Sustainability Report

Home , AntarChile, Arauco Province, Carahue, Corte Alto, Huilliche people, Longitudinal valley

2010 sustainability report

GROWING THE FUTURE THROUGH GLOBAL “LEADERSHIP IN THE DEVELOPMENT OF SUSTAINABLE FOREST PRODUCTS”

Growing the Future Promoting sustainable forest management

This report has been manufactured with paper made from raw material provided by sustainably managed forests according to standards established by PEFC.

Printed by: Ograma

PEFC Certification This paper is made from raw material provided by sustainably managed forests and controlled sources.

PEFC/24-31-1200 www.pefc.org

General supervision and coordination: ARAUCO’s Corporate Affairs and Marketing Management

Edited by: Myriam Mellado Nowack Beer Consulting Sustenta RSE

Translated by: Pamela Alarcón

Photography: ARAUCO Archives

Art and Design: Idenco

For more information, visit: www.arauco.cl

Celulosa Arauco gri 2.1/2.4 y Constitución S.A. ARAUCO Headquarters Av. El Golf 150, 14th Floor Las Condes, Santiago, Chile Phone : (56-2) 4617200 Fax : (56-2) 6985967 www.arauco.cl

Celulosa Arauco y Constitución S.A. (ARAUCO) has prepared annual Corporate Sustainability Reports since 2004. This report provides a comprehensive review of the economic, environmental and social performance of the company’s business operations in Chile, Brazil, Argentina and Uruguay, for the time period January 1 through December 31, 2010.

This report was written following Global Reporting Initiative (GRI) protocols, and uses the GRI G3 Guidelines, which cover a broad range of sustainability topics.

Growing the Future

2010 Sustainability Report 2010 Sustainability Report 2 Chapter 1 40 34 26 20 14 Business Our 8 4 Presentation

Our Products the World Around ARAUCO ARAUCO’s Businesses Overview Corporate Sustainability Strategy CEO’s Statement Chairman’s Statement

Chapter Chapter 2 3 62 60 56 51 48 Contents 73 72 70 Performance Economic Engagement and Stakeholder Corporate Governance Earthquake andReconstruction Earthquake and Acknowledgements 2010 Awards InitiativesARAUCO’S CommitmenttoExternal Relationship withStakeholders Governance Corporate Indirect EconomicImpacts ARAUCO’s PresenceintheMarket Financial Results

Chapter Chapter 6 4 127 115 112 90 90 Regulations 89 88 88 81 80 78 78 76 Performance Environmental Fire Prevention andSuppression fromTransport Impacts Management ofEnvironmental Compliance withEnvironmental Discharges Emissions Management Biodiversity Water Management Management Energy Input Management Environmental Policy Responsibility towards Society Social Investment for Programs Corporate Community Relations and Society Community

Chapter Chapter 5 7

109 108 102 98 97 95 People 157 155 152 148 146 144 Appendices 136 135 132 Our Human Rights andEqualOpportunities Diversity Workers Training andEducation Health andSafety at Work and Freedomof Association Company - Worker Relations Employment Financial Consolidated Statements and Approved in2010 Environmental Permits, Processed Certifications of Glossary Terms Addresses Business Offices GRI Table Contact Scope andBoundaries About this Report

2010 Sustainability Report 3 2010 Sustainability Report 4 1.1 gri sorrow, we had to bear the loss of six of our contract workers. contract of our of loss six sorrow, the to bear had we and grief With facilities. of our many it shut and down years 40 where we’ve for operated more than communities of the part it destroyed families, their workers and our affected disaster This tsunami. and 27 earthquake February the by hit directly were company’s our memory. in forever We 2010 remain year The will taken in Brazil toconsolidateourforestland andtheopeningofasalesofficetaken inBrazil inChina. stepsthe were direction,as this in step concrete a was Uruguay in mill pulp efficient and modern a build to billion US$1.9 invest and Enso Stora with join to decision Our our company tohelpensureitseconomicandsocialsustainability. of our future part outside our borders,important taking on the challenge of globalizing process.ago, internationalization fewyears our a of Just anbuilddation to wedecided However, not all was adversity. The year 2010 also will be remembered for the consoli- with whichwe conductourbusiness inthisdifficult situation. gether with the communities and workers, and that we were able to apply the efficiency to- challenge this faced we way the of development.proud country’s the very Weare we made sure weinitiatives generated for supported the mid- that and truly long-term all of our actions were aimed at responding quickly to the emergency. At the same time, We were able to recover our facilities and resume operations in record time. Ultimately, that whatever ARAUCO didwouldasasign. betaken by others calm.of sense a people Weprovidecountry. knewwas a did as we ting thing first The ac- and communities.together their working and of responsibility Weworkers the felt ourwith together so did we if stand to able be only would we that certain were we for responsibility to ARAUCO.call a became beginning, very earthquake the The From Statement Chairman’s excellence. ofstandards and practices of incorporation the and growth to call a by characterized is our suppliers, not only to share daily work, but also to share a unique business vision that and personnel our for programs training year,new coming implement the will weDuring broad, inclusive, consultation process transparent stakeholderthat encourages participation. a embrace to is certification FSC of goal our achieve to way only the that certain Weare socially beneficial andeconomically viable. dard – a standard that promotes forest management which is environmentally responsible, stan- worked with the Forest Stewardship Council (FSC) international diligently to align ourselves we 2010, During impacts. of number a as well as benefits important generated to recognize publicly that our growth, as well as the nature of operations,our forestry has andcommunities to relate we which in way the rethink to allowedus Chile in operations ourfor certification Management Forest dialoguestakeholders.FSC our seek with to conduct decision The we which in way the in made were advances significant 2010, During andinnovation.greater transparency andalongroadliesahead. We arejuststarting models. organization includecompany global a being of challenges Wethe that aware are tion habits, and the environment. Most of all, it is having a far reaching impact on business Globalization is having multiple effects on society, changing the way we live, our consump-

2010 Sustainability Report 5 2010 Sustainability Report 6 forest products. towardmaking path sustainabledevelopmentof the in right leader the ARAUCOglobal a on are company,we our and of growth the to essential been has workersworkers contract our and of labor term. The long the for committed are who people trained highly of team a on count to need we time,over results sustainable achieve to that knowWe our commitmentswiththecountry, peopleandtheenvironment. ablebeing of lifenew breathe to initiativesthrough policies and vision our into fulfillthat challenges along the way. Nevertheless, we are proud of what has been accomplished, and Without a doubt, much remains to be done, and there will be processes new andlearning conducting. weareprocess globalization growthand the of part a are that commitments and policies rights human environment,and thefight againstcorruption. standardsthathaveThese areworld-class the beenaddedto regulations, labor regarding principles its and Compact weresponsibilities havethe undertaken. WeGlobalNations United the to committed are andahead challenges the face to prepared and optimistic feeling us end,left the 2010 In ARAUCO oftheBoardDirectors Chairman José Tomás GuzmánDumas 2010 Sustainability Report 7 2010 Sustainability Report 8 and creativity. and courage required that achallenge before and never as adversity Throughout of ARAUCO. 2010, history company faced the the in periods one intense covers most of the Report Sustainability This a wide variety of products to customers in more than 70 countries aroundtheworld. inmorethan70 countries ofproducts tocustomers a widevariety standards,offersglobal ARAUCO meeting by strategy sustainability our to Responding one whichwefor more than30years. have served markets,growing fastest andour of one in customers our for service providebetter to China,usallowingin office business a process,opened weglobalization our of part As of apulpmillwithanannual production capacityof1.3milliontons. This project, the production largest investment in the country, includes the construction Enso. Stora with partnership in project Plata Uruguay,del In Montes the developed we tobeemployed by for localworkers thecompany. program veloping atraining Impact forStatement Panela in Mill Environmental Teno an commune, approved.was which submitted We 2010.We de- currently are during developed were projects Many wasUS$701million, period a130%increaseascomparedwith2009. reporting ditions,margins.higher attained businessareas our profitof Our forthisall in products sell US$3,788 million, 22% more than in 2009. In addition, due to improving market con- recovered,products forest and topulp us enablingfor 2010, demand global During the Business growth thataffected allofChileaswell asourcompany.and theearthquake environment;the and people;stakeholders our to to commitment commitment our our company’smanagement:growth;the businessfor relevant particularly were issues Four CEO’s Statement and CommercetheChilean Safety Association. Productionfor Chamber (CEOP),the Center University, Excellence Catholic Operational theby organized jointly program Spanish),a in Innovation(PIO Awards Operational first country’s the in recognition highest the year,received Mill Pulp ARAUCO’sNueva Aldea that,thissay 2010. to in proud business Weprogram are the joining our area forestry of the areas,with all in plan Excellence Operational successful our continued Finally, we toimprove oursafety standards. inaneffort rules key work Wellness to and benefitprogram their families and workers launched a campaign covering service-providing and contracting a structured model.labor-relations to also Weour improving and businesses, support strengthening our deepened and people, our of well- being and development occupational the regarding progress important made ARAUCO Commitment toourpeople ARAUCO offering. anyof rate interest lowest the having for States. ted noteworthy were placements Uni- These the in and market national the in placements bond two conducted we addition, In InterconnectedSystem(SICinSpanish),Central Chile’s grid. energy of180MWtothe andthroughwhichwesurplus ces forsupply ouroperations anenergy powersour key the energies,non-conventionalare renewable to which commitment our ves and projects aimed at the sale of biomass-based clean energy. The new name expresses tion), Bioenergy). to (Arauco Bioenergía Arauco all the initiati- This business concentrates In 2010, we also changed the name of our subsidiary, Arauco - Generación (Arauco Genera -

2010 Sustainability Report 9 10 2010 Sustainability Report operations in January 2011. inJanuary operations present.at mill, ourour resumed at operating which Arauco 2 are Line facilities includes of This all destroyed, completely was which sawmill, Mutrún the of exception the With Program. Support Crisis Foundation’s communities,Arauco and fishing for Hope”program of Arauco,the of “Sea community the in entrepreneurship through businesses small for support providing lies, fami- affected for housing new of construction the for donations land provide SERVIUto center, withof cultural initiative Arauco’s joint (PRES),reconstruction a Constitución the of Reconstruction Sustainable the for Plan Master the campaign,Chile” helps the “Chile needs such as water, food, and supplies. We also to contributed broader initiatives such as andtheir families. workers Wecontract workers, developed multipleour initiatives of to aid well-being affected communities,and safety covering basicthe was concern main Our lities were paralyzed. faci- our of 34 destroyedand completely was sawmills our live.of One workers contract and affectedtsunami, by the earthquake and where andmore than 20,000 of our workers We suffered great damage. Of our 35 production units, 30 were located in the areas most operate, andthatwere theepicenterofdisaster. six of workers.our contract We were witness to the devastation of the areas in which ofweloss the bear to had sorrow,we27. great With theFebruary on from tsunami company and our earthquake by and Chile by suffered impact the mention but help cannot I The earthquake FSCcertification. company tosuccess inearning work, groups of dialog stakeholders.and engagement with diverse We are committed as a innovativethrough process certification FSC the with moveforwardWe to continue also initiatives. Inaddition, ARAUCO hasdeveloped for itsworkers. arobust housingprogram and industrial operations, has social-investmentof forestry variety a maintains ARAUCOdevelopedand has company our which in communities the of needs the to response In and excellentacademicresults. in Chile that are funded directly by ARAUCO once again were recognized for their quality blic-school education in the areas of Chile in which ARAUCO operates. pu- In improve to addition, programs committed,quality schoolshighly develop to continued dialog,has and opennessits for Foundation),known Educational (Arauco Arauco Educacional Fundación inourcompany.implementation oftheseprinciples theon reports progress annual publishing of responsibility the fulfill will we report, this with Beginning anticorruption. and rights, protection,human environmental rights, labor on ciples - prin ten its and Compact Global Nations United the to byofficiallycommitting commitment this ratified we2010, In report. this throughout presented are programs operate. weThese maintains engagement with programs communitiesneighboring in all of the in countries which As a company that is committed to society, to communities and to the environment, ARAUCO Commitment toourstakeholders theenvironment and a globalleaderinthedevelopment ofsustainable forest products. businessandglobal a growingbecoming movingof and challenge weforwardthe as face keep to want weparticular, In 2011. in goals important achieving to forward look We and specialrecognition. gratitudeour express to wish I that them to is It workers. contract and workers our of commitmentand effort the of fruit are yeardifficult a such ARAUCO’sin achievements tions andnearby communities. for the comprehensive and strategic approach shown in the of reconstruction our - opera show leadership, vision, innovation and achievements.strategic We were given this award that industry paper and pulp the in businesses honor awardsRISI,by international these recognition of the manner in which we helped Chile recover from this disaster.inAward International OrganizedPaper & Pulp 2010 the year,awarded the was in ARAUCO Late the communities in which we operate, and the responsibility we have for their well-being. tough,was experience the Although allowedit weties deep the confirm haveto us with ARAUCO President &CEO Matías Domeyko Cassel 11 2010 Sustainability Report 12 2010 Sustainability Report of doing business. operational, commercial, environmental and social aspects standards, and to attainobjectives thatbalance the challenges of globalization, to meet orsurpass global ARAUCO’s business model isdesigned to address the

1 Our Business

Our Business

ARAUCO’s vision is to be a global leader in the development of sustainable forest products”

1. 14 2010 Sustainability Report 1.2 gri experience, and different areasofknowledge. to the table nationaland international who bring scientists, academics, professionals, and laypersons sons frominsideandoutside thecompany, suchas This isaccomplishedthrough theinclusionofper is theidentification ofbestideasand practices. modelA key work elementinthiscollaborative that focuses onthecommongood. process through aconstructive, participatory view, and promoting joint initiatives and projects ching consensus, pointsof diverse considering holder engagementrequiresbuilding trust, rea- isfundamentaltoachieving itsgoals.ders Stake- ARAUCO believes thatengaging allstakehol- re knowledge insolvingidentified problems. toinnovate andsha- andperspectives experience of ofpeoplerepresentingabroadrange network dings. withinaThe newmodelrequiresworking ning thecompany’s- relationshipwithitssurroun dialog andopennesswiththecommunity, redefi- a stakeholder engagement model that is basedon its stakeholders. 2010, During ARAUCO adopted 2010 wasredefining ARAUCO’s relationshipwith during component inimplementingitsstrategy and afocus onthedevelopment ofpeople. A key standards;international innovation asacorevalue; tion diversification; adoptionofthemost-stringent globalization; itsabilitytoadaptchange; produc- ARAUCO’s strategy. These includethecompany’s componentsto important There areseveral nities andtheneedsoffuturegenerations. the environment, ourpeopleandtheircommu - for its concern management that demonstrates peopleandefficientning ateamofhighly trained respond to our customers’ needs, and maintai- new markets, to broadeningproductofferings tations andleadingtechnology, expansioninto ties for sustainable growth, investment inplan- - vision isexpressedinthesearchfor opportuni development ofsustainable forest products. This ARAUCO’s visionistobeagloballeaderinthe the environment. valueformust peopleandtheircommunities alsogenerate andprotect responsible company, for itsshareholders, whilemaximizing valuegeneration thata ARAUCO’s isbasedonthecertainty sustainabilitystrategy Sustainability Strategy - Serving • Focusing • Expanding • Improving • business modelinclude: doing business. The key elements of ARAUCO’s commercial, environmental and social aspects of fines objectives thatbalancetheoperational, standards. international meet orsurpass Itde- dress thechallengesofglobalizationandto ARAUCO’s business modelisdesignedtoad- Business Model Developing • Executing • and opportunities inthemarket. and opportunities tunities, identifying changes andaccurately needs, continuously searching for newoppor ofproductsaccording toeachmarket’sriety thatimprovecreates programs quality oflife. socialandeconomic development whichrate improving labor skillsandeducationtogene- for localsuppliers, andviding opportunities stim forestry sector.forestry that presentcompetitiv aroundtheworld. tries thegreatestpossible number ofcoun- to serve thatwillallow network distribution ARAUCO unloading facilities, gy generation. forest resourcethroughbiomass-basedener assets,industrial andoptimize the useofour prove theefficiency andproductionofour economies ofscaleanddifferentiation, im- strengthen competitiv plantations throughadvancedf ment techniques. ulating productiondevelopment, pro-

our

the

an production,

inter

customer people

gro in nationally vestment wth and a product storage and andaproductstorage

s y r

e advantagesthrough

tr ates b creating e advantagesinthe ansportation, y

off

into plan and ering orest manage-

quality

new emplo designed

wide

loading/ regions

yment, of

our va to - - -

CHAPTER 1 Our Business

• Meeting the objectives established in the ARAUCO supports the development of inno- company’s MACSSO (Environmental, Quality vation through the use of a Strategic Innovation and Occupational Health) policy, and the cri- Model that is focused on three key areas: New teria and parameters defined in established Value Offers, Operational Efficiency and Sustai- management systems and procedures. nability and Social Impacts.

• Increasing environmental research and tra- • New Value Offers: This area includes new ining, and carefully managing the company’s products, services and business models fo- ecosystem services and High Conservation cused on wood and wood treatments, wood Value Forests. applications; and on developing business models based on ARAUCO’s knowledge and ex- There are several important pertise in value generation in the market. components to ARAUCO’s • Operational Efficiency: This area of focus strategy. These include the company’s includes process innovations, work organization, and the development of strategies aimed globalization; its ability to adapt to change; at cost reduction, improving product quality, production diversification; adoption of the strengthening the supply chain, advancing te- most-stringent international standards; chnology, and product differentiation, among others. innovation as a core value; and a focus on the development of people. • Sustainability and Social Impact: The objective of this area of focus is to improve significantly the sustainability of operations and the Innovation quality of life of our workers, their families To be a global leader in the forestry industry and the communities in which the company and in the development of sustainable forest operates. products, ARAUCO must maintain its leadership in product development, operational excellence ARAUCO’s vision for innovation allows us to: and the management of its environmental and social programs. - Renew our value proposition and stimulate long-term growth. In order to sustain and enhance its leadership position, ARAUCO invests in efficiency, high-perfor- - Strengthen ARAUCO’s reputation for qua- mance teams and innovation. ARAUCO defines lity products and for environmental and so- innovation as any new product, service, or pro- cial responsibility. cess (operational or managerial), that generates value for current and future markets, and genera- - Support the development of innovative tes incremental revenue for the company. and ingenious people.

2010 Sustainability Report 16 2010 Sustainability Report A • A • The mostsignificant commitmentsare: the company’s decision-makingprocesses. the company’s operations, andhave aneffect on to society. These commitmentsapply toallof has madecommitmentstotheenvironment and of its sustainability strategy,As part ARAUCO ARAUCO’s Commitments neartheirconfluencewiththePacific Ocean. rivers oftheMataquitoandItata forestland locatedintheestuaries will beprojectsincoastalwetlands associatedwith ARAUCO’s social agentstodevelop specificactionplans. and Chile inordertoengagewiththeenvironmental authorities doneinthecompany’ work Strengthen theinternal wetlands in organization. Occupational HealthandSafety Standardsthroughoutthe Communicate million hectares(2.7acres)offorests inChile. of1.1 by theForestStewardshipCouncilfor thecertification pre-assessment inordertocomply withthestandardsrequired Apply actionssuggestedby corrective Commitment Fulfillment of2010Commitments Standardsfor Operational Establish Corporate Establish akey Safety Rulessystem. Ciégnas delNamewetland inChile. capacityfound inthe Conduct astudyofthecarbondrain Paraná forestry unit. forestry Paraná processfor the oftheFSCcertification aspart Argentina Designate newHighConservation andfauna.existing flora do Tenente regionwillbemonitoredtoidentifyandinventory Standard for Brazil. Also, thecompany’s plantationsinCampo acres) of In Brazil, technologies for ourproductionfacilities. gement and leadership development programs. gement andleadership tional health and safety, training, talent mana- potential thatismanifested throughoccupa- commitment commitment 33,000hectares(81,500 willbedonetocertify work Vale (Tunas) doRibiera totheFSCForestManagement ARAUCO’s Environmental Corporate to to the invest development Value Forest(HCVF)in

in Woodmark intheFSC the

A 2010priority best ARAUCO.

of available human

Alto

2010. Accomplished. Work onthecoastalwetlands wascompletedin 2011.Chile during willcontinue in these standardsthroughouttheorganization management ofeachbusiness unit. Regularcommunication of Accomplished. The standardswere communicated by the in 2011. identified by thepre-assessmentaudit. launched, andtechnicalteamswere assignedtoaddressgaps Model)was Forum consultation process(usingtheHybrid audit conductedby Woodmark. 2010, During astakeholder In process. Work beganin2009with thepre-assessment communicated throughouttheorganization. Accomplished. standardswere Seven developed operational and their workers. and alsohave beenadoptedby for providers ARAUCO’s service rules arenow includedin reflectingworkers’ thesenewcontracts operations. for theindustrial ness andfive key rules busi- for theforestry hastwoThis safety key program rules Accomplished. A campaignwasdeveloped andlaunchedinJune. Work willcontinue inthearea2011. Ciénagas delName Accomplished. vegetation inMisionesProvince company’s ofnative forest remainingownership andnatural completion. ring In process. and fauna. ofexistingflora this areaandsubsequently conductaninventory in valueattributes conduct afollow-on toassessconservation wascommissionedto (Imaflora) Management andCertification Accomplished. andtsunami. earthquake after theFebruary kilometer (6mile)sandbaratthemouthofMataquitoRiver ofa10 These studiesincludedananalysis ofthedisappearance studies oftheMataquitoRiver coastalwetland were performed. the Vegas Wetland areaoftheItataRiver were assessed. Inaddition, A • A • these objectives and goals is reported annually.these objectives andgoalsisreported objectives andgoals. Progresstoward achieving ARAUCO’s into commitmentsaretranslated that are a part oftheglobalizationprocess. that areapart environmental and social standardsstringent versity; ventional (NCRE)sources. Renewable Energy Forexample, commitment commitment

Work initiatedin2006todefineHCVFsisnea-

The study and The InstituteofForestry and

The Proyungas Foundationisevaluatingthe thephysical, Wetland” to Compliance Level “Quantification andCarbonFlow in develop to to 2010. wascommissionedduring protect in chemicalandbiologicalvariables comply marketable

This processwillcontinue and with Agricultural conserve or Standards surpass Non-Con- biodi-

the

CHAPTER 1 Our Business

• Changes in economic conditions, trade agree- ARAUCO’s main ments or tariffs in our key export markets. challenges are centered on innovation, • Damage to our assets in Chile from recurring maintaining continuous growth of all our seismic activity and its consequences. businesses, nurturing people’s talents and • Changes in environmental regulations or in leadership skills, ensuring continued the cost of compliance. compliance with environmental, social and • Environmental issues related to the start-up occupational health and safety standards to and operation of the Valdivia pulp mill. maintain and strengthen the business model by meeting or surpassing global standards. • Significant tax increases in Argentina.

• Disruption in production facilities resulting from natural disasters including power supply Risk Analysis Related to interruption, equipment failure, interruption ARAUCO’s Sustainability in raw material supply, labor- related issues ARAUCO has identified and assessed different and other operational problems. risks that could result from changes in economic, political, social and competitive conditions • Global climate change and its consequences. in its main markets.

Following is a list of risk factors for ARAUCO and the forestry industry. If these events were to occur, the company’s business, financial position and operational results could be affected.

• Fluctuations in the market price of our products.

• Increased competition in global markets.

• Economic developments, particularly in Asia and the United States, that could result in a reduction in product demand.

2010 Sustainability Report 18 2010 Sustainability Report ARAUCO’S 2011Commitments Maintain • ARAUCO’s mainchallengesfor 2011areto: for 2011 Challenges andCommitments Montes delPlata, Panel Millin Particleboard Chile. power co-generation plantin Thermal Viñales, Commitment Standards (COS). Operational Corporate Occupational HealthandSafety performance. Standardsfor Environmental and Corporate mill inJaguariaiva, Brazil. (Medium DensityFiberboard) Second ProductionLineatMDF Performance ManagementProgram Professional Engineer/ Program. Academic ExcellenceScholarship meeting or surpassing globalstandards. meeting orsurpassing and Conchillas, strengthen Trainee Program Teno, Uruguay. Chile. the business

model

150,000 cubicmeters. 300,000 cubicmeters. The melaminelinewillhave anestimatedcapacityof mill withamelamineline. The millwillhave anannual panelcapacityofabout ofanewparticleboard US$110 millionwillbeinvested intheconstruction Maule Region. grid,the Chileanenergy SIC. This facilityisbeingbuilt inConstitución, inChile’s company’s requirements, own energy thatwillbesoldto surplus andanenergy for the This newUS$105millionpower 41MWofelectricity plantwillgenerate Implement corporate standardsthroughouttheorganization. Implement corporate of 2012. thesecondquarter during ARAUCO expectsthissecondlinetobeoperational 125,000 cubicmeters. andwillincludeamelaminelinewithanestimatedannual capacityof meters State, A secondproductionlinewillbebuilt attheMDFmillinJaguariaiva, of 2013. half thefirst during The company estimatesthatthisnewmillwillbeoperational investment includes: Conchillas, ofUruguay. intheColoniaDepartment The US$1.9billion willbeginbuilding apulpmillin Ensocorporation ARAUCO andStora employee’s objectives with those ofthecompany. Implement thismanagementtoolatalllevels inthecompany tohelpaligneach offered in2010. in2011tothe100scholarships Add 45newscholarships hed in2010. Standardsestablis- Operational Develop ontheCorporate andprovide training young professionals intotheProfessionalIncorporate Engineer/ plantfueledby renewable resources, Anenergy-generation • A700-meter-longfacilityandanaccesschannelconnected (0.4miles)port • Apulpmillwithanannual productioncapacityof1.3milliontons(ADMT). • between 160and180MW. Garcíachannelfor oceanshipping. to Martín by Brazil.

The millwillhave anannual production capacityof500,000cubic

Maintain • Ensure • cupational healthandsafety standards. businesses.

continued the Objective continuous compliance

growth withacapacityof with Trainee Program. inParaná of global all

our oc-

CHAPTER 1 Our Business

• Nurture people’s talents and leadership skills. • Maintain industry leadership through efficiency, high-performance technologies and innovation. • Maintain permanent, positive relations with the communities in which the company operates, based on engagement and mutual collaboration.

Commitment Objective

Talent Program. Provide a training and development program to strengthen and improve the skills of the 113 workers selected in 2010.

Leadership Training Program. Provide the next level of training for the 500 workers, identified as leaders in their areas, who successfully completed the first cycle of training.

Integrated Model for Sustainable Development Implement the MIDES program and assess the contributions made by the pro- (MIDES). gram in the locations in which the company operates.

Local Economic Development Councils. Continue to support and strengthen Local Economic Development Councils in the locations in which the company operates. Continue to develop local suppliers for the company.

Housing Program for Workers (HPW). Publically announce the HPW program, and continue two pilot projects to construct about 1,000 houses at a cost of CLP$11.8 million (US$23,000) in the Constitución and Curanilahue Communes. These wood houses will be built to high technical standards, and the project will engage all interested stakeholders.

FSC Forest Management Certification Process. Using the Hybrid Forum Model with support from technical teams, continue and expand the consultations already under way in order to generate joint solutions that can be implemented in preparation for a formal FSC certification assessment in Chile.

ARAUCO Sustainable Solutions Program. Register more than 35,000 people as members at www.araucosoluciones.com. In addition, launch the web site in Brazil and Argentina, create 14 new “How To” projects, and add 89 new stores to the Point-of-Sale program.

Coastal wetlands in Chile. Create a network of interested parties, including the academic sector and non-governmental organizations, to consolidate and communicate the results of work on coastal wetlands.

Native Forest Program. Use innovative tools to develop a program that generates a value proposition for ARAUCO’s native forest holdings.

ARAUCO’s Innovation Model. Develop initiatives for all three Innovation Model program areas: New Value Offers, Efficiency in Operations, and Sustainability and Social Impact.

Operational Excellence Program. Implement the Operational Excellence Program in Argentina and Brazil, consolidating the programs developed by ARAUCO’s various businesses in Chile.

2010 Sustainability Report 20

2010 Sustainability Report 2.3/4.1 gri Board ofDirectors wood productsandpanels. pulp,global leaderinthemanufacture ofmarket sawn timber, remanufactured andplantationperformance. offorest ownership in terms Today, ARAUCO isa focus, businesses inLatin thecompany isnow oneofthemajorforestry America leader inthedevelopment ofsustainable forest products. As aresultofthisclear ARAUCO agowiththevisionofbecomingaglobal wasestablished 40years Overview Corporate Timothy C. Purcell Eduardo Navarro EtchegarayAlberto Carlos Croxatto José RafaelCampino Jorge Andueza Board Members Manuel EnriqueBezanilla Roberto Angelini Vice Chairman José Tomás Guzmán Chairman Organizational Structure Marketing DirectorMarketing Charles Kimber andCorporate Affairs Cristián Infante Development Director Management and Felipe Guzmán Director Legal ManagingAffairs Franco Bozzalla Managing Director Woodpulp Business Matías Domeyko Chief Executive Officer Antonio Luque Managing Director Sawn Timber Business Management

Álvaro Saavedra Managing Director Business Forestry Gonzalo Zegers Managing Director Panel Business Gianfranco Truffello Financial ManagingDirector Robinson Tajmuch Comptroller ManagingDirector

CHAPTER 1 Our Business

Legal Form S.A., each of which was created in the late 1960s gri 2.6 Celulosa Arauco y Constitución S.A. is a closely by CORFO, the Chilean Economic Development held corporation, organized under Chilean legis- Agency. lation and subject to regulations applied by the Chilean Government, including Law N° 20.382, Nature of Ownership which was implemented in 2009. This law modi- ARAUCO’s primary owner is Empresas COPEC fied various legal bodies and made changes to re- S.A., a publicly held company with 8,647 sharehol- gulations on corporate governance, including the ders that is listed on the Santiago Stock Exchange, Chilean Securities Market Law and the Chilean Valparaíso Stock Exchange and the Electronic Stock Corporation Law. Exchange. COPEC is a holding company with primary interests in ARAUCO, in fuel distribution busi- The company was established on September 14, nesses, and in the fishing and mining sectors. A 61% 1979, through the merger of two companies, share of COPEC is owned by Antarchile S.A., a busi- Celulosa Arauco S.A. and Celulosa Constitución ness in which the Angelini Group holds a 74% share.

ARAUCO Shareholders

Number of Shares Ownership Percentage

Empresas Copec S.A. 113,127,452 99.97791

Chilur S.A. 24,746 0.02187

Sucesión Cruchaga Montes María Raquel 153 0.00014

Antarchile S.A. 95 0.00008

TOTAL 113,152,446 100.00000

2010 Sustainability Report Subsidiaries and ARAUCO’s Participation Celulosa Arauco y Constitución S.A. gri 2.3 Arauco Internacional S.A.

