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Corporate Social Responsibility

CORPORATE SOCIAL RESPONSIBILITY REPORT

VISION STATEMENT: Staples' corporate soul is centered on a rock solid belief in social responsibility and the desire to make a positive impact on our associates, customers, and the world. We act responsibly and with integrity, conducting our global business as a great employer, corporate citizen and neighbor. Staples' soul thrives in the fair treatment of our diverse and talented associates, in our environmental conscience, in giving back to our communities and in our sound business ethics.

We are proud of the excellent financial results we achieved in 2004. We are equally proud of the way we achieved these results and the positive difference we have made in the lives of our stakeholders. Listening to our associates, customers, suppliers, the communities where we do business, and environmental advocates, we have made significant strides in continuing our journey to be a great corporate citizen. As we grow our business, we believe being socially responsible will differentiate Staples and drive our company performance. Over the past year, we assembled a team of associates to strengthen our commitment to sustainable business practices in four key areas, including the environment, business ethics and corporate governance, diversity, and community affairs. We are pleased with our accomplishments, many of which are summarized below. Going forward, we will continue to seek new ways to integrate our commitment to corporate social responsibility with our core business.

ENVIRONMENT

Environmental stewardship and sustainable business practices continue to be important at Staples. We offer products and services to help our customers preserve natural resources and reduce their environmental footprint.

Staples' company-wide commitment to the environment is founded on four major cornerstones: the purchase and promotion of products containing post-consumer recycled materials; recycling initiatives; energy conservation and renewable power procurement; and environmental education initiatives for customers and associates.

Purchase and Promotion of Products Containing Post-Consumer Recycled Materials
Staples offers for sale nearly 2,800 items containing recycled materials. These products range from paper to plastic storage to remanufactured ink and toner cartridges. This, coupled with our industry-first paper procurement policy, continues to promote responsible sourcing from sustainably managed forests, clean production, and utilization of more recycled and alternative fiber content material. Staples has increased the average post-consumer content in all paper offered for sale in the US from 18.7% in 2002 to 26.9% in 2004, progressing toward our stated goal of 30%. The average post-consumer recycled content offered for sale in cut sheet paper, which includes copy paper and printer paper, is 31.6%. We continue to increase recycled content in paper used in internal operations, such as marketing, shipping, and packaging of Staples brand products.

Staples actively participates with our suppliers, environmental non-government organizations and scientists to identify and protect endangered forests, including those with high conservation values.

While paper represents the greatest opportunity to incorporate recycled content into finished goods, we are looking at creative opportunities to incorporate more post-consumer plastic, metal and wood composites into the design of Staples brand products while maintaining high performance standards and competitive pricing.

Recycling Initiatives
Staples has implemented a variety of programs to make it easy for our customers to recycle. We offer recycling of ink and toner cartridges in the US and Canada, which also benefit local schools through Staples Recycle for Education, a program that donates $1 to public education charities and schools for every eligible used cartridge that is recycled at more than 1,200 Staples stores. Cellphones, PDAs, pagers, chargers and digital cameras are recycled with our partner, Collective Good Inc., with a portion of proceeds benefiting the Sierra Club in the US and Special Olympics in Canada. We recycle rechargeable batteries at all stores through our partnership with the Rechargeable Battery Recycling Corporation. Staples also conducted numerous computer recycling events in 2004 as a US Environmental
Protection Agency "Plug into eCycling" partner, to help address the growing global problem of electronic waste.

We continue to divert more of our own waste stream for recycling, including more than 34,000 tons of cardboard and over 350,000 lamps, and responsibly recover and recycle obsolete electronic assets.

Energy Conservation and Renewable Power Procurement
Staples is committed to reducing the impact on climate change through two key initiatives, energy conservation and renewable power procurement. We continue to incorporate green technology in new building design, retrofit lighting, HVAC and controls in existing buildings. Additionally, we have worked towards aggressively conserving energy through energy management systems, reducing the energy used per square foot of real estate by 12.1% since 2001.

We have signed contracts for two 280kw solar systems in 2004, which will be operational in 2005. Additionally Staples purchases 10% (over 50,000,000 kWh) of total US power from green e-certified sources, including wind, landfill gas, biomass and small certified hydro. Staples was named US Department of Energy Green Power Partner of the Year in 2004. Working towards our 2005 goals, we will continue to reduce direct and indirect emissions.

Environmental Education
Staples was a sponsor of America Recycles Day for the fourth consecutive year in 2004, to help raise awareness of the importance of recycling and buying recycled content products. We sponsored a Business to Business Resource Page in partnership with Earth 911 and the Massachusetts Department of Environmental Protection. The site provides businesses with local resources to help them operate more sustainably.

Staples Foundation for Learning sponsored a grant in 2004 to Earth Force, an organization which provides teachers an innovative multi-disciplinary curriculum focused on environmental education for middle school students.

