for our customersWe took our commitment to meeting our customers’ needs for environmentally responsible packaging to the next level in 2009 with the launch of our True Blue™ brand of sustainable packaging solutions and recycling services.

Our True Blue brand gives consumer product customers a one-stop shop for sustainable packaging solutions that reduce their environmental footprint. The True Blue brand leverages our extensive skill and experience in developing superior design concepts that meet our customers’ performance, cost and sus-tainability requirements.

To qualify for Sonoco’s new True Blue brand, a package must provide a clear environmental advantage over the package it was created to replace, either through the use of more sustain-able materials or source reduction. (More information on our True Blue brand of products and recycling services can be found on page 14 in this report.)

Recognition for sustainabilitySonoco received significant recognition for its commitment to sustainability this past year. We were one of only seven U.S. com-panies selected to join the prestigious Dow Jones Sustainability World Index (DJSI World), which tracks the financial perfor-mance of leading sustainability-driven companies worldwide. Only three global packaging companies are listed on DJSI World, and only about 10% of the approximately 3,000 compa-nies invited to participate in the program were chosen.

Sonoco’s inclusion in this elite index was a result of a 17% improvement in the Company’s overall sustainability score in 2009, which demonstrates the progress we’re making in all of our global operations. This improvement was also recognized by Sustainable Asset Management (SAM), which has assessed and documented the sustainability performance of more than 1,000 corporations annually since 1999. In its Sustainability Yearbook 2010, SAM named Sonoco the “SAM Sector Mover” in the Container and Packaging Sector for achieving the largest year-over-year sustainability performance improvement of the companies in the sector’s top 15%. The Company also was awarded the SAM Bronze Class status for attaining a total score within 5% of the SAM Sector Leader.

To Sonoco Stakeholders

Newsweek magazine also named Sonoco one of the “100 Greenest Large American Companies” and the highest-rank-ing U.S. packaging company in its inaugural Green Rankings. Leading environmental researchers KLD Research & Analytics, Trucost and CorporateRegister.com spent more than a year developing the rankings by evaluating the country’s 500 largest companies on their environmental performance, green policies and reputation.

Finally, in early 2010, we received a Supplier Achievement Award from Altria Corporation as its leading supplier for sus-tainability and corporate responsibility.

People, Culture and ValuesOur values guide the decisions we make and the actions we take to resolve critical challenges, address the expectations of our diverse stakeholders and fulfill our corporate social responsibility. Our priorities and strategies may change as we adapt to shifts in the business environment, but our values are sustainable.

It is our belief that flourishing communities and thriving busi-ness are mutually interdependent. Despite the economic pres-sures, Sonoco continued efforts to strengthen the communities where we operate by dedicating more than 1% of our consoli-dated pretax income to nonprofit organizations. One area of particular importance to us is improving education. More than 75 cents of every dollar we contributed to our communities went to education, with the remaining funding working to develop job growth, improve environmental and social welfare programs and support the arts. (You can read more about our efforts to improve education on page 17.)

On behalf of Sonoco’s employees globally, thank you for taking the time to read the 2009-2010 Sustainability Report and learning how our values shape our future. (You can read more about our prog-ress in achieving our sustainability goals on page 4.)

Sincerely,

Harris E. DeLoach Jr.Chairman, President and Chief Executive Officer


Sustainability Scorecard

ouR 2009 CoMMItMent ACCoMPlIShMentS

1. Social Responsibility Enhance corporate citizenship in the com-munities in which Sonoco operates through:

n Employee giving programs

n Supporting community partnerships

n Workplace practices

n Safety programs

n Diversity

n Corporate governance

2. environmental Stewardship Reduce Sonoco’s environmental footprint by:

n Reducing wastes going to landfills

n Reducing energy consumption

n Reducing greenhouse gas emissions

n Reducing hazardous air emissions

n Reducing water usage

n Implementing and encouraging internal recycling programs

3. economic Performance Create sustainable value for Sonoco and its customers by:

n Enhancing use of sustainable packaging solutions

n Using more sustainable materials

n Providing commercial waste reduction services

n Expanding community-based recycling programs

n Developing renewable energy partnerships

1. Social Responsibility

n Invested $2.5 million in nonprofit organizations to support education, health and welfare, arts and culture, and the environment to improve the communities where we do business

n Provided economic and volunteer support of key economic development programs and initiatives designed to attract industry and jobs into communities where the Company operates

n Exceeded targets for improved service quality, which is measured in percentages of on-time delivery, completed orders, damage-free orders and invoice accuracy

n Improved safety performance in 2009 with a TIR (total incident rate) of .55, com-pared with .63 in 2008; reduced reportable injuries by 41% since 2005 to 108 in 2009

n Increased diversity spend 500% over the past six years to $72 million

n Received low-level risk ratings in audit, board structure and compensation and a medium level of concern rating on shareholder rights from RiskMetrics Group

2. environmental Stewardship

n Diverted 53% of potential landfill waste through beneficial use such as reuse, recycling, upcycling and fuel for our manufacturing processes

n Reduced energy consumption by U.S. and Canadian paperboard mills by 3.3%

n Reduced greenhouse gas emissions by U.S. and Canadian paperboard mills by 13%

n Reduced water withdrawal by U.S. and Canadian paperboard mills by 13%

n Re-energized employee sustainability programs; recycled 6 tons of office waste from Hartsville, S.C. headquarters during the second half of 2009; saved $90,000 in annual energy costs through HVAC setbacks and employee conservation programs

