Investment Proposal Final

TO: Clark Hansen, CEO, Anima Mundi Development Partners FROM: Lisa Chen, Research & Development DATE: Oct 21, 2022 SUBJECT: Investment Opportunity: Graphic Packaging International My job is to find and research possible investment opportunities for AMDP that commit to doing business in a socially responsible, environmentally sustainable, and profitable manner. After careful consideration, I selected Graphic Packaging International (GPK), an industry leader in fiber-based consumer packaging products, as a recommended investment. Before explaining this investment opportunity, I want to reiterate AMDP’s standards. AMDP Standards Triple Bottom Line The triple bottom line analyzes the sustainability of a company through profit, people, and the planet. Profit is the financial performance of a company, or how much money it makes. People refers to customers, employees, and community members impacted by a company’s actions. The planet measures how much of a positive impact a company has on the environment (Miller). Corporate Social Responsibility CSR refers to company strategies designed to ensure that its operations are ethical and beneficial for society. These include environmental, human rights, philanthropic and economic responsibilities (CFI Team). Social Enterprise Social enterprises are businesses that seek to maximize profits while maximizing benefits to society/the environment. These enterprises follow specific social objectives that serve as its primary purpose (Barone). Carbon Footprint Carbon footprint estimates the total emission volume of greenhouse gasses, which are gasses in the atmosphere that trap and release heat, contributing to climate change (“What is”). It is calculated by summing the emissions released from every stage of a product or service’s lifetime, including carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) (“Carbon Footprint”). To combat the effects of global warming and climate change, we must reduce carbon footprint. Overview of Graphic Packaging Background Headquartered in Atlanta, Georgia, Graphic Packaging International was incorporated in 2007 from the merger of Graphic Packaging Corp. and Altivity Packaging. Graphic Packaging provides fiber-based packaging solutions to food, beverage, and consumer companies through a “product portfolio that emphasizes renewable, recycled, and recyclable materials.” These products are cartons, cups, trays, and lids while the company’s notable customers are Kellogg’s, General Mills, and Nestle. Today, Graphic Packaging is the world’s largest fiber-based consumer packaging company and holds the #1 market share in this sector (“Graphic Packaging”). A History of Growth and Profitability Graphic Packaging is a highly profitable business, earning $7.2 billion in revenue and $1.1 billion in EBITDA in 2021. This represents a 9% growth from 2020. Since its incorporation, the company has acquired 17 additional companies, displaying its vast expansion abilities. The company has 130+ locations and 25,000 employees, compared to 86 and 15,600 respectively in 2007 (ElAmin). Graphic Packaging is clearly capable of returning AMDP’s investment. Why Fiber-Based Packaging? As a packaging company, Graphic Packaging is unique because of its fiber-based focus. Specifically, the company is “betting” that it can cause and lead an “environmental-driven shift” from plastic to fiber packaging (Dezember). Fiber-based packaging differs from plastic packaging because it “is the most environmentally friendly and cost-effective solution” that uses a “minimal amount of natural resources” (“Why fiber”). This is because the fiber life cycle supports reuse from recycling up to 7 times, leading to decreased raw material requirements. Additionally, when comparing a 1-pint fiber-based tray versus a 1-pint plastic tray, there is “a 41% reduction in GHG emissions (CO2 eq)” with the fiber-based tray (“Fiber-Based Produce). Why a Packaging Company? Although many consider packaging as harmful to the environment because of the waste it produces, we must remember that all food/consumer products require this packaging for safety regulations. Nonetheless, Graphic Packaging leads this industry in adhering to AMDP standards. Vision 2025 Graphic Packaging is using “Vision 2025” as measurable progress for its ESG standards. It is on track to achieve Vision 2025 by 2025 from 2016 benchmarks. Like the triple bottom line, vision 2025 includes pillars: people, planet, products, and partners (“2021 ESG”). People • Achieve top quartile employee engagement • Continue progress toward target of zero safety incidents • 100% global converting plants in compliance with a social responsibility audit Planet • Reduce GHG intensity by 15% (metric tons CO2e/$1,000 sales) • Reduce nonrenewable energy intensity by 15% (MWh/$1,000 sales) • Reduce mill water effluent intensity by 15% (megaliters/metric ton board) Products • 100% of sales are generated from products that are recyclable • Reduce LDPE (low-density polyethylene) use by 40% Partners • All global facilities will be compliant with a fiber certification standard Company Analysis Graphic Packaging holds itself to its environmental mission and standards. Graphic Packaging’s achievement of these standards resulted in Forbes naming it one of The World's Best Employers and one of The World's Top Female-Friendly Companies in 2021. The ranking asked participants to rate companies on aspects such as economic impact and image, talent development, gender equality and social responsibility (“Meet”). Similarly, Newsweek listed Graphic Packaging on their list of America's Most Responsible Companies of 2021/2022 (“2021 ESG”). The ranking focuses on a “holistic view on corporate responsibility that considers the three areas of ESG (environment, social and corporate governance)” (“America’s Most). From a market perspective, investors highlight Graphic Packaging’s ESG commitment. Michael Roxland, a director of equity research at Truist Securities, said that “GPK is focused on driving sustainability and ESG and has identified ~$9 billion of addressable sustainable packaging market opportunities” (Roxland). Lastly, in August 2022, the company partnered with a Coca-Cola bottling company to launch its sustainable packaging system for multipacks of cans. Paul Mulligan, co-owner of Liberty Coca-Cola Beverages noted that “the most valuable change to reduce plastic waste occurs when bottlers and packaging producers work together and we look forward to partnering with Graphic Packaging on this sustainable packaging for years to come” (McNees). This implies that Graphic Packaging’s products are the most effective option for reducing waste. Mulligan also said that Coca-Cola is “committed to producing sustainable products across our territories that eliminate waste,” displaying how multinational corporations look toward Graphic Packaging to meet their own ESG initiatives (McNees). Recommendation From this analysis, I strongly recommend Graphic Packaging International as an investment for AMDP. Graphic Packaging’s fiber-based products position it as the preeminent company to gain market share as companies shift away from plastic packaging for environmental concerns. The company also sets transparent, measurable standards that align with the triple bottom line and corporate social responsibilities.