98.0000 Arauco 2.0000 Forestal Bioenergía Cono Sur S.A.

99.0000 1.0000 Aserraderos Zona Franca Celulosa y Energía Stora Enso Arauco S.A. Eufores S.A. Punta Pereira S.A. Punta Pereira S.A. Uruguay S.A.

50.0000 50.0000 Arauco Arauco Distribución S.A. Perú S.A.

35.0000 20.0000 Servicios Logisticos Terminal Logística El Esparragal Asoc. Arauco 45.0000 Arauco S.A. e Ind. M’Bopicuá S.A. Agraria de R.L. Australia S.A. 99.9248

99.0000 Paneles 1.0000 Forestal Arauco Arauco S.A. Arauco S.A. Ecuador S.A.

Arauco Colombia S.A. 25.0000

Genómica Agenciam. y Servicios Forestal S.A. Profesionales S.A. de C.V.

Investigaciones 1.0000 Forestales 99.0000 Araucomex S.A. de C.V. Bioforest S.A.

27.7100 1.0000 Controladora Bosques de Plagas Arauco Wood Arauco S.A. 99.0000 5.3200 Forestales S.A. Products Inc.

19.1800 7.6000 1.0000 Forestal Arauco Arauco Arauco Holanda Celco S.A. 99.0000 Forest Products B.V. Denmark APS Cooperatief U.A. 80.0000

1.0000 Forestal Forestal Stora Enso Arapoti Ind. Valdivia S.A. 99.0000 Los Lagos S.A. de Papel S.A. Inversiones Celco S.L.

97.5014 Forestal Sercor S.A. Mahal Emp. e Part. S.A. Arauco Cholguán S.A 20.0000 Do Brasil S.A.

50.0000 Inversiones 99.9700 Arauco Puerto Coronel S.A. Puerto de Coronel S.A. Catan Emp. e Part. S.A. Forest Brasil S.A.

20.1381 99.9900 Depósitos Portuarios Emp. Florestais Arauco Florestal Puerto de Lirquén S.A. Lirquén S.A. Santa Cruz S.A. Arapoti S.A.

50.0000 Forestal EKA Chile S.A. Leasing Forestal S.A. Alto Paraná S.A. Nuestra Sra. 22 del Carmen S.A.

Savitar Industrias Forestales S.A. 2010 Sustainability Report CHAPTER 1 Our Business

Celulosa Arauco y Constitución S.A. 98.60576

Arauco 1.394243 Internacional S.A.

50.0000 Arauco Forestal Bioenergía Cono Sur S.A. 50.0000 50.0000 50.0000 100.00 Aserraderos Zona Franca Celulosa y Energía Stora Enso Arauco S.A. Eufores S.A. Punta Pereira S.A. Punta Pereira S.A. Uruguay S.A.

Arauco 99.9987 Arauco 0.0013 Distribución S.A. Perú S.A. 100.0000 99.0000

Servicios Logisticos Terminal Logística El Esparragal Asoc. 1.0000 100.00 Arauco Arauco S.A. e Ind. M’Bopicuá S.A. Agraria de R.L. Australia S.A.

Paneles Forestal 99.9000 Arauco 0.1000 Arauco S.A. Arauco S.A. Ecuador S.A. 1.5000 1.5000

1.5000 Arauco 1.5000 Colombia S.A.

94.0000 Genómica 99.9980 Agenciam. y Servicios 0.0020 Forestal S.A. Profesionales S.A. de C.V.

Investigaciones 99.9995 0.0005 Forestales Araucomex S.A. de C.V. Bioforest S.A.

Controladora 99.6047 0.3953 Bosques de Plagas Arauco Wood Arauco S.A. Forestales S.A. Products Inc.

Forestal Arauco 100.0000 Arauco 0.0080 99.0000 Arauco Holanda 1.0000 Celco S.A. Forest Products B.V. Denmark APS Cooperatief U.A.

99.9920 100.0000 Forestal Forestal Stora Enso Arapoti Ind. 20.0000 0.0000 Valdivia S.A. Los Lagos S.A. de Papel S.A. Inversiones Celco S.L.

97.5010 Forestal Arauco 2.4990 Cholguán S.A Sercor S.A. Mahal Emp. e Part. S.A. Do Brasil S.A. 100.0000

76.8007 23.1991 Inversiones Puerto de Coronel S.A. Catan Emp. e Part. S.A. Arauco Puerto Coronel S.A. 74.7000 Forest Brasil S.A. 25.3000

100.0000 Depósitos Portuarios Emp. Florestais 80.0000 Arauco Florestal Puerto de Lirquén S.A. Lirquén S.A. Santa Cruz S.A. Arapoti S.A.

82.4200 2.0000 98.0000 99.9775 Forestal 9.1600 EKA Chile S.A. Leasing Forestal S.A. Alto Paraná S.A. Nuestra Sra. 8.4200 del Carmen S.A. 23

20.0000 90.0230 9.9770 Savitar 80.0000 Industrias Forestales S.A. 2010 Sustainability Report 24 2010 Sustainability Report 2.9 gri 2.8 gri • The Montes delPlataCorporationwasestablished • A new businessofficewasopenedinChina 2010. capacity during andinstalledgarding itsstructure, ownership ARAUCO registeredthefollowing changesre- and Structure During2010 Significant Changesin ARAUCO’s 2010 Key EconomicIndicatorsfor Today,is: ARAUCO Relative Size of Arauco’s Businesses (1) EBITDA: Earnings before Interest, (1) EBITDA:Earningsbefore Taxes, DepreciationandAmortization. equal tes delPlataCorporation, whichisowned in nish During inChina. customers foster acloserrelationshipwith itswoodpulp abroad. This newoffice willhelpthecompany in Shanghai, China, itseleventh business office 2010,In January ARAUCO opened an office ture lonia pulpmillinPuntaPereira,the-art intheCo- the jointventure, astate-of- andwillconstruct business willmanageforest assetsacquired by proximately mill’s annual production capacitywillbe ap- presenting an investment ofUS$1.9billion, the Number ofDirect andIndirect Jobs Net Income EBITDA Debt Assets Sales inthemanufac- • One leaders oftheworld • ture andsaleofwood-based panels. pulp intheworld. producerofmarket The secondlargest company, was Department shares 2010, 1 established 1.3

ARAUCO Stora million each (Province) Enso, ARAUCO’s Size partner. in tons. and

May established

Montes the

of 2009.)This (The Uruguay. Swedish-Fin- joint the del

Mon- Plata

ven- new Re-

• A power fourth boilerbeganoperationatthe • Investments were madeintheForestry business tribute rator. Oncefully operational, thisfacilitywillcon- (known astheSIC). grid national energy of This newpower boiler hasaproductioncapacity ler wasbroughton-line at the millsite.Arauco halfof2010, power thefirst boi- During afourth Arauco millsite in Chile, Argentina, andUruguay. Brazil hectares and tenance chinery, equipmentandotherfixed assets, main- llion inforest plantations, facilities, housing, ma- 2010,During ARAUCO invested US$222mi- of Uruguay. Territorial fromtheHousing,environmental authorization requiredContract. Italsoobtainedtheprimary prepared aFeasibilityStudyandanInvestment plant.based energy 2010, During thecompany facilitiesandabiomass- also willfeature port ofbiomass- • One generators ofthelargest • The landowner in Latin largest • The producerofwood productsin largest 210 based clean energy inLatin based cleanenergy America. Hemisphere. the Southern 31 tons/hour US$ 12,506million an MW US$3,788million US$ 1,406million US$ 3,450million activities (86,500 US$ 701million estimated Planning, of electricity of acres) and

35,704 forest and total the of Environment from of biomass-based land purchase 32 its and MW turbine America. plantations of to Ministry 35,000 Chile’s steam gene-

CHAPTER 1 Our Business

• Arauco Generación changes its name to in 2011, the sawmill’s capacity will be 334,000 Arauco Bioenergía cubic meters, an increase of 100,000 cubic me- Arauco Generación (Arauco Generation) chan- ters of lumber per year. ged its name to Arauco Bioenergía (Arauco Bioenergy). The name reflects the consolidation • Construction was started on the Viñales of all of the company’s biomass-based clean Thermal Cogeneration Facility energy initiatives and projects, and a strengthe- In June 2010, construction began on the Viñales ning of ARAUCO’s commitment to the use of Thermal Cogeneration facility, on land adjacent sustainable, natural resources. to ARAUCO’s Viñales sawmill. This new facility will include a biomass-fueled power boiler • Dynea Brasil was acquired with a production capacity of 210 tons/hour of In April 2010, ARAUCO’s subsidiary, Arauco steam and a turbine generator with a capacity do Brasil, acquired 50% of the shares of Dy- of 41 MW of electricity. Once completed and nea Brasil S.A. for US$15 million and now owns online, this facility is expected to contribute up 100% of its shares. This business has an annual to 31 MW to Chile’s national energy grid, the production capacity of 150,000 tons of resins Central Interconnected System (SIC). (urea formaldehyde, phenol formaldehyde and melamine formaldehyde). These resins are used • The Nueva Aldea Pulp Mill capacity in the production of panel products. expansion was more than 50% complete Through a series of investments, capacity • The Mutrún Sawmill was destroyed by the at the Nueva Aldea Pulp Mill in Chile will February 27 tsunami be increased to more than one million tons As a result of the tsunami caused by the Fe- (ADMT) per year. This project includes upda- bruary 27 earthquake in southern Chile, the ting existing equipment and the addition of Mutrún sawmill, located in the city of Cons- new equipment to allow the use of pine or titución, was destroyed. At the time of its eucalyptus on existing production lines. By destruction, this facility accounted for 6% of year-end, about 55% of the planned work had ARAUCO’s sawn timber production in Chile. been completed.

• The Horcones II Sawmill was reopened • ARAUCO made two successful bond placements In July 2010, ARAUCO resumed operation of its During 2010, the company made two suc- Horcones II Sawmill, located in Chile’s Arauco cessful bond placements at the lowest interest Commune. This production unit was closed in rates in the company’s history. In September December 2009 due to reduced demand cau- 2010, ARAUCO made a ten-year bond place- sed by the global economic crisis. The Sawmill ment in the Chilean market for UF5 million has a monthly production capacity of 14,500 (about US$210 million) at an annual interest cubic meters of green wood. These products rate of UF + 3.18. (UF, Unidad Fomento, is a are sold primarily in Chile and in Middle Eas- Chilean Unit of Account indexed to inflation.) tern, Asian and Central American markets. That same month, the company issued an addi- 25 tional US$400 million in bonds in the United • The Viñales Sawmill was expanded States, with a ten-year term and an annual in- ARAUCO made an investment of US$17 mi- terest rate of 5.115%. llion to expand capacity at the Viñales Saw- mill, located in the Constitución Commune in

Chile’s Maule Region. When fully operational 2010 Sustainability Report 26 Argentina

2010 Sustainability Report Uruguay 2.3 gri Brazil Total Chile ARAUCO’s Businesses ARAUCO Panels, (1) Includestotalforestplantationsand50%offorestlandintheMontesdelPlatajointventurewithStoraEnso. Source: ARAUCO(December2010) (2,635, 750acres) 1,006,660 hectares (1,783,000 acres) 737,939 hectares (181,750 acres) 73,561 hectares (314,500 acres) 127,290 hectares (167,700 acres) 67,870 hectares Forestry Sawn has Timber andEnergy. (1) five (1) businesses: 3.21 millionADTM 6 Mills 2.86 millionADMT 5 Mills 350,000 ADMT 1 Mill

Pulp Forestry,

Woodpulp, Growing theFuture 3.18 millionsm 8 Mills Plywood 3 Mills MDF 2 Mills PB MDF PB HB MDF 3 Mills (2)

Panel : : : : : : : 800,000 m 300,000 m 530,000 m 715,000 m 260,000 m 515,000 m 60,000 m production for eachbusiness: activities, assetsandfacilities, mainproductsand Following 3 3 3 3 3 3 3 3 2.77 millionm 9 Sawmills 65,000 m Facility 1 Remanufacturing 320,000 m 1 Sawmill 409,000 m Facilities 5 Remanufacturing 2.45 millionm 8 Sawmills is Sawn Timber a brief 3 3 3 3 description 3 183 MWenergysurplus 647 MW 11 Plants 3MW energysurplus 78 MW 2 Plants 180 MWenergysurplus 569 MW 9 Plants of the Energy company’s

CHAPTER 1 Our Business

Forestry ARAUCO is the largest owner of forestland in Latin America, with 1,006,660 hectares (2,635,700 acres) of plantation forests in Chile, Argentina, Brazil and Uruguay.

ARAUCO Land Ownership by Country (1) (2)

Country 2008 2009 2010

Chile 1,090,627 h 2,695,000 a 1,099,846 h 2,717,800 a 1,101,963 h 2,723,000 a

Argentina 256,083 h 632,800 a 257,722 h 636,845 a 257,705 h 636,800 a

Brazil 122,659 h 303,100 a 126,616 h 312,800 a 155,445 h 384,100 a

Uruguay 39,374 h 97,300 a 126,786 h 313,300 a 127,234 h 314,400 a

Total 1,508,743 h 3,728,200 a 1,610,970 h 3,980,800 a 1,642,347 h 4,058,300 a

ARAUCO Land Ownership by Use (1) (2)

Forest Use 2009 2010

Plantation Forest 993,794 h 2,307,450 a 1,006,660 h 2,487,500 a

Native Forest 326,975 h 808,000 a 373,573 h 923,100 a

Other Uses 226,707 h 560,200 a 201,594 h 498,100 a

Land to be planted 63,424 h 156,700 a 60,520 h 149,550 a

(1) Includes 80% of Forestal Los Lagos in Chile, 50% of land and forests of Monte del Plata in Uruguay, and 80% of Florestal Arapotí in Brazil. (2) h = hectares, a = acres.

During 2010, ARAUCO’s forestry operations harvested 42,981 hectares (106,200 acres) of plantation forests and planted 62,893 hectares (155,600 acres) of pine and eucalyptus seedlings in Chile, Brazil, Argentina and Uruguay. Area Harvested and Planted by Year (hectares [h] and acres [a])

Forestry Activity 2008 2009 2010

Harvested 37,667 h 93,100 a 38,754 h 95,800 a 42,981 h 106,200 a

Planted 44,156 h 109,100 a 43,165 h 106,700a 62,893 h 155,400 a

ARAUCO’s forestry business is responsible for to finance maintenance and land-protection activities, supplying the company’s industrial facilities with manage plantations, and purchase land, machinery wood fiber for a wide variety of applications, and equipment. including: woodpulp; sawn timber; remanufactured products; panels; mouldings; and clean ener- Genetic Material gy production. As part of the research it conducted during 2010, the Forestry Business identified genetic material In 2010, ARAUCO processed 24.8 million cubic me- and developed clonal plantations in Chile, Argenti- ters of wood fiber in its industrial facilities and sold na and Brazil. The company established 9,130 hec- 2.9 million cubic meters to third-party sawn timber tares (22,500 acres) of Radiata pine clonal planta- and plywood producers, primarily in Chile. Forestry tions in Chile. In Argentina 4,000 hectares (9,900 Business sales accounted for 4.1% of ARAUCO’s to- acres) were planted with high-genetic-value Taeda tal sales in 2010. pine plants, produced through plant propagation. In Brazil, 75,000 Taeda pine mother plants were About 75% of the total fiber consumed and sold was established for Arauco do Brasil. In the next few 27 sourced from the company’s plantation forests. years, these plants will begin to generate high-genetic-value plants. During 2010, Eucalyptus clones In 2010 ARAUCO’s Forestry Business invested also were planted on 90% of the area available for US$222 million in the countries in which it operates forestation by Arauco do Brasil. 2010 Sustainability Report 28 2010 Sustainability Report ring 2010include: ring Examples projects. protectionandotherstrategic tary tem management, wood properties,phytosani - ber products, genetics, siteproductivity, ecosys- research areasincludepulpproduction, wood fi - technology.develop appliedforestry Bioforest’s ses. Inaddition, Bioforest to conductsfield work technologies initslabs, andgreenhou- nurseries and usesthelatestequipment, techniquesand Bioforest employs highly qualified personnel research Bioforest is ARAUCO’s scientific-technology Bioforest jectives areto: andwoodpulp business.forestry Bioforest’s ob- biotechnology procedures for the company’s has beenactive inthedevelopment ofleading • Developing • Introducing • Develop methodologiesfor biodiversity • Improve pulp-productionprocesses; • Increase thequality, also quantified. on soilandfutureplantationgrowth was courses. machinery The effect ofharvesting intowater ces toreducesedimentrun-off optimizing initialplantationdensity. sites for plantations, controlling weeds, and chniques, for preparing includingprograms conservation. with afocus onsoilenhancement; of performance ARAUCO’s plantations, center. of Bioforest’s new, new

For

road-construction precision, two productionand accomplishments decades,

silvicultural

Bioforest and - practi

du- te-

• Initiating • Bioforest • Developing • Initiating • Restructuring the respective area. degreeincialist holdingapost-graduate three divisionswillbemanagedby aspe- Ecosystem Productivity, of Properties Wood, and (Genetics, Like Bioforest’s otherexistingdivisions cooking process. cess, and to increase fiber yield in the pulp consumption inthepulpproductionpro- pulp bleaching process, toreducewater research toreducechemicaluseinthe onwoodpulp.grams Bioforest Pulpbegan (Bío wood fuckeliana. gus Neonectria ber ARAUCO produces. thefiber thatbegan tobetterunderstand duction processandwood fiber analysis timize wood consumption in the pulp pro- 2010,ring researchwasconductedtoop- pulpresearchlabin2011.world-class Du- companies. restry jointly by ARAUCO otherfo andseveral - into Products three Bío). wasps suppression mid-

Pulp This Phytosanitary divisions: Management), a (Sirex) and and the suppression is strategy long-term Industrial preparing Bioforest

programs in Pulp Chile’s

Protection, was Production, each research Environment. Pulp strategy to for Region developed launch of the division these

pro- fun- Site

VIII for Fi- a

CHAPTER 1 Our Business

Woodpulp ARAUCO is the second-largest market pulp pro- As a result of the damage caused by the February ducer in the world. The company has a 7.8% share 27 earthquake and tsunami, Line 2 at the Arauco of Pine Bleached Softwood Kraft pulp, a 3.6% share pulp mill remained closed through the end of this of Eucalyptus Bleached Hardwood Kraft pulp, and reporting period. This production line resumed about a 16.9% share of the Unbleached Softwood operation in January, 2011. Kraft pulp market. Production in 2010 was 23.6% less than in 2009. The company operates six pulp mills, five in Chile The main reason for this reduction was the ear- and one in Argentina, and has a total rated annual thquake, which affected all of ARAUCO’s mills capacity for market pulp of 3.2 million metric to differing degrees, and the subsequent tsunami tons. ARAUCO’s pulp is produced from wood which affected only the Constitución pulp mill. fiber coming from sustainably managed pine and eucalyptus plantations.

Pulp Production Bleached by Product Kraft Pine (BKP) (Thousands of ADMT’s) Bleached Eucalyptus Kraft (BEK) Unbleached Kraft Pine (UKP) 2010

Fluff

2009

2008

2007 0 500 1,000 1,500 2,000

ARAUCO 2010 Pulp Capacity by Mill

Mill Country Capacity Type Pulp

Arauco Chile 790,000 ADMT BKP & BEK

Constitución Chile 355,000 ADMT UKP

Licancel Chile 140,000 ADMT BKP & BEK

Valdivia Chile 550,000 ADMT BKP & BEK

Nueva Aldea Chile 1.027,000 ADMT BKP & BEK

Alto Paraná Argentina 350,000 ADMT BKP & Fluff

Total 3,212,000 ADMT 29

ADMT: Air Dried Metric Ton.

During 2010, ARAUCO’s woodpulp business invested a total of US$322 million in operational, environmental and energy improvements and in occupational health and safety initiatives. 2010 Sustainability Report 30 2010 Sustainability Report ARAUCO Panel Millsby Country owns two resinplantslocatedin andBrazil. Argentina Chile, two in andthreeinBrazil.Argentina Italso three facilities in The company operates currently ofMDFmoulding. meters million combined facilities inChile, andBrazil,Argentina witha and saleofwood-based panels, eight operating leaderinthemanufactureARAUCO isaworld Panels Brazil Argentina Chile Country cubic installed meters Pien MDFandParticleboard Mill Jaguaraiva MDFMill Curitiba Particleboard Mill Zárate Particleboard Mill Piray MDFMill Trupán-Cholguán MDFandHardboardMill Mill Nueva AldeaPlywood Mill Arauco Plywood Panel Mill capacity of Hardboard Plywood panels

Particleboard Fiberboard Medium Density of and more 326,000 than 2007 2008 2009 2010 cubic 3.18

0 (Thousands ofm by Type Panel Production to between 2010and2009levels canbeattributed Plywood andHardboardproductionvariations improvements. of In 2010, ARAUCO’s panelbusiness invested atotal purchase of Tafisa in2009. Brazil due toincreasedcapacitythatresultedfromthe crease

200 Capacity by ProductionLine(m ARAUCO 2010Panel Particleboard (PB)Panels Hardboard (HB)Panels Medium DensityFiberboard(MDF)Panels PanelsPlywood Production Line US$80 the 400 effects in MDF 600 million

800 3 and ) the in

1,000 operational Particleboard February

1,200

1,400 earthquake. and 1,600 production (in m/year) Quantity environmental 3 ) 1,530,000 790,000 800,000 60,000

The was in-

CHAPTER 1 Our Business

Sawn Timber ARAUCO is a major timber producer in the In 2010, ARAUCO’s Mutrún Sawmill was com- Southern Hemisphere. The Sawn Timber Busi- pletely destroyed by the earthquake and tsuna- ness produces a wide variety of wood and re- mi of February 27. However, the company was manufactured lumber products with various fi- able to reopen the Horcones II Sawmill, which nishes, appearances and value-added processes. had been closed in December 2009 due to reduced demand caused by the global recession. The company operates eight sawmills in Chile and one in Argentina, with a combined rated ca- In 2010, ARAUCO’s Sawn Timber Business in- pacity of more than 2.77 million cubic meters vested a total of US$55 million in operational of green lumber and 2.3 million cubic meters and energy-related improvements. of kiln-dried lumber. In addition, ARAUCO owns six remanufacturing facilities – five in Chile and one in Argentina – that produce 474,000 cubic meters of high-quality remanufactured lumber and millwork, including solid and finger-joint mouldings and pre-cut pieces.

Sawn Timber Production (Thousands of m3)

Green Wood 2010

Kiln-dried Wood

Remanufactured Wood 2009

2008

2007

2006 0 1,000 2,000 3,000 4,000

2010 Sustainability Report 32 2010 Sustainability Report EN6 gri ** fromthenetwork. facilityconsumesenergy The Esperanza facility. producedatthePiray This isoffsetby cleanenergy *Kyoto ProtocolCDMregisteredfacilities. of2011. quarter thefirst expected tobeginduring November during The installedcapacityof 2010. thatbeganoperating facilitiesincludesanew31MWturbinegenerator is Arauco Itscommercialoperation accordingtoCDEC-SICrequirements, totheSICmayContributions vary basedonadaily schedule. System (SIC). Chile’s grid, energy Interconnected theCentral Arauco Bioenergy generation powergeneration plants: seven oftheseco- co- nineelectric-energy ARAUCO operates sources. (NCRE) gy - ener selling business, clean biomass-based energy capacity company’s power plantshave atotalinstalled dieseloilfor fuel.) up turbinesthatburn The use and process steam) electricity ously generate duce tributing ARAUCO’s processesandcon- own industrial Arauco BioenergyCapacity by Facility Total Argentina P. Esperanza P. Pïray ARGENTINA Total Nueva AldeaIII* Nueva AldeaII Nueva AldeaI* Horcones Valdivia* Licancel Cholguán/Trupán* Constitución Arauco CHILE Plant In addition, facilityissoldtothe fromthe Piray grid. energy electric surplus Argentine from biomass energy. Bionergía an of Non-Conventional energy facilities

and/or (The 569 (Arauco company MW, surplus black (facilities

Maximum Installed Bioenergy) providing Capacity (MW) liquor of also Renewable 569 140 140 127 38 78 40 10 30 24 29 29 40 up that as to has is fuel 180 RAUCO’s AR energy simultane- two to MW Energy back- pro- for to Average Power Generated

435 100 106 58 35 10 29 24 18 28 30 90 23 Bioenergía through surplus The productionofenergy Arauco inthespotmarket. ofenergy the price This increasewasmainly aresultofanincreasein company’s in operations Argentina. za, for the energy andthermal provide electric 77.5 in withatotalinstalledcapacityofArgentina plants twoARAUCO cogeneration operates production flowing throughChile’s SIC. Chile’s In 2010, to surplus profit from thesaleofenergy 640 GWhwassoldtoChile’s SIC. operations, ofwhich producinganetsurplus 2329 2010,In Chileduring thecompany generated MW. GWh SIC

accounted These increased Used by ARAUCO Used Average Power and 255 55 40 63 15 45 14 15 22 81 14 0 0 facilities, consumed by for 14% 1.5%

in over Piray 1817 of the Available tothe the and SIC Grid GWh total -5** 180 37 14 61 13 10 24 2009 3 4 8 9 8 - Esperan energy in level. its

CHAPTER 1 Our Business

Kyoto Protocol gri EC2 The company has four power plants registered as emission-reduction projects with the Clean Development Mechanism of the Kyoto Proto- col. ARAUCO has obtained revenue through the sale of 1,070,788 Certified Emission Reduction credits (CERs) since it began selling them in 2007. No CERs were sold in 2010.

2010 Sustainability Report gri 2.5 ARAUCO Around the World ARAUCO serves customers in 71 countries around the world, offering a wide variety of woodpulp, sawn timber, panel and moulding products through its sales offices and sales agents.

Holland

US & Canada

Mexico

ARAUCO maintains sales offices in ele- Venezuela ven countries: Argentina, Australia, Brazil, Colombia Chile, China, Colombia, Holland, Japan, Mexico, Peru, the United States and Ca- nada. The company also has sales agents Brazil operating in India, Indonesia, Korea, Ma- Peru laysia, the Middle East, Norway, the Philip- pines, South Africa, Taiwan, Thailand, and Venezuela. Uruguay Chile

Argentina

Sales Offices

Operational Centers

34 Sales Agents

2010 Sustainability Repor CHAPTER 1 Our Business

Norway

Korea China Japan

Taiwan Middle East

India Thailand Philippines

Malaysia Indonesia

Australia South Africa

2010 Sustainability Repor 36 2010 Sustainability Report 2.7 gri pulp woodpulp, for market China isthesinglelargest ARAUCO total woodpulp sales. ARAUCO’s cated in Argentina, Brazil, ChileandUruguay. Of The companycenters, hasfour operational lo- ARAUCO’s Mainmarkets tomers. for 33years,market andhasmorethan300cus- leading woodpulp supplier, this hasbeen serving total woodpulp salesin2010. ARAUCO isChina´s the accounted ARAUCO Woodpulp market 14.6% assets,equipment andforestry accountingfor 73.8% ted in Chile, account for andChilean operations facilities, assetsareloca- equipmentandforestry 13.8% has pment of thecompany’s 2010income. 10.8% year. sales of of of and

The the the

ARAUCO’s and in sells of for forestry totals 2010 the company’s company’s Asian accounted 47% woodpulp company’s assets, totaled of market assets, properties, ARAUCO’s 2010

2010 for 75.4% in

US$1,790 accounting accounts 36% 43 properties, income. income. countries. of of

facilities, its total the million, properties, for

Argentina company’s for Brazil

facilities, sales

59% Wood-

11.6% equi-

and has for of

(US$3,788 billion) by Market Consolidated Sales (US$1,790 billion) by Market 2010 PulpSales

All Other2% 6% Argentina Central andSouth America 10% Europe 11% Chile 12% Brazil 12% 13% North America Asia 34% China 36% All other2% The Americas19% Europe 20% Rest of Asia 23% CHAPTER 1 Our Business

Panel Market 2010 Panel Sales In 2010, panel sales of US$1.109 billion accounted for 29% of the company’s consolidated sa- by Market (US$1,109 billion) les. Panel products were marketed in 59 countries, with Latin America accounting for 75% of ARAUCO’s total panel sales. Rest of Latin America 41%

Brazil 34%

Canada and USA 16%

Europe 5%

All other 4%

Sawn Timber Market 2010 Sawn Timber Sales ARAUCO’s wood and remanufactured lumber by Market products are sold in more than 38 countries, (US$621 million) finding application in furniture, construction, remodeling and packaging.

Sawn timber and remanufactured product sales during 2010 were US$621 million, and accounted for 16% of the company’s consolidated sales. Rest of the Americas 39%

ARAUCO’s primary market for wood and rema- Canada and USA 26% nufactured products is Latin America. Asia and Oceania 25%

Middle East 9%

Europe 1%

2010 Sustainability Report 38 2010 Sustainability Report and Portuguese. conferences fairs, trade expositionsandof international In 2010, inanumberARAUCO participated in International Trade Fairs ARAUCO’s Participation ARAUCO’s Participation in2010 Trade Fairs, Expositions&Conferences publishing focus with a multicultural andmative materials for customers, infor tional seminars preparing products. The company alsodeveloped educa- awareness ofthecompanyhelp raise and its

6 播种未来 Edifica Fair Enela EESUR FITAL XVII Bienalde 依靠创新 them Arquitectura (shown 成长之路 in 质量 Spanish, in 可持续性发展 the May /Santiago, August / August / October / November /Santiago, following Date andLocation

English, Temuco, Valdivia, Talca, 责任

Chile Chile 未来 Chile

Chile table) Chinese Chile 承诺 to -

in 2010. two years. is heldevery industry, fairfor theconstruction trade isaninternational EDIFICA leaders, ENELA isanannual business conference for businessmen, members ofCongress,members andacademicians. business in southern Chile.business insouthern the public sector. Sponsoredby ARAUCO, thisconference focuses on by developing newrelationshipsandalliancesbetween business and EESUR isabusiness conference intendedtofoster business growth held inChile. ties intheMauleRegion. - FITAL fairthatpromotesbusiness opportuni trade isaninternational Chile. Biennial isregardedasthemostsignificantarchitectureexpositionin Museum, andMilitary Held attheChileanHistorical Week In June2010, thecompany celebrated ARAUCO ring 2010anditschallengesfor thefuture. ring highlights ofthecompany’s accomplishments du- place Week In theShanghaiExpo. activitiesduring te invarious - were invitedsawn to participa timber customers Itsthemefor 2010was sectorassociationmembers, November in in for 成长之路们已经达到了世界林业公司的领先地位。追求的目标。今天，不仅在土地面积、盈利和生产方面，而且在创新、对环境保护的责任和对社会的承诺方面，我极贡献。于对自然资源高效、负责的进行利用，关注公司员工的健康和工作安全，以及对在我们林业操作范围内的社区的积企业管理的成功基于取得高质量的生产以满足我们的客户，同时平衡来自公司和员工、环境和社会的需求。还取决自环境和社会的；当然还有来自客户的。 “ 成为全球林业产品可持续性发展的领先企业是企业管理的成功取决于如何平衡各方面的需求，包括来自公司和员工得，以及来 London, Asia. its European

Morethan25,000peopleattendedthisfair More events trade Itisoneofthemostimportant 2010, 成长之路

where Description “8.8 Reconstruction.”

than the ” Government authorities, customers. 36 company 800 ARAUCO customers woodpulp, 成立 40 多年以来一

This

held Architecture 直积极 union were event ARAUCO

panel

given took it and

7 播种未来

CHAPTER 1 Our Business

Fimar April / Córdoba, Argentina FIMAR, a trade fair for carpenters, furniture makers, designers and architects, attracted 125,000 visitors in 2010. ARAUCO sponsored the event and introduced Nature, a new Faplac brand particleboard product.