3. economic Performance

n Established the True Blue™ brand, a new umbrella brand for packaging solutions and recycling services which offer our customers environmental advantages over the solutions and services they are intended to replace, either through the use of more sus-tainable materials, material source reductions or reduced consumption and emissions

n Collected and measured Scope 1 and 2 GHG emissions from key strategic suppliers, which represents over 75% of spending

n Collected globally 3 million tons of paper, plastic, metal and other materials to be recycled from more than 15,000 major retailers, manufacturers and municipalities

n Diverted over 10,000 tons of potential landfill waste from internal and customer locations per month


Environmental Stewardship

environmental PolicySonoco takes seriously its responsibility to protect the environment in which we work and live, and will conduct its business in accordance with all legal requirements and ethical responsibilities, using scientific knowledge, technical innovation and sound environmental management practices.n We will be sensitive to environmental issues throughout our business systems, including our selection of materials, processes and products. We will utilize appropriate monitoring techniques to ensure adherence to accepted standards. n We will conduct operations in full compliance with applicable environmental laws and regulations. In those areas of the world where such requirements are at a minimum, we will operate in a completely responsible manner.n We will utilize natural resources efficiently, continuously seeking ways to reduce our requirements. We will strive to maximize the utilization of recovered materials in the products we manufacture and use. n We will minimize the generation of discharges to the environment, including air emissions, wastewater and solid waste.n We will support the development of scientific knowledge relating to environmental matters and implement appropriate new technologies to improve our environmental performance. n We will proactively assist our customers in addressing environmental issues related to their use of our products. n We will communicate openly with our stakeholders concerning our environmental record.n We will cooperate with public and governmental organizations to seek responsible solutions to environmental needs and to develop effective and balanced environmental standards.

Climate Change Policy StAteMent of Intent

Sonoco recognizes it has a responsibility to address the chal-lenges of climate change and is committed to setting the stan-dard in sustainability and environmental performance in the packaging industry. As a result, the Company has established and is implementing a robust climate change policy that mea-sures and reports its progress toward a series of goals, including the reduction of energy and water consumption, emissions and waste generation by Sonoco operations around the world.

We are also committed to providing open, ongoing communica-tions about our efforts, goals and progress, and to working in part-nership with our suppliers and customers on this pressing issue.

Areas of focusSonoco’s climate change policy has three primary areas of focus:n Reducing Sonoco’s overall environmental footprintn Reducing the carbon emissions related to the products we manufacture and services we providen Developing industry partnerships and other cooperative arrangements that encourage awareness and actions related to global warming issues

These focus areas are closely aligned with the Company’s sus-tainability goals and are integrated into the way we operate and grow our businesses.

Goals and targetsWe have set targets aimed at reducing our environmental foot-print by cutting GHG emissions from our global manufactur-ing facilities. We also remain focused on further reducing other air emissions and our overall energy and water usage.

We implemented a global Web-based environmental manage-ment system to collect GHG emissions (tCO2e) data from all of our international manufacturing facilities. We used this new global data to establish baselines and set a goal of reducing GHG emissions from our more than 300 manufacturing facili-ties by 15% by 2014.

To meet this GHG emission goal, we expect to reduce energy usage at our uncoated recycled paperboard mills by maximizing 06 07 08 09

WATER WITHDRAWAL

(million cubic meters)

14.0

10.5

7.0

3.5

12.2 12.5 11.5 10.0


DOES NOT ACCOUNT FOR WATER TREATED AND RETURNED TO STREAMS



energy efficiency through targeted investments and initiatives. We also plan to change process steam production at some of our mills to either renewable or other less carbon-intensive fuels.

We have also submitted our global data for participation in the Carbon Disclosure Project and are working to expand our GHG tracking scope to reduce mobile sources.

Sonoco Recycling Inc. is one of the world’s largest recyclers, collecting more than 3 million tons of recyclable materials annually. In the U.S., Sonoco Recycling collects and processes more than 2 million tons of material each year through 21 recycling centers and 10 paper mills.

overviewSonoco is working to shrink the environmental footprint at each of it’s more than 300 manufacturing plants in 35 countries. Throughout its 111-year history, Sonoco has always complied with all applicable environmental laws and regulations, exceed-ing standards when technology made that possible.

Reducing GhG emissions and energy consumptionIn 2009, by reducing energy consumption and converting steam boilers at some of its paper mills in the United States and Canada to less carbon-intensive fuels, Sonoco achieved a 13% reduction in carbon emissions from its North American mill



system and made significant progress toward achieving its five-year reduction goal. After implementing a global Web-based system to collect emissions data from its international facilities, the Company set a goal of reducing its GHG emissions from its more than 300 international manufacturing operations by 15% by 2014.

The Company is also providing GHG emissions and other information about Sonoco’s environmental footprint to the Carbon Disclosure Project, an independent, not-for-profit orga-nization that maintains the world’s largest and most respected global database of primary corporate GHG emission and cli-mate change information. In 2010, Sonoco added a sustainability section to its supplier scorecard that collects Scope 1 and Scope 2 GHG data on more than 75% of its managed supplier spend, as well as suppliers’ GHG reduction goals, carbon intensity and ability to provide innovative, environmentally based solutions.

