Environment, Health and Safety Progress Report

2002

Contents

Xerox gives new life to old products through its equipment remanufacture and parts reuse/recycle operations.

1

To Our Stakeholders A Message from the Chief Executive Officer

2

About This Report For More Information

3

Executive Summary 2001 Highlights

4

Company Profile

5

Policy, Goals and Strategy Integrating Environment, Health and Safety into Xerox Business

10

Waste-Free Products Sustainable Design

18

Waste-Free Goals in Practice Product Showcase

20

Waste-Free Facilities An Ongoing Commitment

26

Environmental Remediation Compliance Penalties

27

Accessible Products Designing for Universal Use

28

Employee Well-Being Health and Safety at Xerox

32

September 11, 2001 Xerox’s Response

Corporate Environment, Health and Safety Policy Xerox Corporation is committed to the protection of the environment and the health and safety of its employees, customers and neighbors. This commitment is applied worldwide. The following principles shall govern all business practices in the design, manufacture, procurement, marketing, distribution, maintenance, reuse/recycling and disposal of products and related services:

• Protection of the environment and the health and safety of Xerox employees, customers and neighbors from unacceptable risks takes priority over economic considerations and will not be compromised. • Xerox operations must be conducted in a manner that safeguards health, protects the environment, conserves valuable materials and resources, and minimizes the risk of asset losses. • Xerox is committed to designing, manufacturing, distributing and marketing products and processes to optimize resource utilization and minimize environmental impact. • All Xerox operations and products are, at a minimum, in full compliance with applicable governmental requirements and Xerox standards. • Xerox is dedicated to continuous improvement of its performance in environment, health and safety.

To Our Stakeholders A Message from the Chief Executive Officer

In today’s economy, businesses and organizations of all sizes face the challenge of improving their performance or being overtaken by the tide of change. For Xerox, the last two years have not only been the most challenging in our history, they have been about survival. We have taken dramatic steps to return to operational profitability. We have sold non-core assets to raise over two billion dollars and improve our liquidity. We have taken over one billion dollars out of our cost base to improve our competitiveness. And we have strengthened our operations, invested in our core business and charted a course for future growth. None of this has been easy. Through it all we have maintained a firm commitment to our company’s values, regarding them not as burdens but as keys to success. These core beliefs, articulated over 40 years ago by our first Chief Executive Officer, Joseph C. Wilson, are guideposts for doing business in these turbulent times: • We succeed through satisfied customers. • We value and empower our employees. • We aspire to deliver quality and excellence in all we do. • We provide superior returns to our shareholders. • We use technology to develop market leadership. • We behave responsibly as a corporate citizen.

Building on these values, Xerox adopted a corporate environment, health and safety policy long before it was popular to do so. The policy commits our business to the protection of the environment and the health and safety of our employees. It states that we will not take unacceptable risks with the environment or people’s health and safety in pursuit of economic gain. This principle is central to the way Xerox does business in every nation around the globe. A comprehensive set of worldwide programs that focus on environmental and safety management systems form the backbone of our efforts to put this policy into practice. Five years ago, we set a goal of implementing environmental management systems in every manufacturing operation around the world — driving responsibility for environmental performance to the operational level where it is most effective. This year, we met that goal when we registered our last manufacturing operations to the ISO 14001 environmental management system standard. Xerox operations are guided by an environmental goal that can be articulated in a few words: making Waste-Free Products in Waste-Free Factories, to help our customers attain Waste-Free Workplaces. The environmental progress detailed in this report is the direct result of ongoing efforts to reach this goal. Key results from 2001: • Our pioneering efforts in remanufacturing and parts reuse diverted 167 million pounds of waste from landfills. • Through the reuse of parts and the sale of ENERGY STAR® products, we enabled energy savings of more than 49 million therms (nearly 1.5 million megawatt hours). • Xerox factories worldwide recycled 90 percent of their non-hazardous solid waste.

The importance of protecting our employees from hazards in the workplace is deeply embedded in our company values. Our Zero Injury program, begun in 1997, has yielded good results by two industry measures. Between 1996 and 2001, our Total Recordable Incident rate dropped 47 percent and the Day Away From Work case rate was cut 46 percent. While our rate of improvement has slowed over the last two years, we will not be satisfied until we reach benchmark levels of employee protection. The year 2001 brought profound changes to our world — most notably, the events of September 11. We deeply feel the loss of two employees — Sean Booker and Robert Chin — who perished in the tragedy. The spirit of Xerox people was most evident during and after the events of that day. You will find a brief summary of their contributions in this report. The pace of change is accelerating. Regulatory schemes are more complicated. Customer expectations have grown. Pressing environmental problems of the 21st century, such as global climate change and proliferating electronic waste, pose a sense of urgency. In response, we are strengthening environment, health and safety requirements for our suppliers, investing in technology to reduce the environmental impacts of our products, and designing products and solutions that are usable by a greater base of potential customers, including those with disabilities. Every business must do its part in striving toward a sustainable world. I pledge that Xerox will. Sincerely,

Anne M. Mulcahy Chief Executive Officer

1

About This Report Xerox’s 2002 Environment, Health and Safety Progress Report is the eighth in a series of annual reports documenting our progress toward goals for protecting the environment and the health and safety of Xerox employees, customers and neighbors. This report reviews worldwide performance during the 2001 calendar year. It also includes discussion of 2002 goals and activities. Safety performance data cover all Xerox operations and its wholly-owned subsidiaries during the 2001 time period. Environmental results show full-year performance of Xerox manufacturing, research and development, and equipment recovery/recycle operations, including facilities sold in late 2001.

This report supports our continued efforts to maintain an open dialogue with audiences interested in Xerox’s environment, health and safety initiatives, including employees, customers, investors, government agencies and non-governmental organizations. Each year, Xerox strives to enhance the value of this report, incorporating best practices in international reporting and feedback from readers. Please send your comments and suggestions to:

Xerox Customer Environment, Health and Safety Support Xerox Corporation 800 Phillips Road, Bldg. 205-99F Webster, New York 14580 U.S.A. Telephone: (800) 828-6571 TTY: (866) 375-4134 E-mail: [email protected] Xerox Europe Environment, Health and Safety Bessemer Road Welwyn Garden City Hertfordshire AL7 1HE England Telephone: 44 1707 353434 E-mail: [email protected]

For More Information The following environment, health and safety materials are available from the Xerox contacts listed above or on the Internet: www.xerox.com/environment.html. • Xerox Environment, Health and Safety

Progress Reports, 1994-2001 • Material Safety Data Sheets • Product Safety Data Sheets • Protecting our Planet is a Group

Project: Join In • Because We Can’t Remanufacture

Xerox beneficially manages 99 percent of the hazardous waste generated in our manufacturing facilities, largely through on- and offsite treatment and recycling.

the Earth • Business Guide to Waste Reduction

and Recycling • Facts About the Safety of

Xerox Products • Facts About Ozone

The 2002 Xerox annual report and information about corporate commitments to social responsibility and diversity are available from www.xerox.com.