Batimat June / Argentina BATIMAT, a trade fair focused on architects and furniture makers, attracted some 116,000 visitors in 2010. ARAUCO sponsored an exhibit featuring the new Faplac melamine product Nature, and a new surface design, Terrarum.

Expomueble September / Buenos Aires, Expomueble is an international furniture exposition for promoting Argentina new business, including exports. ARAUCO’s new Faplac Nature product line was featured in designs by Michael Thonet Furniture, which won First Place in the Design category.

Estilopilar October / Buenos Aires, ESTILOPILAR attracts some of the best architects, decorators, Argentina and landscape designers in the northern part of Argentina. ARAUCO provided MSD material and Faplac Nature panels for the construction of a “Dock House,” designed by architect Adriana Piastrellini.

Formobile July / Sao Paulo, Brazil FORMOBILE, the largest forestry and furniture supply exposition in Latin America, featured 750 exhibitors and attracted more than 60,000 attendees from Central and South America.

International August / Atlanta, USA The annual International Woodworking Fair focuses on furniture Woodworking Fair design and manufacturing. ARAUCO featured its AraucoPly products..

AMD October / USA The Associated Millwork Distributors Show is an annual convention for moulding, millwork and door distributors. ARAUCO exhibited its line of TruChoice products.

Expo Deconarq 10 May / Riviera Maya, Mexico EXPO DECONARQ is targeted at developers, builders, architects, contractors, and engineers along the Mexican Riviera. ARAUCO exhibited its Sustainable Solutions program.

Expo Tecnomueble August / Guadalajara, An international exposition for furniture makers and suppliers, EXO Mexico TECNOMUEBLE drew more than 3,000 visitors from Mexico, Brazil, Italy and Spain. ARAUCO participated with an exhibit at this show.

M&M March / Bogotá, Colombia The M&M trade fair is focused on wood industry technology and is the most important show in Colombia and the Andean Region. ARAUCO exhibited at this show in 2010.

Excon October / Lima, Peru EXCON is the largest exhibition for housing, construction, architecture, and design in Peru, and attracted about 35,000 visitors in 2010.

Pollutec November - December / A leading international trade fair, POLLUTEC focuses on equipment, Lyon, France technology and services for environmental preservation. The country of Chile was a guest of honor in 2010. ARAUCO had an exhibit and presented information on the company’s biomass-based energy business.

Expo Shanghai May - October / Shanghai, The theme of the 2010 Shanghai Expo international world exposition China was “Better City, Better Life” (a focus on urbanization). ARAUCO was an official sponsor, and donated the wood for the construction of the Chilean Pavilion, which received more than 3,000,000 visitors during the fair’s six-month run.

2010 Sustainability Report 40 2010 Sustainability Report 2.2 gri nificant sig and anew to ARAUCO, brand, parent the ding exten differentiation, product generate Sub-brands duction ofitscarbonfootprint. managed forests, andthemeasurementre- basedonitssustainablysure producttraceability The company complies with standards that en- industries.and construction products for thepaperandpackaging, furniture supplier specializinginqualitysustainable forest ARAUCO seekstoberecognized asaglobal standards. thehighestinternational surpassing andtheenvironment,our commitmenttostakeholders andmeeting or whilefulfillingrequires maintainingexcellenceandefficiency inouroperations forest products–demandsthemanufacture ofhigh-qualityproducts. This ARAUCO’s vision–tobeagloballeaderinthedevelopment ofsustainable Our Products reliability toitsproductbrands. providesARAUCO’s leadership, brand corporate credibility, innovation, quality, sustainabilityand ARAUCO’s GlobalBrands Unbleached Kraftpulp Bleached Kraftpulp Bleached Kraftpulp Bleached Kraftpulp Bleached Kraftpulp Radiata pineECF Taeda pineECF Eucalyptus ECF

segment. Radiata pine Taeda pine Pulp

FLUFF Alto Paraná BKP Alto Paraná Arauco UKP Arauco BKP Arauco BEK

Hardboard and Particleboard Painted MDF Hardboard Plywood Panels MDF Faplac Trupán AraucoPly Durolac Cholguán - - Arauco the decision to purchase. to decision the guiding and differentiation, providing customer, the to relevant are that associations adding tion, proposi the value-benefit represent Sub-brands technical dataandproduct-useinformation. providing them withalso assistsitscustomers ronmentally responsible materials. The company withquality,nufacturers high-performance, envi- andma- provide builders sectors and furniture ARAUCO’s wood products for the construction Clear Sawn Timber Lamin Kiln-dried Panelin Lumber W Wood ood ated g

Decofaz Hilam MSD MDF, FingerJoint and Solids Mouldings TruChoice - CHAPTER 1 Our Business

The objective of ARAUCO’s Brand System and its products is to create a virtuous circle between the company’s brand, which must provide reliability, and its products, which seek differentiation within the competitive global market.

RINTING / T ER / P ISSU PAP E

B UI uilders Pa LD ers B per M IN sign anu G De fa / ct R rs ur E re ilding Channel er M tu Bu s O c ditional Remodeling N a Tra E D f Prefabricated n G u e l N E I n n ew g S a n in L a C I E h ts e N M C le h e D l al g a G e P rin n r r ia e- u n s / r r ct e u t tu fa / E t s i u ls i u rn n A A R n u a d F m r R r n e U I R c C u T h F A H I i t g N e I e T

s c R n r E t t U e s C s s f F l l a T e e n C U s n d

r n o R a R u

n E h e o t

p Y C r

- r a

t e n c I

- o t

i e

o t o

u r

D s

b a

2010 Sustainability Report 42 2010 Sustainability Report different markets theyserve. different markets Each ARAUCO’s MainProducts by Business ARAUCO’s Principal Productsby Business Pruned Saw Logs Pruned Forestry Business Product Standard Saw Logs Posts (SIC). grid central topower cleanbiomass-basedenergy ARAUCO itsoperations. generates toChile’s energy electric The company alsosellssurplus Bioenergy Sawn Timber Hilam TruChoice MSD Sawn TruChoice Cholguán Faplac Trupán AraucoPly Panel Business UKP FLUFF BEK BKP Woodpulp Business Eucalyptus PulpLogs Pine PulpLogs of Timber Business ARAUCO’s businesses develops Radiata pinelogsindifferent diameters, ofknot-freefiber.ble plantationforest managementregimethatproducesasignificantportion Radiata pinelogsindifferent diameters, from3.2mto12(1040feet). range RadiatapineandEucalyptus posts, Debarked and untreatedform. construction and the remanufacturing industry. andtheremanufacturing construction Lumber productsavailable for sizesuseinfurniture, andgrades invarious packaging, pallets, Laminated beams. Mouldings, andconstruction. lumberfor useinfurniture Kiln-dried MediumDensityFiberboard(MDF)Mouldings. Ultralight Hardboard panels. panels.Particleboard Medium DensityFiberboard(MDF)panels. Plywood panels. filter papers, ofspecialtyproductssuchas PinepulpusedtomanufactureUnbleached awidevariety Kraft hygiene products. feminine and diapers of cores absorbent the manufacture to used pulp pine Kraft Bleached paper. andprinting pulpusedtomanufacture writing Bleached Eucalyptus Kraft paper. andprinting Pinepulpusedtomanufacture writing Bleached Kraft Eucalyptus logsindifferent diameters. upto14cm(5.5inches) andalengthof2.4m(8feet). Radiata pinelogsindifferent diameters doorframes, insulationpapers. packagingrollstockandelectric a broad edge-gluedpanels. variety of Length: at24cm(9inches). starting at18cmto40(716inches). starting products, Description upto24m(79feet) long. 2.4m(8feet).

according Sourcedfromasustaina- to

Available intreated the needs Lengths of the

CHAPTER 1 Our Business

ARAUCO Sustainable Solutions construction through the addition of new hou- The company developed its “ARAUCO Sustaina- sing projects complete with floor plans and ma- ble Solutions” program to promote the benefits terials lists. In addition, the program produced a of wood use among architects, builders, furnitu- series of videos on how to build the floors, walls re makers and the general public. The program and roof of a wood-framed house. In the area provides product feature and benefit information, of furniture making, information was added on installation and finishing instructions, technical re- working with ARAUCO panels. Plans for easy- ference, and other insights so that customers can to-assemble furniture projects also were added. use ARAUCO’s wood products safely, reliably and The “How To” series is currently divided into successfully in a variety of applications. four categories: construction; furniture; projects and suggestions. The current series includes 26 During 2010, the Arauco Sustainable Solutions projects. The goal for 2011 is to have 40 projects program enhanced its content and explored new in the series. ways to communicate with its audience by: • Training 13,000 store salespeople, furniture • Redesigning its web site www.araucosoluciones.com makers, builders, professionals and students. This to provide easier access to information. The site surpassed the number trained in 2009; now has more than 14,000 registered members. In addition, the site is accessible on four of the lead- • Developing and roll-out of a Point-of-Sale pro- ing social networks: Facebook, Twitter, YouTube and ject for customers in Latin America, to provide Flickr. The goal for 2011 is to reach 35,000 mem- better information on the ARAUCO Sustainable bers and to launch the site in Brazil and Argentina. Solutions program. The project includes display- counter materials, technical information, training, • Responding to the needs generated by the ear- support for the point-of-sale layout, and advice thquake in Chile, the company’s “How To” se- on communicating the program. During 2010, ries emphasized issues related to Do-it-Yourself the point- of-sale project was launched in 77 stores throughout Argentina, Brazil, Colombia, Mexico and Peru. The goal for 2011 is to add 89 additional stores.

• Publishing a book entitled, “Technology and Construction in Wood.” The book is divided into six chapters: The Forest Resource; Technical Des- cription of Products; Properties of Wood; Tech- nologies for Construction in Wood; The Framing System; and Tables and Charts. Published in Ar- gentina by ARAUCO, and authored by architects Jorge Barroso and Diego García Pezzano, it is an adaptation of the Chilean version of the book, “Engineering and Construction in Wood.”

2010 Sustainability Report 44 2010 Sustainability Report Value Proposition ARAUCO Sustainable Solutions

Demand Energy Metalwork Details Construction Series “How To” Book ICM Experiments construction time. Wood ismore efficientinbothcostand Savings of earthquakes. Building withwood isthesafest choiceincase Safety permanent intime. plantations, ensuringforest resources thatare We usewood fibersourced from responsibly managed Sustainable cement. comparedheating energy tohomesbuiltwith Houses builtwithwood save upto50%in Energy product mix. We offer abroad wood andpanels Product Variety international standards thatensure thehighestquality. Our products are manufactured understringent Quality

tion andFurniture Manufacturing Promoting Solutionsfor Construc- Australia andJapan. Australia ARAUCO projects that use responsibly produced wood, To andfurniture promoteefficient construction Air gulations established by theStateofCalifornia tes, for example, ARAUCO complieswithre- products indifferent markets. IntheUnitedSta- emissions standards in order to sell its panel formaldehyde- The company meetsstringent and safety. people’sthat aredesignednottoharm health ARAUCO sellswoodpulp andforest products Customer HealthandSafety substance. products andfinished goodsthatcontain this formaldehyde emissionsfromcompositewood loaded atwww.arauco.cl. alsoisavailablematerial onlineandcanbedown - andfairs. workshops and throughtraining This rent storesthroughthepoint-of-saleprogram, orbooksthatwereindiffeas flyers distributed - jects; andsuggestions. This contentwaspresented into four categories: construction; furniture; pro-

Serie Cómo Hacer mueblería

Mueble Resources Modular Escolar • Fácil y rápido de armar • Diseño simple y práctico • Crea ambiente acogedor

www.

araucosoluciones

.com Serie Cómo Hacer construcción

published Similar

Muro • • •

www.

Aislación

Rápido

Construcción

araucosoluciones

termo-acústica fácil Board

Interior

paso

construir

.com

paso standards a (CARB), “How

2 Serie Cómo Hacer sugerencias

Cómo Ahorrar Energía en Calefacción • Control de las filtraciones

www.

araucosoluciones To” exist

which

.com

Serie Cómo Hacer proyectos series

Casa de 126m • Material renovable • Resistente y segura • Fácil y rápida construcción

www.

araucosoluciones in regulates Europe, divided

.com

PR1 gri CHAPTER 1 Our Business

ARAUCO’s TruChoice brand MDF moulding Marketing Communications gri products have been in compliance with the and Product Labeling PR3/6 first phase of the CARB requirements since ARAUCO complies with each country’s legisla- January 2009. This means that the formaldehyde tion and regulations regarding communication emissions from the MDF are below 0.21 parts about and marketing of its products. The purpose per million as determined by the ASTM EI333 of ARAUCO’s product labeling is to identify pro- Chamber Test. ducts, designate the customers at which the product is targeted, and transparently communicate The panel business has an active research and product benefits, attributes and technical specifi- development program to ensure that its pro- cations. ducts stay ahead of anticipated changes in regulations. The company’s TruChoice brand MDF ARAUCO’s compliance with

products met the Phase-Two CARB formalde- product regulations and sale PR2/4/7/8/9 gri hyde emission requirements (emissions below During 2010, ARAUCO was in compliance with 0.11 ppm using the ASTM EI333 test method) in regulations on products and product sales. advance of the January 2011production phase-in ARAUCO did not receive notices of any of the date called for in the regulations. following events during 2010: • Non-compliance with regulations and voluntary In addition, ARAUCO has the capacity to ma- codes concerning health and safety impacts of its nufacture MDF panels that meet EU (European products. Union) emissions regulations, ANZ regulations (Australia and New Zealand) and JAS regula- • Non-compliance with regulations and volun- tions (Japan) on customer request. tary codes concerning product labeling and information. Customer Satisfaction gri • Substantiated complaints regarding breaches of PR5 ARAUCO offers high-quality products that have customer privacy and loss of customer data. become a reference point in the market. To ensure that product quality is maintained, ARAU- • Non-compliance with regulations concerning CO conducts customer satisfaction surveys on marketing communications, including advertising, a periodic basis. Although the company did not promotion and sponsorship. conduct formal surveys during 2010, ARAUCO • Significant fines for non-compliance with laws received feedback regarding quality and other and regulations concerning the provision and issues through direct meetings with customers. use of ARAUCO’s products and services.

2010 Sustainability Report

So that ARAUCO can better understand the perceptions, interests, and expectations of its stakeholders, the company has created a number of permanent, formal vehicles for engagement, and encourages all stakeholders to participate. Corporate Governance and Stakeholder Engagement

2 Corporate Governance Corporate

The realization of ARAUCO’s vision and commitments is at the core of the company’s economic, environmental and social engagement with its stakeholders.” 2. gri 4.8 Corporate Governance The realization of ARAUCO’s vision and commitments is at the core of the company’s economic, environmental and social engagement with its stakeholders.

Our Vision • To foster a working environment that supports To be a global leader in the development of the career advancement of every employee by sustainable forest products. providing a workplace based on respect, honesty, professionalism, training and teamwork. Our Business To sustainably maximize the value of our • To build permanent, collaborative relationships forests, combining excellence in forestry with the communities where we operate by production with efficient industrial trans- incorporating their concerns and needs in formation of value-added products for their our decision making, and by supporting their worldwide distribution in accordance with development. our customers’ needs. • To maintain open and honest communications Our Commitments with all stakeholders. • To guarantee shareholders maximum return, through the efficient and responsible manage- • To comply with all legal requirements and other ment of all our processes, by applying systems societal obligations that regulate our business and procedures that maximize that value of our and, where possible, perform to a higher level business. than the established standards.

• To promote the sustainable use of natural • To apply systems and procedures that will allow resources, investing in research, technological us to manage our business risks, continuously innovation and training in order to gradually, evaluating our performance in all processes, continuously and systematically prevent and applying the necessary corrective measures reduce the environmental impacts of our on time, and providing transparent and timely activities, products and services. information about our progress.

• To provide all customers with quality products • To make these commitments known to our and services and to motivate our suppliers to employees, contractors and suppliers, involving become part of our value-chain and commitment and training them in order to implement to quality. our policy through everyone’s effort and collaboration. • To ensure occupational health and safety for our employees and contract ors, continuously reducing the safety risks of our operations and services.

Code of Ethics vides guidance on complying with current re- During 2010, ARAUCO’s Board of Directors ap- gulations to promote free competition and fair proved and updated version of the company’s business practices. The addition of these sec- 48 Code of Ethics, adding two new sections: “Com- tions helps round-out a framework for action pany Representation” and “Free Competition.” that also addresses: Conflicts of Interest; Gifts The first section defines situations in which and Gratuities; Relationship with Suppliers; Re- ARAUCO employees have the power to act on lationship with Customers; Relationship with the

Sustainability Report behalf of the company. The second section pro- Environment; Management of Confidential Infor- 2010 CHAPTER 2 Corporate Governance

mation; Accuracy of Information; and Personal be comprised of nine members, none of whom Integrity. can simultaneously hold executive positions within the company. All of ARAUCO’s directors All employees working for ARAUCO and its are designated by the primary shareholder. subsidiaries are obligated to comply with the company’s Code of Ethics, current policies and ARAUCO’s current Board was appointed in April regulations. The Code of Ethics is made available 2010, and will continue to serve for three years. to every employee when hired. The Board does not have specific procedures for: gri Principles 4.7/4.9/4.10 • Precautionary Principle - Determining the qualifications and experience gri In 2010, ARAUCO announced its commitment of members of the Board regarding guidan- 4.11 to the United Nations Global Compact and ce of the organization’s strategy on economic, its ten principles. Among these is Principle 7, environmental and social aspects; or the Precautionary Principle, which is based on Article 15 of the Río Declaration on En- - Assessing the Board’s own performance with vironment and Development. Adoption of the respect to economic, environmental and so- Precautionary Principle commits ARAUCO to cial aspects. “support a precautionary approach to environmental challenges,” to act according to this ARAUCO has not established procedures or a principle in all its areas of influence, and to schedule for the Board to assess the company’s firmly maintain this commitment. economic, environmental and social performance. However, the company’s CEO reports on the • “One Principle a Month” Campaign company’s performance in these areas during During 2010, ARAUCO launched its “One the Board’s monthly meetings. Principle a Month” campaign to support the work underway in the FSC certification pro- ARAUCO is subject to the Chilean Securities cess. The objective of this campaign is to fa- and Insurance Supervisor’s regulations, and sub- miliarize management and employees with the mits financial results to this institution every language and intent of the Forest Stewardship three months. Financial results as of June 30 and Council’s (FSC) 10 Principles and 56 Criteria December 31 are third-party-audited. for responsible forest stewardship. ARAUCO’s Code of Ethics and its Guide for gri The campaign features educational materials Information of Interest to the Market delinea- 4.6 such as posters, handouts, workshops and pre- te situations that are likely to cause conflicts sentations, and interactive monthly meetings of interest for Board members. In addition, the among working teams and direct collabora- General Policy for Customary Operations sets tors at which the “principle of the month” is limits for the company’s operations in dealing discussed. with related parties. For more detail, see the Corporate Governance section of the company gri ARAUCO’s Organizational Structure web site: www.arauco.cl. 4.2/4.3 The Board of Directors of Celulosa Arau- Ethics Committee gri co y Constitución S.A. (ARAUCO) is the ARAUCO’s Board has established an Ethics 4.1 corporation’s highest governance body. Its pri- Committee that meets periodically. It is res- mary mission is to maximize the company’s ponsible for ensuring the communication and value over the long term for its shareholders, application of the company’s Code of Ethics. customers, suppliers, workers, contract workers The Committee’s members are designated by 49 and their families, ensuring the future viability ARAUCO’s Board. Currently, there are four and the competitiveness of the company. members of this Committee: the company’s Se- cond Vice President, the Chief Executive Officer, The Board governs in accordance with the the Legal Affairs Managing Director and the Ma-

corporation’s laws, which state that the Board will nagement and Development Director. Sustainability Report 2010 The Ethics Committee functions are to: ARAUCO’s Board designates the company’s senior • Promote the values and behaviors that appear management team members. The senior manage- in the Code of Ethics; ment team, in turn, is responsible for implementing • Provide consultative services; the company’s economic, environmental, social and occupational health and safety programs. • Direct inquiries to appropriate areas for action; • Approve corrections that guarantee the ARAUCO has grown significantly over time, and Code’s consistency; its organization has become more complex. As • Review employee requests for clarification; a result, the company now requires a high de- • Update and modify the Code of Ethics; gree of specialization in its various functions, • Research, register and direct cases to while requiring that these functions be aligned appropriate areas; and with the vision, commitments and business objectives established by the company. • Promote consistency throughout the organization in the interpretation and The company is committed to continue investing application of the Code of Ethics. in its people through occupational health and safety programs, and training, as well as talent, Fraud Reporting Procedure gri leadership and management development. This 4.4/4.9 The Fraud Reporting Procedure is a mechanism investment is essential for ARAUCO to meet its that allows employees and others to directly globalization objective. communicate with ARAUCO’s Board in reporting non-compliance with the Code of Ethics. ARAUCO’s Senior Management Positions

To facilitate reporting, the company has put in Chief Executive Officer place a confidential, electronic reporting platform, Woodpulp Business Managing Director which can be viewed only by the Board’s secretary. Management and Development Director 1

2 The Procedure to report, investigate and sol- Financial Managing Director ve possible violations guarantees the reporter’s Sawn Timber Business Managing Director anonymity, avoids information leaks, avoids in- Forestry Business Managing Director volving innocent people and guarantees action Panel Business Managing Director (including legal action) if warranted. Legal Affairs Management Director Corporate Affairs and Marketing Director 3 Reports can be made directly or anonymously by Comptroller Director workers, customers, suppliers, shareholders and (1) As of April 1, 2011, departments reporting to this position are: third parties. Reports may concern compliance Management; People Management; Bioenergy; Logistics Services; with Business Principles, Ethical Conduct Regu- Argentina; Arauco do Brasil; and Montes del Plata in Uruguay. (2) As of April 1, 2011. Previously, this position reported to the Corporate lations, Conflicts of Interest, and any other issue Management Director, now titled Corporate Manager for Management and Development. related to non-compliance of regulations, inter- (3) As of April 1, 2011, includes Environmental and Occupational Health nal controls, alteration of Financial Statements, and Safety Corporate Management (MASSO). and situations or facts that require the attention of Senior Management and/or the Board. Senior Management Compensation gri Compensation for directors, managers and assistant 4.5 The Fraud Reporting Procedure includes the fo- managers consists of a fixed monthly salary. ARAUCO llowing elements: Protection for People who Re- occasionally awards annual bonuses, at its own discre- port; Fraud Reporting Channels; Reception, Re- tion, in addition to the established compensation. gistration, Treatment and Resolution of a Fraud Report; Confidentiality; and an Investigation Report. There is no established relationship between com- 50 pensation for members of the company’s highest

ARAUCO’s Senior Management governance body, senior managers and executives ARAUCO’s management model is based on a matrix and ARAUCO’s economic, environmental and so- gri scheme that measures performance and efficiency. cial performance. 4.1 Sustainability Report 2010 CHAPTER 2 Corporate Governance

Relationship with Stakeholders

ARAUCO’s Stakeholders gri 4.14/4.15 ARAUCO’s stakeholders include its shareholders, workers, contract workers, service providing businesses, suppliers, local communities, social organizations, authorities, local government, government agencies, nongovernment organizations, unions and trade associations, educational and scientific institutions, the media, opinion leaders and the general public.

ARAUCO and its Stakeholders

Authorities Customers Educational and Scientific Institutions Shareholders

Opinion Local Leaders Governments

Government Associations Agencies ARAUCO and Unions

Media Suppliers

Social NGOs Organizations

Workers and Contract Service-providing Workers Local Businesses Communities

Stakeholder Engagement gri 4.16 So that the company can better understand the perceptions, interests, and expectations of its stakeholders, ARAUCO has created a number of permanent, formal vehicles for engagement and encourages all stakeholders to participate.

During 2010, ARAUCO adopted a new consultation process known as the Hybrid Forum Model. This formal process brings together people with different experiences, expertise and education to discuss a variety of issues and areas of concern in an effort to develop new insights and to reach consensus-based solutions. Sustainability Report 2010 FSC Forest Management Certification Process in Chile

The Means to an End: In July 2010, the Hybrid Forum Model was an- FSC and an Innovative Methodology nounced internally, and the process of forming for Dialog the forums began. A Base Forum was established In May 2009, ARAUCO decided to pursue FSC to generate the basic operating rules, define the Forest Management certification for its forest hol- specific issues or themes to be discussed, propose dings in Chile. To facilitate this effort, the company members for specific theme forums, and analyze made a commitment to conduct a transparent, ri- the solutions proposed for each area of concern. gorous and participatory implementation process, The Base Forum is comprised of 17 people from abandoning its unidirectional model for relating to inside and outside the company. stakeholders. ARAUCO adopted a solutions-focu- Cada mes sed consultation process, called the Hybrid Forum The Base Forum held a total of un Principio Cumplimiento de las leyes y Plan de manejo. los principios del FSC. Se deberá escribir, implementar y mantener actuali- El manejo forestal deberá respetar todas las leyes zado un plan de manejo de acuerdo a la escala y a la aplicables en el país, los tratados y acuerdos inter- intensidad de las operaciones propuestas. En él, de- nacionales de los que el país es signatario, y deberá berán quedar claramente establecidos los objetivos 1 cumplir todos los Principios y Criterios del FSC. 7 del manejo, y los medios para lograr estos objetivos. Derechos y responsabilidades Monitoreo y evaluación. de tenencia y uso. Deberá realizarse un proceso de monitoreo -de Model, to facilitate dialog and systematically ad- six meetings during the year, and La tenencia y los derechos de uso a largo plazo sobre acuerdo a la escala y a la intensidad del manejo fo- la tierra y los recursos forestales, deberán estar cla- restal- para evaluar la condición del bosque, el ren- ramente definidos, documentados y legalmente esta- dimiento de los productos forestales, la Cadena de blecidos. Custodia, las actividades de manejo y sus impactos 2 8 sociales y ambientales. Derechos de los Mantenimiento de bosques pueblos indígenas. con alto valor de conservación. Los derechos legales y consuetudinarios de los pue- Las actividades de manejo en Bosques con Alto Valor blos indígenas para poseer, usar y manejar sus tie- de Conservación deberán mantener o incrementar rras, territorios y recursos deberán ser reconocidos los atributos que definen a dichos bosques. Las de- 3 y respetados. 9 cisiones referentes a los bosques con alto valor de conservación deberán tomarse siempre dentro del dress issues raised by stakeholders. established four Theme Forums: contexto de un enfoque precautorio. Relaciones comunales y derechos de los trabajadores. Plantaciones. 10 AGOSTO 12394 El manejo forestal deberá mantener o elevar el bien- Las plantaciones deberán ser planeadas y manejadas de estar social y económico a largo plazo de los trabaja- acuerdo con los Principios y Criterios del 1al 9 y con dores forestales y de las comunidades locales. los Criterios del Principio10. Si bien las plantaciones 4 pueden proporcionar una amplia gama de beneficios sociales y económicos y pueden contribuir a la sa- 10 tisfacción de las necesidades de productos forestales Beneficios del bosque. del mundo, éstas deberán complementar el manejo de reducir la presión sobre y promover la restauración y El manejo forestal deberá promover el uso eficiente conservación de los bosques naturales. de los múltiples productos y servicios del bosque, para asegurar su viabilidad económica y una amplia Labor Relations; Mapuche Com- 5 gama de beneficios ambientales y sociales. Impacto ambiental. El manejo forestal deberá conservar la diversidad biológica y sus valores asociados, los recursos hídri- cos, los suelos, y los ecosistemas frágiles y únicos, así como los paisajes, preservando de este modo, las During 2010, the Hybrid Forums focused on ad- munities; Local Development; 6 funciones ecológicas y la integridad del bosque. dressing stakeholder concerns that had been iden- and High Conservation Value tified during a pre-assessment conducted by the Forests. FSC-accredited certification body, Woodmark, in late 2009, identifying 82 areas within Arauco’s fo- On September 23, the first Theme Forum, La- rest management practices that required impro- bor Relations, was launched. Its objectives were vement prior to undergoing a full certification as- to: analyze labor relations between ARAUCO, its sessment. workers and contract workers; establish mechanisms to develop specific labor skills; and conduct In order to move ahead with the solutions develo- an in-depth study of the career of a forestry wor- ped through the Hybrid Forums, the company crea- ker. After a total of nine meetings, the Labor The- ted a Steering Committee to facilitate quick decision me Forum arrived at concrete proposals that were making and the implementation of needed changes. submitted to the Base Forum for review.