Globally, Sonoco’s manufacturing operations continued to focus on reducing energy use. Last year, the Company’s paper mills cut their energy consumption by 3.3%, saving Sonoco approximately $2 million in energy costs and reducing their GHG and other emissions. Sonoco has reduced energy consumption at its mills by 18% over the past decade, saving about $15 million and signifi-cantly reducing emissions. In 2010, a new system began capturing energy usage at all Sonoco plants worldwide.

An upgrade of the lighting at the Company’s Franklin Park, Ill., Global Plastics plant in 2009 cut the energy required to light the building in half and significantly improved the lighting

throughout the whole facility. This lighting retrofit reduces the power used by the plant by more than 299,113 kilowatt hours (kwh) per year, prevents the emission of 150 tons of CO2 and one ton of SO2 per year. And, a two-year old campus-wide energy conservation program that combines HVAC setbacks and with actively involving employees in making Sonoco’s Hartsville headquarters more energy efficient produced about $90,000 in savings and cut campus energy usage by 1 million kwh in 2009.

Reducing landfill waste The Company has collected and processed old corrugated con-tainers (OCC) and other recoverable paper as raw material for its uncoated recycled paperboard mills since the early 1900s. In 2009, Sonoco used approximately 60% of the paper it recovered to produce recycled paperboard used by Sonoco’s businesses to manufacture consumer and industrial packaging.

Sonoco is aggressively pursuing its goal of achieving zero land-fill waste. In Hartsville, non-recyclable materials are kept from being sent to the landfill by using them as fuel for one of the paper mill’s boilers.

In 2009, Sonoco Sustainability Solutions, LLC (S3), the waste-reduction service arm of Sonoco Recycling Inc., audited 114 customer plants and collected more than 102,000 tons of materials for recycling in the U.S. and Canada. S3 expects to triple the number of plants it services and more than double the amount of materials collected for recycling in the next few years. S3 also plans to expand the scope of its waste-reduction

GREENHOUSE GAS EMISSIONS

(thousand metric tons of co2e)

800

600

400

200

664 665 700 561 555

05 06 07 08 09

455 458 477 562 478

05 06 07 08 09

SCOPE 1 – DIRECT EMISSIONS SCOPE 2 – INDIRECT EMISSIONS

DOMESTIC PLANTS AND CANADIAN MILLS

05 06 07 08 09

ENERGY CONSUMPTION

(mmbtu/gross ton)

8.00

6.00

4.00

2.00

6.73 6.54 6.42 6.41 6.21


Sonoco 2010 Sustainability Annual Report

Council’s efforts to increase employee recycling resulted in more than 6 tons of OCC, newspaper, mixed office paper, alu-minum cans and plastic bottles being recycled during the sec-ond half of 2009. Hartsville-based employees also took advan-tage of the opportunity to dispose of their personal e-waste responsibly during Sonoco’s first Spring Green-Up in April 2010, recycling appoximately 500-cubic feet of obsolete elec-tronics and small electrical appliances.

For more information, go to sonoco.com/environment.

Hartsville-based employees proved sustainability is important to them, too, by taking part in Sonoco’s first Spring Green-Up in April 2010. Above right: Hundreds of employees attended recycling and conserva-tion classes led by Jane Hiller, recycling education liaison at Sonoco Recycling’s Columbia, S.C., recycling center. Above left: Many employ-ees also signed a sustainability pledge agreeing to help the Company become more sustainable.

services by handling customers’ organic waste, which can be either recycled or composted.

S3’s efforts also are focused on improving recycling opportunities at Sonoco’s North American manufacturing plants. Most of the Company’s paper-based scrap is recycled into paperboard for conversion into new fiber tubes and cores, protective packaging and composite cans. In addition, Sonoco has expanded the beneficial reuse of products, such as the Company’s nailed wood reel recycling program. During 2009, more than 160,000 tons of products were returned to Sonoco for reuse.

The Company’s Hartsville-based “It’s Easy Being Green” office waste recycling initiative first introduced in 2007 was expanded and revitalized in 2009. A new cross-func-tional group from each of Sonoco’s non-production buildings was created and charged with increasing office waste recycling and energy conservation and develop-ing, tracking and reporting key landfill avoidance and energy conservation metrics. In addition to achieving the energy conservation results previously discussed, the

8


05 06 07 08 09

VOLATILE ORGANIC COMPOUND EMISSIONS (VOCS)(tons per year)

4400

3300

2200

1100

4234 3653 3009 2773 3461*

INCLUDES REGULATED AIR POLLUTANTSDOMESTIC AND CANADIAN PLANTS

*2009 INCLUDES NEWLY ACQUIRED PLANTS

07 08 09

SOLID WASTE DISPOSAL

(thousand tons per year)

240

180

120

60

84 99 103

beneficially usedlandfilled

98 87 92

U.S. AND CANADA

Sonoco 2010 Sustainability Annual Report

residential recycling is a growing part of sonoco recycling inc. and now makes up about 10% of the tons collected by the Company in North America. Expanding residential recycling is one reason why Sonoco Recycling was able to grow its collections by 4% in 2009, while the recycling industry’s collections declined on average by nearly 10%. Most of the Company’s collections growth in 2009 came from a series of new contracts won from munici-palities looking to improve or expand their materials recovery programs.