2

Executive Summary 2001 Highlights Xerox demonstrated continued progress toward key environment, health and safety goals in 2001, improving the performance of Xerox products and facilities for the benefit of our customers, employees and neighbors. The following paragraphs summarize this progress, linking our accomplishments to the goals they support.

Goal: Waste-Free Products

• Increased the number of Xerox products meeting the stringent requirements of the international ENERGY STAR, Canada’s Environmental Choice and Germany’s Blue Angel ecolabels.

Manufacture (Parts Reuse)

Use (ENERGY STAR)

CO2 Emissions

49

50

1,000

45 856 800

40

40

733

32 30

26

20

400

381 8

10

• Expanded our line of recycled-content supplies to include colored papers and several new premium products for digital color printing applications.

600

565

253

200

55 //

0 1991

Avoided CO2 Emissions (Thousands of Tons)

• Enabled energy savings of more than 49 million therms (nearly 1.5 million megawatt hours) through the reuse of parts and the sale of ENERGY STAR products.

Energy Savings From Parts Reuse and ENERGY STAR Product Features

Annual Energy Savings (Millions of Therms)

• Prevented 167 million pounds of material from entering landfills through the reuse and recycling of Xerox equipment and supplies.

0 1997

1998

1999

2000

2001

Goal: Waste-Free Facilities

• Beneficially managed 99 percent of hazardous waste through treatment, recycling or fuels blending.

2001 Hazardous Waste Management 16% Treated Off-Site

• Recycled 90 percent of non-hazardous solid waste generated in all Xerox facilities. Xerox’s worldwide equipment recovery/recycle operations achieved a 94 percent recycle rate.

69% Treated On-Site

8% Recycled 6% Fuels Blended

• Registered Xerox manufacturing facilities in Dundalk, Ireland, to the ISO 14001 standard for environmental management. With the certification in 2002 of our plant in Wilsonville, Oregon, and a supplies manufacturing operation in Webster, New York, we have completed a multi-year effort to register all Xerox manufacturing operations to ISO 14001.

1% Disposed

Goal: Safe Workplace and Healthy Workforce

• Reduced the number of musculoskeletal injuries among Xerox employees in our U.S. manufacturing operations by 65 percent from a 1992 baseline.

Workplace Injury Rates Total Recordable Incidents

Day Away From Work Cases

4

Per 100 Employees

• Maintained injury levels well below industry averages. Further improved our safety record with a two percent reduction in the rate of Total Recordable Incidents and an eight percent decline in the Day Away from Work case rate.

3 2.40 1.92

2

1.85 1.56

1

1.05 .73

1.30

1.28

.81 .69

.62

.57

1.15 .51

0 1996

1997

1998

1999

2000

2001

2002 Target

3

Company Profile Product Portfolio

Founded

1906, as The Haloid Company 1961, renamed Xerox Corporation Corporate Headquarters

800 Long Ridge Road P.O. Box 1600 Stamford, Connecticut 06904 U.S.A. Chief Executive Officer

Anne M. Mulcahy Vice President Environment, Health and Safety

Jack C. Azar Stock Information

Xerox is publicly traded on the New York Stock Exchange; symbol XRX.

4

Xerox sales and service operations support commercial and government customers in the United States, Canada, Europe, and more than 120 countries in Africa, Central and South America, Eurasia and the Middle East. Our products are sold via direct sales, telebusiness and the Internet, as well as independent resellers, agents and concessionaires. Xerox has research and manufacturing sites in ten countries around the world. Manufacturing operations build production printing systems as well as imaging supplies such as toners, inks, photoreceptors and copy/print cartridges. They also remanufacture and recycle machines and supplies returned to Xerox by customers at end-of-life. Xerox changed the scope of its manufacturing operations significantly in 2001, outsourcing the production of office equipment to Flextronics International Limited, a global electronics manufacturing services company. This arrangement involved the transfer of manufacturing operations in eight facilities in Brazil, Canada, Mexico, Malaysia, the Netherlands, the United Kingdom and the

Thousands of Employees

100

91.5

92.7

94.6

U.S. 92.5 78.9

75 50

50.2

52.0

53.2

50.0

46.6

25 0

1997

1998

1999

2000

2001

Revenues U.S. Dollars (Billions)

Scope of Business Operations

Employees Worldwide

20

17.4

18.8

19.0

18.8 17.0 5.0

Other Areas Europe

10.0

U.S.

2.0

15 10 5 0 1997

1998

1999

2000

2001

Net Income 1,000 893

U.S. Dollars (Millions)

Xerox announced the world’s first automatic plain paper copier in 1959. Since then, the company has transformed itself into a digital, color and document solutions and services company.

Xerox provides offices and production printing environments with a wide array of offerings. Our product portfolio includes printing and publishing systems, presses, multifunction systems, copiers, printers and fax machines. Our line of supplies includes toners, inks, copy/print cartridges and printing materials. Xerox software, solutions and services — including operation of in-house production centers — help customers streamline processes for managing documents and information.

844

500 -167

0 -500

1997

1998

1999

-273

-71

2000

2001

United States. These operations represent approximately two-thirds of Xerox’s worldwide manufacturing capacity. Because the transfer to Flextronics began in late 2001, these facilities’ performance data are included in this report.

Policy, Goals and Strategy Integrating Environment, Health and Safety into Xerox Business Xerox’s environment,

Environment, Health and Safety Vision and Goals

health and safety vision

The value of responsible corporate citizenship has been firmly embedded in Xerox culture since the company’s inception. We consider protection of the environment and the health and safety of our people to be fundamental components of our commitment to good corporate citizenship.

and strategic goals have led to significant progress in many areas.

Xerox’s environment, health and safety policy, established in 1991, provides a solid foundation for the development of goals applicable to our global operations. Today, Xerox’s strategic environment, health and safety goals are organized into five categories: Safe Workplace and Healthy Workforce, Waste-Free Facilities, Safe Products, Accessible Products, and Waste-Free Products. While there is still work to be done, we have made significant advances toward these goals over the last decade, as shown below.

Environment, Health and Safety Vision and Goals: A Decade of Accomplishments Vision

Goals

Provide Value to Employees and Society

Safe Workplace & Healthy Workforce

Results of the Zero Injury program, initiated in 1997: • 47% reduction in Total Recordable Injury rate. • 46% reduction in Day Away From Work case rate.

Waste-Free Facilities

89% reduction in air emissions from supplies manufacturing operations since 1991.

Performance

Improvement in non-hazardous solid waste recycling rate from 56% to 90% since 1991. 94% or more of hazardous waste managed beneficially since 1999 through treatment, recycling or fuels blending. 8% reduction in water use since 1999. 5% increase in energy consumption since 1999. Provide Value to Customers

Safe Products

Design requirements for materials safety, mechanical and electrical safety and ergonomics are integrated into the Xerox product development process. No product is launched until these criteria are satisfied.

Accessible Products

Products are designed to be usable by a wide range of persons, including those with disabilities. Starting in 2002, all new product designs include requirements consistent with the U.S. Government’s Section 508 accessibility standards.