Project FSC Steering Organization Committee

Forest Managers Executive Executive Committee Secretary Committee

Base Forum

Implementation Technical Theme Teams Teams (6) Forums (6)

Technical Teams (6)

52 16 pre-assessment 30 pre-assessment 36 pre-assessment indicators: findings of an indicators: findings of pre-assessment indicators: findings of a 211 operational nature that an operational nature indicators: no findings social nature that require require non-technical that require technical stakeholder consultation resolution resolution for resolution Sustainability Report 2010 CHAPTER 2 Corporate Governance

During the last quarter of 2010, ARAUCO laun- Approximately 400 managers and employees at- ched the Theme Forums on Mapuche Communi- tended ten FSC-focused events during 2010. To- ties, Local Development and High Conservation pics of discussion included: legislation applicable Value Forests. Each of the Theme Forums develo- to the forestry sector; land use and tenure rights; ped a number of proposals and visions regarding indigenous people’s rights; worker’s rights; and issues under consideration. These proposals were benefits derived from the forest. enriched through the inclusion of stakeholder points-of-view. The company acquired a better As an example, the company held seminars in six understanding of stakeholder concerns through cities on the topic, “An Approach to the History this open dialog. and Characteristics of the Mapuche People.” The- se seminars, which were proposed by the Ma-

Cada mes un Principio The Theme Forums also bene- puche Communities Theme Forum, allowed peo- Cumplimiento de las leyes y los principios del FSC. El manejo forestal deberá respetar todas las leyes fited from the participation of ple in Constitución, Chillán, Arauco, Concepción, aplicables en el país, los tratados y acuerdos inter- nacionales de los que el país es signatario, y deberá 1 cumplir todos los Principios y Criterios del FSC. community members and other Valdivia and Santiago to learn more about this 12394 AGOSTO 10 AGOSTO 12394 interested parties. Stakeholder indigenous culture’s world vision. opinions could be expressed Cada mes un Principio freely through a web site, www. FSC: Not Just Requirements, Mantenimiento de bosques con alto valor de conservación. Las actividades de manejo en Bosques con Alto Valor de Conservación deberán mantener o incrementar los atributos que definen a dichos bosques. Las de- 9 cisiones referentes a los bosques con alto valor de foroabierto.cl that was set but Opportunities conservación deberán tomarse siempre dentro del contexto de un enfoque precautorio.

up for this purpose. Since its The Theme Forums are sup- 10 AGOSTO 12394 launch in mid-2010, the site has received more ported by 12 ARAUCO tech- than 3,500 visits. nical groups that are working on the implementation of the Concurrent with the Hybrid Forum work, ARAU- FSC standard. Comprised of CO conducted an internal education program fo- 60 people, these technical groups have been cusing on the philosophical underpinnings of the working for 14 months to arrive at solutions FSC standards. In August 2010, that will resolve issues found in Woodmark’s

Cada mes ARAUCO launched its “One un Principio pre-assessment of Arauco’s forest manage- Impacto ambiental. El manejo forestal deberá conservar la diversidad bio- lógica y sus valores asociados, los recursos hídricos, Principle a Month” campaign to los suelos, y los ecosistemas frágiles y únicos, así como ment practices. los paisajes, preservando de este modo, las funciones 6 ecológicas y la integridad del bosque. familiarize management and employees with the language and 10 AGOSTO 12394 Initiated in March 2010, these technical groups intent of the Forest Stewardship will continue their work during 2011, reporting Council’s 10 Principles and 56 on progress made and remaining challenges Criteria for responsible forest through a series of internal and public meetings. stewardship. The campaign uses educational material and workshops to increase awareness and understanding of this standard, and to challenge management and employees to integrate the spirit of the FSC into their work.

Sustainability Report 2010 Expanded Use of the Hybrid • 800 Toll-free Telephone Line gri 4.17 Forum Model Stakeholders can contact ARAUCO by telephone ARAUCO launched its Hybrid Forum Model in to make inquiries, requests, complaints, reports, 2010 to support the process of obtaining FSC or address other issues. ARAUCO maintains toll- Forest Management Certification for its forest free “800 numbers” in Chile and Argentina. holdings in Chile. (See FSC Forest Management Certification Process in Chile.) A total of 941 calls were made by stakeholders to ARAUCO’s 800 numbers during 2010. The majo- A Base Forum was created to begin this process. rity of these (53%) were general inquiries. The Base Forum held six meetings during the year to define the issues to be discussed in the Theme Forums, forum membership and work rules. In 800 Line late 2010, four Theme Forums were established. (941 calls) These four groups met a total of 25 times.

FSC Implementation Project: Theme Forums N° of Meetings Theme Forum (September - December 2010)

Labor Relations 9

Mapuche Community 6 Inquiries 53% Local Development 6 Complaints 22% High Conservation Value Forests 4 Emergencies 5%

The Hybrid Forum Model also was utilized after Requests 1%

the earthquake and tsunami destroyed the city of Other calls 19% Constitución, in Maule Province. Following the Hy- brid Forum protocols, theme forums were created to help to design, in 90 days, a master plan for the • ARAUCO Website rebuilding of the city. Launched by ARAUCO, the ARAUCO’s website is updated regularly to pro- Municipality of Constitución and the Chilean Hou- vide current information to all stakeholders. The sing Ministry, each stage of the Sustainable Recons- company website receives 360,000 visits annually. truction Plan for Constitución (PRES), has been em- braced by community members and the more than The company also maintains a product-specific 50 experts that are working on the initiative. (See website, www.araucosoluciones.com. To date, sections Earthquake and Reconstruction, Sustaina- 14,000 visitors have registered through this site ble Reconstruction Plan for Constitución (PRES)). to receive information about the company’s products. Communication and Feedback Mechanisms Site traffic also has benefited from the use of so- ARAUCO maintains a number of different chan- cial networks. Today, ARAUCO has 4,750 fans on nels that stakeholders can use to communicate Facebook, as well as a presence on other social with the company and to provide feedback. networks such as YouTube, Flicker and Twitter.

Sustainability Report 2010 CHAPTER 2 Corporate Governance

• Guided tours 2010 Visits Since 2006, ARAUCO has offered guided tours of the company’s facilities to members of the Location Number of Visitors community, allowing people to see first-hand Chile how the plants operate. The visitor program Constitución 3,259 is based on an open-door policy intended to Licantén 102 strengthen and maintain trusting relationships Cholguán 315 with the communities in which the company operates. Nueva Aldea 1,865 Arauco 751

In 2010, a total of 7,811 visitors toured ARAUCO’s Los Ríos 299 facilities in Chile, Argentina and Brazil. ARGENTINA Zárate Industrial Park 65 • 2010 Corporate Reputation Survey In 2010, ARAUCO participated in the Fifth Cor- Chemical Division 73 porate Reputation Assessment in Chile, conduc- Piray Sawmills 157 ted by the Reputation Institute and the Faculty Piray MDF 57 of Communications of the Pontifical Catholic Forestry Operation 266 University of Chile. The assessment was conducted using RepTrak™ Pulse methodology. BRAZIL Arapoti 122

The report shows reputation level by company Campo do Tenente 74 and sector at the national and global levels, mea- Curitiba 37 sured according to the Pulse methodology. The Jaguariaíva 274 national assessment was conducted in July 2010. In addition, ARAUCO received a report, based Tunas do Paraná 95 on a simplified application of the RepTrak™ mo- TOTAL 7,811 del, showing the effect of the seven dimensions of the company’s reputation and brand.

Sustainability Report 2010 ARAUCO’S Commitment to External Initiatives

Adherence to International gri 4.12 Principles ARAUCO supports international principles and ARAUCO supports participates in a number of external social, environmental and economic programs and initiatives. international principles and participates in a number of external social, environmental and economic United Nations Global Compact In September 2010, ARAUCO formally commit- programs and initiatives. ted to supporting the United Nations Global Compact and its ten principles regarding respect for human rights, labor rights, environmental pro- Certifications tection and anti-corruption. During 2010, ARAUCO continued its program of compliance with international standards by In a letter addressed to United Nations Secre- obtaining and maintaining its third-party certi- tary-General Ban Ki-moon, ARAUCO’s Chief fications and international seals. This program Executive Officer stated, “through this letter we is a tool to meet the company’s commitments are expressing our intention of supporting and and to continuously improve its operations (See developing these principles in our areas of in- Certifications Annex). fluence. It is our intention to make the Global Compact and its Principles part of the strategy, Support of External Initiatives culture and daily actions of our company, and to During 2010, ARAUCO supported the following work to ensure that our company, our employees, external initiatives: our partners and customers all fulfill this commitment. Further, we commit ourselves to business transparency and to reflect our adoption of the compact in our annual reports and other public documents.”

FSC Forest Management Certification Process In May 2009, ARAUCO decided to pursue FSC Forest Management certification of its forest holdings in Chile. The company developed a transparent, rigorous and participatory process in order to better engage its stakeholders. (See section Stakeholders Engagement: “The Means to an End: FSC and an Innovative Methodology for Dialog”.)

Sustainability Report 2010 CHAPTER 2 Corporate Governance

External Initiatives Supported by ARAUCO during 2010

Initiative Description

World Exposition Shanghai 2010. In keeping with the Shanghai Exposition theme, Better City, Better Life, the Chilean Pavilion used a Radiata pine seed as a focal point, since trees are a renewable resource that store carbon. ARAUCO’s wood products were the predominant raw material used in the construction of the Chilean pavilion. .

Environmental Expo POLLUTEC 2010. Chile was a guest of honor at this international exposition on the environment, which was held November 30 through December 3. ARAUCO made a presentation about environmental management, highlighting company programs to protect biodiversity and combat climate change.

The Center for Global Change of the Pontifical In November 2010, ARAUCO signed an “agreement for consultancy and Catholic University of Chile. research development services related to climate change” with the Center for Global Change of the Pontifical Catholic University of Chile. The objective of the partnership is to conduct joint research on environmental issues, primarily those related to global climate change. A study on carbon capture in the El Name wetland was conducted and a study on the Mataquito River Basin was initiated in 2010.

The Faculty of Biological Sciences of the Pontifical In December 2010, ARAUCO signed an agreement with the faculty of Biological Catholic University. Sciences of the Pontifical Catholic University of Chile to prepare a lecture on Environmental Ethics. The objective of this lecture was to generate discussion about how society addresses this environmental ethics and what specific initiatives should be launched.

Chilean Society for Ocean Sciences. ARAUCO provided support for the Ocean Sciences Annual Congress.

National Oceanographic Society and Committee. Through a sponsorship, ARAUCO supported the preparation of courses on ocean pollution.

Engineers Institute of Chile. ARAUCO participated in the institute’s environmental group and collaborated on climate change issues.

Domeyko Group University of Chile. ARAUCO provided support for seminars on biodiversity.

EULA Center for Environmental Sciences of ARAUCO provided support for the monitoring of fresh water systems and Concepción University. coastal wetlands.

Pontifical Catholic University of Chile. ARAUCO participated in cooperative for research and monitoring of fresh- water bodies and the ocean.

Concepción University. ARAUCO participated in cooperative marine research and for monitoring and training programs.

Catholic University of Holy Conception. ARAUCO participated in cooperative marine research and monitoring.

University of Chile (Science Faculty). ARAUCO participated in cooperative which undertakes bird monitoring and research on land biodiversity.

Sustainability Report 2010 Membership in Associations tutions and local government organizations, playing gri 4.13 ARAUCO actively participates in more than 60 an active role in the community and society, and industry-sector and social organizations. In addi- contributing to the accomplishment of mutual goals. tion, the company works with seven universities, 50 scientific centers and a large number of non-go- Following is a partial list of international associa- vernmental organizations, media, government insti- tions and organizations to which ARAUCO belongs.

Membership in Associations

Country Associations

Chile • Fundación Accion RSE www.accionrse.cl • Asociación Técnica de la Celulosa y el Papel www.atcp.cl • Asociación de Industriales del Centro, Región del Maule www.asicent.cl • Cámara Chilena de la Construcción www.cchc.cl • Cámara Chileno Argentina www.camarco.cl • Cámara Chileno Británica www.britcham.cl • Cámara Chileno-China de Comercio, Industrias y Turismo www.chicit.cl • Cámara Chileno Norteamericana de Comercio www.amchamchile.cl • Cámara de Comercio e Industria de Valdivia www.cciv.cl • Centro de Estudios Públicos, Comisión de Medio Ambiente www.cep.cl • Centro para el Fomento del Mercado del Carbono www.chile-co2.cl • Cooperativa de Mejoramiento Genético Forestal • Centro Educacional de Alta Tecnología www.ceat.cl • Corporación de Adelanto y Desarrollo de la Provincia de Arauco www.corparauco.cl • Corporación Chilena de la Madera www.corma.cl • Corporación Chilena de la Madera Maule • Corporación Chilena de la Madera Bío-Bío • Corporación Chilena de la Madera Los Ríos-Los Lagos • Corporación por el Desarrollo de Valdivia www.codeproval.cl • Corporación Industrial para el Desarrollo Regional del Bío-Bío www.cidere.cl • Fundación Belén Educa www.beleneduca.cl • Fundación Integrare www.integrare.cl • Icare www.icare.cl • Red Pacto Global Chile www.pactoglobal.cl • Sociedad de Fomento Fabril www.sofofa.cl • Un Techo para Chile www.untechoparachile.cl • Corp Arauco • Visión Valdivia www.visionvaldivia.cl • Corporación para el Desarrollo Productivo de La Araucanía www.corparaucania.cl • Facultad de Ciencias Universidad de Chile • Pontificia Universidad Católica de Chile • Universidad Austral de Chile • Universidad Católica de la Santísima Concepción

58 • Universidad de Concepción

Sustainability Report 2010 CHAPTER 2 Corporate Governance

Argentina • Asociación Forestal Argentina (AFOA) • Asociación de Fabricantes de Celulosa y Papel, Argentina (AFCP) • Federación Argentina de la Industria de la Madera y Afines (FAIMA) • Cámara Argentina de la Industria de la Madera Aglomerada (CAIMA) • Cámara Argentina de Aserraderos de Maderas, Depósitos y Afines • Instituto Argentino de Responsabilidad Social Empresaria • Feria Forestal Argentina (concurso Modelando Futuro) • Consorcio de Protección Forestal Iguazú • Guardaparques del Parque Provincial Cruce Caballero • Parque Provincial Araucaria • Parque Provincial Teyú Cuaré • Grupo de Fundaciones y Empresas (GDFE) • Mesa Ministerio de Trabajo de la Nación • Fundación Compromiso • Grupo Solidario: ONG de la Provincia de Misiones • Facultad de Arte Universidad Nacional de Misiones • Facultad de Ciencias Forestales de la Universidad Nacional de Misiones

Brazil • Associação das Empresas da Cidade Industrial de Araucária Associação das Empresas da Cidade Industrial de Curitiba • Associação Paranaense de Empresas de Base Florestal • Conselho Regional de Engenharia, Arquitetura e Agronomia do Paraná • Cooperativa de Recursos Genéticos de Coníferas da América Central y México, Brasil • Fundação de Estudos e Pesquisas Florestais do Paraná • Fundo Nacional de Controle da Vespa da Madeira (Funcema) • Fundação Projeto Pescar • Instituto de Pesquisa e Estudos Florestais • Sindicato das Industrias da Madeira do Estado do Paraná

United States • Association of Millwork Distributors • Moulding & Millwork Producers Association • The Chilean-American Chamber of Commerce of the South

Mexico • Asociación Nacional de Importadores y Exportadores de Productos Forestales A.C. • Cámara Nacional de la Industria Maderera de México • Cámara Mexicana Chilena de Comercio e Inversión • Consejo Nacional de la Madera de Construcción

Colombia • Fedemaderas • Cámara Colombo-Chilena de Comercio • Consejo Colombiano de Construcción Sostenible

Australia • Australia-Chile Chamber of Commerce 59

Sustainability Report 2010 gri 2010 Awards and Acknowledgements 2.10 In 2010, ARAUCO received numerous awards for its performance in various sustainability programs and activities, as detailed in the following table.

2010 Awards

Award Basis for the Award

Pulp & Paper International (RISI) ARAUCO received the Business Strategy of the Year award from Pulp & Paper “Business Strategy of the Year” Award International (PPI) for 2010. Organized by RISI, an information service for the forestry products industry, the PPI Awards distinguish pulp and paper businesses at the global level for their leadership, vision, innovation and strategic achievements. ARAUCO was given this award for the strategy it implemented in the reconstruction of its operations and nearby communities after the earthquake and tsunami that struck Chile on February 27, 2010.

Gold Award at Shanghai Exposition from BIE The Chile Pavilion at the 2010 Shanghai World Expo, which was built with ARAUCO’s support, was given a Gold Award in the “Theme Development” category for pavilions up to 3,000 square meters by the Bureau International des Expositions (BIE). In addition, the pavilion received the “Most Human Pavilion” Award, by the Shanghai Morning Post, and was awarded second place as Outstanding Project in the “Public-Private Cooperation” category by the Chilean business newspaper, Diario Financiero.

First place at the national level in PEC For the second consecutive year, Consultora Bosques Ltda, a company that manages certification Forestal Celco’s Quivolgo nursery, received the highest awards to be given in Chile to businesses certified in risk-prevention management programs. Awards were earned in two categories: “PEC Competitive Business Award” and “PEC Standard”. These annual awards are sponsored by the Safety Mutual (Mutual de Seguridad).

Three Chilean National Safety The Arauco Plywood mill received three awards at the 47th National Safety Council Safety awards Contest. This contest is organized annually by the Chilean National Safety Council (CNS in Spanish). The awards were the following: • "Excellence in Risk Prevention," given to businesses that achieve zero accident frequency for two or more consecutive years; • "National Safety Council," awarded to businesses with the lowest accident frequency rate in their group category and whose value is significant; • “Effort in Risk Prevention,” given to companies that reduce their accident frequency rate by 25% or more during participating given year, as compared to the average rate attained during the two previous consecutive years of participation in the contest.

Sustainability Report 2010 CHAPTER 2 Corporate Governance

Highest Distinction Award in the First National Nueva Aldea Sawmill earned the Operational Innovation Award (PIO), the Operational Excellence Contest in Chile highest distinction in Chile’s First National Operational Excellence Contest, for its project “Risk rate reduction in log inventory.” This contest was organized by the Catholic University, the Center for Operational Excellence, the Chamber of Production and Commerce and the Chilean Safety Association.

The Chilean Chamber of Construction’s Safety The Arauco pulp mill won an award for achieving outstanding occupational health Mutual Award and safety results in 2010. The Chilean Chamber of Construction’s Safety Mutual award was made through the Certified Business Program (PEC in Spanish),

Chilectra’s “Women’s Energy” Award Arauco Educational Foundation Manager Angélica Prats received the “Women’s Energy” award, given by Chilectra, for her contribution to education.

Security and Emergency Response Training The Arauco Pulp Mill was given an award for its successful post-earthquake Center, SERTC, award emergency control regarding chemical product management. The Security and Emergency Response Training Center, SERTC, based in the United States made the award. This was the first time the award was given to a company outside the US. The Arauco Pulp Mill was nominated by TTCI (Transportation Technology Center, Inc.) due to the magnitude of the field work carried out by the mill.

Misiones On Line Award Arauco Argentina was given an award for job creation in Misiones Province by (Argentina) Misiones On Line, an online media site (www.misionesonline.net). ARAUCO generated more than 4,000 direct jobs and directly or indirectly supported more than 700 small and medium businesses benefiting 50,000 people in the area.

“Protagonistas ” TV Show Award Arauco Argentina employees were given an award for their on-the-job (Argentina) commitment to their neighboring communities. The award was made by the cable television news program, “Protagonistas,” which airs in Misiones Province.

Community School Program Award Arauco do Brasil received the Community School Program Award, given by the (Curitiba, Brazil) Municipality of Curitiba, for the company’s contribution to local development.

Sustainability Report 2010 Earthquake and Reconstruction On February 27, 2010, a Richter-scale magnitude 8.8 earthquake struck the central and southern areas of Chile. The quake spawned a series of tsunamis that devastated the coastal areas of three regions: O´Higgins, Maule and Bío Bío. Thousands of people were affected, their homes destroyed, and social services, communications and production infrastructure were damaged as a result of this disaster.

The earthquake and tsunami resulted in signif- Emergency icant losses for ARAUCO: The Emergency stage included the following initiatives: • Six workers and contract workers were killed

• 162 families were affected; including 133 • A welfare action plan, including the distri- which suffered the total loss of their homes bution of prepared meals; care packages; • More than 20,000 company workers in the area were affected • Of the company’s 35 production facilities, In order to address the 30 were located in the devastated area situation, work was • Five pulp mills were shut down; two of these were severely damaged organized in four stages defined as Catastrophe, Emergency, • One saw mill was completely destroyed by the tsunami Reconstruction, and Reflection.

Despite the serious impact on ARAUCO and its workers, the company made an effort to main- clothing, flashlights, blankets, sleeping bags tain labor stability and wages for all its workers and mats; rolls of plastic sheets to cover tents; and contract workers. In order to address the diapers; and water barrels. Arauco’s gymna- emergency, work was organized in four stages sium was made available, as was the Colegio defined as Catastrophe, Emergency, Reconstruc- Constitución’s school gym, to serve as collection, and Reflection. tion centers for Municipality community aid.

Catastrophe • ARAUCO contributed CLP$1.5 billion (US$3,000) Efforts in this stage were focused on people. to the “Chile helps Chile” Telethon. In addition, Work was done to re-establish communications ARAUCO worked with Un Techo para Chile and begin a registry of the condition of our (A Roof for Chile) Foundation, providing workers and their communities. Personnel from wood to build more than 20,000 emergen- the company’s People Management department cy homes before the arrival of the winter moved into the affected areas and were able season. to locate 100% of the company’s workers. Ac- cording to the registry, 1,260 families were left • Special assembly plants were installed in with damaged homes and 95 families lost their Constitución and Coronel to manufacture belongings. emergency homes, and about 25,000 homes 62 were built before June 15, providing families Work also was done during this stage to assess with shelter for the winter. and quantify the damage to the 30 company production facilities located in the areas that • Psychological support for the company’s

Sustainability Report were most affected. workers and residents of the Communes 2010 CHAPTER 2 Corporate Governance

most affected by the earthquake was provi- Reconstruction ded by the Arauco Educational Foundation, The Reconstruction stage included the following ARAUCO’s People Management department initiatives: and the Pontifical Catholic University’s department of Psychology Center for the Pro- • “Sea of Hope” campaign in support motion and Study of Good Treatment. In total, of Bío Bío fishermen 1,129 people from 20 Communes in the Maule The artisan fishing sector is very important and Bío Bío regions used these services. in the regions in which ARAUCO maintains operations. The company signed an agreement • A financial support plan for ARAUCO’s wor- with the Artisan Fishermen Federation of Bío kers whose homes were damaged by the Bío Region (Ferepa), Concepción Universi- eathquake and, in some cases, by the tsunami. ty, and Radio Bío Bío to develop the “Sea of The following aid categories were established: Hope” program to support artisan fishermen affected by the earthquake and tsunami, a di- o Money in advance for total loss saster that destroyed at least 500 fishing boats. o Money in advance for homes with significant damage This strategic alliance was successful in raising o Money in advance for homes with minor CLP$283,285,513 (US$556,000). Funds were damage and/or loss of belongings donated by companies, organizations, unions, national and foreign institutions and people in o Money in advance for house rental general. ARAUCO donated CLP$100 million o Psychological support (US$197,000).

• Provision of company land for use in the These donations were invested in 35 fully construction of temporary housing. Land was equipped boats that were given to fishermen made available in the Communes of Puertas in the affected regions, directly benefiting 140 Verdes, Constitución, Fundo el Coihueco de families. Penco, Fundo el Molino de Dichato, Tomé, La Araucana in Los Álamos, Reserva Los Ríos, El • Support for the cities of Arauco Descabezado 2 and Herrera in Curanilahue. and Constitución Given the critical situation, ARAUCO took on • Provision of heavy machinery to clear streets a key role in the reconstruction of Constitu- and remove rubble; corporate volunteer ción and Arauco, two cities that were most work; an alliance with Aramark to provide affected by the earthquake and tsunami. two camp kitchens and prepare 7,000 rations of food in Constitución; and support from the - Constitución: The Sustainable Reconstruc- contractor, COMIN, to assess the condition tion Plan for Constitución (PRES), a public- of 4,500 houses and 25 sheds and conduct private alliance to guide the reconstruction necessary clearance work. process was established by ARAUCO, the

Sustainability Report 2010 Housing Ministry of Chile and the Munici- • In 2010, ARAUCO supported the production pality of Constitución. of the movie, “Mauchos.” Directed by Ricardo Larraín and Sebastián Moreno, the documen- - Arauco: The company supported fundraising tary, filmed in Constitución, shows the long efforts for the reconstruction of the cultu- and hard process the “maucho” people (resi- ral center, which will be achieved through dents of the Maule basin) have experienced US$2 million in donations from ARAUCO’s in rebuilding their homes, streets and schools customers. The company also donated land and in continuing the lives they led before the (in partnership with SERVIU) for the cons- earthquake. The movie was first shown on truction of housing for affected families, and January 5, 2011 at Plaza Arturo Prat in Cons- provided support for small businesses. titución. This event was attended by 3,500 people. - Curanilahue: A technical roundtable was established to manage reconstruction is- • ARUACO provided support for the book, sues such as finding solutions for people “Our Earthquake,” by Alfredo Sepúlveda and affected by the disaster; a support fund for Francisco Aravena of Alberto Hurtado Uni- small businesses (seed capital); and finan- versity. The book gives an account of the ex- cial support for the demolition of a public periences of a few ARAUCO workers before school, Liceo de Curanilahue. and after the earthquake and tsunami. The book will be published in 2011. • Resuming operations in ARAUCO’s production facilities During April 2010, most of ARAUCO’s facili- Despite the serious ties resumed operations, except for the pulp mill in Constitución and Line 2 of the Arauco impact on ARAUCO pulp mill. and its workers, the company made The Constitución pulp mill resumed produc- an effort to maintain labor stability tion on May 20, an event marked by a cere- mony attended by hundreds of its workers, and wages for all its workers the Chilean minister of Labor and Social Welfare Camila Merino, the mayor of Cons- and contract workers. titución Hugo Tillería, and ARAUCO’s CEO, Matías Domeyko. • A video entitled, “Chile, Seismic Country,” Repairs to Line 2 at the Arauco pulp mill con- was produced with support from the Arauco tinued through 2010, and the mill resumed Education Foundation. The video was officially operation in January 2011. presented to the Education Ministry in Oc- tober 2010, and was distributed nationally. In Reflection addition, the Foundation supported the coor- ARAUCO deemed it important to leave historic dination and distribution of a donation of testimony about the disaster for future genera- more than 4,000 books to 21 public libraries tions, honoring the memory of victims as well as in 21 Communes in regions Maule, Bío Bío the integrity and fortitude of people who parti- and Los Ríos. cipated in the reconstruction efforts. ARAUCO’s 2010 financial support of these ini- Following are some of the actions undertaken tiatives totaled about CLP$3,5 billion (US$6,9 by ARAUCO to document the impacts of the million). 64 February 27 disaster and Chile’s recovery: Sustainability Report 2010 CHAPTER 2 Corporate Governance

Sustainable Reconstruction Plan PRES Constitución

On March 18, 2010, ARAUCO signed a private- A team of professional and technical people from public alliance with the Municipality of Constitu- the Chilean architecture firm, Elemental, the UK ción and the Housing and Urbanism Ministry of engineering and urban development firm, ARUP, Chile to develop a Sustainable Reconstruction Talca University, Chile Foundation and Marketek Plan (PRES) for the city of Constitución. The first were called on to develop the reconstruction plan. objective was to generate and agree upon a Mas- ter Plan within a 90-day time period. How did we do it? PRES based its operation on three pillars:

Operating Principles Excellence Viability Participation Integrated Design Sense of reality With and for the people

1. Architecture 1. Identifying pre-existing or 1. Transparent 2. Urban Design ongoing projects 2. Not differentiated, not segmented 3. Landscaping 2. Existing covenants and restrictions 3. Multichannel and multi-scale 4. Engineering 3. Establishing a Public Sector 4. Binding 5. Energy Efficiency Strategic Committee 6. Tourism 4. Prioritizing and Programming (Gantt Charts) 5. Contingency Coordination 6. Cost 7. Implementation Plan

Sustainability Report 2010 Citizen Participation referendums also were held. During the initial PRES required coordinating the work of ex- 90-day planning period, 6,300 visitors atten- perts and authorities, while incorporating the ded Open House meetings, and the project opinions and contributions of the residents of website (www.presconstitucion.cl) received Constitución. A Consulting Committee, with more than 10,700 hits. More than 1,200 ideas a membership representing neighborhood were submitted through the project mail box associations, union organizations and sector and 4,230 votes were cast in the binding civic associations, was established and held week- referendums. ly meetings. The concerns and opinions of the stakeholder participants were channeled During this same period, more than 100 mee- through initiatives generated in Open House tings were held with public and private sector meetings. These became the place to listen actors to verify the technical, social and eco- to, talk about and debate plans for the city’s nomic viability of proposed projects. The key future, and to offer ideas for inclusion in the throughout this process was citizen participa- technical team’s projects and proposals. tion. The original proposal was adjusted and enriched through the inclusion of input from In total, 45 sector forums were held, with an community citizens about specific problems, additional 50 meetings held at the request of and by incorporating their views on the futu- community citizens. Dozens of home mee- re and their priorities for the various projects tings, nine open forums, and two binding civic once the reconstruction process began.

Citizen Participation

PERMANENT SPECIFIC ON DEMAND BINDING

6,300 1,200 9 50 CITIZENS’ VISITS TO OPEN HOUSE IDEAS SUBMITTED BY HYBRID FORUMS MEETINGS BINDING MAILBOX BY REQUEST REFERENDUM 10,707 10 45 4,230 VISITS TO CONSULTATIVE SECTOR FORUMS NUMEROUS VOTES CAST WWW.PRESCONSTITUCION.CL GROUP WEEKLY IN-HOME MEETINGS FORUMS

Maule River Park Project

Projects Prioritized by the Community 1 2

Fire Station Bus Terminal Sustainability Report 2010 CHAPTER 2 Corporate Governance

Sustainable Reconstruction Plan PRES Constitución

Strategy/Projects PRES Conclusions PRES generated projects and proposals in five In addition to reconstructing public buildings areas sharing a common theme, Sustainability: and housing using designs that reflect the city’s characteristics, PRES includes: • Safety infrastructure: The plan proposes a solution to mitigate the river’s overflow and 1. Creating a city with ‘anti-tsunami DNA’ by the impact of possible tsunamis, while deve- building a coastal mitigation park. loping the riverfront area as a center for city activity. 2. Changing the city’s axis towards the river- bank, and capitalizing on the city’s natural and • Public-area infrastructure: The plan includes founding heritage. manufacturing and tourism infrastructure development in strategic areas to boost existing 3. Reducing Constitución’s urban density to 6.6 fishing and shipyard activities. It also includes square meters per resident (from 2.2 square a new market, tourism docks and recreational meters before the earthquake) by creating a areas. new public area. (The World Health Organiza-

tion recommends as a standard 9 square me- • Economic diversification: During the citizen- ters per resident. Ñuñoa Commune in Santia- participation process, residents stated the go city has 7.2 square meters per resident). need to diversify the city’s manufacturing base. Community members wanted to ad- 4. The opportunity to develop the city’s tourism dress the city’s long-standing aspiration to potential, helping to diversify its traditional reactivate tourism, while taking advantage of manufacturing-based economy. the reconstruction to add a forestry-related identity to Constitución. 5. Provisions for dealing with the flooding of es- tuaries, which was a priority for the community. • Energy: Three areas of energy development are addressed in the plan. One is related to waste generated by the city, another to new non-conventional renewable energy technologies, and a third to existing energy sources that are currently not being used efficiently.