Works Cited

“America's Most Responsible Companies 2022.” Newsweek, https://d.newsweek.com/en/file/462268/americas-most-responsible-companies-2022-methodology.pdf. Accessed 21 October 2022.

Barone, Adam. “Social Enterprise Definition - Business Essentials.” Investopedia, https://www.investopedia.com/terms/s/social-enterprise.asp. Accessed 18 October 2022.

“Carbon Footprint Factsheet | Center for Sustainable Systems.” Center for Sustainable Systems, https://css.umich.edu/publications/factsheets/sustainability-indicators/carbon-footprint-factsheet. Accessed 18 October 2022.

CFI Team. “Corporate Social Responsibility (CSR) - Types and Business Benefits.” Corporate Finance Institute, 7 May 2022, https://corporatefinanceinstitute.com/resources/knowledge/other/corporate-social-responsibility-csr/. Accessed 18 October 2022.

Dezember, Ryan. “Can Paper Replace Plastic? A Packaging Giant Is Betting It Can.” Wall Street Journal, 2 January 2022, https://www.wsj.com/articles/can-paper-paperboard-cardboard-replace-plastic-packaging-11641134377. Accessed 21 October 2022.

ElAmin, Ahmed. “Graphic Packaging and Altivity merge.” Bakery and snacks, 19 July 2008, https://www.bakeryandsnacks.com/Article/2007/07/13/Graphic-Packaging-and-Altivity-merge. Accessed 21 October 2022.

“Fiber-Based Produce Packaging: The Key to Success for Forward-Thinking Growers.” fiber-based produce packaging e-book, 30 August 2022, https://www.graphicpkg.com/documents/2021/11/fiber-based-produce-packaging-e-book.pdf/. Accessed 21 October 2022.

“Graphic Packaging Holding Company Investor Day / 4Q and Full Year 2021 Earnings.” Investor Meeting Slides, 17 February 2022, https://s23.q4cdn.com/180757317/files/doc_financials/2021/q4/Investor-Meeting-Slides-vFF-Website-(2).pdf. Accessed 21 October 2022.

McNees, Marissa. “Graphic Packaging to launch KeelClip paperboard technology in US market.” Recycling Today, 17 August 2022, https://www.recyclingtoday.com/article/graphic-packaging-partners-with-liberty-coca-cola-beverages-to-launch-keelclip-in-united-states/. Accessed 21 October 2022.

“Meet The World’s Best Employers 2022.” Forbes, 8 March 2014, https://www.forbes.com/sites/elisabethbrier/2022/10/11/meet-the-worlds-best-employers-2022/?sh=1b6afe0bc086. Accessed 21 October 2022.

Miller, Kelsey. “The Triple Bottom Line: What It Is & Why It's Important.” HBS Online, 8 December 2020, https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line. Accessed 18 October 2022.

Roxland, Michael. Investor Meetings Highlight Solid Execution, Momentum; Buy GPK. 6 September 2022. Graphic Packaging Holding Company (GPK), Truist Securities, https://workspace.refinitiv.com/web/Apps/Research/?view=documentViewer#/documentViewer?docID=98223217&date=2022-09-06T06:00:00&pdfSize=page-actual&moreDocs=true&windowTitle=DocumentInformation&halo=true&keyword=esg.

“2021 ESG Highlights.” Graphic Packaging International, 8 March 2014, https://cdn.metrio.net/clients/graphicpkg/global-assets/reports/2021-gpi-esg-highlights.pdf. Accessed 21 October 2022.

“What is a carbon footprint.” Conservation International, https://www.conservation.org/stories/what-is-a-carbon-footprint. Accessed 18 October 2022.

“Why fiber-based packaging is a solution for sustainable supply chains?” Nefab, https://www.nefab.com/en/news-insights/2022/why-fiber-based-packaging-is-a-solution-for-sustainable-supply-chains/. Accessed 21 October 2022.