Waste-Free Products

More than 1.2 billion pounds of waste diverted from landfills since 1991 through equipment end-of-life strategies. Up to 80% reduction in product energy consumption since 1990.ı Product features such as duplex copying/printing help customers make efficient use of paper. 86% of products introduced in 2001 offer duplex capability. • 81% reduction in product dust emissions since 1990. • 56% reduction in product ozone emissions since 1990.

ı Energy consumption of the Xerox Document Center 535 Digital Copier compared to the Xerox 5034, introduced in 1990. Customer use patterns affect energy consumption.

5

Policy, Goals and Strategy Xerox’s vision of environment, health and safety leadership is constantly evolving as we strive to maximize value to our customers, employees and society while maintaining relevance and consistency with changing business strategies and product lines. The integration of environment, health and safety considerations into the company’s strategic planning process helps keep our goals current. As part of this annual process, we develop a three-year outlook of regulatory developments, customer requirements and competitive trends in areas such as product energy efficiency, materials use and product end-of-life management. These trends are considered in product planning initiatives. Policy Deployment

The Environment, Health and Safety organization is charged with ensuring company-wide adherence to Xerox’s environment, health and safety policy. The governance model we employ to accomplish this task is illustrated below. Its central elements include clearly-defined goals, a

single set of worldwide standards, and an audit process that ensures conformance to these requirements. Effective policy deployment depends not only on the integrity of our governance model, but on a corporate culture that supports managers and employees when the inevitable day-today conflicts with competing business objectives arise. The company CEO builds employees’ awareness of their responsibility to our corporate environment, health and safety commitment through an annual ethics letter. Each employee must confirm his/her understanding of this commitment through a formal acknowledgment process. Xerox’s Business Ethics and Compliance Office, established in 2001, manages an ethics helpline and is developing a code of conduct and employee training for 2003. An evolving product portfolio and a diverse base of suppliers, coupled with the decentralized nature of Xerox operations, present

Xerox Environment, Health and Safety Governance Model EH&S Corporate Policy

EH&S Strategic Goals Safe Workplace & Healthy Workforce

Waste-Free Facilities

Safe Products

Accessible Products

Waste-Free Products

ISO 14001 Environmental EH&S Integration into Management Product Development Process

Supply Chain Management

EH&S Standards

Zero Injury Program

Xerox Business Divisions & Operations

EH&S Audit Program

6

Corporate Reporting Relationships Board of Directors

Chief Executive Officer

Document Systems & Solutions Group

Xerox Management Audit Committee

Business Ethics & Compliance Office

Environment, Health & Safety Organization

significant challenges to effective policy deployment. We are countering these challenges by ensuring that environment, health and safety goals are fully integrated into ongoing business practices. Essential deployment mechanisms are described in the following pages.

Environmental Plank of Xerox’s Ethics Policy

“Xerox is committed to protect the environment and the health and safety of its employees, customers and the communities where it does business. Xerox will operate in a manner that conserves natural resources, and will comply with all laws regulating these matters.”

Policy, Goals and Strategy • Standards Environment, health and safety standards are our primary tool for ensuring compliance with corporate policies and goals. Applicable to all operations worldwide, these standards establish specific requirements for product safety, materials use, packaging, environmental management and reporting, workplace safety, emergency response and asset protection. Xerox employees access these standards via the company’s internal web site. • Zero Injury Program The Zero Injury program is designed to ensure the safety of Xerox employees around the world. Launched in 1997, it requires Xerox operations to report workplace injuries and illnesses each month to the Environment, Health and Safety organization. Xerox trains managers in safety management and holds them accountable for their organizations’ safety performance. The Environment, Health and Safety organization provides guidance as needed to correct deficiencies and ensure progress toward our ultimate goal of benchmark safety performance. Xerox’s Supplier EH&S Requirements

• Comply with applicable government environment, health and safety regulations. • Eliminate ozone-depleting substances from all parts/materials supplied to Xerox. • Eliminate toxic heavy metals including cadmium, lead, mercury and hexavalent chromium. • Work with Xerox to achieve environmental leadership-driven goals for product design. These specifications encompass prohibited/restricted materials, packaging materials, recycled content, recyclability and hazardous materials minimization. • Mark plastic parts with recycling codes, as defined by ISO standards.

• ISO 14001 Environmental Management System All company manufacturing operations employ ISO 14001 conforming environmental management systems to ensure compliance with regulations and Xerox standards, identify environmental impacts and set reduction targets. The ISO 14001 system requires the integration of environmental planning and program management with day-to-day business activities. This approach helps to better integrate environmental considerations into overall operational activities. All of our major manufacturing operations have been registered to ISO 14001 since 1997. In 2002, we completed the registration of all manufacturing operations to the standard. • Product Development Process Xerox integrates environment, health and safety criteria into the earliest stages of Xerox product design and development. Adherence to safety standards, ecolabel criteria, accessibility requirements and end-of-life strategies are reviewed at each major phase of the development process. Failure to meet these requirements can delay product launch. • Supply Chain EH&S Management Starting in 1998, we began distributing to our material and component suppliers a set of environment, health and safety requirements. In 1999, requirements were extended to chemical and raw material vendors that support our supplies manufacturing business. Suppliers are asked to meet five specific requirements in order to do business with Xerox. Suppliers are also expected to develop an ISO 14001conformant environmental management system. These requirements are integrated into our supplier assessment program. Evaluations consider conformance to the expanded set of Xerox requirements and form the basis for competitive comparisons among suppliers.

Xerox research, manufacturing and service operations undergo comprehensive environment, health and safety audits at least once every three years.

Audit Program

A well-established audit program measures our success in implementing environment, health and safety goals and targets. Research, manufacturing and service operations undergo audits at least once every three years. Xerox audit teams evaluate operations against Xerox standards, applicable government regulations and industry guidelines, identifying environment, health and safety risks and potential areas of non-compliance. Local managers, with the assistance of audit teams, develop action plans to correct deficiencies. Situations that pose a high risk of environmental damage, serious injury to employees, or regulatory non-compliance receive special attention from senior management and are tracked for immediate resolution. This program has proven to be an important mechanism for identifying and correcting performance gaps. At the same time, it offers a valuable opportunity to share best practices among facilities.

7

Policy, Goals and Strategy Employee Involvement

We recognize that it is Xerox people, from all facets of our global operations, that form the backbone of our day-to-day efforts to achieve corporate goals for environmental and social responsibility. Working in Xerox facilities and surrounding communities, our employees use their knowledge, experience and talent to implement corporate environmental initiatives and make progress toward sustainable growth. We established the Xerox Earth Award program in 1990 to recognize employees worldwide for outstanding achievements

in resource conservation, waste reduction, recycling and community involvement. The Earth Award program is an important communications vehicle, increasing employee awareness of Xerox’s environmental goals and initiatives and inspiring new efforts throughout the company. Our thirteen 2002 Earth Award-winning teams involved more than 120 Xerox people from North America, Europe, India and Australia. These teams identified savings of over $11 million, proving once again that what is good for the environment can also be good for business. The Xerox Earth Award program recognizes employees’ contributions to environmental protection.