• Housing: Seven types of houses and apartments were designed as part of the plan. These are tied into existing subsidies and to the different geographic areas available for reconstruction.

94%IN FAVOR 3 4 4,230 Votes Cast

Municipal Theatre Tourism Plaza Sustainability Report 2010 68 2010 Sustainability Report communities, and to the needs of future generations. that isresponsive to the environment, to people and their opportunities for growth through sustainable management ARAUCO seeks to maximizethe value of its forests, finding

Economic Performance

3 Economic Performance ARAUCO’s profits are distributed as compensation to personnel and service providers, repayment to financial creditors, returns to shareholders, taxes to the government, and reinvestment in our businesses.” 3. 70

2010 Sustainability Report EC1 gri ned by allofthecompany’s businesses asare- obtai- tohighermargins This wasdueprimarily US$700.7 million, 130.1%morethanin2009. 2010,During aprofitARAUCO of generated llection, andfinancial planningservices. businesses through its treasury, credit and co- It also provides assistance to ARAUCO’s various adequateliquiditylevels.finances toguarantee plansandcontrolsthecompany’sdepartment sources. fromvarious rations Inaddition, this financing for thecompany’s projectsandope- the company’sadministers capital and secures ARAUCO’s Management FinancialCorporate mand andsoldintheglobalmarket. ciently producedinresponsetocustomerde- ARAUCO’s sustainable forest productsareeffi- generations. environment, topeopleandtheircommunities, andtotheneedsoffuture for growth throughsustainable managementthatisresponsive tothe ARAUCO seekstomaximize thevalueofitsforests, finding opportunities Financial Results Direct EconomicValue GeneratedandDistributed (inUS$Million) EBITDA/Interest Net Debt/EBITDA Total Debt/EBITDA Investments Financial Costs Net FinancialDebt Financial Debt Net Income EBITDA Margin EBITDA Sales

31.5% 2008 2,485 2,652 1,169 3,714 460 175 405 6.7 2.1 2.3 is expected to begin operating early in2012. early is expectedtobeginoperating a newMDPplantbeingbuilt in Teno, aplantthat investment wasusedtopurchaseequipmentfor 27, 2010.on February ofour A smallportion Chile thatstruck relatedtotheearthquake pairs andonre- cused onmaintenanceofoperations 4.7% lessthanin2009. fo- These were primarily Investments in2010totaledUS$688.3million, forhigher averageallproducts. sellingprices as comparedto2009, from resultingprimarily to a 55.1% increase in the net margin primarily than in2009. The increaseinEBITDA wasdue for 2010wasUS$1.406billion, 92.9%greater to total2010salesofUS$3.788billion. EBITDA plains the21.7%increasefrom2009saleslevels sult of improved conditions. market This also ex- 23.4% 2009 2,669 3,203 3,113 722 194 305 729 3.8 3.7 4.4 37.1% 2010 2,406 3,450 1,406 3,788 688 214 701 6.6 1.7 2.5 CHAPTER 3 Economic Performance

Resources Generated Suppliers and Services 45% and Distributed in 2010 Reinvestment 19% (Sales US$3,788 million) Staff Salary 20%

Financial Creditors 6%

Shareholders 4%

Government 6%

Resources Generated Reinvestment 58% and Distributed in 2010 Financial Creditors 15% (EBITDA US$1,406 million) Shareholders 11%

Government 16%

Financial Risks and Opportunities tion credits (CERs) that are sold in global car- gri EC2 Related to Climate Change bon markets. Each CER represents one metric ton of carbon dioxide equivalent that was not Financial Opportunities emitted into the atmosphere. Since 2007, ARAUCO and its biomass-based energy-generation projects have benefited from To date, ARAUCO has issued 1,070,788 CERs, provisions in the Clean Development Mechanism and has received a total of US$21.4 million from (CDM) of the Kyoto Protocol. The objective of the sale of these credits. No CERs were sold in this international agreement was to verify and 2010. certify greenhouse gas (GHG) emission reduc- Financial Risks tions. The CDM was established as a mechanism 71

to accomplish this objective through projects ARAUCO has identified several potential risks carried out in developing countries. Emission to the company’s activities due to climate chan- reductions resulting from these projects are ex- ge. Should these events occur, they could have pressed in terms of Certified Emission Reduc- a negative effect on the company’s financial re- Sustainability Report 2010 72

2010 Sustainability Report EC5 gri Negative • Additional • Increased • identified include: ge). However, thathave themajorrisks been to predictphenomenarelatedclimatechan- pacts hasnotbeenassessed(sinceitisdifficult sults. The magnitudeofpossible economicim- (US$337). minimum monthly wageinChileisCLP$172,000 of CLP$280,000permonth(US$550). The legal inChileataxable netminimum wageworkers and asaresultofthispolicy, ARAUCO pays its standards for allworkers. As ofNovember 2010, tes. basicwageThese policiesseektoguarantee - inwhichthecompany opera of thecountries for each andtheemployeeskers ofcontractors ARAUCO hasadoptedwagepoliciesfor itswor company employees Minimum wagefor workers andcontractor ARAUCO’s Presence intheMarket tion qualityandincreaseproductioncosts. rest growth rates, negatively impactplanta- could reduce fo- Changes in climate patterns growing cycles.ideal conditionsfor short regions andcountries, have whichcurrently zil orUruguay, andonplantationsinother plantations locatedinChile, Argentina,- Bra necessary toreduceGHGemissions.necessary bon footprint. toreducethecompany’s car due toefforts laws andregulations, and(atthelocallevel) materials,and raw duetonewinternational investments impacts costs for on for energy, the facilities company’s

transportation, and equipment forest - -

2010. (SeechapterSociety: Foundation). Integrare chases ofUS$936,000fromsmallbusinesses in Through thismechanism, ARAUCO madepur te purchases from small and micro-businesses. - for corpora platform promotes anintegrated profit organization, Foundation, Integrare which tes inabusiness initiative withtheChileannon- Following thesameconcept, - ARAUCO participa total purchases. increasedfrom30%to40%oflocal suppliers province, wherethecompany’s purchasesfrom achieved outstandingresultsin gram Arauco In 2010, theLocalSupplierDevelopment Pro- Development Agency.mic velopment, suchasCORFO, theChileanEcono- nesses andinstitutionsfocused onsupplierde- arerepresentatives ofdifferent busimembers - for thecompany.ge localsuppliers The Council’s ment Councilstoidentify, train, equipandmana- The company hasestablished LocalDevelop- ment andsocialwell being. theireconomicdevelop - tosupport suppliers focuses on increasedpurchasing from local supply chain.the forest-industry The program tostrengthenSupplier Development Program 2009,During ARAUCO launcheditsLocal Development ofLocalSuppliers

- EC6 gri CHAPTER 3 Economic Performance

Local Hire The local economic development impact of the- gri ARAUCO favors local hires in its staff-selection se investments has not been measured. EC7 process. Each time the company begins operations in a new area, it engages relevant com- Other Indirect Economic Impacts gri munity agencies and actors -- such as Municipal ARAUCO’s indirect economic impacts on the EC9 Employment Offices, universities, professional communities in which it operates and the mar- institutes, technical education centers and pu- kets it serves result from such activities as im- blic schools -- to create a formal job-application proving local infrastructure, increasing purchases mechanism for the positions to be offered in from local suppliers, and providing products that the area. offer environmentally responsible solutions for housing and other construction applications. All Indirect Economic Impacts of these activities help improve the quality of life in local communities. Investments in infrastructure gri EC8 Since its beginnings, ARAUCO has made large ARAUCO has not yet measured the scope of investments in infrastructure to support its pro- these economic impacts. However, during 2011, duction activities. Many of these investments also ARAUCO will begin to identify and systemati- provide public benefits. For example, many of the ze its direct and indirect economic impacts on roads and bridges built by the company for fores- communities, through the implementation of an try operations are available for public use. Integrated Model for Sustainable Development.

During 2010, the company invested US$49.5 million in Chile for the construction of 2,500 kilometers (1,500 miles) of roads. In addition, ARAUCO’s forestry units make regular investments to improve road conditions. The forestry business spent US$9.6 million on road maintenance in 2010, including repairs to bridges, sewers and road signs. Of this amount, US$1.9 million was invested in improvements for public roads and for access to these roads.

Sustainability Report 2010 74 2010 Sustainability Report continuous, systematic reduction of environmental impacts. Implementation of thispolicy focuses onprevention and on protection and the sustainable use of natural resources. Policy spells outthe company’s, commitment to environmental ARAUCO’s Environmental, Qualityand Occupational Health

Environmental Performance

Generation of biomass-based Non-Conventional Renewable

4 Energy, reduction of the Environmental Performance company’s carbon footprint, and the conservation of biodiversity are at the core of ARAUCO’s environmental management strategy.” 4. 76 2010 Sustainability Report environmental impactsrelatedtothecompany’s vention, oncontinuous, systematicreductionof Implementation ofthispolicyfocuses onpre- observed inallofthecompany’sobserved plants, facilitiesandactivities. resources.protection andthesustainable useofnatural This policymust be (MACSSO) spellsoutthecompany’s commitmenttoenvironmental ARAUCO’s Environmental, QualityandOccupational HealthPolicy Environmental Policy Establish • customer requirements as a Meet or surpass • Comply withenvironmental, quality, and • company’s and businesses to: personnel MACSSO policy, whichcommitsallofthe With thisinmind, ARAUCO developed the conditionsfor sustainable development.sary and occupationalhealthsafety areneces- Environmental protection, productquality, Policy (MACSSO) and OccupationalHealthSafety ARAUCO’s Environmental, Quality, chnology to reduce adverse environmentalchnology toreduceadverse cols. Inaddition, usethebest-available te- through continuous-improvement proto- reduce occupationalhealthandsafety risks part of developing long-term relationships. ofdeveloping long-term part management; for forestCERTFOR andcriteria principles vices. This includesadherencetoFSCand the company’s activities, productsandser commitments in all of tions and pertinent occupational healthandsafety laws, regula- and assess goalsandobjectives to - safety ofemployees workers. andcontract need to safeguard the occupational health and activities, productsandservices, andonthe behavior anddaily decision-making. oftheir part this policyshouldbeanintegral meetitaswell.that others Complying with Health andSafety policyandfor makingsure Environmental, Quality, andOccupational for meetingtherequirementsofcompany’s All of ARAUCO’s areresponsible personnel Communicate these concepts and com- • Ensure thatallemployees andcontract • Avoid • terested parties. providers, andotherin- relevantsuppliers mitments to company personnel, service safety goals. vironmental and occupational health and in meeting quality,responsible work en- them with the meanstoconductsafe and their responsibilities,form and provide toper receive adequatetraining workers activities, productsandservices. environmental pollution inthecompany’s ties, productsandservices. impacts resultingfromthecompany’s activi- work-related illnessesandaccidents, work-related - CHAPTER 4 Environmental Performance

Environmental Management Environmental responsibility at ARAUCO falls on every person at all levels of the organization. The company has an Environmental and Occu- pational Health and Safety (MASSO) corporate management function to which MASSO Mana- gers of the Pulp, Panel, Sawn Timber and Fores- try businesses report.

The MASSO management area helps ensure “Ser un referente mundial en el desarrollo sostenible de productos forestales es compliance with the commitments required by Sembrar Futuro” ARAUCO’s MACSSO policy, as well as the cri- 1ra Edición 2009 teria and parameters defined in the company’s management systems and procedures. Estándares Corporativos para el desempeño en Medio Ambiente, Seguridad In addition, ARAUCO promotes science-based y Salud Ocupacional environmental research and training to better understand and manage ecosystem services in its plantations and its forest areas containing high conservation values. This training is delivered by the company through its own initiatives and through partnerships with educational cen- International Standards and Certifications ters and other specialized organizations. ARAUCO uses a number of international, third- party protocols to certify its environmental ma- Corporate Standards for Performance nagement and to communicate the results trans- in Environment and Occupational Health parently. and Safety During 2010, ARAUCO developed Corporate ARAUCO’s forest plantations and industrial ope- Standards for performance in Environment and rations are certified to the following schemes: Occupational Health and Safety. These provide a framework for administration and evaluation • International Standards Organization Environ- that is complementary to the international stan- mental Management Systems (ISO 14001) dards used within the company, such as ISO 14001 and OHSAS 18001. • Occupational Health and Safety Assessment Series (OHSAS 18001) These new Corporate Standards were developed to attain two objectives: defining the crite- • Chilean System for Sustainable Forest ria needed to audit performance; and promoting Management (CERTFOR) continuous improvement in the implementation of the policy. • Brazilian National Forest Certification Program (CERFLOR) The new standards were disseminated to senior managers in all of the company’s businesses du- • Forest Stewardship Council (FSC) Forest Ma- ring 2010, and will be implemented throughout nagement, for certain forests in Brazil, Argen- the company during 2011. tina and Uruguay, and Chain of Custody and Controlled Wood for ARAUCO’s various forestry units and facilities. (See detail by business units in Certifications Annex) 77

Sustainability Report 2010 78

2010 Sustainability Report EN3 gri EN2 gri EN1 gri Energy ManagementEnergy that isaddedtomaintainthesystem’s conditionandbalance. balancefailures),thermodynamic sodaandlimestonearealmostentirely recycled, exceptfor material Since pulpproductionisessentially aclosedprocess(theonly lossesstemfromsystemfailuresand Use ofRecycledMaterial NotAvailable.NA: (2) “SUB”is“solidunderbark”(debarkedwood). tochemicalplantsinArgentinaandBrazil.Brazilreported44%Formol, whichwaschanged(1) Refers to37%beableconsolidatedata. Material Inputs,by BusinessArea Input Management approved. theyear,During five Environmental Impact Assessments and13Environmental ImpactStatementswere company facilities. atvarious operations the efficiency ofitsindustrial 2010,During ARAUCO submittedeightEnvironmental Impact Assessments for projectstoimprove Environmental Permit Management (2) Data reported refers only toChile. only (2) Datareportedrefers (1) Direct EnergyConsumptionby BusinessArea Business Area Panel Panel Business Sawn Timber Pulp Pulp Sawn Timber Data reported in 2009 was corrected due to recalculated information. Data reportedin2009wascorrectedduetorecalculated information. (1) (2) (See detailin ANNEX “2010 Processedandapproved environmental permits, by country”). Urea Formaldehyde Resin Fiber (Wood Chips) Hydrogen Peroxide Sodium Chlorate Liquid Oxygen Formol 37% Formic Acid Sulfuric Acid Methanol Wood Fiber Wood Fiber Limestone Paraffin Oxygen Urea Urea Input Soda (1) (1)

(1) (1) (1) GWh GWh GWh Unit Million m Millions ofADMT Million m Metric Ton/year Metric Ton/year Metric Ton/year Metric Ton/year Metric Ton/year Metric Ton/year Metric Ton/year kg/ADMT kg/ADMT kg/ADMT kg/ADMT kg/ADMT kg/ADMT kg/ADMT Units 3 SUB 3 SUB (2) 161 NA 1,701 2008 / year (2) 140,252 2008 25.16 23.10 16.98 15.09 26.43 5.65 4.17 2.87 4.28 NA NA NA NA NA NA - 127 NA 1,812 2009 185,214 2009 24.87 23.87 19.67 11.94 22.90 4.62 5.57 2.79 2.66 NA NA NA NA NA NA - 134 639 2,015 2010 213,199 2010 72,550 72,503 73,622 8,379 2,703 25.68 20.04 25.18 21.60 4.56 5.90 2.81 2.34 9.68 5.3 33 CHAPTER 4 Environmental Performance

Energy Efficiency through the burning of fossil fuel.) No CERs were gri EN5/7 The company’s energy efficiency model responds to sold in 2010. ARAUCO’s vision and its core sustainability strategy of making full use of the forest resource, which In addition, a number of business units developed includes reusing forest biomass as carbon-neutral specific initiatives during 2010 to reduce energy cogeneration fuel. This model has allowed the com- consumption. For example, Arauco’s Panel business pany to increase its contribution to Chile’s energy implemented awareness campaigns promoting the grid (the SIC) by 14% in 2010, as compared to 2009. responsible use of electric energy, Operational Exce- llence projects to reduce consumption on production At the same time, ARAUCO has used the additio- lines (e.g., adding controls to stop idle equipment), and nality provision of the Clean Development Mecha- changes in plant layouts to make better use of natural nism (CDM) of the Kyoto Protocol as the basis for light. Through these initiatives, the Panel business met expanding its capacity to generate clean electric the Chilean Production Agreement’s reduced-energy energy at some of its industrial facilities. This shift consumption commitments set for this program. away from fossil fuels results in a reduction of greenhouse gas (GHG) emissions. Renewable Energy gri ARAUCO invests in the latest technology to pro- EN6 The company has registered four facilities Clean duce renewable, biofuel-based clean energy and to Development Mechanism (CDM) provisions of the contribute to climate change mitigation. The com- Kyoto Protocol, and in past years has generated pany operates seven electricity cogeneration plants revenue from the sale of carbon credits based on in Chile and two in Argentina. These plants produce the generation of biomass-based clean energy. The energy from industrial biomass residue and forestry company began selling Certified Emission Reduc- waste, providing a sustainable supply of energy for tion credits (CERs) in 2007, and has sold 1,070,851 most of the company’s production facilities, and con- CERs to date. (Each CER represents one metric ton tributing surplus energy to national electric grids. of carbon dioxide equivalent that is not emitted

Biomass-based Energy Generation

Start date for Surplus Installed capacity Production (GWh) Facility Energy sales to the grid MW % of total 2006 2007 2008 2009 2010

Arauco (1) 1996 127 23,7% 653 586 622 631 372

Constitución 1996 40 7,5% 229 223 223 231 171

Licancel 2004 29 5,4% 127 56 121 120 110

Valdivia 2004 140 26,1% 559 617 597 655 601

Nueva Aldea (Panels) 2004 30 5,6% 208 215 233 230 217

Cholguán 2003 29 5,4% 185 187 219 197 210

Nueva Aldea (Pulp) 2006 140 26,1% 101 522 707 787 648

Total in Chile 535 100% 2,062 2,406 2,722 2,851 2,329 79

P. Piray 2002 38 49% 200 178 146 178 199

P. Esperanza N/A 39,5 51% 311 310 311 289 302

Total in Argentina 78 100% 510 488 456 407 500 Sustainability Report (1) Installed capacity at the Arauco facility includes a new 31MW turbine generator, which began operating in November 2010. Its commercial operation is expected to begin

during the second quarter of 2011. 2010 80

2010 Sustainability Report EN10 gri EN9 gri EN8 gri Bioforest’s Plywood • production processes. Examplesinclude: water recyclingandreuseinitiatives for their of Several ARAUCO’s facilitieshave developed consumption ofwater. on any impactsonwater sourcesof ARAUCO’s There isnorecordorbackgroundinformation In • ecosystem perspective. from an also addresses soilconservation gram to maintainwaterqualityand quantity. The pro- a Water thatdevelops tools andSoilprogram Sawmills • Water Consumption,by Business(inmillionsofm Water Management (1) SoloconsideradatosdelaoperaciónenChile (3) In Argentina, consumption by a few internalcustomerswasnotdeducted. (3) InArgentina,consumptionby afew (2) (1) ARAUCO’s EnergyConsumptionandNetSurplusin2010,by Facility (GWh) Woodpulp Panel Business Sawn Timber Includes energyconsumptionby Includes internalcustomersateachfacility(inChile). diesel-fueledenergygenerationinChileby Doesnotinclude HorconesandNuevaAldeaPhase 2facilities. ARAUCO Total EnergyConsumption Net Surplus Total Purchases fromthegrid Total Salestothegrid Total GenerationinFacilities Energy Surplus Total ConsumptioninFacilities water wasutilized. of the water used in the drying kilns. of thewaterusedindrying logs for peeling. water tomaintainlogdeckandprepare log decks. In2010, 61,320m by usingreclaimedprocesswatertomaintain Argentina, Ecosystem in mills 3 Chile

water in Chile reclaimed 1 2 consumption Management use reclaimed 13% 3 ofreclaimed 2008 52.47 (113,700m Division is 3.11 0.79 optimized process has 3 )

Chile 1,689 1,817 2,329 512 512 128 640 During these the qualityandquantityofwaterprovided by sources canbemanagedtomitigatechangesin ARAUCO’s forestland were identified. These case basis. Morethan1,200supply sourcesin for allof ARAUCO’s forestland, onacase-by- tify andupdatepotable watersupply sources system. vironmental implicationsoftheplannedroad by theen- roadandplanningunitstofully grasp Bioforest potential issues. toidentifyaffected by the2010-2011harvest thatcouldbehydrography ofinletsandrivers 3 ) sites. 2010, 2009 50.32 4.29 0.72 also

Bioforest analyzed addition,

began the Bioforest Argentina drainage a 397 441 500 60 25 45 70 process 2010 52.34 measured 6.00 0.89 work to iden- done the

CHAPTER 4 Environmental Performance

Environmental Investments 2010 Environmental gri EN30 During 2010, ARAUCO invested US$45 million Investments in various environmental projects. In 2009, the (US$45 million) company had invested 35% more (US$69 million), primarily for construction of new infras- Pulp Chile 74% tructure. The company’s focus in 2010 was to maintain existing infrastructure. Panel Chile 16%

Forestry Chile 4%

Brazil 3%

Argentina 3%

Biodiversity Management gri High Value Biodiversity Areas in ARAUCO’s Forestland EN11 ARAUCO owns 373,573 hectares (923,100 acres) of native forest, which account for 23% of its forestland. This area is designated for biodiversity conservation management, since a great number of flora and fauna species occurring therein have been identified as high-value conservation species, and many of these are classified as rare, threatened or endangered.

ARAUCO’s Native Forest by Country

Country 1 Native Forest Area (in hectares/acres) Native Forest as a % of ARAUCO’s forestland, by Country

Chile 2 194,165/479,800 17.6%

Argentina 112,513/278,000 43.7%

Brazil 59,825/147,800 38.5%

Uruguay 3 7,070/17,500 5.6%

Total 373,573/923,100 22.7%

(1) Includes Alto Paraná S.A. in Argentina and FAPLAC plantations in Brazil. (2) Includes 80% of Forestal Los Lagos which represents ARAUCO’s ownership share. (3) Includes 50% of Montes del Plata land and plantations, which represent ARAUCO’s share in the joint venture.

Programs for Biodiversity Protection gri EN13 ARAUCO’s environmental management programs are strategically focused on biodiversity protection. The company implements various methodologies, programs and initiatives in each of the four countries where it operates. 81

During 2010, ARAUCO participated in a number of programs to protect high-value biodiversity habitats and protected species. Sustainability Report 2010 82 2010 Sustainability Report EN12/14 gri ARAUCO’s 2010ConservationPrograms during harvesting operations; the harvesting monitoring during veying of water, resources soil andbiodiversity Protection oftheseecosystems requiresthesur ofitsforest holdings.in Spanish)whicharepart Value Environmental Areas (abbreviated as AAVA systemtoidentifyand protectHighinformation forest for conservation, ARAUCO maintainsan areasofnativeIn additiontosettingasidelarge Environmental Areas for ProtectingStrategy High Value Program Name Program Partnership withNGO M’Bocua Biopark URUGUAY Arapotí do Tenente Campo monitoring program Senges, Floraandfauna BRAZIL reserves high- valuebiodiversity andfaunain of flora Research onprotection Program Sponsorship Native Trees Ecosystem inMisiones the Araucariaangustifolia Conservation Programfor Misiones of DrainageBasinsin Integrated Management ARGENTINA Reserve Nonguén National Parque Oncol Nahuelbuta Mountain CHILE Vieja -Paysandú Survey ofMonteNativo Capilla Native faunabreedingstation,FrayBentos. management units. in forest flora andfaunabiodiversity Identification of management units. in forest flora andfaunabiodiversity Identification of management units. in forest flora andfaunabiodiversity Identification of anumber ofresearchprojects. Support for educational andgovernmentinstitutions 4,800 nativetreeswere givento14 parkFire managementtrainingfor rangers. were restored. 2008. In2010,230hectares(565acres) ARAUCO wasadmittedtotheprojectin areas, ongoingsince2003. therecoveryofriparianAgreement for Support oftheconservationthisarea. Valdivian Coastline, LosRíosRegion. Protection ofwildarea,locatedonthe inBíoRegion. native forests ecosystemsand forestry Protection for Description Program Program

- tect High Value Environmental Areas. unittopro- andineachforestry in eachcountry ARAUCO utilizes specific managementstrategies prevent fires. illegal hunting, fishing andhabitation, aswell asto company alsopatrolsitsforestland toprevent controlling weeds; andmanagingchemicals. The intransit; rehabilitating land; machinery nitoring forest dynamicsand structure;monitoring mo- sites; atforestry work quality ofwaterduring Gensa (NGO) Montes delPlata Arauco doBrasil Arauco doBrasil Arauco doBrasil Center. Technical Research,AtlanticForest Research Scientificand National Commissionfor Natural Resourcesand Tourism. Misiones MinistryofEcology, Renewable Municipalities, NationalGuard,andthe Temaiken Foundation. Natural Resourcesand Tourism andthe Misiones MinistryofEcology, Renewable Natural Resourcesand Tourism. Misiones MinistryofEcology, Renewable History Museum,GovernmentofChile. Concepción University, ConcepciónNatural Community groups,Socialorganizations, Local community, Scientificcommunity. Local communities. international NGO’s, GovernmentofChile, companies,Chilean forestry Nationaland Stakeholders Participating Protected Land Area Protected (hectares/acres) 23,800/58,800 17,208/42,500 2,500/6,200 3,055/7,550 1,921 /4,750 745/1,800 3,650/9,000 160/400 12/30 N/A N/A N/A CHAPTER 4 Environmental Performance

Chile a “Integrated Management of Drainage Basins” During 2003, ARAUCO began to identify high- program. By the end of 2010, the program had value sites for biodiversity conservation based restored 230 hectares (565 acres) of forestland. on the Systematic Conservation Planning model (abbreviated “PSC” in Spanish), and classified the- Brazil se sites into seven categories: Threatened Flora; In Brazil, Arauco Forestal Arapoti owns 49,987 Priority Fauna Habitats; Native Ecosystem Nuclei; hectares (123,500 acres) of forestland, which is High Connectivity Corridors; CONAMA Priority certified as compliant with the FSC forest mana- Sites; Wetlands; and Forest Types. The PSC model gement standard. Of this area, 16,906 hectares identifies effective types of programs and three (41,800 acres) are native forest and 218.5 hec- stages of implementation: Identification of the tares (540 acres) are considered High Conser- conservation category; Management practices; vation Value Forest (HCVF). During 2010, a pro- and Monitoring. gram was established to monitor the flora and fauna in this region. To date, this initiative has identified and protected 32 High Value Environmental Areas. These Arauco Forest Brazil owns 35,225 hectares areas are managed according to specific conser- (87,000 acres) of native forest. Of these, 12,000 vation plans that include programmed activities hectares (29,600 acres) are classified as HCVF. (which are revised periodically) and provisions for stakeholder input. During 2010, as part of the Jaguariaíva plant expansion, ARAUCO prepared an environmental The company maintains information on threa- control plan that identified the main environmen- tened flora species (endangered, vulnerable and tal impacts of the facility on the region’s flora, rare) in the company’s Forestland Information fauna and population. As part of this effort, about System. 65,000 square meters (16 acres) of preservation area was restored after being damaged by rain- Argentina fall-caused erosion. In Argentina, ARAUCO implemented the FSC methodology for identifying high-value biodiver- Uruguay sity sites, termed High Conservation Value Fo- In Uruguay, Montes del Plata designated two rests (HCVF). areas as High Value Conservation and Preserva- tion Areas (AAVC) after identifying and classifying The company owns 110,000 hectares in Misiones Uruguay’s main ecosystems. The AAVC consists Province that are part of the Paranaense Rain- of 1,921 hectares (4,700 acres) located in Capilla forest, an eco-region included in WWF’s “Global Vieja and 110 hectares (272 acres) of wetlands 200 Hotspots” list. This area is mainly covered and palm trees in Santo Domingo. During 2011, by native forests and is set aside for conserva- Montes del Plata will monitor the flora and fauna tion. More than 46,000 hectares are grouped in in these areas and will develop an eco-area pro- five large conservation blocks that considera- gram through which to study and classify Montes bly strengthen the network of protected areas del Plata forestland. in Misiones Province. In the 46,000 hectares of Alto Paraná’s native forestland, a little more than 19,000 hectares (47,000 acres) are considered HCVF. The remaining 64,000 hectares (163,000 acres) constitute an important network of corridors that connect the large blocks of conservation areas and protect waterways.