Staples continues to improve content of environmental information on our website and in-store signage, and promotes environmental stewardship through company sponsored events. Additional environmental information and a complete 2004 Sustainability Report can be found at www.staples.com/recycle.

BUSINESS ETHICS AND CORPORATE GOVERNANCE

Business Ethics
Our commitment to business ethics starts with our Code of Ethics. This is a set of guiding principles that applies to all of our associates around the world, as well as members of our Board of Directors. We implemented a Code of Ethics more than a decade ago, but in 2004 we made a renewed effort to build awareness of our standards and make it easier for associates to do the right thing. We created a new role of Vice President, Business Ethics to focus our efforts in this important area and make sure that business ethics is part of our everyday culture.

Over the past year, we also created a new Supplier Code of Conduct. The Supplier Code of Conduct formalizes our factory certification program, which has been in place for several years. Under this program, we use a third party to audit new and existing factories manufacturing Staples brand products to ensure they can meet our quality, social responsibility, and security standards. We are committed to working with factories that can provide and sustain fair and safe labor practices.

Corporate Governance
Since our founding, we have sought to follow best practices in corporate governance in a manner that is in the best interests of our business and shareholders. In 2004, we further aligned management's interests with the interests of Staples' shareholders through two important corporate governance initiatives. First, we do not have a shareholder rights plan in effect and are not considering adopting one. Further, in response to our shareholders’ request, our board of directors adopted a shareholder rights plan policy, under which we will only adopt a shareholder rights plan if the plan has been approved by shareholders either in advance or within 12 months of its adoption by our board. Second, our board adopted new stock ownership guidelines. These guidelines require that non-management members of the board own a minimum level of equity in the company worth at least $200,000. The new guidelines also call for minimum equity ownership levels for all senior executives, including the CEO, who must own equity worth at least five times his salary. Going forward, Staples will continue its commitment to best practices in corporate governance.

A GREAT PLACE TO WORK

Staples strives to be a truly great company -- one that people are proud to work for, offering an inclusive environment where each member of our diverse and talented team can develop and make a difference.

Fostering such an environment helps us build a more productive, vibrant and loyal workforce. Our associates' diverse set of viewpoints helps us understand and build rapport with our customers, resulting in better customer service and a more rewarding shopping experience. Reflecting the face of our customers helps us sustain a competitive advantage that is crucial to our success. Visitors to our stores who are greeted by associates with similar backgrounds - even languages, in some cases - feel more at home and are more likely to become loyal customers. We're reaching out directly to attract diverse customers, as well. In southern California, we launched our first advertising campaign targeted to the Latino population. Our excellent track record in diversity is an important factor that many of our Contract customers look to when making their supplier decision.

To attract and retain people from diverse populations, we market Staples in a variety of venues. We recruit at historically black and high-minority colleges, attend job fairs, and advertise on diverse Web sites. In 2004, our college recruiting initiatives resulted in 67% diverse new hires and 45% female new hires. We work with various professional organizations that represent women and minorities, such as Women for Hire, the Association of Latino Professionals in Finance and Accounting, and the national Association of Black Accountants.

Staples provides many opportunities for associates to learn and grow in their careers. Staples University offers world-class training to all associates including classroom, computer-based, and satellite instruction. In 2004, our continued efforts to build a strong and talented team helped us fill nearly 60% of all management openings with internal candidates.

Because we want every associate to think like an owner, we provide a wide range of equity incentive programs and profit sharing opportunities. Staples' Employee Stock Purchase Plan gives all associates a chance to share in Staples' long-term success. We also offer a performance based bonus program to our store associates for team performance that drives high customer service and sales results.

Our diversity strategy was developed with input from our associates. The Staples eDiversity Marketplace, an initiative created internally, supports minority- and women-owned businesses that supply goods and services to Staples.

We've expanded our national partnerships and initiatives that support diversity. Partnerships with organizations like the Initiative for a Competitive Inner City, as well as the creation of the Staples Minority-Owned Business of the Year Award, support our commitment to small businesses in America's inner cities and focus on entrepreneurs and 28% of minority-owned businesses in communities nationwide. In 2004, Staples was recognized by DiversityBusiness.com as a multicultural business.

Staples emphasizes an inclusive, results-oriented environment that values each of the 65,000 members of our team. We recognize our associates for their many ideas, impact, talent, and leadership style that truly make a difference --- to our associates, to our customers in the local communities we serve, and in the success of our business. Promoting and publishing our TeamCARE values ensures that every associate knows diversity is key to our company's success.

STAPLES IN THE COMMUNITY

Staples Foundation for Learning, Inc.
Staples supports communities nationwide by providing resources to non-profit organizations that provide educational opportunities for all people, with a special emphasis on disadvantaged youth. Staples Foundation for Learning was launched in August of 2002, and has since contributed over $4 million to 205 organizations in 129 communities throughout the country. The Foundation supports causes that teach, train and inspire young people from diverse backgrounds to help them achieve their highest potential and grow into capable and productive members of society.