Al Dugan, Executive Vice President, Corporate Business Ethics and Compliance (left) and John Laing, Senior Vice President, Supplies Delivery Unit (right) present a 2002 Earth Award to Xerox employees Ali Uthman, David Maty and Carl Wisniewski. The team evaluated the reuse potential of more than 2,000 samples of trigonal selenium, a material used to manufacture Xerox photoreceptors. By qualifying more than 850 pounds of the material for reuse, the team eliminated hazardous waste and related disposal costs.

This team of Xerox Earth Award winners from Webster, New York, simplified the design of a Xerox photoreceptor assembly, eliminating several components used to dampen noise. The redesigned assembly demonstrated equivalent noise performance without the additional parts. This innovation has conserved valuable resources while streamlining the manufacturing process.

Community Outreach

Community outreach is part of the normal business routine at Xerox’s “SUMEX” facility in Nogales, Mexico. SUMEX’s efforts to promote environmental stewardship among local businesses, private organizations and government groups have been recognized over the last several years by the Arizona-Mexico International Green Organization (AMIGO), a joint effort of the states of Arizona and Sonora. In 2001, SUMEX received its third AMIGO award for a variety of outreach programs, including support to companies interested in ISO 14001 registration, and work with the University of Arizona and Institute of Technology in Nogales to improve air and soil quality. The governors of Arizona and Sonora present the AMIGO Award to Xerox's SUMEX plant. From left to right: John Swanson and Dante Talavera, Xerox; Jane Dee Hull, Arizona Governor; Armando Lopez Nogales, Sonora Governor; Alfonso Mendoza, Xerox.

8

Policy, Goals and Strategy and suppliers of Xerox paper. At the same time, we have continued careful monitoring of those suppliers who provide electronic recycling and waste disposal services.

As one of the largest resellers of cut-sheet paper in the world, Xerox recognizes its obligation to ensure that the practices of its paper suppliers are consistent with its own environmental commitments.

Working to Become a Sustainable Company

For more than a decade, our deployment of the Waste-Free concept has resulted in dramatic improvements in the environmental performance of our factories and products. Along the way, we have maintained an unwavering commitment to our environment, health and safety policy even when changing business strategies and external pressures posed significant challenges. Today, as we continue to change our business and become more aware of environmental impacts throughout the product life cycle, we are strengthening our focus on supply chain management. Xerox first introduced an environment, health and safety supply chain management process for suppliers of parts and raw materials in 1998. More recently, we have increased our involvement with our new provider of finished Xerox office equipment

to this review process with the development of a corporate position on paper sourcing. This year, we are designing supplier requirements to support this position. The requirements, which take into consideration key environmental aspects of forestry management and paper production, will be included in our existing qualification process for paper suppliers.Vendors will be expected to meet these requirements, or show progress toward these goals, in order to continue doing business with Xerox.

• Outsourcing of Manufacturing Operations In October 2001, we outsourced the manufacture of our office equipment to Flextronics International Limited, a global electronics manufacturing services company. The Flextronics agreement involved the transfer of approximately two-thirds of our global manufacturing capability, including a portion of our remanufacturing operations, to this new supplier. Even as we moved equipment production outside our own factory walls, we wanted to ensure a continued focus on reducing the environmental impacts of these operations. Flextronics has an environmental management system that conforms to the internationally-recognized ISO 14001 standard. Additionally, Xerox requires Flextronics to adhere to our high standards for product safety. Any modifications to the product manufacturing process, including parts substitutions that have a potential health or safety impact, must be approved by Xerox Environment, Health and Safety personnel prior to implementation.

• Electronic Equipment Waste With an extensive collection program for end-of-life equipment, Xerox manages a significant volume of electronic equipment waste each year. In 2001, our efforts to remanufacture equipment and supplies and reuse and recycle parts prevented more than 167 million pounds of waste from entering landfills. Material that can not be reused is shipped to recyclers for processing.

• Paper Sourcing In the past several years, Xerox and key stakeholders have sharpened their focus on responsible forestry management. As one of the largest resellers of cut-sheet paper in the world, Xerox recognizes its obligation to ensure that the practices of its paper suppliers are consistent with its own environmental commitments.

Xerox’s Position on Paper Sourcing

Xerox has always based its paper purchasing decisions on a careful review of suppliers’ abilities to meet stringent technical and quality standards. In 2000, Xerox initiated efforts to add an environmental dimension

Recognizing the importance of proper recycling and disposal practices, Xerox has had an audit process in place for electronic recycling and waste vendors for many years. This process helps us ensure that vendors’ practices are safe, environmentally sound and compliant with all regulations. Additionally, Xerox requires its recyclers to document the final disposition of the electronic scrap sent to their facilities.

Xerox sources its paper from companies that are committed to sound environmental practice and sustainable forest management. This commitment is designed to protect forest ecosystems, biodiversity, water resources and soils, and to maintain sustainable yields. Companies must be in full compliance with environmental regulatory requirements in the countries where they operate.

9

Waste-Free Products Sustainable Design Each new generation of Xerox products offers increasing functionality while conserving energy and materials and requiring fewer hazardous substances throughout the product life cycle. Xerox’s commitment to becoming a WasteFree company spans more than a decade. An ambitious set of Waste-Free goals and supporting programs established in the early 1990s have helped us put this commitment into practice. As a result, each new generation of Xerox products offers increasing functionality while conserving energy and materials and requiring fewer hazardous substances throughout the product life cycle.

The efforts of Xerox Xerox Waste-Free Product Goals and Initiatives engineering teams to incorporate increasingly Waste-Free Sustainable Product challenging targets for Product Goals Design Initiatives energy efficiency, • Equipment remanufacture and Efficient use reuse/recycling and parts reuse/recycle of materials and • Supplies return and energy minimized use of recycle programs • Energy-efficient design hazardous materials • Efficient use of paper into future product • Recycled content in equipment, supplies and packaging designs will ensure continued advances Minimal use of hazardous substances in these areas. The • Design to Xerox worldwide product environmental deployment in 2002 of performance standards Low emissions a revised, more and noise stringent environment, health and safety standard for Xerox packaging will drive ENERGY STAR, Canada’s Environmental progress in this area as well. Choice EcoLogo and Germany’s Blue Angel. One measure of the success of our Today, more than 90 percent of Xerox’s Waste-Free focus is the number of Xerox eligible product offerings are ENERGY STARproducts that meet the world’s most widely and Environmental Choice-certified, while recognized certifications for product environmore than 45 percent comply with Blue mental performance — the international Angel criteria.

Xerox continued to make good progress toward our Waste-Free Product goals in 2001:

• Energy-efficient product features enabled energy savings of 33 million therms (nearly one million megawatt hours). The reuse of parts saved an additional 16 million therms (500,000 megawatt hours) of energy. • Emissions of ozone and dust from Xerox equipment were reduced by 56 percent and 81 percent, respectively, from a 1990 baseline.

10

ENERGY STAR Cumulative Number of Products

• Xerox equipment remanufacture and supplies reuse/recycle programs diverted 167 million pounds of material from landfills.