83 During 2006, the Faculty of Forestry Sciences of Misiones National University identified high conservation value attributes in the large conservation blocks. Beginning in 2008, the University and Misiones Province Ecology Ministry initiated Sustainability Report 2010 84 2010 Sustainability Report Conservation Areasby Country Santo Domingo Capilla Vieja URUGUAY (*) Reserva Particular de Patrimonio NaturalBarraMansa BRAZIL Área conservaciónPiray-SanPedro Área deconservaciónValle delaAlegría Área deconservaciónLosPalmitos Reserva Forestal SanJorge ARGENTINA Planta delLeóndeMariquina Alerzal yCipresaldeIsladelRey Alerzales deNaguilán Las Trancas Alerzal Bosques EntreRíos Bosques Pantanosos Caupolicán Bosques deEstancilla Araucarias deCarahue Planta delLeóndeSanGabriel Michay araucanodeLleulleu Cipreses yLleuquesdeRucapillánSanAntonio Bosques Rucapehuén Bosques CosterosLebu Humedal Tubul-Raqui Chauras deLaraquete Michay deCuyincoAlto Pitaos deLaIsla Pitaos yCipresesdelRíoLías Queules deCaramávida Costilla delosCorrales Palmas deHualañé Huemules deÑuble Humedal deSantaElena de Tilicura Pajonal Ciénagas delName Queules yPitaosdeLomalaMadera(Queules Tomé yPenco) Queules deRalbún yCopiulemuH5 Ruiles dePorveniryElFin Ruiles deAguaBuena Ruiles yPitaosdeQuivolgo Ruiles deLosCalzoncillos Ruiles deHuelón (*) CHILE Reserve Surface (hectares) 1,921 6,975 4,106 2,036 6,650 110 219 185 226 254 338 242 110 140 120 293 171 113 10 50 52 47 49 65 36 50 21 18 58 11 71 22 54 21 14 1 1 9 9 CHAPTER 4 Environmental Performance

AAVA Significance Conservation Purpose High Value Environmental 1. Pajonal de Tilicura Wetland close to the shoreline of the Wetland Areas in Chile (Tilicura Grassland) Vichuquén complex. 2. Palmas de Hualañe Southern border of the Chilean palm tree. Chilean palm tree (Hualañe Palm Trees)

3. Ruiles de Huelón Populations of this species are in danger Ruil O’Higgins (Ruiles of Huelón) in the northern border. Region 4. Ruiles de Los Calzoncillos Populations of this species are in danger Ruil 1 (Underwear Ruiles) in the northern border. 2 3 5. Ruiles de Agua Negra Populations of this species are in danger Ruil 4 (Black Water Ruiles) in the northern border. 6 5 7 6. Costilla de Los Corrales A relict fragment of Maule Forest. Bosque Maulino (Barnyard Rib) (Maule Forest) 8 Maule 9 7. Quivolgo Ruiles and Pitaos Ruil population near Maule, with Ruil Region a northern border of pitaos. 10 8. Ruiles of Porvenir and El Fin Southern population of ruil. Ruil

9. Name Swamps Wetland in Chile’s longitudinal valley, Wetland with populations of endemic bird and fish species. 11 12 10. Queules of Ralbún Populations found at the species’ northern Queule and Copiulemu border. 13 11. Huemules of Ñuble Population at the species’ northern border. Huemul 14

16 15 Bío-Bío 12. Queules of Tomé and Penco Diverse populations of this specie are Queule Region endangered. 17 18 19 20 13. Santa Elena Wetland Wetland in Chile’s longitudinal valley, Wetland habitat of the cuca heron. 21 22 14. Tubul-Raqui Wetland Coastal wetland, a stopover for migrating birds. Wetland

23 15. Chauras of Laraquete Only known populations of this Chaura de Laraquete species, which has an extremely limited distribution. 24 La Araucanía 16. Pitaos of La Isla Pitao southern border. Pitao Region 17. Lebu Coastal Forests Olivillo forest, a relict forest with a large Bosque Olivillo llama population. Costero (Coastal Olivillo Forest)

25 18. Pitaos and Cypresses Abundant populations of pitao and Pitao of the Lías River northern border of the coastal mountain 26 cypress. 27 19. Rucapehuén Forests Darwin fox habitat, coastal araucaria, Darwin’s Fox 28 connection to Nahuelbuta Park. 29 30 31 Los Ríos 20. Queules of Caramávida Southern border of this species. Queule Region 21. Michay of Cuyinco Alto Populations of threatened red michay, Red Michay 32 a native liana species.

22. Lleuques and Cypresses Populations of cypress in the mountains Bullock’s Frog of Rucapillán and San Antonio and Lleuques in the coastal mountain range; Bullock’s frog habitat. Los Lagos Region 23. Michay Araucano of Lleulleu Southern border of the Michay Araucano. Michay araucano

24. Araucarias of Carahue Southern coastal border of this species, a Araucaria genetically special population.

25. Caupolicán Swamp Forests Northern border of huillín populations. Huillín

26. Mariquina Lion Plant Northern border of this endangered species. Valdivia gayana

27. Entre Ríos Forests Valdivian rainforest relicts located in the Valdivian rainforest longitudinal valley, possible coastal-Andes ecological connection.

28. Forests of Estancilla Valdivian rainforest. Valdivian rainforest

29. Fitzroya and Cypress areas Northern border of the fitzroya and Alerce (Fitzroya) of Isla del Rey (King’s Island) guaitecas cypress (pilgerodendron) on the coastline. 85 30. Fitzroya area of Naguilán Northern population of Fitzroya and Alerce (Fitzroya) connection to other protected areas.

31. San Gabriel Lion Plant Abundant population of Valdivia gayana. Valdivia gayana

32. Las Trancas Fitzroya area Coastal forests of fitzroya and valdivian Alerce (Fitzroya) rainforest. Sustainability Report 2010 86 2010 Sustainability Report the ofExcellenceon ResearchProgram The Marine River’s Ecosystem(PIMEX–Nueva Aldea) Marine Research Program ontheItata ARAUCO’s activitiesandoperations. as spillsorsignificant forest fires)resultedfrom 2010, negativeDuring impacts (such noreportable ARAUCO’s Participation in Wetland ConservationProgramsinChile, 2010 impact theenvironmental during sed by stakeholders designed toinvestigate expres - areasofconcern Aldea), waslaunchedin2006. wasThis program PIMEX quirements ofChile’s environmental laws. re- by PIMEXaresupplementaltothemonitoring complex. forestry industrial The studiesperformed participating representingallofthestakeholder groups Directors ment, andConcepciónUniversity. fishing communities, ARAUCO, theRegionalGovern- for four years, includesrepresentatives fromartisan discussion group, together whichhasbeenworking Name andDescription number ofavifauna. river estuary;Hometoanimportant Coastal wetland locatedintheMataquito Mataquito River Wetland species suchastheChileansilverside. coruros, coypu andanumberoffish swans, egrets,red-garteredcoots,ducks, black-neck depend onrainfall;Habitatfor Superficial lagoonwherewaterlevels Ciénagas delNameWetland the Itatariver. Coastal wetland locatedintheestuaryof Vegas delItata Wetland central coast conservation valuewetlands inChile’s Considered oneofthehighest Tubul-Raqui Wetland Estuary has assessment a in staff of the the of Nueva process 33 Itata researchers Aldea River for the Round Maule Region Cauquenes Area Maule Region Bío-Bío Bío-Bío (PIMEX-Nueva and Nueva Region a Table. Board Aldea

This of

University of Holy Conception(UCSC) University ofHoly and tsunami.ARAUCOcommissionedresearchconductedby theCatholic The andfaunaofthis wetland flora wereimpacted by theearthquake biological, physicalandchemicalcomponentsofthewetland. GlobalChange.University ofChileCenterfor The alsoassessedthe study Environment CenterofConcepciónUniversityandthePontificalCatholic Wetland” wasconductedby thePontificalCatholicUniversity, theEULA on“CarbonQuantificationandFlowintheCiénagasdelName A study measures. wetland’s functionandstructure, usingbothbiologicalandhydrological biological variables.Studieswere conductedin2010tounderstandthe conducted assessmentslinkedtothewetland’s physical-chemicaland fromAustralandConcepciónUniversities PIMEX andprofessionals remainder oftheyear. EULA Center, visitsandassessmentsthroughoutthe field withfollow-up supported apreliminaryassessmentby theUniversityofConcepción Aftertheearthquake, ARAUCO the coastalareaby 1.6meters(5.2 feet). This wetland wasdamagedby theearthquakeandtsunami,whichraised ture To- of ecosystem struc develop a deep understanding construction thesispapers.graduate there- ARAUCO supported andpost- asanadvisorfor four graduate- and served andcongresses,17 presentationsinChileanseminars congresses,made threepresentationsininternational 2010,During PIMEXpublished 10scientificpapers, Chemical Oceanography. two mainareasofresearch: EcologyandPhysical and to theirsustainability. 2010tocontribute during number ofprograms ina and protectionofwetlands andparticipated ARAUCO iscommittedtotheconservation Wetland Protection 27, 2010. area onFebruary were severelythe damagedby thetsunamithatstruck inDichato,Station ofConcepciónUniversity which and functioning, of Situation and Action Situation PIMEX

PIMEX facilities Nueva at the Aldea Marine established Biology CHAPTER 4 Environmental Performance

Academic Extension and Training Activities In Uruguay, Montes del Plata sponsored a se- In October of 2010, the Chilean Environmental ries of speeches by conservation experts on the Ministry sponsored a conference to “promote need to classify the “Queguay Forests.” the private sector’s participation in the conservation and responsible use of wetlands”, a stated Finally, a series of speeches was presented in goal of the RAMSAR Convention on Wetlands. rural schools located near the Santo Domingo ARAUCO, along with three other businesses, conservation area in Uruguay. These speeches, supported this conference, entitled the “First along with the reintroduction of 20 coatis (Na- Business Management Meeting for Wetlands.” sua nasua) into their native forest habitat, were Attendees included representatives of the carried out in support of the United Nations World Wildlife Fund (WWF), Wildlife Conserva- International Year of Biodiversity initiative.

tion Society (WCS), the International Union for Endangered Species gri the Conservation of Nature (IUCN), business, Native ecosystems in Chile that are part of EN15 academia, and the science community. ARAUCO’s forestland are home to a variety of species included in the Red Book for Land Flo- In Santiago, ARAUCO, working with the Domeyko ra and the Red Book for Land Vertebrates. The Foundation of University of Chile, organized a semi- company has identified 21 species of threatened nar entitled, “Innovative Approaches for the Conser- flora and fauna. . vation of Biological Diversity.” Darwin’s fox (Pseudalopex fulvipes) was found ARAUCO supported three workshops in Chile in ARAUCO’s forestland in Chile. This wild spe- to assess the physical, chemical, biological and so- cies inhabits the Nahuelbuta Mountain Range. cial natural effects of the earthquake and tsuna- The company has an active biodiversity conser- mi of February 27, 2010. The company, together vation program in this mountain range. The pro- with the Ocean Sciences Chapter of the Cruz del gram includes monitoring activities to quantify Sur (Southern Cross) Network, issued scientific the species’ population and to better unders- bulletins which were distributed to interested tand this species’ behavior. stakeholders and decision makers at the national level. Cruz del Sur Network members supporting Members of the Zoology Institute of the Facul- this activity were the Pontifical Catholic Universi- ty of Science of Austral University of Chile and ty of Chile and Concepción University. Concepción University reported their redisco- very of adult individuals of the amphibian spe- ARAUCO also participated in the Ocean Scien- cies Alsodes vanzolinii in ARAUCO forestland. ces Congress in Chile. During the Congress, the The discovery took place in the Ramadillas area company and the Ocean Sciences Chapter of southeast of Arauco commune, in the Nahuelbu- the Cruz del Sur Network organized and sup- ta mountain range. No sightings of adults of this ported a seminar on Climate Change and its critically endangered species had been reported 87 effects on the Marine Environment. since it was first discovered in the 1970s. Sustainability Report 2010 88 EN16/17 gri 2010 Sustainability Report EN21 gri (CO In Effluents, by Business Area unit andwere expressed intonsofCO Total GHGemissions were calculatedby business the 2008operations. indirect greenhouse gas emissionswasconducted for ARAUCO’s mostrecentmeasurementofdirectand Greenhouse GasEmissions Emissions Campo do Tenente region. region;the Morungavá and atotalof15speciesinthe region (mostly mammals); threethreatenedspeciesin identified 27 threatened species: nine in the Arapoti 2010,During thecompany conductedstudieswhich cies andestablish measuresfor theirprotection. spe- These studiesidentifythreatenedorvulnerable andfauna.develops inflora projectsfor areasrich standard In ordertocomply with the FSC forest management araucaria, aprotectedtreespecies. include morethan275hectares(680acres)ofnative tened by the State of Paraná. ARAUCO’s forests also A studyof2009emissionswillbeconductedin2011. forestlands Of the 231 bird species identified in the company’s species alsoareprotectedinMisionesProvince. Monuments. Another 25animalspeciesand14plant ron angustifolia. This speciesand polyneu- Aspidosperma endangeredisatree,sidered mostcritically Araucaria ARAUCO’s forest areas. Ofthese, thespeciescon- NA: (1) aes : 707,700 tons : • Sawn • Panels : • Pulp • Forestry Business Woodpulp Panel Not Available. ArgentinaandBrazil.Panel for millsinChileconsolidateeffluentthrough the pulpmillintheirindustrial complexes. Data isreportedonly Argentina, are 2 e): (1) protected ibr : Timber in in Brazil,

Brazil, 42 35,000tons 141,300 tons 32,900tons

by the IUCN

12 Misiones Total suspendedsolids company Liquid Effluents have Description Red been Province conducts List classified species law 2 studies equivalent as as Natural Kg/ADMT m m inhabit threa- 3 /ADMT Unit 3 /year and neering andsectorpermits. neering 2009. 2010, During wasdone on project engi- work 19,Environmental Assessment System on February Region. ARAUCO hadsubmittedthis projecttothe Regional Environmental Commission of the Los Ríos treated wastewaterintotheseawasapproved by the its mit touseanunderwaterpipelinedischarge 2010,During the Valdivia pulpmill’s requestfor aper of2011.was tobecompletedby January repaired. resumedinJuly 2010and The pipelinetrial sectionofthepipelinewas places ontheoverland 27, 2010. onFebruary Damagetoafew earthquake by the wasinterrupted The plannedsix-monthtrial ne, treated wastewater into the sea. which discharges ofits52km(32mile)wastewaterpipeli- gan atrial Discharges In New Pipelines related thereby reducingthelevel ofgreenhousegasemissions biomass, powerrestry togenerate for itsoperations, ARAUCO uses renewable sourcesoffuel, suchasfo- Initiatives toReduceGreenhouse GasEmissions measure emissionsfor thatyear. thquake andtsunami, thecompany hasdecided not to ofthe2010ear Due totheimpactonoperations In areaofthecountry.south-central System (SIC), to the this electricity which distributes Interconnected thatissoldtotheCentral gy surplus of thecompany’s an ener needsandgenerate energy In Chile, ARAUCO’s power plantsprovide almostall powerand electric for ARAUCO’s plants. efficiency, hashighthermal neration andsuppliessteam when the Formol plantisshutdown forwhen theFormol maintenance. process.the panelmanufacturing Emissionsonly occur Brazil, December 46.57 2008 1.82 NA to

ARAUCO its production 2009, generates

the 44.94 2009 1.62 activities. NA Nueva steam

Biomass-based Aldea using pulp 1,099,850 energy 45.51 2010 2.30 mill coge- from be- - - - EN18 gri CHAPTER 4 Environmental Performance

Total Solid Waste by Business Area

Business Unit 2008 2009 2010

Forestry Metric Ton/year NA NA 2,049

Panel (1) Metric Ton/year 52,072 59,159 72,793

Woodpulp Kg/ADMT 107.68 91.50 105.00

Madera Aserrada ton/year 7,159 5,694 3,927

(1) 163,551.7 liters of hazardous waste generated in Argentina is not included in this table. NA: Not Available. gri Spills and Affected Water Bodies Compliance with Environmental gri EN23/25 During 2010, no reportable spills or negative Regulations EN28 impacts on bodies of water or nearby habitat In 2010, ARAUCO received the following fines were caused by ARAUCO’s operations. and non-monetary sanctions for non-compliance with environmental laws and regulations: Solid Waste Management gri EN22/24 ARAUCO’s business units use a variety of methods • Mitigation for damage caused to dispose of non-hazardous solid waste. More to Araucaria trees than 60% of this waste was taken to landfill sites. On November 5, 2010, the Court of Concep- ción in Chile decided that Bosques Arauco S.A. The company began to develop initiatives to re- must institute mitigation measures for damage cycle paper, cardboard, cans and plastic waste, caused to 33 Araucaria trees in 2003. The affec- as well as awareness and education campaigns. ted trees were located in the “Los Morros” forest site, owned by Bosques Arauco. ARAUCO does not transport, use or dispose of waste deemed hazardous under the terms of The 33 trees had regenerated naturally and had the Basel Convention. attained an estimated height of between 0.30 and 2 meters (1 foot to 6.5 feet). They were ac- Management of Environmental cidentally damaged during harvesting activities Impacts from Products and Packaging in pine plantations owned by Bosques Arauco. gri EN26/27 ARAUCO’s high quality Pulp, Sawn Timber, Panel and Energy products are the result of sustaina- The court required that ARAUCO: plant more bly focused management and certified produc- than 300 araucarias; fence the area to ensure tion processes that have a minimal impact on exclusion of livestock; restore vegetation in ra- the environment. ARAUCO products meet or vines; modify water courses to avoid run-off; surpass customer expectations in 71 countries and install adequate signage. Other measures around the world. required by the court included: planting 2.36 hectares (5.8 acres) in addition to a buffer area, All of ARAUCO’s products are manufactured using with a density of 1,000 plants per hectare; using fiber sourced from sustainably managed forest plan- plants grown in a nursery from seeds gathered tations, which serve as natural stores for carbon. in the Nahuelbuta area; controlling competition from other species through hand-clearing; and In general, ARAUCO does not reclaim its products restoring areas populated by araucaria trees. To or packaging at the end-of-life. However, in Chile, a large extent, these measures had already been the Sawn Timber business is implementing an ini- added to the company’s mitigation plan, which tiative to recover metal strapping for reuse in the began in 2003. Corrective actions were inclu- handling of wood within the plant. ded to avoid similar accidents in the future.

Sustainability Report 2010 90 2010 Sustainability Report EN29 gri mat from TransportImpacts Management ofEnvironmental A • vironmental risks. convenience tolocalresidentsandprevent en- schedulesthatwillminimize in- transportation tem (GIS)technologytohelpdesignroadsand Sys- Information The company usesGeographic communities.the environment and neighboring once toreducetheimpactsofitsoperations materials,its raw for finished goodsandwork of ARAUCO tooptimize strives transportation (US$1,175,000). agreed toapayment ofCLP$600million a settlement, ending the trial. The company 29,On January 2010, thelitigantsreached Region. located inLicancelcommune, intheMaule alleged damagecausedtoState-owned assets required tomake anindemnitypayment for vil lawsuit, requestingthatthecompany be Chilean filed theci- Treasury Department) The StateDefense Council(representingthe liquidwasteintotheMataquitoriver.dustrial for damage caused by a spill of untreated in- On September7, 2007, ARAUCO wassued the MataquitoRiver fine of CLP$600 million for pollution

of -

loped thefollowing initiatives: area ofinfluence. 2010, During ARAUCO deve- dialog withthecommunities inthecompany’s strengthen relationsandmaintainacontinuous and createawareness onthisissue, aswell as to seektoinformtion andsuppressionprograms company’s forestlands, ARAUCO’s fire preven- Since 70%ofwildlandfires occuroutsidethe theyear. during programs mentation ofitsfire prevention andsuppression company invested US$16.1 million on imple- onitsforestlands.1,630 fires thatoccurred The 2010,During ARAUCO successfully suppressed conservation. andtobiodiversity industry try Forest fires are a constant threat to the fores- Fire Prevention andSuppression • “Living • business aswell aspeoplelivingnearby. have noborders, andcanimpacttheforestry hazards offorest fires, and ofthefactthatthey shops aredesignedtocreateawareness ofthe and neighborhood associations. - These work schools were held atrural ofworkshops ries these programs. andLosLagosregionsattendedAraucanía tal awareness. Some 3,500 students in the schools inChiletopromoteenvironmen - shops andspeecheswere given in150rural “Living Without Forest” Forest program: Fires”

- of work A series A se- program: A CHAPTER 4 Environmental Performance

• Silvicultural Prevention Program: Speeches were given to encourage residents of areas near ARAUCO’s forestland in the Maule and Bío Bío regions to help reduce the risk of fires.

• Firefighter Training: In Brazil, 13 fire simu- lation activities and six training workshops were held during 2010.

• Awareness speeches: In Argentina, speeches on fire prevention and suppression were delivered in seven elementary schools in Puer- to Libertad and Puerto Piray.

• Workshops: The company, along with Te- maiken Foundation, held a training workshop on Fire Management for provincial park rangers in Cruce Caballero Provincial Park in Misiones, Argentina. A second Fire Manage- ment workshop was held in the Iguazú Park area at the request of the National Program for Fire Management, the Provincial Program for Fire Management and local businesses.

Sustainability Report 2010 92 2010 Sustainability Report respect, honesty, professionalism, training and teamwork. advancement of every employee and aworkplace basedon to foster aworking environment thatsupports the career The missionof ARAUCO‘s People Management department is

Our People

Through the vision, commitment and work of ARAUCO employees, we can accomplish our goals and meet the

5 challenges ahead”. Our People 5. 94 2010 Sustainability Report Group, established a “People Services” area. 2010,During ARAUCO, withthe HAY working ining programs. mance Managementandproviding- specific tra each person’scareerpotentialthroughPerfor purchase ofhomesby workers, maximizing des increasingminimum wages, subsidizingthe from acomprehensive perspective. This inclu- ARAUCO approachespeople-related issues ining andteamwork. based onrespect, honesty, professionalism,- tra employee andaworkplacecement ofevery thecareeradvan- environment thatsupports The company’s missionistofoster aworking accomplish ourgoals. the company andmake it possible for usto alike –breathelife into workers and contract nable growth. Thousands ofpeople–workers forARAUCO’s arethedriver sustai - workers professionals. Resultsintheseareaswillbegintoshow in2011. on retainingtalent, young skillsandattracting developing leadership 2010,During wasfocusedARAUCO People Managementdepartment Our People - attracting young theyear. professionalsattracting during taining talent, skillsand developing leadership The People Managementstafffocused onre- tified theneedfor theseservices. conductedin2008iden- tional ClimateSurvey health; welfare; sports; and family. - An Organiza infive key areas:hensive support education; compre- workers area offers This new service CHAPTER 5 Our People

Employment During 2010, the company launched a scholarship program in Chile to provide recognition and financial support for children of ARAUCO workers who pursue higher education.

ARAUCO’s Workforce gri LA1 During 2010, ARAUCO provided 35,704 jobs worldwide through direct and indirect employment. Most of the company’s operations are located in Chile, accounting for more than 27,000 total jobs (5,259 employees and 22,028 contract workers).

Number of Employees and Contract Workers at ARAUCO 2008 2009 2010 Employees 7,815 8,095 9,034 Contract workers 26,460 26,893 26,670 Total 34,275 34,988 35,704

Workforce by Type of Employment(1). Employment Category 2009 2010 Variación % Executives 298 302 1% Professionals and Technicians 2,606 3,086 18% Workers 5,191 5,646 9% Total 8,095 9,034 12%

(1) Includes ARAUCO’s subsidiaries or businesses in which it owns more than a 50% share.

Average Employee Turnover turnover, 29%, occurred among men, while tur- gri LA2 During 2010, ARAUCO’s average employee nover among women averaged 18%. turnover was 7%. In Chile, employee turnover was 2%. The turnover rate among women was Social Benefits for Employees gri 8%, and turnover among men was at 2%. ARAUCO provides a number of social benefits for its LA3 full-time workers, based on country of employment. In Argentina, average employee turnover was Benefits include a wage policy, education benefits, -0.4%. The highest turnover was among wo- food, catastrophic health insurance, and life insurance. men, at -4%, while turnover among male employees averaged -0.1%. A negative turnover Minimum Wage rate indicates a net gain in employee count, During 2010, ARAUCO increased the minimum and is calculated as: wage in Chile for its workers and for contract (Number of New Hires) – (Number of Attritions & Terminations). workers employed by service-providing busines- Total Employees. ses to guarantee basic wage standards in excess of the national minimum. In Brazil, ARAUCO pays

the legal minimum wage established in Paraná 95 Average employee turnover in Brazil was 28%, due to changes in legislation which required the province, which is 22% more than the national company to hire 500 people who were pre- minimum wage. In Argentina, employee wages viously contract workers. The highest average always exceed the national minimum wage. Sustainability Report 2010 96 2010 Sustainability Report payments on the part oftheemployee.payments onthepart thatrequireco- catastrophic healthinsurance employees andIt alsooffers medicalinsurance 0.035% oftheirwagestoward thiscoverage. the equivalent ofare required to contribute coverage for employees. However, employees In Brazil, thecompany provides life insurance oftheemployee.the part thatrequireco-payments onhealth insurance ployees andcatastrophic medicalinsurance company-paid life insurance. em- Italsooffers ARAUCO provides itsemployees inChile with Health andLife Insurance levant legislation. provides employee mealsincompliancewithre- allowances. In andBrazil,Argentina ARAUCO ployees incompany orthroughcash cafeterias In Chile, thecompany provides mealsfor em- Food Academic Excellence Scholarship in2010.Academic ExcellenceScholarship programs. Onehundredstudentsreceived the for studentsenrolledintechnicalanduniversity tire schoolyear andincludesanannual stipend health. tuitionfor covers theen- The scholarship economic situation, andfamily seniority worker award include:larship outstanding scholarship, for teria ARAUCO’s Academic ExcellenceScho- highereducation. whopursue workers - The cri for childrenofcompanyand financial support inChiletoprovide recognitionship program 2010,During thecompany launchedascholar- for Children of Workers Academic ExcellenceScholarship thewinterfluseason. ness during nual influenzavaccinationstohelpprevent ill- In ChileandBrazil, ARAUCO provides free an- for moneyspentonpharmaceuticals. In Argentina, workers thecompany reimburses

CHAPTER 5 Our People

Company-Worker Relations and Freedom of Association So that new workers can make informed decisions about union affiliation, ARAUCO provides them with information about union representation and about the company’s free-association policy.

Collective Bargaining of a work contract and damage to union re- gri LA4 A large part of ARAUCO’s workers are covered presentation. In compliance with the Union As- by collective bargaining agreements. sociations Law, the company provided an area within the facility for meetings and activities of Percentage of Workers Covered the Union Board Commission. by Collective Bargaining Agreements Also, a commitment to “Work Relations in Country Percentage of Workers Covered Good Faith” was established, and communica- Chile 55.4 ted throughout the company. The commitment Argentina (1) 50.8 calls for mutual respect; leaders’ responsibility; Brazil 100.0 truth; transparency; honesty, full validity of la-

(1) All of Argentine workforce covered under various collective bargaining agreements. bor collective bargaining; positive outlook; and a mutual commitment to resolve conflict through dialog. Freedom of Association gri HR5 During 2010, there were no reports that In Brazil, each business unit has an internal com- ARAUCO or any of its service providers enga- mission of union representatives and maintains ged in activities that might impinge upon wor- open and continuous dialog between manage- kers’ rights to freedom of association or collec- ment and labor. tive bargaining. Minimum Notice Procedures Regarding gri In Argentina, ARAUCO implemented a number Organizational Changes LA5 of actions to protect workers’ rights to freedom ARAUCO’s collective bargaining agreements do of association. In addition, ARAUCO observes not require advance-notice periods regarding a mediation agreement with labor organizations organizational changes. However, under current to resolve disputes. labor legislation, a 30-day advance notice of layoff is required, and a penalty of one-month’s additio- Workers from the Bossetti Sawmill who were nal pay is due the employee if no advance notice part of the Wood Industry Union agreement of layoff is made. were transferred to other facilities in Argentina. This decision was approved by the labor autho- Employee notice on changes in job function are rity, to avoid damage from employer’s right to handled on a case-by-case basis. Employees directly make unilateral changes to non-essential aspects involved in such changes are informed in advance.