Sonoco Recycling now serves 125 cities and towns in North America. The City of Durham, N.C., is the most recent addi-tion, having signed a two-year contract with Sonoco Recycling

to haul, sort and recycle residential and commercial materials. Recyclable materials collected from the city are delivered to Sonoco Recycling’s facility in Durham before being transferred to the Company’s full-scale materials recovery facility (MRF) in Raleigh, N.C.

Marcy Thompson, division vice president and general manager of Sonoco Recycling, said when Sonoco becomes a business partner with a community, the Company works to take that

Expanded facilities and new upgrades to equipment at Sonoco Recycling’s center in Charlotte, N.C., have allowed the facility to handle more residential materials as well as more nontraditional recyclables, such as the molded pulp cartons shown above. The Charlotte center will become a full-scale materials recovery facility in 2010.

Sonoco Recycling Inc.

9



Curbside residential material from the City of Durham is unloaded at Sonoco’s Recycling facility in Raleigh. The City of Durham recently signed a two-year contract with Sonoco.

relationship beyond the recycling of materials. She points to the City of Durham as a good example.

“We made a significant commitment to the city, and we plan to integrate ourselves into the community through a number of outreach initiatives, including public education programs and partnerships with local elementary schools,” she said. “We also have plans for a number of recycling events for the community that target various types of paper and e-waste.”

Durham Deputy City Manager Ted Voorhees said Sonoco Recycling offers the service capabilities needed to meet the city’s recycling requirements, and the Company was able to make assurances that it could handle Durham’s recycling at no cost and no risk to the city.

New business and increased volumes create a need for addi-tional facilities, upgraded equipment and improved infrastruc-ture. Sonoco Recycling, which now owns and operates two full-scale MRFs in the Southeast along with 20 other processing facilities, is quickly meeting that need.

In Raleigh, where Sonoco recently extended the city’s contract for an additional five years, operations have grown approxi-mately 800% in the past decade. To keep up with the growth, Sonoco Recycling installed new baling and sorting equipment so that it could increase the center’s capacity. This project was completed in September 2009 and increased baling capacity by 125% and single-stream capacity by 300%.

Single-stream recycling is the process of collecting all paper, plastic, glass, metal and other material in a single container for pick up and separating those materials during processing. A sin-gle-stream solution makes recycling more convenient for resi-dents because they do not have to sort recyclables at the curb, and this increases participation rates overall.

In November 2009, Sonoco Recycling completed a $2 million expansion project at its center in Charlotte. In addition to expanding the facility’s footprint by 23,500 square feet, state-of-the-art sorting and baling equipment were installed, and the facility’s outside space was redesigned to improve traffic flow. Further facility and equipment upgrades will be made in the fall

of 2010 to turn the Charlotte facility into a full-scale MRF, bringing to three the number of MRFs owned by Sonoco Recycling. The upgraded facility will allow the Company to sig-nificantly expand its reach throughout the region.

Sonoco Recycling also completed an expansion of its MRF in Columbia, S.C., in June 2010. The Company invested approxi-mately $2.5 million to expand the facility by 14,700 square feet. It also added new high-tech sorting and conveyor equipment, as well as a high-speed baler to increase single-stream waste capacities.

“By expanding our service capabilities and improving our infra-structure, we’re able to increase—on a significant scale—the amount of materials being processed at our facilities,” Thompson stated. “This better positions us to meet the growing needs of those customers and communities that count on us.”

Sonoco Recycling, one of the world’s largest recyclers, began col-lecting and processing residential materials in 1993. Today, the Company annually collects more than 3 million tons of recycla-ble materials through its commercial, industrial and residential operations, including old corrugated containers and other paper, plastics and metals. The Company operates 48 recycling facilities globally. Throughout the United States, Sonoco Recycling col-lects and processes more than 2 million tons of material each year through 21 locations and 10 paper mills.

For more information, go to sonoco.com/recycling.


Economic Performance

05 06 07 08 09

NET SALES

(billions of dollars)

3.53 3.66 4.04 4.12 3.60$4.8

3.6

2.4

1.2

overviewSonoco’s sound business philosophy and financial strength con-tinued to help the Company fulfill its obligation as a responsible manufacturer, employer and member of the community. In 2009, despite the extremely tough global economic conditions, Sonoco delivered positive business results. Cash generated

from operations was the third highest in Com-pany history at $391 mil-lion, exceeding the $379.4 million generated in 2008. This figure was achieved despite a $100 million voluntary pen-sion contribution.

Cash flow from operat-ing activities was used to pay down debt, fund capital expenditures of $104.2 million and return $107.9 million to shareholders through dividends—marking the 85th consecutive year

of paid dividends to shareholders. Total debt at year end was $581 million, compared with $690 million at the end of 2008, and the Company’s debt-to-total-capital ratio declined from 37% in 2008 to 29.6% in 2009.

Sonoco’s strategy to shift its business mix more toward consumer-related markets also continued to show remarkable success. The Consumer Packaging segment achieved record operating profits of $170 million, up 30% from 2008.