Xerox Products with Ecolabel Certifications Canada’s Environmental Choice EcoLogo

Germany’s Blue Angel 194

200 176 160

175

178

150 128 112

125 100

100

52

50 25 0

82

65

75

14

18 8

9 0

18

20

13

// 1995

1997

1998

1999

2000

2001

Note: Cumulative totals include certified products that are no longer marketed today.

Waste-Free Products Integrating Waste-Free Goals into Product Design

Xerox recognized early in our drive for Waste-Free Products that the best results — both environmental and financial — are achieved when products are designed from the outset with Waste-Free goals in mind. Customer feedback, combined with a forward-looking view of global trends in technology, regulations, and ecolabels such as ENERGY STAR, has shaped the development of a comprehensive set of Xerox product environment, health and safety performance standards. The standards incorporate Waste-Free goals as well as requirements encompassing electrical and mechanical safety, ergonomic design, electromagnetic emissions, fire resistance and materials safety.

Products under development undergo a careful review by Xerox business teams and the Environment, Health and Safety organization at each stage of Xerox’s Time to Market product development process. These ongoing reviews ensure that environment, health and safety requirements are fully satisfied by all Xerox products, whether they are designed by Xerox or suppliers. Failure to fully meet environment, health and safety standards can delay the introduction of a new product. The following pages describe the sustainable product design practices that have been most significant in moving Xerox toward its Waste-Free Product goals. The graphic at the beginning of each section links the initiative to the Waste-Free Product goal it supports.

Xerox test facilities ensure that products comply with the strictest safety regulations. Our anechoic chamber in Webster, New York, measures product emissions of, and immunity to, electromagnetic radiation.

Xerox’s Time to Market Product Development Process

Strategic Planning

• Market Research • Competitive Trends • Regulatory Trends

Technology Assessment

• EH&S Technology Needs • EH&S Design Standards • Product Accessibility Requirements

Product Definition and Design

• Product Safety • Materials Safety • Environmental Requirements • Ergonomic Design • Remanufacture/ Recycle • Product Accessibility

Product Launch

• Environmental Marketing • Customer Communications

Product Delivery

• Customer/Sales Support • Customer Satisfaction Surveys and Feedback

The Xerox Time to Market product development process is the mechanism we use to deploy environment, health and safety product performance standards. Xerox engineers consider environment, health and safety requirements in the earliest phases of product design. Regular assessments of developing products ensure that these criteria are fully implemented.

2001 Customer Environment, Health and Safety Inquiries Material Safety Data Sheets

48%

Disposal/Return Programs

39%

Materials

4%

Product Emissions

4%

Environmental

2%

Electrical/Energy/Heat

1%

Product Safety

1%

0%

10% 20% 30% 40% Percentage of Inquiries (n = 10,800)

50%

Environment, Health and Safety support teams worldwide responded to nearly 11,000 customer inquiries in 2001. This feedback, coupled with the results of customer satisfaction surveys, plays a role in shaping Xerox standards for product environmental performance. Our goal is to ensure that each generation of products meets growing customer expectations.

11

Waste-Free Products Waste-Free Product Goal: Efficient use of materials and energy Xerox Equipment Remanufacture and Parts Reuse

Since its inception in the early 1990s, Xerox’s equipment remanufacture and parts reuse/recycle program has reduced our use of raw materials and kept more than 1.2 billion pounds of waste out of landfills — enough material to fill New York’s Empire State Building three times.

The practice of converting end-of-life office equipment into new products and parts is one that Xerox pioneered. We developed a comprehensive process for taking back end-of-life equipment from customers in the early 1990s, establishing a remanufacture and parts reuse program that forms the foundation of our Waste-Free initiatives. Today, one hundred percent of Xerox-designed equipment is developed with remanufacturing in mind. Our approach to managing products at end-of-life translates into significant environmental and financial benefits. Equipment remanufacture and the reuse and recycling of parts prevents millions of pounds of waste from entering landfills each year — 149 million pounds in 2001 alone. The practice of reusing parts reduces the amount of raw material and energy needed to manufacture brand new parts, generating several hundred million dollars in cost savings annually. We estimate that in 2001, energy savings from parts reuse totaled 16 million therms (500,000 megawatt hours) — enough energy to light more than 380,000 U.S. homes for a year.

Xerox Equipment Recovery and Parts Reuse/Recycle Process Raw Materials Fabricate New Parts Build Product Deliver Process Parts for Reuse

Customer Use

(equipment remanufacture or conversion)

Return to Xerox

Recycle Parts

Dismantle

Recycle Materials (third party)

Alternative Uses

Sort/Inspect Disposal Goal: Zero to Landfill

12

Designing for Reuse

Xerox has been able to maximize the end-oflife potential of products and components by incorporating reuse considerations into the design process. Machines are designed for easy disassembly and contain fewer parts. Parts are designed for durability over multiple product life cycles. Parts are also easy to reuse or recycle, and coded with disposition instructions. As a result, equipment returned to Xerox at end-of-life can be remanufactured — rebuilt — reusing 70 to 90 percent by weight of machine components, while meeting performance specifications for equipment with all new parts. Xerox has further extended its ability to reuse parts by designing product families around modular product architectures and a common set of core components. These advances offer Xerox multiple options for giving new life to old equipment. A returned machine can be rebuilt as the same model through remanufacture, converted to a new model within the same product family, or used as a source of parts for nextgeneration models. Improved processes for forecasting equipment returns from customers have allowed Xerox to increasingly rely on previous generations of equipment as a source of components for products in development. Xerox products whose designs are based on previous models may have 60 percent of their parts in common with previous equipment, with no compromise in performance. As the pace of technological innovation has shortened product life cycles, our ability to reuse parts across product generations has become increasingly important.

Waste-Free Products

Customer acceptance remains a challenge for Xerox’s program. Despite a decade of proof, there remains a misperception among some customers that products with recycled parts are inferior to those built from all-new parts. Xerox will continue to educate customers about the quality and reliability of remanufactured equipment and reused parts. At the same time, we will promote purchasing policies and practices that eliminate barriers to remanufacture and reuse by focusing on the quality and performance of products regardless of recycled content.

100% 90%

90%

90%

80% 60% 40% 20% 0%

Reductions in Energy1 and CO2 Emissions from Parts Reuse Therms

CO2

30

300 22

22

22

20 10 0

151

151

8

200

17

16

121

113 100

151

55

0 // 1991 1997 1998 1999 2000 2001

Annual CO2 Emissions Avoided (Thousands of Tons)

Meeting Customer Requirements

100%

1998 1999 2000 2001 Note: Percentages are the proportion of Xerox-designed product models marketed each year that are designed for remanufacture. This metric first developed in 1998.

Note: Xerox experienced a temporary decline in parts reuse in 2000 and 2001 as a result of our recent shift from light-lens to digital product technology.