Sustainability Report 2010 98

2010 Sustainability Report LA6 gri illness risks. is tofind and assessaccident-andwork-related- operations. The objective ofthese committees committees for HealthandSafety inallofits ARAUCO maintains jointmanagement-worker Health andSafety Committees Percentage of Workers Represented in people. and transporting materials;down equipmentorsystems; transporting andequipment;machinery isolatingandpowering- ing inconfined spaces; withhazardous working at height; equipment; using mobile industrial work- thefollowing performing activities:workers working ARAUCO’s COSseekstoreduceaccidentsamong ofthecompany’s years veral accidentstatistics. dards were from an examination of se- derived incidents. ofindustrial and severity These stan- cesses, thereby helpingtoreducethefrequency safety ofallthecompany’s productionpro- (COS). isintendedtoimproveThis program the Standards Operational mented seven Corporate 2010,During ARAUCO developed andimple- Corporate OperationalStandards (COS) rates.severity significant reductionin accident frequency and subsidiaries. restry hasresultedin a This effort facilitiesandfo- initsindustrial accident risks to minimize and strategies develops programs managementarea,ty corporate thecompany vironment and Occupational Health and Safe- employee worker. andcontract Through itsEn- to theoccupationalhealthofevery ARAUCO Maintaining optimalsafety conditionsis essential all workers and contract workers. andcontract all workers period.orientation forARAUCO programs alsoconductsannual training the during receivetraining formal workers andcontract New workers Health andSafety at Work 2008 2009 2010 (3) (2) (1) Safety andHealthCommittees Safety Percentage of Workers Representedin in 2009, respectively. were 29.3% and31.5%lessthanfrequency rates in 2009. At thesametime, and accidentseverity time days duetoaccidents was29.3%lessthan improvement 2010. during The number oflost- ARAUCO’s safetyshowed performance marked Health andSafety Indicators Brazil Argentina Chile Country Includes ARAUCO employees only. businesses. fromservice-providing andworkers company workers include facilitiesandsubsidiaries Safety committeesinforestry businesses. service-providing from andworkers includecompany workers ties andsubsidiaries facili- Joint CommitteesandLaborinforestry (1) (3) 220 (2) 224.3 per millionhoursworked) (Number oflost-timedays Lost-Time Rate Accident

250 Percentage of Workers Represented

280 100.0 % 100.0 % 91.0 % 317.1 321.4 310

340 LA7 gri CHAPTER 5 Our People

Accident Frequency Lost Time Rate (*)(**) (Number of accidents with lost time per million MH) N˚of Fatalities

2010 5.6 2010 6

2009 8.2 2009* 19

2008 9.5 2008 10 4 0 2 6 8 0 5 10 10 15 20

(*) A helicopter crash in 2009 resulted in the death of the pilot and 12 firefighters who were on board. The helicopter, operated by Flight Service, crashed into a hill while combating a forest fire N˚of Work near Chanco in the Maule Region. Accidents

Accident Frequency 2010 418 Rate by Business (Number of accidents with lost-time days per million hours worked) 2009 593

723 2008 8.2 13.6 13.6 Forestry 0 400 200 600 800

3.0 3.6 Pulp 6.4

N˚of Work Related 3.8 2010 Illnesses (***) 4.9 2009 Panels 5.6 2008

3.5 2.7 2010 35 6.7 Sawn Timber 6 0 3 9 12 15 2009 21

* Figures include only industrial operations in Chile, Argentina and Brazil. The accident frequency rate is the number of accidents with lost-time 2008 47 days per million hours worked. ** The company’s average accident frequency rate for 2009 was corrected 99 by reducing the number of accidents stated as labor accidents and their lost days. The figure includes Bioforest, Arauco Distribution and the

0 Engineering and Construction Management Unit. 20 10 30 40 50 *** The 2009 figure has been adjusted, as the previous figure was incorrect. Sustainability Report 2010 100

2010 Sustainability Report LA8 gri ** * (Number ofdayslostpermillionmanhours) Accident SeverityRateby Business* could puttheirlives or physical healthatrisk. avoid hazardousactionsthatto helpworkers applicable,versally were developed safety rules are simple and clear, like soccer rules.” Key, uni- campaign’s sloganis thatsave“Key rules your life protect thehealthandsafety ofitsworkers. The ofaccidentprevention andtohelp importance for all of its businessesgram to emphasize the ARAUCO developed theKeySafety Rulespro- Key Safety RulesCampaign 2010. during members The main initiatives were: for workers,grams theirfamiliesandcommunity pro- loped anumber ofeducationandtraining related toon-the-jobsafety, ARAUCO deve- In ordertoimprove safety skillsandreducerisks Corporate Safety EducationPrograms Total Sawn Timber Panels Pulp Forestry

lost-time days. The figure includesBioforest, ManagementUnit. andConstruction andtheEngineering Distribution Arauco byThe company forreducingthenumber average2009iscorrected ofaccidentsstatedaslaborandtheir accidentfrequencyrate inChile, operations Industrial andBrazil.Argentina 321.4 230.1 161.8 144.5 483.5 2008 317.1 ** 144.4 150.0 546.9 99.2 2009 tina andBrazil. includea programs The training Systems,”ring-Down for itsstaffinChile, - Argen “Working atHeights”and“IsolatingPowe- programs, Standards training Operational rate 2010,During ARAUCO- launchedtwo Corpo Training for CorporateOperationalStandards workers. and contract campaign for all workers training work. ARAUCO annually conductsacontinuous at theirinductionperiod during mally trained arefor workers andcontract All newworkers agreement. sign-onannually tothis workers and contract Safetythe Agreement.”“Annual workers All In Brazil, thissafety initiative wasincludedin 224.3 100.3 104.3 396.5 2010 87.5 Percent change between 2010and2009 -29 -31 -30 -12 -28 - CHAPTER 5 Our People handbook and information on procedures and In Brazil, MASSO teams are re-trained annually specific work permits. and are responsible for leading the company’s internal committees on ergonomics. These commit- In Brazil, each employee that is potentially expo- tees have been set up in all of the business units. sed to risks is annually trained and new employees performing highly exposed jobs are trained Risk-Prevention Expert Program during their induction period. During the past two years, Concepción Universi- ty has worked closely with MASSO management Hygiene and Ergonomics in the development of a Risk-Prevention Expert In Argentina, Alto Paraná offered a 40-hour postgraduate degree for ARAUCO employees. course entitled, “Ergonomics and Biomechanics Completed in 2010, the program’s objective is for the Prevention of Skeletal Muscle Damage.” to provide accreditation for ARAUCO profes- Twenty-three risk- prevention professionals and sionals that attain a higher level of skills concer- two Alto Paraná professionals participated in ning occupational health and safety issues. this course. ARAUCO continued its safe driving skills training Industrial Hygiene programs were developed program in Brazil (known as BTW - Behind the to identify, asses and apply strategies to control Wheel). During 2010, 67 drivers were trained on pollution agents in the workplace. The company how to safely drive light vehicles and 4x4s. also developed a program of pre-employment physical examinations for new hires. Health and Safety Issues Covered in Formal gri Agreements with Unions LA9 At Alto Paraná, an “Industrial Hygiene Diagnosis” None of ARAUCO’s formal agreements with course was developed. In addition, the company unions address worker health and safety issues. developed its “Handbook for Hygiene at Work,” which established strategies to assess contamina- ting agents in compliance with Argentinean Laws.

101

Sustainability Report 2010 102 2010 Sustainability Report LA10 gri LA11 gri economic, environmental andsafety standardsfor thecompany. a continuous improvement focused on attainingthehighest program ARAUCO’s (OEMP)is ExcellenceManagementProgram Operational Workers Training andEducation ceived a total of 75,657 hours oftraining.ceived atotalof75,657hours Most of 2010,During ARAUCO employees inChilere- Average Hoursof Training perEmployee employment category. for this oftraining total ofroughly 16,000hours each, oftraining received 12hours for aworkers 2010. during oftraining Onaverage,of 9.1 hours In Argentina, eachemployee received anaverage nals, and5%for executives. 35% for professio technicalandadministrative - 2010, during Brazil 60%ofthiswasfor workers, in of training ARAUCO conducted 91,022 hours 2010 Training inChileby Type ofEmployee Category Professionals Unit Leaders Superintendents Executives Technicians Total Storekeepers, Forest Rangers Dispatchers, Assistants, Drivers, LatheOperators, Administrators Number 5,154 1,388 1,925 487 173 794 346 41 Workforce 100% 27% 15% 37% % 1% 9% 3% 7% programs. of skills-managementandcontinuing education 2010,During ARAUCO developed anumber Skills ManagementandOngoing Training the following table: positions. Training statisticsfor 2010areshown in inprofessional worked andtechnical those trained Courses 13,814 1,864 3,741 1.835 5,580 379 171 244 Participation 100% 13% 27% 13% 40% % 3% 1% 2% 75,657 Hours 19,214 13,116 31,181 2,074 8,436 1,064 572 Training Hours 100% 11% 25% 17% 41% % 3% 1% 1% CHAPTER 5 Our People

Skills Management and Ongoing Training

Program Description

The objective of this program is to develop management skills through individual coaching and workshops. During 2010, the MASSO function, the Pulp business, Arauco Trading, Arauco’s Management Teams Educational Foundation and business offices in Mexico, Peru and Columbia were added to this five-year-old program. A total of 594 hours of coaching was provided in 2010 for a total of 2,085 hours since the program was launched.

This program’s purpose is to develop the leadership skills needed in ARAUCO’s businesses. The program curriculum covers Personal Efficiency, People Management and Leadership Training Leadership, and Effective Management in the Organization. This program is expected to be made available to 500 leaders of different business units during 2011.

Objectives for this new program include identifying and developing talent to provide the expertise and skills needed to grow ARAUCO’s business. During 2010, the Pulp Business piloted this program, identifying 113 talents from Talent Management about 570 professionals working at the pulp mills. In 2011, selected people will participate in a training and development program to further their strengths.

Labor Competencies In Brazil, ARAUCO certifies forestry operator la- In Chile, ARAUCO and Fundación Chile deve- bor competency annually, working with technical- loped a Labor Competencies Training project to education entities such as the National Service for improve workers’ performance through ongoing Rural Learning. In the forestry business, ARAUCO training. Skills-training for workers is focused on certified the occupational skills of 14 chain saw work classified as “high-risk”, based on accident operators, 94 agrochemical applicators, 170 fire history. High-risk work includes forest production; fighters, 31 forestry machine operators, 52 log- harvesting (particularly tower and winch opera- harvesting-tower operators during 2010. In its tions); wood transport; and commercial thinning. manufacturing businesses, ARAUCO certified the occupational skills of 63 electricians, 76 pressure- During 2010, ARAUCO certified the occupational vessel operators, 213 operators working in confi- skills of 286 chain saw operators, 386 agrochemi- ned spaces, 151 elevator operators and 41 heavy cal applicators, 57 fire fighters and 60 harvesting machinery (crane and tractor) operators. Certifica- and silviculture supervisors. ARAUCO has been tion was conducted in partnership with technical- certifying forestry operator labor competency in education entities such as the National Service for Argentina since 2007, working with the Argenti- Industrial Education. In addition, all of the busines- nean Forestry Association and the Argentinean ses have emergency-response brigades which re- Union of Rural Workers and Stevedores. ceive re-training every year.

103

Sustainability Report 2010 104 2010 Sustainability Report 2010 OperationalExcellenceManagementProgram* workers, and provides a mechanism for continuous directly engages Excellenceprogram The Operational ARAUCO’s pulp, panel, andsawn timberbusinesses. growth, in confidence ofworkers andperformance OEMP waslaunchedin2003toimprove thepersonal ronmental andsafety standardsfor thecompany. focused onattainingthehighesteconomic,gram envi - (OEMP)isacontinuous improvementProgram pro- ARAUCO’s ExcellenceManagement Operational Operational Excellence Operational ExcellenceManagementProgram2010 Winning Projects * Business Forestry Panel Woodpulp Sawn Timber Total ARAUCO considered part ofthenextyear’s reporting,inthiscase2011.considered part The year-end ExcellenceinthePulpBusinessisNovember closingandgoalaccountingfor Operational 30. Decemberdatais S.A.Alto Paraná fromsubsidiary Consolidates information Panel Area andChemicalDivision. Moulding Line. Increase in Tandem for the Painting Production Chile Trupán-Cholguán Facility, S.A. Paneles Arauco and Location Project Name Oven. theTocchioclean Treatment Reclaim thewaterusedto Mill,Zárate Argentina New Ideas Presented 1,297 384 516 316 mouldings. pre-painted TruChoice in themanufacture of consumptionsubstrate moulder andreduceMDF of tandemlinewith Increase production Objectives from jammedboards. offireand reducerisk throughputIncrease dryer 81 Ideas that Became Projects 565 101 316 49 99 another. moulding profile to changeover fromone toimprovevariables sensor’s the transport tandem. Inaddition, adjust the moulderand betweenPlace abarrier Proposed Solution feed thedosagetotank. and pumpwere addedto modified aswell; apipeline gluing area. This areawas of resinintheparticleboard diluting itinthepreparation used asprocessingwater, by The wastewateristobe Tocchio Oven. Treatment by cleaningthegenerated wastewater (2.000lts/day) Reclaim thecleansing workers and contract workers. andcontract workers vement inproductionprocessesamong ARAUCO’s workers, acultureofcontinuous impro- generating seven years, atotalof11,771 hastrained theprogram In 2010, 4,931workers. its theOEMPtrained During product quality, increaseproductivity, andreducecost. ce, improve environmental performance, enhance creative solutionsthatwillimprove safety- performan sinesses. Teams to suggest and implement are formed withinandbetween buexchange ofbestpractices - improvement facilitatedby injobperformance the Successful Projects 284 154 24 23 83 of People Trained of Number 4,931 1,158 3,334 424 15 performance, saving 8.1m Increased cutting and 19%inthetandem. by 67%inassessedprofiles Increased average production Results cooking area. glue in theparticleboard month inresinpreparation redced by 60,000lts/ Water consumptionwas by 5.352m Reduced gasconsumption of MDFboards. 9.77 MW/month. consumptionby electricity People Trained since People Trained 3 beginning ofOEMP /month and

11,771 1,635 4,848 4,663 625 3

CHAPTER 5 Our People

Project Name Objectives Proposed Solution Results and Location

Paneles Arauco S.A

Nueva Aldea Facility, Increase dryer throughput Install an industrial water Increased panel Chile and reduce risk of fire spraying system at the productivity by 7.2% from jammed boards. dryer entrance, increasing through the dryers, from Increase Dryer Throughput the panels’ surface 45.43 to 48.69 m3/hour; by Moistening the Panel moisture. and eliminated fire risk in Surface. the dryers. Install six water lines with 3 to 4 sprayer nozzles at each of the dryer’s six levels.

Celulosa Arauco S.A.

Valdivia Mill, Chile Attain a 50% reduction in Develop, manufacture Reduced lost time by 63%. delivery time of operating and test (physically and Mechanism to Replace equipment and restarting electrically) a mechanism Frequency Variators. facilities affected by that replaces frequency destructive failures. variators of different sizes and weight. Reduce the number of people required to repair this type of failure.

Arauco Mill, Chile Reduce time at the end Adjust the angle of the Reduced steam of the drying process, forming table to reduce consumption resulting Improvement in Sheet without production loss drained water in that in reduced consumption Formation by Adjusting from poor sheet formation area and increase sheet of fuel oil in the power the Forming Table Angle. Until July 2009, achieving formation activity on the boiler. the management tables’ forming fabric. Eliminated the recycling of average drying figures waste paper at the cutter was impossible since resulting from poor sheet this generated jams in formation. the cutter and required recycling paper waste The increase in steam generated as a result of availability resulted in an poor sheet formation. increase in pulp capacity.

Arauco Mill, Chile Reduce lost time and Increase the angle of the Eliminated jamming from jamming from bark by south wall of the discharge free-falling bark, branches Improve Discharge Chute, at least 30%.Reduce chute from 45° to 60° to and stones. Upper Stone Trap in bark flow in clusters to avoid jamming that had to Eucalyptus Line. conveyor 255. be cleared using water. Eliminated the need for fresh water to clear jams. Eliminate additional water consumption.

105

Sustainability Report 2010 106 2010 Sustainability Report Truck Loads. Sling ReeltoSecure Katango. business: Service-providing S.A. Forestal Valdivia Front LoaderClaw. Protection ofHosein Forestal TraversoS.A. business: Service-providing S.A. Forestal Valdivia (Stihl MS381chainsaw). stopper inchainsaw Use ofoptionalchain Ltda. Alto Corte EspecializadosServicios business: Service-providing Forestal CelcoS.A. operators. for chainsawHarness Lientur Forestal Araucaria business: Service-providing S.A. Bosques Arauco S.A. Forestal Arauco and Location Project Name

forestry truck loads. truck forestry slings usedtotiedown prolong theshelflife of Facilitate theuseand John Deerefrontloaders. withCaseandperformed activities in harvesting reduce maintenancecosts Increase productionand operators. activities by chainsaw harvesting traditional of timberduring safe productionGuarantee secured work tools. secured work free andwithadequately them tomove hands- by allowingoperators chainsawfor forestry improve ergonomics Increase safety and Objectives used tosecuretheload. reeling-in oftheslings andquickorderly Install areelthatpermits transported. damage by wood being front loader’s claw from the hoseinside Install ascreentoprotect durable component.durable stopper withamore chainReplace theoriginal moving. isthe chainsaw operator safety conditionswhile toimprovea harness This solutionincludes offallsandaccidents.risk equipment toreducethe the chainsaw andits used totransport Redesign thebackpack Proposed Solution

truck’s eightslingsby 43%. Reduced timetoroll-upthe the slings. position whilereeling-in to improved operator duetime categories) with- andwithout-lost accidents (inboththe Reduces potentialfor Indicator. Reduces company Risk environmental performance. Improves thecompany’s hazardous waste. ofReduces thegeneration biodiversity. pollute soil, water, and Reduced potentialto leaks indamagedhoses. Reduced oilspillsfrom accidents. reduce thepotentialfor chain saw, whichshould the isoperating worker stopper breakingwhilethe ofthechainReduced risk each month. stopper anumber oftimes to changethechain save moneyby nothaving willChainsaw operator the number offelled trees. Potential for anincreasein movement, orfalls. operator’s transport, thechainsawspills during Reduction ofpossible fuel his equipment. movement whilecarrying duringchainsaw operator Improved for ergonomics falls. Indicator forfrom severity 50% reductioninRick Indicator fromfalls. 50% reductioninRisk the operator’s back. and weight oftheloadon by improving thebalance offallingReduced therisk Results CHAPTER 5 Our People

Project Name Objectives Proposed Solution Results and Location

Aserraderos S.A.

Horcones II Sawmill Produce sawn timber Incorporate more workers Offsite grading was that is finished, graded, at the grading table and eliminated. 100% Finished Product. packaged and strapped at stackers Reduced company Risk the sawmill. Before this Add a platform at the Indicator by 38% at the project, 85% of the timber wrapping station. wrapping station and was graded, packaged and by 100% at the off site strapped offsite. Modify machine design location. to be able to install vinyl more quickly, and produce Reduced Environmental packaging no wider than Risk Indicator by 33%. 900mm. 100% of timber production Install mirrors in front is finished at plant. of the wrapper operator Reduced downtime from to enhance visibility and backlog at wrapping lighting in the grading area. stations A and B by 65%, which reduces cost.

Nueva Aldea Sawmill Reduce risks incurred Use a common garden Risk of falls is reduced by control staff while sprayer to spray by avoiding the use Risk Indicator Reduction inventorying logs. The water-based paint from of ladders. Risk of in Log Inventory. goal is to reduce the risk a distance to mark log entrapment in the log indicator from 20 to 10. ends. The inventory is deck is reduced since conducted more quickly, there is no physical Before this project was and there is no risk of falls. contact with the logs. implemented the log Reduced the Risk Indicator inventory was performed Log counting accuracy was from 20 to 5, exceeding by climbing ladders to facilitated by the addition the goal. walk over the stacked logs of a mechanical counter in order to mark them. that indexes every time Prevented log counting the spray trigger is mistakes by using the This exposed the workers pressed. mechanical counter. to the risk of falls and injuries. The new marking device is effective, regardless of the height of the worker.

Viñales Remanufacturing Improve quality of unions, Before this project Reduced chipping from Plant reduce loss from chipped was implemented, the 7.3% to 4% and tripled unions, and increase shelf percentage of moulding the shelf life of Finger-Joint Chipping Reduction life of Finger–Joint lugs. repairs from chipped lugs. of Finger-Joint Union. Finger-Joint unions had increased. The project considered changing the direction of the perforation, so that the lug moves over the groove in 2mm. This allows the movement that regulates and maintains tolerance, until the lug’s shelf life expires.

107

Sustainability Report 2010 108 2010 Sustainability Report LA12 gri plan to be developed during thenextperiod.plan tobedeveloped during luation andprovides guidelinesregardinganaction The committeeapproves eachworkers’ final eva- ple Managementdepartment. area andarepresentative ofthecompany’s Peo- and oftherelevantwork Assistant Managers oftheManagerThe committeeiscomprised toanassessmentcommittee.of eachworker mance ofhisdirectteamandpresentareport must assesstheperfor The worker’s supervisor job function. set objectives and skills required by his or her assessment, against evaluating their performance In addition, must eachworker conductaself- ducted over ofabout10to12months. aperiod tablished for eachworker, anassessmentiscon - objectivesOnce individualperformance arees- required by thepresentjobfunction. themtotheskills skillsandcomparing her current byof eachworker identifyingandassessinghisor process to continually improve the performance ARAUCO developed aPerformance Management Performance Management 2010. during cue workers In Brazil, res- 65newforestry ARAUCO trained program. inaliteracy to participate theopportunity pany alsooffered allitsworkers laid off. To goal, reachitszero-illiteracy the com- retirement or being who were nearing Argentina 2010,During in 50workers ARAUCO re-trained Other TrainingInitiatives - nantly male, asshown inthefollowing table. ARAUCO’s by workforce genderispredomi- and functionsrequiredoftheposition. member’s suitabilityto meettheresponsibilities ty groups, exclusively but isdetermined by the suchasgender,ty factors - agegrouporminori - by diversi nior Managementisnotdetermined The compositionof ARAUCO’s BoardandSe- Opportunities Diversity andEqual tions in2010. for non-compliancewithlaborlaws andregula- sanctions or madesubjecttoany non-monetary ARAUCO wasnotassessedany significant fines Compliance withLaborRegulations and Country Workers’ Distribution by Gender employees. ARAUCO implementedthisprocessfor all ofits intheuseofthisnewprocess.trained InBrazil, In Argentina, was 33%ofthetotalworkforce pated inthePerformance Managementprocess. offices inMexico,- Peru andColombiapartici process. Inaddition, 105peopleinbusiness pated in ARAUCO’s Performance Management - 2010,During in Chile partici 1,319 workers Country Brazil Argentina Chile 92% 91% 88% Men Women

12% 8% 9%

LA14 gri LA13 gri SO8 gri CHAPTER 5 Our People

People working in similar job positions and responsibility levels within the company receive similar wages, regardless of gender.

Human Rights gri ARAUCO does not condone any practice re- HR2/6/7/8 lating to child labor or forced labor, as stated by its adherence to the United Nations Global Compact. No practices entailing potential childlabor risk, or forced- or compulsory-labor risk, were identified within the company or among its service-providing companies during the year.

ARAUCO’s security staff receives specialized gri training courses on issues relating to human HR3 rights.

109

Sustainability Report 2010 110 2010 Sustainability Report in long-term, transparent dialog. of resources, and engage allof society’s stakeholders with neighboring communities, promote sustainable use and its commitments to build collaborative relationships ARAUCO’s relationship model reflects the company’s vision

Community and Society

ARAUCO’s Integrated Model for Sustainable Development (MIDES) seeks to create social and environmental value by developing lasting, stable, mutually beneficial relationships with the

6 community”. Community and Society 6. 112 2010 Sustainability Report SO1 gri society’s inlong-term, stakeholders dialog. transparent communities, promotesustainable useofresources, andengageallof commitments tobuildrelationshipswithneighboring collaborative ARAUCO’s relationshipmodelreflectsthecompany’s visionandits Community Relations and Involvement to Communities: SocialInvestment Programs thatContribute munity. mutually beneficial relationships with thecom- ronmental valueby developing lasting, stable, Development seekstocreatesocialandenvi - ARAUCO’s Modelfor Sustainable Integrated totaled US$11million. 27. Investments mi ofFebruary inthiscountry and tsuna- people affected by the earthquake where ARAUCO’s in2010wastohelp priority Most oftheinvestments were madeinChile, general. nefiting thecompany’sandsocietyin workers in communities near ARAUCO facilities, be- aredesignedtoimproveprograms conditions in which it operates.in the countries These US$12 millioninsocialdevelopment programs 2010,During ARAUCO invested atotalof

in Chile Communities Contributions to ARAUCO’s 2010 Social Investment ARAUCO’s 2010 (US$11 million)

Projects 18% Education andCulture Projects 8% Other SocialInvestment Donations 6% 4% Extension Activities Sponsorships and Earthquake 64% Brazil 3% 3% Argentina Chile 94% CHAPTER 6 Community and Society

Chile The MIDES program includes a “Territory Mana- • Presence of ARAUCO industrial facilities; gement System” through which the company can • High concentration of forest plantations; identify communes affected by its forestry operations. ARAUCO has identified 124 of these “Areas • Social vulnerability (high levels of poverty of Influence,” which are distributed through- and/or unemployment); and out Chile’s five regions: Libertador Bernardo • History of a relationship between the O´Higgins; Maule; Bío Bío; Araucanía; and Los Ríos. company and the territory. These Areas of Influence are Communes where the company has forestry operations. The Territory Management System’s Sustainable Coexistence Standard is used to guide the var- In addition, Arauco has used the system to ious Involvement Programs (in Areas of Influen- identify 31 communes as “Territories of Inter- ce) and Corporate Programs for Social Invest- est”. These communes warrant special attention ment (in Territories of Interest) conducted in by the company, and are the focus of the largest the communes in which Territory Development number of social development activities. In ge- Plans are implemented. neral, Territories of Interest exhibit the following characteristics:

Territory Management System

Areas of Influence: Involvement Programs

Territories of Interest: 1. Involvement Programs Territorial 2. Corporate Programs for Plans Social Investment

ARAUCO’s 31 “Territories of Interest”:

Region Territories of Interest Region Territories of Interest Maule Hualañé Bío-Bío Trehuaco Empedrado Quillón Licantén Contulmo Constitución Santa Juana Curepto Ranquil Teno Arauco Bío-Bío Lebu Los Ríos Loncoche Curanilahue Mariquinia Los Álamos Lanco Cobquecura La Unión Lota Paillaco Portezuelo Máfil Coelemu Corral Cañete Valdivia 113 Tirúa Los Lagos Yungay Sustainability Report 2010 114 2010 Sustainability Report executed withlocalparticipation. investment and involvement programs. They are These plans are the in-field expression of social Territory Plans: as Territories ofInterest. hance thequalityoflife incommunes classified lastingskillsanden- are designedtogenerate within thecommunity throughprojectsthat These Corporate Programs for SocialInvestment: fluence. in relationships withstakeholders Areas of In- and opencommunication, tobuild long-term provide mechanismsforThese programs dialog Involvement Programs: the following programs: The Sustainable CoexistenceStandardincludes Extension Programs Involvement The Sustainable Coexistence Standardusesthe Involvement Programs openness indialog. tion, mechanisms, integration and transparency 10 Fair Creative Industry Lifting MaulethroughI&E and Entrepreneurship: 2010 RoutetoInnovation (I&E) Week Innovation &Entrepreneurship Program Name Development” “The Value ofSocial-emotional Foundation Seminar Educational Arauco Business Development” intoSustainable the Emergency Entrepreneurship: Transforming CSR “Reconstruction, Synergy, th International Conference for International Corporate Programs

Programs

facilitate create which thePRESprojectwascreatedandimplemented. a presentationentitled, “Creative Reconstruction: PRESConstitución,” whichexplainedtheway in FairintheLosRíosRegion, Creative Industry oftheFirst theinauguration ARAUCODuring made thisevent.Colbún andCorfo’s InnovaChile supported This event intheMauleRegion. wasfocused onproviding assistancetoentrepreneurs ARAUCO, Roof for Chile(Un Techo Chile)Innovation Center, para and Avina. after theearthquake. The I&E Week by wasorganized theInnovation Forum, Endeavor Chile, the A ofConstitución Throughout theevent, onprogressinthereconstruction thecompany reported In November, ARAUCO sponsoredInnovation andEntrepreneurship Week inSantiago, Chile. Description Arauco EducationalFoundation. Arauco Training Area of EducationalFoundation.Arauco byThis isthethirdregionalseminarorganized the Andrés Vargas, representative; anEducation Ministry and Alejandra Torretti, technicaldirectorofthe The seminarfeatured threedistinguishedspeakers: SpanishpsychologistPablo Berrocal; Fernández byorganized Acción RSE, wasattendedby morethan1,000participants. segment onReconstruction, andmade apresentationonPRESConstitución. This two-day event, intheInnovation theconference andSustainable Solutionspanelduring ARAUCO participated communica- social value

restry operations.restry wherethecompany hasfo- in theterritories a continuous, consultationprocess long-term pand its use of this model in2011toestablish process.its FSCcertification ARAUCO willex- used by thecompany in2010tosolicitinput tion ofthestakeholder consultationmodelfirst The MIDESconsultationmodelisanadapta- ning company operations. andinputthemintotheprocessofplan- cerns the expressed con- ARAUCO to incorporate community involvement.courage This allows dialog, andconsultationtoen- participation The company mechanismsfor employs various community. order tofoster acloserrelationshipwitheach in community needsandconcerns understand area,forestry inparticular, wantstobetter in its decision making.dividual concerns The the company to consider community and in- stakeholder consultationcomponent, enabling ARAUCO’s Consultation Involvement Programs include a

CHAPTER 6 Community and Society

The Involvement Programs developed by • Basketball Camp: About one hundred chil- ARAUCO in Areas of Influence will include the dren participated in a basketball camp that sharing of social benefits with the community took place on July 23 and 24 in San José de la as a means of developing deeper mutual un- Mariquina. The kids were coached by Ame- derstanding over time. rican instructor Matt Logan. A basketball coaching clinic was also offered. Extension Programs ARAUCO develops a number of extension • Arauco Cup - United by sports: The soccer programs to approach the community. tournament’s fourth version was held in Arau- co province. More than 1,100 students from Guided Tours the province’s seven communes participated. ARAUCO has been offering guided tours of its facilities in Chile since 2006, allowing the com- Corporate Programs for Social munity to visit the company’s industrial com- Investment plex and operations. A total of 6,591 visits were In response to needs expressed by communi- made in 2010. (For more information see section ties, ARAUCO has developed programs for so- “Communication and Feedback Mechanisms”.) cial investment in disciplines in which the company can contribute its skills, understanding A total of 150 schools participated in the En- and capacities. vironmental Education program “Living the Fo- rest”, benefiting 3,395 students during 2010. ARAUCO’s Corporate Program Territory Plans The program consists of a series of didacti- have been developed in response to stakeholder cal audiovisual presentations for elementary input and the particular needs of each territory. school students in rural areas. ARAUCO has defined seven categories of cor- Sports porate programs that include social investment ARAUCO promotes involvement with the and involvement initiatives: community by organizing sports activities, as well as events for community and company • Production Chain Development. members: • Local Employment Programs.

• Nueva Aldea Soccer Cup: Twelve teams (240 • Compatibility and Production Diversification. people) from six communes and/or locations • Education and Culture Programs. in the areas of influence of the Nueva Aldea • Housing Programs. Industrial Forestry Complex participated in this soccer tournament. • Programs for the Development of Indigenous Communities. • Arauco-Mariquina Soccer Cup: School soc- • Programs for Native Forests and High Value cer tournament played by a total of 270 Environmental Areas. fourth to eighth grade students of the area’s municipal schools.

115

Sustainability Report 2010 116 2010 Sustainability Report EC6 gri technologies and opportunities to the local business network. technologies and opportunities experience, by transferring development local to contribution asignificant make to seeks ARAUCO Production ChainDevelopment A Rural Forestation low-income families by training workers in tech- in workers by training families low-income among poverty rural overcome to is objective program’s The municipalities. local and poration) cooperation in by ARAUCO sponsored was initiative joint This Region. Maule Chile’s in located Commune, lluhue Forestry SDP Forestry Panels SDP Nueva Aldea Arauco Territory development. (SDP). throughlocalSupplierDevelopment Programs localsuppliers ofthesecouncilsistoseekandtrain The purpose ARAUCO arecompaniesandinstitutionsspecializinginlocalsupplier established LocalDevelopment Councilswhosemembers Methodology andpurchasingtheirproducts. localsuppliers To by supporting market enhancetheproductionchainofforestry Objective rural spent in 2009. in spent US$365,000 the times three almost was 2010 and company’s the by 87%, goal surpassed This 2010. during US$936,000 totaled suppliers Integrare-registered from purchases ARAUCO’s 2010. during Region Bío Bío Chile’s in suppliers to extended was program on the company’s the Based in positive experience, the Santiago area. business opportunities promoting 2008, in establishment foundation’s the since Integrare in participated has ARAUCO chains. supply business in services and products suppliers’ of registered incorporation the in resulting parties, various among interaction facilitating on focused is also work foundation’s economy. The country’s the in participation their improve and increase groups of minority members helps foundation The entrepreneurs. female and immigrants, persons, indigenous persons, disabled as groups nority mi such for opportunities job facilitates and promotes Foundation Integrare non-profit The Integrare Foundation forestation with CORMA program (Chilean was discontinued. 2010, was during for theprogram for thistraining even thoughgovernment support support andtheir continuing training. withthesafety ofitsworkers is concerned The company maintained intheforest. asachainsawrequirement for operator work ForestalCelco, ARAUCO’s subsidiary, thinning. wasdesignedtoimproveThe training safety standardsandlabortechniquesisa andtree onharvesting for chainsaw BusinessSDPconductedtraining operators The Forestry Improving on businesses humanresources throughtraining managementofservice-providing • AdoptingtheEnvironment andOccupationalHealthSafety program, whichprovides • toChileanRegulationNCh2909, Becomingcertified known astheChileanregulationfor • objectives: businesses inthePanels SDPprovide employment for 900workers. Training centeredonthree sponsoredby through aprogram ARAUCO’s Panel Business. The 28small-andmedium-sized 2010 during oftheSDPwereSmall- andmedium-sized trained businesses thataremembers atanumber of foods whichweretraditional served ARAUCO events. to provide healthy snacks. local inpreparing supplierforA cafeteria thepulpbusiness wastrained in2010.program Herbifrut, acompany fruit, thatproducesdehydrated wasaddedasasupplier foods were andlocaltraditional amongthosejoiningthe fruit ofdehydrated New localsuppliers increasedfrom30%in2009to42%ofthecompany’s totalpurchases in 2010.services management, for 2010. development during were thepriority Purchasesoftheseproductsand clothing,Products andservices, suchasindustrial machineshop, hardwareitemsandhotel Results Internal NCh2909”Internal Auditors and “Labor LegislationanditsModifications.” compliance withrequiredregulations. 2010, During were completed: two courses “Training of toreduceaccidentrates. andinstruction regular training ofsystematicprocesses.competitiveness ofsmallbusinesses throughtheincorporation small- andmedium-sized business management. This standardisdesignedtoincreasethe launched Wood in Cor Pe - - the program’s creation in 1998. in creation program’s the since plants 6,250,430 donated has company The program. Forestation Rural the through seedlings of 950,000 atotal donated 2010, ARAUCO During plant. to them for dlings see pine of Radiata donation the through and trees, growing for technologies new and niques - - CHAPTER 6 Community and Society

Local Employment Programs Overcoming poverty depends on a number of factors, among which quality employment and perspective have a key role.

