Wood Supply – Klabin

Wood Supply

FORESTRY OPERATIONS ENSURE THE COMPANY’S COMPETITIVENESS AND SUSTAINABILITY DUE TO THE HIGH PRODUCTIVITY OF ITS FORESTS, SUSTAINABLE MANAGEMENT AND TECHNOLOGICAL INNOVATIONS APPLIED TO THE PROCESSES

Sustainable
Development
Goals

<i>5 - </i>Gender equality 5 - Gender equality
<i>8 - </i>Decent jobs and economic growth 8 - Decent jobs and economic growth
<i>12 - </i>Responsible consumption 12 - Responsible consumption
<i>16 - </i>Peace and justice 16 - Peace and justice

—  Operational efficiency that begins in the forests

(GRI 102-9, 103-1, 103-2, 103-3)

Klabin’s forests are already among the most efficient in the world in terms of the production of pulp per hectare planted. High productivity is a key factor for ensuring competitiveness and sustaining the company’s growth strategy. The company’s products are produced based on the pine and eucalyptus forests, through which Klabin has been advancing in new markets, such as pulp.

Most of the wood used comes from own plantations. Supply is supplemented by the purchase of material from producers that are members of Fomento Florestal or from independent producers with which the company maintains contracts that cover criteria such as quality, delivery times, compliance with relevant laws and the adoption of measures to protect the environment, among others.

Klabin’s forestry operations have been evolving to address the higher production volumes of pulp, paper and packaging resulting from the company’s capacity increases.

>> IN 2018, AROUND 15.7 MILLION TONS OF LOGS AND CHIPS OF PINE AND EUCALYPTUS WERE HANDLED FOR TRADING, PAPER PRODUCTION AND WASTE FOR ENERGY GENERATION <<

The technological innovations the company has implemented over the last few years have been making the forestry operation processes more efficient, especially with regard to forest monitoring and information processes.

  • MANAGEMENT OF THE FORESTRY UNITS (SÃO PAULO, PARANÁ AND SANTA CATARINA) IS CERTIFIED BY THE FOREST STEWARDSHIP COUNCIL® (FSC®) (FSC-C022516), TOTALING 239,000 HECTARES OF PLANTED FORESTS.

  • AVERAGE DISTANCE OF SELF-OWNED FORESTS TO THE PLANTS OF
    66 KM IN PARANÁ AND 74 KM IN SANTA CATARINA, REPRESENTING A GREAT COMPETITIVE ADVANTAGE IN TERMS OF LOGISTICS.

—  Forestry Goals

(GRI 103-1, 103-2)

To ensure that forest assets are even more prosperous and present increasingly greater performance, Klabin’s objectives and vision for the forestry area, to be achieved in a few years, are summarized in the six aspects of the Forestry Proposal:

 

  • Greater productivity: we want to consolidate the forest productivity gains in the world pulp and paper market, in order to increasingly distance ourselves from the competitors. Klabin’s Forestry units are already among the most efficient in the world in terms of the production of pulp per hectare planted. Our goal is to consolidate our top position, increasing our differential compared to competitors.

Through its Research, Development and Innovation department, the company continuously seeks to improve its planting and management processes in order to increase the productivity of forests.

  • Lower operational costs: we want to be the lowest-cost producer among global pulp and paper companies.

The short distance between forests and factories, coupled with the high productivity of the forests, allow Klabin to have the lowest-cost wood mill in the world. However, costs were affected by the purchase of third-party forests, further away from the factories, leading the forestry operation to seek structural alternatives for this characteristic of the operation and to continue pursuing this purpose.

  • Acceptance by the community: we work to be good neighbors and citizens. This effort permeates activities both large and small. Our water trucks, for example, dampen the dirt roads through which the wood haulers pass, preventing dust clouds. If possible, we change the trucks routes so that they do not cross school or large pedestrian areas, and we keep our planted forests separated from neighboring properties and roads to avoid shaded areas.

Since 2016, Klabin has been implementing a program involving various stakeholders to measure the acceptance of our activities in all the cities in which we operate. The company intends to regularly evaluate how it is viewed in order to build stronger relationships with communities. The results of the last survey, in 2018, showed significant advances in this indicator.

  • A reference in safety: our goal is to have world-class job safety, ensuring the physical integrity of our employees.

Klabin maintains programs that seek to develop a safety culture that allows the company to achieve high levels of productivity while preserving the well-being of employees. For 2019, the area commissioned a survey to measure the stress level of forestry operation employees to improve initiatives focused on their quality of life. Read more in People, health and safety.