A record for new product sales of $179 million also occurred in 2009, including $162 million generated through Sonoco’s new consumer-related products. GovernanceSonoco adheres to the philosophy that greater transparency and comparable financial reporting is beneficial to the Company’s stakeholders, including its shareholders. The

Company’s board of directors and its leadership team strongly support and adhere to the legislative and regulatory standards adopted by the U.S. Congress, the Securities and Exchange Commission and the New York Stock Exchange.

Integrity is a hallmark of the Sonoco culture. The Company will not permit any type of illegal, unethical or improper behavior on the part of any employee. Employees are expected to comply with the law and conduct all business in a fair and ethical manner.

Corporate governance quotientSonoco’s governance policies, procedures and actions are reviewed and rated by various third-party governance scoring methodologies. The Company’s current governance rating indi-cators (GRId), as determined by RiskMetrics Group, measure risk levels in four governance cat-egories: audit, board structure, compensation and shareholders rights. Sonoco was rated as having a low level of concern in the audit, board structure and compensation categories and a medium level of concern regarding shareholder rights. GRId ratings are deter-mined on an absolute basis com-pared to “best practices” rather than on a relative basis compared to peer and general industry practices.

For more information, go to sonoco.com/economicperformance.

05 06 07 08 09

CASH FLOW FROM OPERATIONS/FREE CASH FLOW

(millions of dollars)

$520

390

260

130

227 483 445 379 392

free cash flowcash dividendscapital expenditures

FREE CASH FLOW EQUALS CASH FLOW FROM OPERATIONS MINUS CAPITAL EXPENDITURES AND DIVIDENDS

05 06 07 08 09

CASH DIVIDENDS PAID TO SHAREHOLDERS

(dollars per share)

$1.20

.90

.60

.30

.91 .95 1.02 1.07 1.08

05 06 07 08 09

NET INCOME ATTRIBUTABLE TO SONOCO

(millions of dollars)

161.9 195.1 214.2 164.6 151.5$220

165

110

55


Sonoco at a Glance

the world’s largest producer of composite cans and a global leader in rigid paperboard containers and convenience closures

Products and Services: Round and shaped com-posite paperboard cans, single-wrap paperboard packages, fiber cartridges. Aluminum, steel and peelable membrane easy-open closures for com-posite, metal and plastic containers

Markets: Food (Both): Powdered beverages and infant formulas, coffee, cereal, snacks, nuts, cook-ies and crackers, confectionery, refrigerated dough, frozen concentrates, spices/seasonings, nutritional supplements, pet foods (Ends and clo-sures): Vegetables, fruit, seafood, poultry, soup and pasta, dairy Nonfood: Adhesives, caulks, cleansers, household chemicals, lawn and gar-den, automotive, pet products

Global Rigid Paper and Closures

a provider of printed innovative high-barrier, high-performance flexible packaging solutions Products and Services: flexible packaging made from thin-gauge, value-added rotogravure, flexographic and combination printed film, includ-ing performance laminations, rotogravure cylinder engraving, global brand artwork management

Markets: Confectionery and gum, hard-baked goods, coffee, processed foods, beverages, snack foods, pet foods, home and personal care

Global flexibles

a leading provider of “one-stop” display solutions, including fulfillment and fee-for-service supply chain management

Products and Services: Designing, manufac-turing, assembling, packing and distributing tem-porary, semipermanent and permanent point-- of-purchase (P-o-P) displays. Packaging supply chain management, including custom and con-tract packing, co-packing, fulfillment, primary package filling and scalable service centers. Custom-printed Stancap® glass covers, Rixie™ coasters, other paper amenities

Markets: (P-O-P displays, supply chain management): Automotive, beverages, confectionery, electronics, personal care, baby care, food, cosmetics, fragrances, office supplies, toys, hosiery, home and garden, liquor, medical, over-the-counter drugs, sporting goods, tobacco (Paperboard specialities): hotels and resorts, food and beverage, healthcare facilities, catering services, transportation, advertising

Global Services


a leading manufacturer of blow-molded plastic containers, consumer and industrial thermoformed plastic pack-aging, and engineered molded and extruded plastic products

Products and Services: Monolayer and multi-layer bottles and jars, monolayer, coated and barrier and non-barrier laminated tubs, cups, con-sumer and industrial trays, spools, product design, tool design and fabrication

Markets: Food: noncarbonated, high-barrier beverages/ready-to-drink products, processed foods, sauces, dips, coffee, powdered bever-ages, pet foods, snacks, nuts, fresh-cut produce, desserts, food service, condiments Nonfood: health and beauty, household chemicals, adhe-sives and specialty products, automotive, medical devices and disposables, textiles, wire and cable, fiber optics, filtration

Global Plastics

Industrial Converted Products

the world’s largest producer of tubes and cores. also a leading provider of custom-designed and engineered protective packaging solutions and reels for the wire and cable industry

Products and Services: Paperboard tubes, cores, roll packaging, molded plugs, pallets, pallet components, concrete forms, void forms, rotary die boards, proprietary protective packaging (Sonopost® technology, Sonobase® carriers, Sonopop® systems), contract package testing, steel, nailed wooden, plywood, recycled and poly-fiber reels