Waste Diverted from Landfills through Parts Reuse/Recycle Millions of Pounds

Xerox has been using Signature Analysis technology in its equipment disassembly and remanufacture operations since 1994. Prior to its introduction, the reuse potential of returned parts was determined on the basis of average life expectancy data. Some parts were consistently scrapped, while others were consistently approved for reuse. Today, Signature Analysis assesses the reuse potential of each individual part. As a result, Xerox identifies unacceptable parts that might otherwise have been approved for reuse, improving equipment reliability and

The full integration of equipment remanufacture and parts reuse with traditional manufacturing processes is another critical element of Xerox’s strategy for ensuring consistent quality for all products. Machines with reused/recycled parts are built on the same manufacturing lines as newly manufactured equipment, and they undergo the same rigorous quality assurance tests. As a result, products with reused/recycled parts carry the same Xerox guarantees, warranties and service agreements as Xerox equipment made from all new parts.

Products Designed for Remanufacture Percentage of Xerox Product Models

Xerox has developed unique processes and technologies to ensure that all Xerox products, regardless of their reused/recycled part content, meet the same stringent specifications for performance, appearance, quality and reliability. Signature Analysis is one such technology. It enables Xerox engineers to determine the life expectancy of motors and other electromechanical components. Using this technology, we test new parts to determine a “signature” — an acceptable range for the noise, heat or vibration that electromechanical parts produce while in use. We then test the same characteristics in parts from returned equipment. Only those parts whose signatures are consistent with those of newly built parts are approved and processed for reuse.

customer satisfaction. Xerox also identifies many useful parts that would otherwise have been scrapped, reducing unnecessary waste and eliminating costs associated with the purchase of new parts.

Annual Energy Savings (Millions of Therms)

Ensuring Product Quality

135

150

145

148 142

149

100 50 0

105

Parts Recycled

44

Parts Reused

49 // 1992 1997 1998 1999 2000 2001

Xerox uses Signature Analysis technology to test the usable life of parts from returned equipment.

ı Energy savings are calculated using material life cycle data from Franklin Associates, Ltd. Energy savings are converted into avoided emissions of carbon dioxide using a U.S. energy profile and emissions factors calculated by the U.S. Environmental Protection Agency and Department of Energy.

13

Waste-Free Products Waste-Free Product Goal: Efficient use of materials and energy Return Programs for Xerox Supplies: The Green World Alliance

Like our equipment remanufacture and parts reuse program, Xerox return programs for supplies are a central element of our strategy to achieve Waste-Free Product goals for efficient use of materials and energy. Partnerships with Xerox customers have made these programs a success. In 2001, our supplies return initiatives prevented nearly 18 million pounds of waste from entering landfills.

Xerox return programs for supplies provide significant environmental benefits. In 2001, these initiatives diverted nearly 18 million pounds of material from landfills worldwide.

Xerox has well-established methods for collecting and reprocessing spent copy/print cartridges, toner containers and waste toner from Xerox copying and printing systems. Prepaid postage labels and the packaging from new supplies allow customers to return these materials to Xerox for reuse and recycling. Returned products are cleaned, inspected, and then remanufactured or recycled. Remanufactured cartridges, containing an average of 90 percent reused/recycled parts, are built and tested to the same performance specifications as new products. Similarly, waste toners qualified for reuse may account for 25 percent of the weight of new toner, without any compromise in toner functionality.

Xerox Green World Alliance: Waste Diverted from Landfills 20

17.8 14.8

15

10

2.0

Toner Containers

2.1

Waste Toner

13.7

Cartridges

9.4

5

0 1998

14

17.8

Millions of Pounds

16.3

1999

2000

2001

Xerox Green World Alliance

In 2001, Xerox made a focused effort to streamline existing return processes for various supplies by introducing one simplified program — the Green World Alliance. Using this new program, customers worldwide returned more than seven million cartridges and toner containers to Xerox. More than 90 percent by weight of these returned materials were remanufactured or recycled. Customers also returned nearly two million pounds of waste toner to Xerox in 2001. Xerox processed 100 percent of the returned toner for reuse. The plastic bottles used to ship waste toner to Xerox — more than 260,000 in number — were recycled. Xerox has also continued its efforts to expand the scope of our waste toner return program from high-speed production machines to office equipment. In 2000 and 2001, Xerox completed the rigorous research and testing required to qualify a reuse process for waste toner from two families of office copiers and multifunction systems. Remanufacture of this newly qualified waste toner began in 2001, expanding by 14 percent the volume of waste toner remanufactured from the previous year. In 2002, we will continue to qualify new cartridges and waste toner for remanufacture and recycling. At the same time, we are changing our strategy for managing plastic toner bottles, shifting from a return and reuse/recycle approach to one that encourages local recycling by our customers. This new approach will reduce the significant environmental and financial impact associated with transporting these bottles back to Xerox. Going forward, Xerox will design toner bottles for recycling and continue our commitment to the use of post-consumer recycled content.

Waste-Free Products Waste-Free Product Goal: Efficient use of materials and energy

Environmental Benefits of Product Energy Efficiency Programs Manufacture (Parts Reuse)

Use (ENERGY STAR)

CO2 Emissions

Energy Efficiency

In 2001 alone, Xerox ENERGY STAR equipment in customer locations around the world — several million machines — enabled energy savings of 33 million therms (nearly one million megawatt hours). These energy savings translate into an avoidance of 743,000 tons of carbon dioxide emissions. By remanufacturing equipment with reused parts in 2001, Xerox saved an additional 16 million therms of energy (500,000 megawatt hours) and prevented 113,000 tons of carbon dioxide emissions from entering the atmosphere. In total, the energy saved in 2001 through ENERGY STAR product features and equipment remanufacturing is enough to light more than one million U.S. homes for a year. It is also more energy than our worldwide research and manufacturing plants consumed during the year.

49 45 733

40

40 32 30

1,000 856 800

565

600

26 381

20

400 253

10

8

200

55

0

0

// 1991

Avoided CO2 Emissions (Thousands of Tons)

50

Annual Energy Savings (Millions of Therms)

Xerox has followed a comprehensive approach to reducing product energy consumption over the past decade, achieving significant reductions in several phases of the product life cycle. First, the company’s remanufacture and parts reuse program, described in the preceding pages of this report, has reduced the amount of energy required to build equipment. This is because it takes much more energy to build a new part from raw materials than it does to process a part for reuse. Second, product design features such as automatic powersaver modes have substantially lowered the energy consumed by products during the customer use phase of the life cycle. Together, these initiatives have dramatically reduced the energy needs of Xerox products, generating cost savings for Xerox and its customers and notable benefits for the environment.

1997

1998

1999

2000

2001

Note: Energy savings from parts reuse represent the difference in energy required to build new and reused parts, assuming an average machine composition of 60 percent plastic and 40 percent steel. Material life cycle data was obtained from Franklin Associates, Ltd. Annual energy savings from ENERGY STAR features are calculated by comparing the annual energy consumption of Xerox ENERGY STAR-qualified product types to non-ENERGY STAR counterparts. Savings are aggregated across the estimated number of Xerox ENERGY STAR-qualified machines in customer locations. Energy reductions are translated into avoided CO2 emissions using U.S. Environmental Protection Agency and Department of Energy conversion factors.