2004 National Grants:

Boys & Girls Clubs of America
Since 2002, Staples Foundation for Learning has been a national supporter of Boys & Girls Clubs of America (BGCA), an organization that provides a safe and structured environment for children after school. In 2004, the Foundation continued to fund its three-year, $2.5 million grant to the Boys & Girls Clubs of America's Torch Clubs program. In addition to helping build character and leadership skills in pre-teens, Torch Clubs promote positive self-esteem and personal growth, reinforce academic achievement and encourage children to develop into conscientious citizens. During 2004, Staples Foundation for Learning helped BGCA accomplish the following:

  • Established 248 new Torch Clubs, serving 3,761 youth
  • Improved training for Torch Club advisors by providing over 3,200 new professional development opportunities
  • Increased the community service commitment of Torch Club members by establishing the Staples Torch Club Awards to annually recognize outstanding programs in the areas of Service to the Club and Community, Education, Health and Fitness and Social Recreation

Initiative for a Competitive Inner City
Staples Foundation for Learning awarded a grant to the Initiative for a Competitive Inner City (ICIC) to support the Inner City 100 program. Developed in partnership with Inc. Magazine, the Inner City 100 list recognizes entrepreneurs in some of America's most disadvantaged inner city communities. In 2004, ICIC accomplished the following with the support of Staples Foundation for Learning:

  • Increased nominations to Inner City 100 list by more than 20%
  • Created best business practices report for inner city businesses, mayors and staff involved in economic development
  • Began an advisory board of minority CEOs to help fuel ideas for ICIC programs

Earth Force
Staples Foundation for Learning awarded a grant to Earth Force to support its National GREEN Initiative, a program that helps teachers infuse classroom teaching with environmental problem solving. Staples Foundation for Learning helped Earth Force accomplish the following:

  • Provided 32 teachers with specialized environmental training and teaching resources
  • Impacted over 950 students through environmental education and community projects
  • Increased teacher and student community involvement, awareness of environmental issues and development of critical thinking skills

LINC TELACU Education Foundation
The LINC TELACU Education Foundation received a grant from Staples Foundation for Learning for their College Advisement & Leadership Program. LINC TELACU provides financial assistance, advisement, counseling, and internship opportunities to qualified Latino students seeking college degrees. The College Advisement & Leadership Program is for all incoming freshman LINC TELACU scholars, and provides college survival skills, leadership training, and job-preparedness skills.

Institute for Entrepreneurship
Staples Foundation for Learning provided the Institute for Entrepreneurship support towards its national Youth Venture Grant Program. The mission of the Institute for Entrepreneurship is to provide young people throughout the United States with assistance to start businesses.

Product Donations
In 2004, Staples donated office products worth $4 million to help outfit non-profit organizations in communities throughout the United States. In Staples stores, managers develop relationships with local charities and donate product to help fulfill their needs. In addition, Staples Distribution and Fulfillment Centers provide organizations such as SHOPA Kids in Need Resource Centers and Crayons to Computers with much-needed supplies.

Cause-Related Programs

Supplies for School Kids
Each year during the back to school season, Staples joins forces with its customers to help prepare children from low-income families for the school year. Staples’ customers are encouraged to make a donation that provides school supplies for a local Boys & Girls Club member. Now in its third year, this program builds upon the partnership between Staples and Boys & Girls Clubs of America by providing additional tools and resources for children to be successful in school and beyond. Through the efforts of Staples' associates and customers, Staples contributed approximately $1 million in school supplies to Boys & Girls Clubs members nationwide in 2004, a 150% increase from 2003.

Staples Business Depot in the Community
Staples Business Depot is committed to building a stronger, more caring community through various programs throughout Canada. Staples Business Depot has been a proud national sponsor of Special Olympics Canada since 1996 through financial and in-kind support to help fund training programs in every province and territory across Canada. In addition, each year customers are invited to help support Canada's Special Olympics athletes through the Give a Dollar Share a Dream program. By giving a donation, customers can help send athletes to the Special Olympics National and World Games. Over the last three years, over $1 million has been raised through this program.

Each year, Staples Business Depot organizes the National Writing Challenge to promote children's literacy and raise money for Canadian schools. Winners' stories are published in the annual Staples Business Depot short story book, which is sold in stores for a limited time each year. Staples Business Depot donates all of the net proceeds from the sale of the book to Canadian schools.

In addition, Staples Business Depot helps meet the needs of hundreds of community, regional and national projects and organizations every year throughout Canada through store community involvement funds. From sports tournaments to educational programs, Staples Business Depot stores devote resources to organizations within their local communities.

LOOKING AHEAD

We are excited about the progress that we have made over the past few years as we have sharpened our focus on sustainability. While we are pleased with our accomplishments, we recognize this is the beginning of a journey. We look forward to continuing the dialogue with our stakeholders and implementing new initiatives to further our progress to drive social responsibility.