Markets: (Tubes and cores): Construction, film, flowable products, metal, paper mill, shipping and storage, tape and label, textiles, converters (Protective packaging): household appliances, heating and air conditioning, office furnishings, automotive, fitness equipment, lawn and garden, promotional and palletized distribution (Reels): Wire and cable manufacturers

Primary Materials

a global manufacturer of un-coated recycled paperboard for sonoco’s fiber-based packaging divisions and the external con-verting industry, and one of the largest packaging recyclers

Products and Services: (Paper): uncoated recycled paperboard, chipboard, tubeboard, lightweight corestock, boxboard, linerboard, corrugating medium, specialty grades, recovered paper (Sonoco Recycling Inc.): Collection, processing and recycling of old corrugated containers, paper, plastic, metal, glass, other recyclable materials

Markets: Converted paperboard products, spiral winders, beverage insulators

Founded in 1899, Sonoco is a $3.6 billion global manufacturer of consumer and industrial packaging products and provider of packging services. From our headquarters in Hartsville, and 312 operations in 35 countries, our approximately 16,500 employees produce packaging for a variety of industries and many of the world’s most recognized brands in some 85 countries.


True Blue™ Products and Services

overviewA longtime leader in sustainable packaging, Sonoco took its commitment to meeting customers’ needs for environmentally friendly packaging to the next level in 2009 with the launch of its True Blue™ brand of sustainable packaging solutions and recycling services.

To qualify for Sonoco’s True Blue brand, a package must pro-vide a clear environmental advantage over the package it was created to replace either through the use of more sustainable materials or source reduction. A package may also qualify for this new line of sustainable packaging solutions if it requires less energy, water and/or raw materials to produce or results in fewer carbon emissions. The True Blue brand’s stringent stan-dards also require that any improvement in the sustainability of

a package must be verifiable through a life-cycle assessment, third-party certification or recognition by an independent industry organization.

Sonoco’s True Blue product line includes shaped and round composite cans; blow-molded plastic containers; molded and extruded plastic products; ends and closures; printed flexible packaging; point-of-purchase (P-O-P) displays; and protective packaging.

High-performance composite cans from Sonoco’s True Blue line are helping customers like Kraft Foods reduce their products’ environmen-tal footprint. In 2009, Kraft Foods converted its popular Maxwell House coffee from a metal can to a greener and less expensive Sonoco rigid paper can spiral-wound from 100% recycled paperboard.


True Blue™ Products and Services

SM

PEFC/29-31-68

SW-COC-003307The mark of responsible forestry

©1996 Forest Stewardship Council A.C.

true Blue products and servicesIn 2009, Kraft Foods replaced the metal can it was using for its Maxwell House coffee with a high-performance composite can from Sonoco’s True Blue line. Less costly and more environmentally responsible than metal, the can is spiral-wound from 100% recycled paperboard and reduces the amount of raw materials required for package production by more than 4 million pounds annually. It also requires less energy to manufacture and results in fewer GHG emissions. The recycled paperboard that makes up most of the container’s weight is FSC certified and Sonoco’s mills also have received certifications from the Sustainable Forestry Initiative (PWC-SFICOC-294) and the Programme for the Endorsement of Forest Certification (PWC-PEFC-294).

Sonoco, considered the industry leader in non-BPA (Bisphenol A) easy-open ends, introduced its first BPA-free closures in 2008. Today, the Company offers a variety of BPA-free membrane, aluminum and steel clo-sures, including several Ultraseal® membrane ends designed spe-cifically for the powdered infant formula market. Sonoco’s True Blue convenience closure portfolio also includes Ecoseal™ and Safetop® peelable membrane closures, and we continue to pursue downgauging and VOC (volatile organic compound) reduction.

True Blue eco-friendly point-of-purchase displays like the one developed for Unilever’s Vaseline® Sheer Infusion™ body lotion help customers and their retail partners meet their sustainability and sales goals. By redesigning an existing floorstand wing unit, Sonoco’s Global Services group cut the paperboard required to produce the display in half—from 65.2 to 32.65 square feet—without sacrificing its ability to attract consumer attention.

The Protective Packaging group’s packaging transformation pro-gram has also developed a number of new True Blue protective packaging designs that significantly reduce the amount of pack-aging material required. One of Sonoco’s new protective packag-ing designs for Hewlett-Packard (HP) LaserJet printers reduced

the volume of foam required by more than 50%, cut the pack’s corrugated weight by 69% and decreased over-

all packaging volume by 52%. Most of the pack’s components are made from recycled paperboard, so the entire package is easier

to recycle than the previous one. And, although it’s lighter, less expensive and more sustainable than the older, heavier and more expensive package, it provides the same level of product protection.

The Company is also helping customers reduce and ultimately eliminate landfill waste through its fast-growing Sonoco Sustainability Solutions (S3) waste-reduction consulting service. S3 consultants have been working with Kraft Foods since 2007 to help it send zero manufacturing waste to landfills. In 2010, Kraft Foods announced that it had achieved zero-waste-to-landfill status at nine plants; cut manufacturing waste by 30% over the past four years; and now reuses or recycles 90% of its manufacturing waste. And, by identifying recycling alternatives for materials being sent to landfills and developing a more comprehensive recycling pro-gram at Unilever’s Lipton Tea plant in Suffolk, Va., Sonoco helped the largest tea processing plant in the U.S. become a zero landfill plant in 2009.