  • Sustainable forestry management: we work to maintain our forest management practices as a benchmark among companies in the global pulp and paper market, seeking to achieve results close to the maximum productivity potential while protecting biodiversity and natural resources such as water and soil.

Forest management follows the mosaic concept: pine and eucalyptus plantations are interspersed with areas of native forests and preserved areas of the Brazilian Atlantic Rainforest to create ecological corridors that preserve the local fauna and flora. Read more on sustainable forest management certifications in Certifications.

  • Quality raw material: we strive to satisfy our internal and external customers with quality raw material compatible with their needs.

—  Connectivity and integration in forest areas

Klabin continuously studies the improvement of planting, forest management and harvesting processes to increase the productivity of the operation and meet the expected higher production volumes. Under the concept of industry 4.0, the company has been investing in innovation and technology to promote connectivity and integration in its forest areas. Some examples of improvements implemented in the last two years are:

  • Acquisition of new harvesting machines to operate on steep slopes, increasing the possibilities of harvesting wood for logging in areas that are difficult to reach.
  • Software embedded in the harvesting machines and the use of tablets in the field allow data to be captured quickly and reliably, improving information management in the forestry operation.
  • Remote monitoring of images through nano satellites (weighing between 1-10kg) that periodically capture forest images, allowing for assessments that contribute to greater control of occurrences in the forest and support forestry operational planning.

For the short and medium terms, the company has been studying new forestry innovation projects, such as the deployment of unmanned aerial vehicles (UAV) – i.e. drones – with camera sensors for image monitoring; and the implementation of an Operations Center to improve information connectivity, from the harvesting of the wood to its shipment to the factory.

—  Value partnerships

(GRI 102-9, 103-1, 103-2, 103-3)

Klabin has been maintaining the Programa de Fomento Florestal since 1984, seeking to expand and diversify the income of communities close to its units by planting forests on rural properties. At the same time, these producers represent an important link in the company’s wood supply chain.

The Programa Matas Legais is another initiative that contributes to improve landscape planning, taking into account environmental and social factors. Carried out in partnership with the Associação de Preservação do Meio Ambiente e da Vida [Environment and Life Preservation Association] (Apremavi) since 2005, the program guides independent producers from Santa Catarina and Paraná to cultivate their lands in a sustainable manner, encouraging the recovery of native forests, responsible forestry, organic agriculture, ecotourism and conservation of natural heritage.

Klabin offers rural producers a family farming incentive program called Matas Sociais [Social Forests], in partnership with Apremavi and Sebrae. Learn more in Promoting local development.

Governance of forestry operations with regard to the interaction with the areas, dialogue, mapping operational impacts, and regional actions is carried out by the Paraná Community Relationship department (see Continuous Engagement).

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>> PROGRAMS HELP TO IMPROVE LANDSCAPE PLANNING AND ENCOURAGE FAMILY FARMING <<

—  Management of suppliers

(GRI 102-9, 103-1, 103-2, 103-3, 308-1, 414-4)

Legal compliance with labor practices, environmental and human rights aspects – such as forced labor, child labor or discrimination of any kind – is a non-negotiable condition for hiring suppliers at Klabin.

The FSC® certification, which Klabin has had since 1998, requires solid and transparent raw material tracking processes to ensure that there are no violations of legislation and human rights in its supply chain. Quality criteria, on-time delivery and tax compliance, among others, are also fundamental for choosing suppliers. In addition, no evidence of deforestation was found in the activities of wood suppliers in 2018.

The main procurement-related policies are described in Klabin’s Code of Conduct, which covers expected relationship and behavior standards in negotiation processes; the General Supply Conditions, which contribute to Klabin’s business transparency by disclosing in advance the requirements applicable to all suppliers; the Klabin Anticorruption Manual, which guides the fight against corruption; and the Social and Environmental Responsibility Policy for Hiring Klabin Suppliers. These documents are available for public consultation on Klabin’s website. These commitments are reinforced by the company’s voluntary adoption of the Brazilian National Pact to Eradicate Slave Labor.

Fundamental Rights

(GRI 407-1, 408-1, 409-1)

The Policy of Fundamental Rights in Labor Relations  encompasses the guidelines established by the Guiding Principles on Business and Human Rights developed and approved by the UN Human Rights Council. It specifies the regulations on the issue in the productive chains, ensures freedom of contracted professionals and their suppliers for union association and collective bargaining, determines that all forms of compulsory or child labor are not to be accepted and cites the actions to be taken for full eradication in case of suspected misconduct. It also establishes that labor relations should provide decent work conditions regarding working hours, wages, weekly rest, holidays, health and safety, maternity protection and reconciliation of work and family duties.