In 2001, Xerox enabled energy savings of 49 million therms — more energy than our worldwide research and manufacturing facilities consumed in the same time period — by reusing parts to remanufacture equipment and incorporating ENERGY STAR features into Xerox products.

Reducing Product Energy Consumption During Use

Since the early 1990s, Xerox equipment has been designed to enter a “power saver” mode after a specified period of non-use. Because office equipment is often inactive for portions of a workday and may be left on overnight, this power saver feature has the potential to substantially reduce energy use. Xerox formalized its commitment to energyefficient product design in 1993, joining the U.S. Environmental Protection Agency’s ENERGY STAR Office Equipment program as a Charter Partner. Since then, we’ve introduced nearly 200 ENERGY STAR-qualified copier, printer, fax and multifunction products. Each of these has been carefully designed with energy-saving features that bring value, efficiency and

flexibility to our customers’ work environments. Ninety-five percent of eligible Xerox products introduced in 2001 met ENERGY STAR criteria. Advances in fusing technology and new electronics architectures have made today’s Xerox office equipment significantly more energy efficient than comparable 1990 models, even while offering customers enhanced features and functionality. For example, the annual energy consumption of the ENERGY STAR-qualified Xerox Document Centre 535 Digital Copier is up to 80 percentı less than that of the Xerox 5034, a comparable model introduced in 1990.

ı This calculation assumes that customers do not manually power off equipment at the end of each workday.

15

Waste-Free Products Xerox Multifunction Systems: Inherent Environmental Benefits

Xerox multifunction systems further reduce the amount of energy required to provide customers with copy, print, fax and scan capabilities by combining the functions of multiple products into one machine. The annual energy consumption of a Xerox Document Centre multifunction system is 25 percent less than the combined annual energy consumption of the individual ENERGY STARqualified copier, fax and printers it replaces. Energy savings increase to 60 percent if a multifunction system replaces individual products that are not ENERGY STAR-qualified. Product energy efficiency is becoming an increasingly important customer consideration. Accordingly, Xerox continues to invest in breakthrough technologies required to achieve further reductions in product energy consumption. Current research is focused on further reducing fusing energy, developing lower-melting toners and designing ultra-low power electronics.

Paper

The U.S. Environmental Protection Agency estimates that manufacturing a piece of paper requires ten times more energy than making a copy. As a result, Xerox products are designed with reliable two-sided (duplex) capability and other features that allow customers to use paper efficiently. Xerox recycled papers, containing up to 100 percent post-consumer recycled content, use post-consumer waste in place of new pulp to help conserve natural resources. These products are designed for optimal performance in our equipment and are required to meet the same performance specifications as non-recycled paper.

Annual energy consumption of an office copier, two printers and a fax machine: 1070 kWh

Annual energy consumption of a multifunction system: 800 kWh

By combining the functions of multiple products, Xerox multifunction systems can reduce annual energy consumption by 25 percent compared to the standalone copiers, fax machines and printers they replace.

Xerox expanded its line of recycled supplies in 2001 to include colored papers and several new premium products for digital color printing applications. Xerox also increased the number of its papers manufactured using elemental chlorine-free (ECF) or totally chlorine-free (TCF) bleaching or de-inking processes. In Europe, Xerox introduced Planet Light, a 70 gram per square meter (g/m2) paper that achieves the same characteristics of a heavier-weight 80 g/m2 sheet using less fiber. Planet Light also requires fewer energy and chemical resources during production than traditional papers.

Planet Light Planet+ (TCF)

16

➡ 25% reduction

Digital Color Graphics (30% recycled content)

Xerox’s expanding portfolio of software products such as KnowledgeShare, DocuShare and DigiPath allow customers to replace paper-based document management with electronic processes. By facilitating print-on-demand and distribute-then-print workflows, these software solutions help reduce paper use and minimize the environmental impacts of delivering documents by air or ground transportation.

Multipurpose Recycled Paper (30% recycled content)

Waste-Free Products Waste-Free Product Goal: Minimal use of hazardous substances

Waste-Free Product Goal: Low emissions and noise

To reduce the use of chemicals considered harmful to human health or the environment, Xerox has established a set of requirements that govern product design and materials selections. Xerox design engineers and our component and materials suppliers follow these guidelines.

Recognizing the importance of contributing to a safe and pleasant work environment for our customers, Xerox designs its products to strictly control emissions of chemicals and noise, going well beyond regulatory requirements. Since 1990, Xerox engineers have decreased emissions of ozone and dust from office and production copying and printing equipment by 56 percent and 81 percent, respectively.

In 2001, Xerox’s efforts to eliminate chemicals of concern from our product line continued to focus on mercury and lead. We are working to phase out the mercurycontaining lamps that scan images and back-light user displays in some of our products. Working with our suppliers, we are also investigating lead-free alternatives to the lead-containing solders, glass, and wire insulation in our equipment.

Sophisticated noise prediction models developed by Xerox experts have made it possible to identify potential noise sources in the earliest stages of product design — even before prototypes are available for testing. This modeling capability, coupled with a

Reduction in Product Chemical Emissions Since 1990

81%

56%

1990 2001 Ozone

1990

Incorporating state-of-the-art technologies into Xerox office and production equipment has significantly reduced ozone and dust emissions.

Xerox’s noise chamber and precision instruments evaluate product noise emissions to ensure conformance with Xerox standards.

focus on low-noise design, has helped Xerox products achieve noise levels consistent with the requirements of the world’s strictest ecolabels. The Xerox DocuColor iGen3 Digital Production Press, launched in 2002, incorporates Xerox’s latest low-noise innovations. This color press exhibits noise levels during operation that are 25 percent lower than those of black-and-white production equipment of the same speed introduced in 1988. The DocuColor iGen3’s noise levels are 80 percent lower than those of a traditional offset press.

2001 Dust

Toward the Future

Maintaining leadership in sustainable product design requires an ongoing effort. Xerox is committed in the near-term to implementing a new set of challenging environmental performance goals. Going beyond existing Xerox product design standards, these goals set stretch targets for future products. A particular focus has been placed on product energy efficiency, the elimination of hazardous materials, and designing equipment, supplies and packaging for reuse or recycling.

As Xerox continues to expand its focus from copiers and printers to integrated document management solutions, we are able to combine Xerox systems, software and services to enable customers to share documents — and the information they contain — in ways that further minimize material and energy resources. And as Xerox scientists continue to develop innovative technologies, we are committed to maximizing their capability to transform the way society works, ultimately helping Xerox customers do more with less. 17

Waste-Free Goals in Practice Product Showcase Xerox introduced a number of products and supplies in 2001 and 2002 whose environmental features demonstrate our latest advances toward Waste-Free Product goals. Emulsion Aggregation Toner

Innovative design features coupled with digital technology make Xerox’s new DocuColor iGen3 Digital Production Press an environmentally-preferable choice for the commercial printing industry.