For more information, go to sonoco.com/trueblue.

Sonoco is helping customers like Unilever and HP meet their sustain-ability, sales and product protection goals with its new line of True Blue sustainable packaging solutions and services.


Social Responsibility

overviewSonoco continued its strong support of communities in 2009 despite facing challenging global economic pressures. The Sonoco Foundation, the primary conduit for corporate dona-tions, made cash contributions of more than $2 million to numerous nonprofit organizations. In addition, the Company made in-kind contributions of about $500,000.

These grants are funded entirely by the Company and are approved by the Sonoco Contributions Committee. Funding is concentrated on those institutions, programs and organiza-tions that encourage the development or improvement of edu-cation, social welfare and health, arts and culture, civic institu-tions and in areas that reinforce our employee volunteerism.

Employees of Sonoco also made a difference by sharing their time and talents for a number of worthy causes. Whether it was helping raise money through active participation in events or offering counsel in a board-membership capacity, Sonoco employees were intent on improving the quality of life in their communities. In many instances, Sonoco structured its finan-cial giving to support those activities in which employees participated.

The Sonoco Institute for Packaging Design and Graphics opened at Clemson University in 2009. The facility acts as an academic stimulator for developing new innovative technologies, research and training focused on consumer experience, printed electronics/optical inks, total package workflow and sustainability.



Sonoco works hard to remain responsive to the ever-changing needs of its communities. At least once each year, the Company’s philanthropic, community, employee and general citizenship activities and policies are reviewed by the Employee and Public Responsibility Committee of Sonoco board of directors.

A focus on educationSonoco has always put great emphasis on supporting education. In fact, education accounted for approximately 75% of the Com-pany’s giving in 2009. Perhaps no other project reflects Sonoco’s commitment to education more than the Sonoco Institute for Packaging Design and Graphics at Clemson University.

Officially opened in March 2009, the 28,000-square-foot facil-ity is the first in the nation to formally house the disciplines of packaging design and graphics under one roof. In addition to learning the basic principals and fundamentals of package design and manufacturing, students enrolled in these curricu-lums get a chance to study how consumer packaging will be perceived, marketed and consumed in the future.

Chip Tonkin, director of the Sonoco Institute, said the new facility provides the packaging industry a resource for develop-ing innovative technologies along with research and training. The curriculum focuses on four specific areas—consumer experience, printed electronics/optical inks, total package workflow and sustainability.

Sonoco Chairman, President and Chief Executive Officer Harris DeLoach said the Sonoco Institute will play a vital role

ContributionsA summary of all 2009 cash contributions in Sonoco communities :n Educational $ 1,575,900n Cultural and Civic 253,200n Social Welfare and Health 220,450n ToTal ConTribuTionS $2,049,550

General policy and guidelinesThe general target for Sonoco’s charitable contribu-tions is 1% of Company domestic pretax profits. Charitable grants are made only to organizations with tax-exempt status. our priority is to give to and support those communities in which we operate. Special consideration is given to those institutions which are supported by our employees through their personal contributions of time and/or money. Sonoco does not make grants to individuals or orga-nizations for religious or political purposes, either for lobbying efforts or campaigns. Sonoco generally does not make grants for educational capital funds programs, endowment purposes, or for trips or tours.

All requests for specific information should be sent to:Sonoco Foundation – a091 north Second StreetHartsville, SC 29550sonoco.com/foundation

the SonoCofounDAtIon

05 06 07 08 09

EMPLOYEE DIVERSITY

(percent)

32

24

16

8

24.9 25.3 25.4 25.6 25.4

womenminority

8.9 9.2 9.3 9.8 10.1

05 06 07 08 09

SUPPLIER DIVERSITY SPENDING

(percentage of total company spending)

8%

6

4

2

3.2 4.5 5.1 5.4 5.4

National Average 3.2%


in helping Sonoco and other companies better meet the changing expectations of consumers and customers in the fast-growing packaging industry. “The Sonoco Institute is an inno-vative way for us to address consumer trends while also main-taining a strong focus on the real issues of packaging perfor-mance and cost,” he said.

Another project Sonoco is especially proud of is the new, state-of-the-art academic center at the Governor’s School for Science and Mathematics in Hartsville. Slated to open in the fall of 2010, the new 70,000-square-foot facility will allow the school to grow its faculty, expand its innovative course offerings and increase enrollment capacity to 300, which more than doubles the previous enrollment number.

In addition to its contributions toward education, Sonoco also provides a scholarship program for the children of U.S. employ-ees. This program, which is administered by a third-party orga-nization, awards 10 four-year scholarships in the amount of $2,000 per year. Scholarships are awarded based on academic record, participation in school and community activities, dem-onstrated leadership, work experience and a statement of goals and aspirations.

SafetySonoco’s overall success in its business would not be possible without a strong commitment to safety. Through ongoing training, including programs focused on eliminating motion-related injuries, Sonoco employees set a new safety record in 2009 with a total incident rate (TIR) of .55, breaking the record set a year earlier of .63.