Thus, Klabin’s operations are covered by union agreements in line with the company’s premises (see item 102-41 in the GRI Summary) and labor practices are in accordance with the legal requirements established by the Ministry of Labor. No actual or potential risks were identified in the operations conducted by Klabin or its suppliers in 2018.

Assessment and monitoring

(GRI 103-1, 103-2, 103-3, 308-1, 308-2, 414-1, 414-2)

Since 2013, Klabin has had a criticality matrix to evaluate the critical suppliers contracted in the industrial area and the risks they pose to the company, both financially and regarding sustainability. The impacts identified through the matrix relate to the type of supply, licensing, compliance with environmental and labor legislation, eco-efficiency initiatives, greenhouse gas (GHG) inventory, water consumption and effluent generation, training on environmental standards, Occupational Health and Safety (OSH), occurrence of slave labor in the supply region and social responsibility. One of the targets for employee bonus eligibility is the annual reassessment of this matrix.

The company does not follow specific practices based on socio-environmental criteria to search for new suppliers. However, failure to fully comply with these criteria may prevent their approval.

In 2018, there were no reports of complaints related to negative social and environmental impacts generated by suppliers. In 2019, the Procurement and Sustainability departments are jointly working on a project to improve the sustainability assessment system for suppliers.

Documentation analysis

The Third Party Management area has established quantitative targets focused on receiving and analyzing monthly labor documentation on contracts for the supply of outsourced labor. It also carries out field monitoring efforts, including interviews with outsourced employees, and addresses possible complaints received through Klabin’s official Ombudsman’s office. The process is still being implemented, but most service providers were already included in 2018.

Field visits are carried out semiannually and if deviations are detected, action plans are jointly established with the outsourced company involving hierarchical managers and Klabin’s internal audit team for the implementation of the containment actions contractually provided for, which shall be monitored through a computer system.

>> ALL SUPPLIERS (EXCEPT WOOD SUPPLIERS) CONSIDERED STRATEGIC TO KLABIN FROM AN ECONOMIC AND FINANCIAL POINT OF VIEW SHALL BE ASSESSED AND HIRED TAKING INTO CONSIDERATION THEIR LEGAL COMPLIANCE WITH ENVIRONMENTAL ASPECTS, LABOR AND HUMAN RIGHTS PRACTICES <<

OPPORTUNITIES

Klabin considers ways of economically including its suppliers when the need is identified. An example was the event organized in partnership with the local government in the city of Ortigueira, the Brazilian Micro and Small Business Support Service (Sebrae) and the Ortigueira Business Association to create communication channels for local entrepreneurs and enable business opportunities.

Wood suppliers

(GRI 102-9)

The forestry units follow the Controlled Wood Program, in which suppliers are assessed by the Forestry area based on specific methodology related to the FSC® chain of custody certification. In 2018, 574 visits were made to certified and uncertified wood suppliers in Paraná, and 201 visits were made in Santa Catarina.

All suppliers of forest units are audited by Klabin on a quarterly basis. Human rights, environmental and social (surrounding communities) aspects are considered, as well as the supplier’s compliance with labor legislation, possible practices of slave-like and child labor and other factors that may threaten human dignity. In case of non-conformity, Klabin interrupts the supply immediately and forwards a recommendation of compliance. After implementing the recommendations, the supplier is again audited and, if there are no outstanding issues, the supply agreement is resumed.

 

—  Suppliers of products and services

(GRI 102-9, 204-1)

Klabin has about 5,000 active suppliers throughout Brazil for supplying raw materials such as forestry inputs, commodities and specialty chemicals for pulp and paper production, fuel, power and packaging for finished products; provision of logistics services, material management, storage and rental of forklifts; supply of auxiliary production material, uniforms and personal protective equipment (PPE), bearings, pumps, and provision of cleaning, security and maintenance services, among other functions, in addition to wood suppliers. Of this total, 1,203 suppliers are monitored by the Criticality and Sustainability Matrix, of which an average of 64.3% were contracted in the states in which Klabin has operations.

Percentage of the purchase budgets and contracts of major operating units spent on local suppliers¹ (GRI 204-1)

2018 2017 2016
Paraná 65,0% 62,2% 79,5%
São Paulo 87,6% 85,0% 68,1%
Santa Catarina 56,0% 49,8% 50,5%
Amazonas 38,7% 77,8% 14,4%
Minas Gerais 45,9% 39,2% 14,3%
Pernambuco 50,6% 48,7% 52,9%
Rio Grande do Sul 14,7% 14,5% 2,2%
Bahia 56,6% 28,3% 20,5%
MÉDIA 64,3% 60,9% 63,9%

1 The term “local” refers to the state where the unit to which the service is provided is located or to which the material/product is supplied.