In July 2001, the Xerox Research Centre of Canada announced emulsion aggregation (EA) technology, a breakthrough process for producing color toner. Developed over eight years and protected by more than 100 patents, the EA method chemically builds toner particles to any desired shape or size. Traditional toner manufacture involves mechanical grinding of large particles of solid colored plastic into smaller ones, followed by a classification process which sorts out toner particles of the desired size. Compared to this conventional method, the more precise EA technology conserves energy and nearly eliminates out-of-specification toner waste.

Compared to traditional offset printing presses, the DocuColor iGen3 creates little waste, emits 80 percent less noise, and neither generates hazardous waste nor uses hazardous consumables. • Up to 97 percent of the parts in this three ton machine and 80 percent by weight of the waste it generates can be reused or recycled. This 80 percent figure includes the machine itself, empty toner bottles, waste developer and packaging. • The dry inks are non-toxic and have a transfer efficiency rate of nearly 100 percent, reducing the potential for waste. • Emissions of chemicals such as ozone and dust are strictly controlled to the same levels achieved by Xerox office machines, and well below regulatory requirements. • Digital print-on-demand technology reduces paper use and excess inventory by making it economical to print books and brochures “just in time” as they are ordered. • Every part that is lifted, pushed or pulled during machine assembly, operation or service has been ergonomically-designed and evaluated to minimize risk of injury to Xerox employees and customers.

▲

DocuColor iGen3 Digital Production Press

18

EA toner also reduces the amount of energy and waste associated with printing. Measuring about five microns in diameter, EA toner particles are much smaller than conventional toner. This extremely small size, coupled with a uniformly round shape, means EA toners can be more uniformly charged and transferred efficiently and uniformly to receiving paper. The result is sharper color images and fine lines, less toner per printed page, and a

significant reduction in toner waste. By eliminating fuser oil, EA technology conserves resources while eliminating potential service calls for oil streaks. Finally, EA toner exhibits image fixing capability at low temperatures, reducing per-page product energy consumption. The Xerox DocuColor 1632 and 2240 color copier/printers are the first products to feature EA toner.

▲

Digital Color Press Technology

Under the direction of Dr. Hadi Mahabadi (pictured above), materials scientists at the Xerox Research Centre of Canada have perfected new EA toner technology.

Microscopic views show the “rough” edges of conventional toner (at left) and the smooth shape of chemically-grown EA toner particles.

Waste-Free Goals in Practice Digital Multifunction Systems

SmartPaper™: Reusable Electronic Paper

Xerox multifunction systems offer inherent environmental benefits. By combining the functions of multiple products into one system, Xerox has significantly reduced the raw materials and energy required to provide customers with copying, printing, faxing and scanning capabilities.

The DocuColor 1632 and 2240 color multifunction systems represent state-of-the-art energy-efficient design. Advances in systems integration and fuser technology result in ultra-low power levels and fast recovery from low power modes, going well beyond ENERGY STAR criteria.

Phaser 8200 and ColorStix

▲ Solid Ink Color Printers

Solid ink printers use ColorStix® ink — solid blocks of ink at room temperature. During the printing process, these sticks are melted and jetted through piezoelectric printheads. Images are printed onto a rotating drum and offset onto paper in a single pass of the print engine, achieving nearly 100 percent ink transfer efficiency.

▲

By eliminating print cartridges and minimizing the number of other consumable items that must be replaced throughout the life of the machine, solid ink printing conserves valuable material resources and the energy required to make them. Solid ink printing also reduces waste, generating 95 percent less waste during use than a typical color laser product. Fewer consumables translate into lower operating costs, increased reliability and ease-of-use. The Phaser 8200 is the newest Xerox product featuring solid ink.

Gyricon Media, Inc., a Xerox spin-off company, is charged with bringing SmartPaper to market. Gyricon’s first application of this technology is MaestroSign™ Systems, a retail solution that synchronizes SmartPaper pricing displays with point-of-sale databases. This wireless system reduces the waste and labor associated with daily management of traditional cardboard signage, giving retailers the ability to instantly change display pricing from one central location. In 2001 and 2002, Gyricon is conducting pilot tests of the MaestroSign solution with several major retailers in the United States.

▲

The Document Centre 500 Series is our newest generation of black-and-white multifunction systems for the office. Its modular design allows customers to buy only those features they need, conserving resources. Scan to file and scan to e-mail capabilities eliminate the need to fax or mail hardcopy documents, helping customers reduce paper inventory and minimize the negative environmental impacts of delivering documents via air or ground transportation.

SmartPaper, a recent Xerox invention, has significant resource-conserving potential. Like traditional paper, it is thin, lightweight and flexible. Unlike conventional paper, however, it is electrically writable and erasable and can be reused thousands of times.

SmartPaper contains millions of small two-color beads sealed in a thin layer of transparent plastic. When voltage is applied to the surface, the beads rotate to show one color or the other, producing an image.

Document Centre 555 Multifunction System (left) and DocuColor 2240

19

Waste-Free Facilities An Ongoing Commitment Since the early 1990s, Xerox has managed environmental performance in its manufacturing operations to an internal benchmark known as Waste-Free Factory. Our commitment to the goals of this initiative, along with global implementation of an ISO 14001 compliant environmental management system, has driven environmental performance improvements over the last decade. Note:

Figures presented are based on total quantities for manufacturing, research and development, and equipment recovery/recycle operations. Unless otherwise noted, all numbers represent worldwide figures. Data are normalized using the standard hours worked in each of the reporting facilities. Where multi-year worldwide data are available, normalized trends are shown. Air Emissions

Whereas a third of the dichloromethane waste generated was released to the air in 1991, only three percent is released today. The remainder is captured and collected for on-site reuse or off-site recycling.

Xerox facilities released 185 tons of air emissions in 2001, a seven percent decrease from 2000 and a 29 percent decline since 1999. The reduction is due primarily to declines in production levels.

We continue to enhance our ability to reclaim and reuse dichloromethane. In 2001, process improvements enabled the capture of an additional 137 tons of dichloromethane, reducing our requirements for raw materials and reducing the generation of hazardous waste. To date, we have not been able to identify another chemical as a suitable replacement, but the reduction of dichloromethane emissions to the air remains a priority.

Operations that manufacture Xerox supplies — toners, inks and photoreceptors — are our most chemically-intensive operations. With a firm commitment to our Waste-Free Factory goals, these facilities have made tremendous progress in reducing air emissions over the last decade. Reduction, reuse and recycling strategies have enabled an 89 percent decrease in air emissions since 1991.

54% Other Volatile Organic Compounds

17% Dichloromethane

The majority of the 185 tons of air emissions released in 2001 were volatile organic compounds, with dichloromethane (methylene chloride) as the single largest contributor.

Percentage of Waste Generated

1991

2001 97%

100%

Air Emissions Supplies Operations

All Xerox Facilities

67%

75% 50%

33%

25% 0%

3% Released to Air

Reused or Recycled

701

260 198

200 0 1991

//

110

118

1997

1998

114 1999

185

76

78

2000

2001

Xerox facilities worldwide have reduced air emissions by 29 percent since 1999. Xerox’s supplies manufacturing operations have achieved an 89 percent reduction since 1991.

20