Sonoco also recognized 219 of its facilities in 2009 with the Company’s prestigious President’s Safety Award, which is given to plants and other facilities that complete 200,000 hours with-out a recordable injury. Of those facilities that received the award, 158 achieved the honor by completing the year without a recordable injury.

In South Carolina, 12 Sonoco plants received 2009 Safety Awards from the South Carolina Chamber of Commerce. And in Brantford, Ontario, Canada, a Sonoco paper mill was named by Pulp & Paper magazine as 2009’s Safest Mill in Canada.


Supplier and employee diversitySonoco is committed to being a leader in the area of diversity. In a difficult economic year, the Company was able to maintain the percentage it spent with women- and minority-owned sup-pliers. The Company directed 5.4% of its total spending to diverse businesses. The national average for similar-sized compa-nies is about 3.2%.

Sonoco is a proud member of the National Minority Supplier Development Council (NMSDC), which in 2009 nominated the Company for Corporation of the Year. The Company also is a member of the Carolinas Minority Supplier Development Council (CMSDC). This organization has twice recognized Sonoco for its supplier diversity initiatives. It is also worth not-ing that in 2009, Diversity Plus magazine selected a Sonoco employee for its Champion of Diversity award.

Employee diversity also is an important part of Sonoco’s culture. The Company encourages every employee to contribute ideas, seek challenges, assume leadership and achieve his or her personal goal by helping Sonoco succeed. Since 2004, Sonoco’s representa-tion in exempt positions for women has grown from approxi-mately 24% to 25.6%, while minority representation has grown from approximately 8.4% to 10.1%. These figures are updated each quarter and shared with Sonoco’s leadership team.

Sonoco also supports Employee Network groups for women and minorities.

For more information, go to sonoco.com/socialresponsibility.

00 01 02 03 04 05 06 07 08 09

SAFETY PERFORMANCE

(total incident rate per 100 employees per year)

1.99 1.49 1.19 1.03 .98 .84 .85 .75 .63 .552.00

1.50

1.00

.50


Corporate Sustainability CouncilSonoco has a strong record in the area of corporate sustainabil-ity, reflecting the Company’s recognition that sustainability is an important issue to our customers, shareholders, employees, the communities where we operate and other key stakeholders.

In 2005, Sonoco identified the need for a more comprehensive approach for the future and formed a corporate sustainability committee with the overarching goal of ensuring that Sonoco continues to integrate the concept of sustainability into the Company’s business strategy, culture and actions.

Council PurposeThe purpose of the Sonoco Corporate Sustainability Council is to provide oversight, guidance and direction on social, commu-nity and environmental issues that have potential impact on the reputation and long-term economic viability of the Company and our stakeholders. Through our actions, we contribute to the economic and social well-being of our stakeholders.

The council meets quarterly and reports to and is sponsored by Sonoco’s chairman, president and CEO. The council reports on Sonoco’s sustainability activities, at least annually, to the board of directors.

Council objectivesn Identify and define those issues that are relevant to Sonoco’s long-term sustainability and image as a good corporate citizenn Establish meaningful long-term and short-term sustainabil-ity objectives related to key areas of focus and provide Sonoco’s executive committee with meaningful recommendations or guidance on how to meet those objectivesn Recommend and establish new Company guidelines, poli-cies and processes to support areas of focusn Create and communicate a business case for corporate sustainabilityn Provide recommendations for the Company’s philanthropic efforts in support of overall corporate sustainability objectives

Board of Directorsemployee and Public Responsibility CommitteeJohn E. Linville, Chairperson

James L. CokerDr. Pamela L. DaviesEdgar H. Lawton IIILloyd W. NewtonPhilippe R. Rollier

Sustainability CouncilCindy Hartley, Senior Vice President, Human Resources

– Committee Chair

Vicki Arthur, Vice President, Global Corporate Accounts

Gloria Bell, Staff Vice President, Internal Audit

Jim Bowen, Senior Vice President, Primary Materials Group, N.A.

Rodger Fuller, Vice President, Global Rigid Paper and Closures

John Grups, Staff Vice President, Operating Excellence

Allan McLeland, Staff Vice President, Human Resources – Industrial

Marty Pignone, Vice President, Global Manufacturing – Industrial

Bob Puechl, Vice President, Global Plastics

Roger Schrum, Vice President, Investor Relations and Corporate Affairs

Jeffrey Schuetz, Staff Vice President, Global Technology – Consumer

Marcy Thompson, Division Vice President and General Manager,


For more information on Sonoco’s sustainability efforts go to sonoco.com/sustainability. Sonoco Corporate Headquarters n 1 North Second Street n Hartsville, S.C. 29550-3305 n +843/383-7000 n sustainability@ sonoco.com

n American Forest and Paper Associationn Carolina Recycling Associationn City of Columbia Green Business Initiativen Environmental Education Association of S.C.n Institute of Scrap Recycling Industriesn National Association of Information Destructionn National Council for Air and Stream Improvementn National Recycling Coalitionn Paper Stock Institute (Chapter of ISRI)n Program for the Endorsement of Forest Certificationn South Carolina Forestry Association n Sustainable Packaging Coalitionn Virginia Recycling Associationn Walmart’s Packaging Sustainable Value Network

MeMBeRShIPS

Sustainability Oversight