Objective To promote employability in areas where ARAUCO operates, supporting training and the development of skills that the company needs for its new projects and ongoing business.

Territory Results

Teno Training at Teno Panel Mill Together with Inacap and the Teno municipal Office for Labor Intermediation (OMIL), ARAUCO created a training program for the 600 local hires it will need for its new Panel Mill in Teno. This plant is estimated to begin operation in late 2011. The five-month training program will begin in March 2011.

Arauco Agreement with the Technical Training Center in Lebu During 2010, 27 senior-level students participated in a work-study program based on an agreement between ARAUCO and the Technical Training Center in Lebu. This program was designed to give students part-time, real-world work experience to complement their courses of study. During 2010, students pursuing technician-level training in Electricity, Industrial Electronics, Instrumentation, and Industrial Control participated in the program.

Los Ríos Region Cooperation Agreement with Forestry Schools ARAUCO signed cooperation agreements with Forestry Schools in the Los Ríos region to supplement students’ technical education. Among the initiatives were: presentations on technical aspects of plant production, mechanized harvesting, and occupational health and safety; internships for teachers regarding fire protection and occupational health and safety; observation internships at Los Castaños Nursery; field internships on silviculture and fire-fighting techniques; class trips to industrial facilities; and guided tours at Parque Oncol. A total of 150 junior and senior students participated in these programs during 2010.

Maule Region Tourism Education ARAUCO provided financial support for various courses designed to improve employability in the region. The training courses focused on: Tourism Management; Production of Events; Basic English applied to Tourism; Environmental Education on the Forestry Cycle; Tourist Guide; and Integrated Care of Senior Citizens.

ARAUCO’s Technical and Professional Internships Business 2010 2011 Each year, ARAUCO offers technical and professional internships that contribute to students’ Pulp 185 189 professional growth and development. In addi- Forestry 32 40 tion, the company offers advanced-level students the opportunity to work on their theses. Panel 64 77

A total of 346 students participated in the in- Sawn Timber 31 14 ternship program during 2010, and 351 students Offices 34 31 117 are expected to participate during 2011.

Total 346 351 Sustainability Report 2010 118 2010 Sustainability Report Compatibility andProductive Diversification Program company has channeled its resources toward toward resources its channeled has company The sustainability. country’s the to central was Chile in of education quality the improving that decided ARAUCO ago, 20 years than More Education andCulture Programs Parque Oncol Bío-Bío Region Los RíosRegion Nueva Aldea Province Arauco Territory in2010follows. listoftheactivitiesundertaken A partial To thisprogram, capital. support or working ARAUCO roundtables organizes andmakes financialdonations for infrastructure Methodology Tourism, Viniculture, andCrafts. activitiesthatprovide socialandenvironmental benefitstothecommunity.The company supports Fishing, Theseinclude: Artisan andeconomiclevels.that benefitcommunities atcultural To tothesustainable activities contribute development ofcommunities near ofnon-forestry ARAUCO’s throughsupport operations Objective to train park employees offered topromotetourism. park andimproveto train thequality ofservices for ParqueProgram Oncol. requiredaninvestmentThis program ofCLP$40million(US$78,400) For athirdyear, ARAUCO signedanagreementwithCORFOfor aSupplierDevelopment andtraining. infrastructure affected (aiding fishermen by thetsunamiinFebruary). for Thecompany alsoprovided support in theregion, atthisroundtable hadbenefitedfromtheSeaofHopeproject thefishermen andfishingactivities. tosearch for ways regional fishermen tocombine forestry Like others Bío-Bío RegionFishermen. discussionroundtable with inapermanent ARAUCO participates 3.- Productdiversification. ARAUCO tobroadeningeconomicactivitythroughthe contributed 2.- Improving productioninHandlingandExtraction Areas ofBenthicResources(AMERB) Federation. skillsoftheFishermen 1.- Strengtheningthetechnicalandorganizational ARAUCO results oftheroundtable discussions: tobeginanongoing,gatherers) dialogbetween collaborative theparties. Following aresomeofthe ofMehuínandmemberunions(600fishermen, Federation and Fishermen divers with the Artisan ofMehuín. Fishermen Roundtable with InMarch2009 Artisan ARAUCO aroundtable organized for Nueva Aldea Support Vineyards throughCoopAldea. inSantaCruz. Gathering Arts for Program Management Support Women ofQuinchamalí, inaNative Artisans whoparticipated productiondevelopment; strengthening;organizational andenhancingqualityoflife furthering University. by ARAUCOThe projectssupported in2010aregroupedintothreecategories: the ItataRiver. inthenegotiationwere theGovernment ofChileandConcepción Also participating oftheareaadjacenttomouth roundtable inapublic-private withfishermen Participation promotioncampaign forCo-financing ofatourism Province. Arauco Activity development of joint ecotourism activities fordevelopment theRíoLingue ofjointecotourism Wetland. 2010, thecompany andthe Women onthe Workers SeaProductsUnionbeganwork fishingactivities, ofinitiatives thatcomplementartisan suchastourism. InNovembersupport studies andfollow-ups intheHandling Areas. by thefederation’s public resourcestofinancebase technicalconsultantstoattract efforts asaninitiative oftheMississippiUnion’s for productiondiversification collectors AMERB; and to improve productionconditions(MississippiandMaiquillahueUnions); theinstallationof the federation’s unions. fishermen initiatives in2010 ARAUCO supported: two surveillance production improvements. proposed ideas, resourcesfrompublic sourcestofacilitate projectsandattracted generated improve skillsoftheunionsandtheirmembers, productionconditionsandtheorganizational financed two atthe professionalsfederation, who work provided technicalassistanceto and cultural opportunity programs. programs. opportunity and cultural Foundation; Educa Belén Arauco; and Cholguán -Constitución, schools of three support direct Foundation; Educational Arauco through: cation edu to access better with communities providing

- CHAPTER 6 Community and Society

Arauco Educational Foundation various teacher-improvement programs that re- Since its creation in 1989, Arauco Educational sult in better learning experiences for students. Foundation has supported municipal education and access to culture to provide children and In 21 years, more than 73 improvement pro- young adults with better opportunities. The grams have been implemented, primarily ad- Foundation’s objective is to complement and dressing preschool and elementary teachers’ strengthen the work of teachers in municipal needs in areas such as oral and written langua- schools located in the Maule, Bío Bío and Los ge, mathematical-logical reasoning, self-esteem, Ríos regions of Chile. To meet its objective, the psychosocial stimulation, pedagogical manage- foundation designs, implements and evaluates ment and special education.

Arauco Educational Foundation’s Programs in 2010

Program Objectives/Activity Location Interactive Program for the Improve oral and written language, mathematical logical rea- Constitución and Development of Rural Elementary soning, self-esteem, pedagogical management and pedagogical Empedrado, in the Education leadership for school directors. Maule Region.

Cultural Support Program Support for Youth Orchestras in Talca, Arauco and Curanilahue. Maule, Bío Bío and Los Ríos Regions.

Program for Teacher Teams’ Boost teachers’ self-esteem. Reinforce team work and improve Valdivia, in the Los Ríos Self-esteem and Reinforcement schools’ social climate. Provide a model to work on self-esteem Region; and Curepto in that can be transferred to work done with students. the Maule Region.

“Sembrar” (To Grow) Programs Promote psycho-social development of children up to five Quillón-Coelemu, and years of age. Ninhue in the Bío-Bío Region.

Early Reading and Writing Lecture Stimulate reading and writing skills. Valdivia, in the Los Ríos Program Region.

Raíces - MAT Program Develop mathematical logical reasoning. Mariquina, Lanco and for the Development of Mathematical Máfil, in the Los Ríos Logical Reasoning Region.

Arauco Reads program: Promote reading in Chile. Arauco, Cañete, • Reading Plan Contulmo, Lebu, • Mobile Library Los Álamos, Tirúa, and Curanilahue, in the Bío-Bío Region. • Reading Plan Motivate children living in isolated areas to read at least eight books during the year. The program delivered 12,442 books to 123 schools, 617 teachers and 11,238 students in the province during 2010.

• Mobile Library Provide a mobile library with 1,000 to 1,900 books and course 119 materials for students, teachers, parents and the community in general. Sustainability Report 2010 120 2010 Sustainability Report Empedrado Constitución Licantén Curepto Arauco EducationalFoundation GeographicCoverage Program Publications Emotional Development” Seminar “The Value ofSocial La Unión Paillaco Corral Valdivia Máfil Mariquina Lanco Region Maule

Objectives/Activity Author: The following textswere published in2010: Ediciones UC. Year: 2010 featured threedistinguishedspeakers: In 2010, EducationalFoundationhelditsthirdregionalconference.Arauco The conference representative Education Ministry (Valdivia,programs Region, This seminarwasoffered asaninvitation totheeducationalcommunity oftheLosRíos EducationalFoundation’sArauco Training area. Seminar’s closing: In addition, the2010 EducationalFoundation Arauco Awards were presentedatthe • ReadingComprehension for theMobileLibrary, oftheFinalReport • Distribution program. Support for theCrisis • FinalReport Program, for RaícesDevelopment Support • FinalReport • The • Arauco EducationalFoundation the LosRíosRegionfor itscommitmenttostudents’ readingachievements. teacher whoisrecognized by theeducationcommunity. commune intheLosRíosRegion.a teacherofMariquina This award distinguishesa specificallyteacherimprovement toCommunes inwhichtheFoundationoffers

EducationalFoundation, Arauco “Mabel Condemarín Region Los Ríos Lanco, Cañete Los Alamos Arauco Coelemu Trehueco Quirihue Lebu Curanilahue MáfilandMariquina). Teaching Tests and Andrés SpanishpsychologistPablo Berrocal; Fernández “Community Award”

Text Production. Gajardoand Ana María Vargas,

waspresentedto and Award” Tirúa Alejandra Contulmo Río Bueno Lago Ranco Futrono Los Lagos Panguipulli wasgiven toLancoCommune in Itata Licantén(2006-2009). Torretti, Medina. Alejandra Region Bío-Bío Valley. González, Ana María Ninhue technicaldirectorfor San Nicolás Publisher:

Yungay Ranquil Portezuelo Quillón CHAPTER 6 Community and Society

Schools ARAUCO maintains a firm belief that educa- In the 2009 SIMCE test, the results of which tion is a key factor for national development. were released in 2010, ARAUCO’s schools ap- This commitment is reflected in the company’s pear at the top of the list. Constitución school sustained contribution to improve the quality was ranked in first place in both fourth-grade of education and broaden educational access and eighth-grade categories. Fourth graders of in areas in which the company operates, gene- the Arauco and Cholguán schools placed 16th, rating solid projects that benefit students, tea- while eighth graders at the Cholguán School chers, their families and the country. placed 28th. Also, the Arauco, Cholguán and Constitución schools achieved excellent results ARAUCO manages and finances three schools at the national and regional levels in the 2010 -Arauco, Constitución and Cholguán- that pro- PSU test. vide preschool, elementary and high school education to children and teenagers in their respec- ARAUCO Schools 2010 PSU tive communities. Average for All Students

School 2010 PSU Average(*) (**) Each of these schools has demonstrated excel- Arauco 673 lent academic performance, as shown by their Cholguán 638 students’ scores on Chile’s standardized SIMCE Constitución 603 and PSU tests. These three schools have con- (*) Test results for the 2010 PSU were made available in January 2011. sistently been ranked high at the national level. (**) The highest possible individual test score in any subject is 850.

Promoting Culture Complementing the work done by Arauco Educational Foundation, the company invested in a variety of initiatives that support access to culture.

Programs to Promote Cultural Activities

Location Initiative

Arauco • Promote reading in the province. • Support the Youth Orchestra of Curanilahue. • Conduct a study of the cultural needs and expectations of Arauco Province. • Agreement for support of the Ayekafe Orchestra of Arauco.

Mehuín, Los Ríos Region • Equip a modern Information Center with fifteen computers and high-speed satellite internet access. • Provide a number of training programs on digital literacy, Web 2.0 and Office to community leaders, women entrepreneurs, Mapuche leaders and young people in the area.

Maule • Support the Youth Orchestra of Talca.

Belén Educa Foundation, Chile ARAUCO, through its primary shareholder Em- The Foundation’s network of eight schools presas Copec, makes a significant financial con- –located in the most economically-vulnerable tribution each year to Belén Educa Foundation’s areas of the Puente Alto, La Pintana, San Joa- eight schools, and also provides scholarships for quín (La Legua-Emergencia), Quilicura, Pudahuel students wishing to continue their studies. Exe- and Maipú Communes– provides education to cutives at Empresas Copec play an active role 10,800 students and employs more than 550 overseeing management of the schools. highly motivated teachers. 121

A charitable program of the Archbishop of San- More than half of the students that graduated tiago, Belén Educa Foundation provides quality in 2009 and 2010 went on to higher education. parochial education to children of families with

limited resources. Sustainability Report 2010 122 2010 Sustainability Report To • To • To • To • neighborhoods and cities. and cities.neighborhoods improve and projects, housing about tudes atti- change image, positive aunique, provide would that housing for astandard develop and create to was company the for A key challenge In Housing for main areas: three in addressed been have issues Housing operations. company near areas low-income in particularly workers, its for housing, of social development the in akey role plays ARAUCO development. their for foundation the is housing Quality does. company the as develop must families their and workers These ARAUCO. at work people 30,000 than More Housing Programs To • goals: following the with Workers 2009, housing projects are located. located. are housing projects ARAUCO’s where communes in velopment developed. being projects housing in of wood use the workers, contract workers, and ARAUCO. and workers, contract workers, standards. workers business workers. service-providing and workers ARAUCO’s for solution housing create promote provide provide develop ARAUCO find Workers andContract and focused satisfying, initiatives neighborhoods a strengthen strong developed and while value for a active circle local meeting a and Housing proposition of economic support Workers housing trust ARAUCO Plan among for that de for for a -

In there. live will who workers of the effort the and resources state available with financed be can projects housing planned the that so ria crite viability financial meet must also standard The values. family and coexistence, harmonious safety, promote that neighborhoods veloping by de of housing value the protect and defend that concepts design housing in resulting lence, excel- technical upon based is standard This workers. particularly stakeholders, multiple of participation the reflects and encourages and efficiency, and creativity promotes that model amanagement reflect must astandard Such Housing the on progress made 2010, ARAUCO During satisfaction. ers’ work- the on afocus reflect will plan of the sult are as built housing the and workers, for by and Workers for Housing recovery. of earthquake burdens plemented im and managed planned, was program The ce. families for solution ahousing find to seeks program This No Improvised Housingin 2011.continue throughout SERVIU ARAUCO Land for Housing families. 1,000 than more for housing permanent provide to is purpose 2010 earthquake. 2010 February by the displaced been had that families 1,600 for housing of social construction the for short, who and ARAUCO’s for and donated with local live Workers Contract the in municipalities. about tent NGO Housing cities Program, Workers 37 Un Arauco Province hectares in Techo Plan Arauco The program despite is para (91 conceived program’s Provin acres) Chile, will the - - - - -

CHAPTER 6 Community and Society

Development Programs for the Mapuche People The Mapuche culture is strong, very much alive and is a source of learning for ARAUCO. The company wants to develop a relationship with Mapuche communities that is based on mutual recognition and teamwork.

Objective To preserve the Mapuche culture and contribute to the economic development of communities neighboring ARAUCO’s operations

Location Initiatives

Arauco Province • Relmu – Witral Mapuche Loom Weavers: Support for infrastructure, working capital and professional consultancies.

Los Ríos Region • Silver Workshop for the Huilliche Millaray Mapuche Women’s Association, in Mariquina Commune: Support for training to revive the silversmith trade, which is a dying tradition in the area. In 2010, training was offered on enhancing jewelry designs by inlaying stones and wood, using elements of the Mapuche world vision to add value to the jewelry and designing and selling the brand. The women artisans designed and manufactured 700 silver brooches with Mapuche native designs which were given to ARAUCO customers at the Shanghai Expo. . • Mapuche loom weaving, language (Mapudungún) and world vision workshop for the Domo-Witral Association, in Mariquina Commune: In its second year, this initiative focused on perfecting the Mapuche loom weaving technique and enhancing designs through a combination of loom weaving, knitting and crochet techniques. The association received machinery to increase its production, and training in marketing and sales. • Mapuche loom weaving, language (Mapudungún) and world vision workshop for the Kollagtuwe Mapu Indigenous Community, Maiquillahue area, Mariquina Commune: ARAUCO provided support for women in improving Mapuche loom weaving techniques, wool washing, combing, and dyeing with natural products and the production of garments such as “ponchos,” sweaters, hats, purses and rugs. • Loom weaving workshop at Martín Tejeda School in the area of Cuyinhue, in Mariquina: ARAUCO provided support for resident women who participated in weekly workshops to learn basic Mapuche loom weaving techniques. • Training and consulting for potato growing and nursery construction and management projects for the Coipuco Indigenous Community of Mehuín Bajo, in Mariquina Commune. • Training and consulting for potato growing projects for the Kollagtuwe Mapu Indigenous Community, in the Maiquillahue area, in Mariquina Commune. • Training and consulting for potato growing projects for the Small Farmers Union of Chan Chan, in Mariquina’s coastal area. • Improvements to the drinking water collection and distribution system for the Cheuque area, in Mariquina Commune.

Cheuque Papas Coipuco

Kollagtuwe Mapu Telar Chan Chan Cuyinhue Platería Los Ríos Region

123 Valdivia Sustainability Report 2010 124 2010 Sustainability Report areas. rural in students school tary forof audiovisual elemen didactic presentations of aseries consists which Forest,” Living “The entitled, program education aforestry sored spon- have Regions, Lagos Los and Ríos Los the divia Since “The LivingForest” Environmental EducationProgram EnvironmentalAreas High Value Programs for Native Forests and People." Mapuche of the Characteristics and History the to "An approach entitled, of talks a series attended 160 2010, than people more During solutions. ficial bene mutually generate and trust, build nities, commu Mapuche with relationship its develop ARAUCO helped has process forum The ties. business these communi decisions that affect about dialog open an guarantee to adopt can ARAUCO that criteria and aframework develop to process inclusive and a participatory provides special The Mapuche characteristics. Forum community’s each respect that relationships ter fos and culture their and people Mapuche the understand better could company the that so up set was Forum The process. certification FSC its in effort engagement stakeholder ARAUCO’s of part as established was Forum Mapuche The Mapuche Forum pany as part of its FSC certification process. process. certification FSC of its part as pany com by the developed activities of many one Principle People’s understanding a better foster to designed were presentations

and 2001, Rights)

a Launched the Month” ARAUCO’s

Chilean of as

FSC part campaign.

November Wood Principle subsidiary of the

This Corporation company’s

3 initiative

Forestal 2010, (Indigenous “One these

Val was for ------

RAUCO AR Environmental EducationatParque Oncol Oncol is available in the Environment Chapter.) Environment the in available is Oncol education environmental in participated and park the visited people 2010, of 34,264 atotal During biodiversity. understand better people help to reserve Oncol forest; Some Regions. Lagos Los and Araucanía the in area extended an covering 20 Communes than more in sented pre been has program the years, ten past the In projects. on environmental hands- in participation and contest, storytelling and drawing annual an includes program The harvesting. and planting tree and resources; forest and of water, soil importance of wood; sing tén, divia, Lagos, Osorno, schools participated in the program. program. the in participated schools 150 from students 2010, of 3,395 atotal During activities. Forest Living in participated have Year 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Gorbea, Corral,

of prevention Futrono, Students the Purranque,

activities. odcts conduc issues Loncoche, La

Mariquina, Unión, of

guided in (More covered forest Schools and Carahue, 150 150 220 220 300 251 201 200 125 65

Lanco, San ors tour San information fires; Number of:

Máfil, are: Pablo,

Juan through industrial Pitrufquen, Panguipulli, benefits

Paillaco, de Río Students 10,000 on 3,395 3,500 5,270 6,341 8,101 6,228 5,956 4,000 2,272

its la proces

Negro, Parque Parque of Costa

Tol Val Los the - - - -

CHAPTER 6 Community and Society

Community and Society in Argentina Using the corporate programs implemented in Chile as a model, ARAUCO developed initiatives for use in Argentina. Topics included Local Employability Programs, Programs for Education and Culture, Health Programs, and Programs for Native Forests and High Value Environmental Areas.

Local Employability Programs in Argentina

Program Name Objective

Tourism Development Support for coordinated and efficient development of tourism in Puerto Libertad, Misiones. The program seeks to turn the area into a tourist attraction by leveraging the synergy between tourism and forestry activities.

Support of social organizations Promote sustainable development of the community’s social organizations by providing training "Solidario ” Group for their leaders.

Labor Skills Certification Provide ARAUCO operators with training courses and certify their skills. This also serves as a mechanism to recognize their performance.

Local and Sector Development Advance knowledge, innovation and development in the field of sustainable furniture Program - Triple Helix Node manufacturing to introduce these products in international markets.

Programs for Education and Culture In Argentina, ARAUCO works to improve the quality of education in Misiones province through Alto Paraná Foundation. Established in 1985, the Foundation provides ongoing support for preschool, elementary and high school education, as well as training for teachers at two educational institutions in Puerto Piray and Puerto Esperanza.

ARAUCO has developed other educational initiatives in Argentina, such as:

Program Name Objective

Rural Literacy Program Provide company operators with elementary- level literacy training.

Modeling the Future Contest Sponsor contest to motivate elementary- and middle-school students to conduct science research and create art projects on the sustainable use of forest products.

Health Programs in Argentina

Program Name Objective

Community Solidarity Marathon Raise funds to benefit hospitals in the northern area of Misiones province and other public health-care organizations and educational institutions in the area.

Alto Paraná Foundation Health Contributions to health centers in Misiones for health services and equipment. This program and Hygiene Program also provides the community with information about disease prevention through speeches and conferences.

Programs for Native Forests and High Value Environmental Areas in Argentina

Program Name Objective

Nature Protection Protect and restore more than 110,000 hectares (272,000 acres) of native ecosystem in preservation areas located in protected strips of land among farms and rivers.

Tree sponsorship Create awareness among students in Misiones’ northern-area schools about the importance of preserving native species through reforestation.

125 Recovery of Riparian Areas Plant native species to restore 100% of protected areas that had been used previously in Alto Paraná for commercial forestry. Sustainability Report 2010 126 2010 Sustainability Report Local Employability Programs inBrazil operations. its near communities the with ships relation- positive lasting, establish to efforts its continued Brazil 2010, ARAUCO During Community andSocietyinBrazil Programs for EducationandCulture inBrazil “Judo for All” Project Crafts WorkshopArtisan Education Network Speeches addressingtheMunicipal Theatre Workshop Living Environment Award Education Theatre Incentives for Education Environmental Education Program Name Apiculture for Sawmills Minimum Price Guaranteed Intern Agricultural YAI – Program Young Digital Inclusion Pescar Project Program Name socially young vulnerable peopletotake upjudo. insports. Motivate young peopletoparticipate succeededinmotivating 118 The program their crafts. tohouseholdincomeby increasedtheir contribution 36%. Workshop participants skillstoincreasehouseholdincomethrough thesaleof Train inartisan 53community members Train inthemunicipal educationnetwork. 428teachers improvement inthefamily relationships. anda90%increaseinself-esteem. academic performance Inaddition, reported 86%ofparticipants amongyoung people. Promote interestinart resultedina12%improvementThese workshops in 3,051 studentsbetween theagesofseven andten. and environmental preservation. greaterenvironmentalThis initiative awareness generated among Promote thecreationofschoolprojectsthatmake positive toconservation contributions students. asameansofcommunicating educationalconceptsto12,065public-school Use cultureandart by 21%. andhigh-schooleducation.elementary- increased workers The schoolinglevel amongforestry for 234young peopleandadultssothattheycouldcompletetheir Provide support program’s implementation, inschoolswasreducedby 98%. trash students. Inaddition, practices. explanationofforestry provide aneasy-to-understand After the conceptsamong2,036public-school aboutenvironmental andpreservation Advance understanding Objective andResults trained. forProvide apicultureinthe technicaltraining region.Arapotí were A totalof20localbeekeepers policy benefitted194individuals. for aminimum wood price residualspurchasedfromlocalsawmills.Guarantee This newpricing 2010, intheprogram, andfamily incomeincreasedby 84peopleparticipated 14%. forProvide young training people, developing abilities. theirbusiness visionandentrepreneurial In income increasedby 45%. Promote digitalproficiencyof young peopleandadults. wasimplemented, Aftertheprogram family for life 2010. asproductive during professionals. intheprogram Fifty-onestudentsparticipated with socially young vulnerable ofagetopreparethem people between 16and18years Intervene Objective andResults for areas: core three in programs developed company The Education; Local Employability and Culture and Programs; Health

Programs. Programs

CHAPTER 6 Community and Society

Health Programs in Brazil

Program Name Objective and Results

Selective Collection Build a Recycling Center and implement the municipality’s selective collection process to reduce the volume of waste transported to dumps.

Oral Hygiene Program Promote better oral hygiene habits among 1,445 students in the municipal education network. This initiative reduced the cavity indicator in Ouro Verde by 110%.

Family Health Program Promote healthy habits among community members through guidance on prevention. This initiative helped 8,248 people. It reduced teenage pregnancy by 81%, and reduced AIDS cases by 50%.

School Garden Establish a public-school garden program. Crops grown in the garden helped 160 students improve their diet.

Land for Livestock Grazing , Montes del Plata, Uruguay To increase economic, social, and labor opportunities, Montes del Plata Corporation developed a program enabling local livestock farmers to obtain low-cost leases for land suitable for cattle grazing.

To date, about 200 local farmers have signed leases for a total of 100,000 hectares (247,100 acres) of grazing land. Milk production has quadrupled for some farmers, thanks to the availability of additional land.

The program also offers other benefits, including veterinary assistance and technical training.

Cattle production is one of the most impor tant activities in Uruguay. Montes del Plata is using an innovative approach by planting trees on land that can also be used for cattle grazing.

Responsibility towards Society

Indigenous Rights Corruption Risks gri gri HR9 No incidents regarding violations involving rights The company seeks to reduce and eliminate any SO2 of indigenous people were reported during 2010. risk of corruption. ARAUCO has established a Fraud Reporting Procedure, and requires all em- Human Rights in Investment Agreements ployees to formally acknowledge the company’s gri HR1/4 and Incidents of Discrimination Code of Ethics annually. ARAUCO does not include human rights clauses in investment agreements, and no discrimination incidents were reported in 2010.

127

Sustainability Report 2010 128 2010 Sustainability Report indirectly related to fraud and corruption issues. corruption and fraud to related indirectly or directly are controls of these number great A reported. been have aggregate, in or alone stand- deficiencies, To significant no date, audits. external and internal through annually sessed as- and reviewed is model The subsidiaries. rent diffe the among of control points 1,500 than more has model control internal risk-based This 3. Information 2. Process 1. General includes: that model control internal hensive acompre implemented company the Chile, In safety, and accuracy of information. of information. accuracy and safety, integrity, the maintain and assess to nagement bases Data to Access Safe and Networks, and tion Systems of Implementation and Development sing beginning of transactions to their completion. completion. their to of transactions beginning the from flows, report financial affect directly that processes assess and monitor to is trols evaluations. and performance lection se staff climate; work regulations; internal Reporting; Fraud of Ethics; Code agement; man- regarding Board of the dependence in as: such issues addressing company the generate a control environment throughout and Controls. Controls and Programs, Systems Program by The these Level (IT) objective Maintenance, controls of Controls. Company. of these allow Addres Opera These con ma ------

were reported in 2010. in reported were incidents corruption No intranet. company’s the through employees to and website, ARAUCO’s through anyone to available is Code This policies. anti-corruption company’s the about formation in includes which of Ethics, Code company’s the read and received they stating a document sign must company by the hired employees All and Procedures ARAUCO’s 2011. of half first the during implemented and launched 2011. March in be Board will by the model The approved be to expected are documents Both 2010. in developed were policy corporate ing The initiative. this head to office Comptroller’s company’s the in Risks and jects of Pro Manager Assistant the designated Board 2010. late in company The the for Model tion Constitución y Arauco Celulosa employees. public foreign or of national bribery and financing, terrorism laundering, asset as such crimes in participating entities legal for penalties criminal establishing 2009, late in enacted was 20.393 law Chilean Crime Prevention Anti-corruption Policies S.A. implemented Model and a its Crime correspond-

Preven - - - SO3/4 gri CHAPTER 6 Community and Society

Public Policy gri SO5/6 ARAUCO does not participate in the development of public policies.

No contributions were made to political parties or related institutions in 2010.

Monopoly Practices and Compliance gri SO7/8 with Regulations During 2010, there were no reports of any legal actions for anticompetitive behavior, monopoly practices or non-compliance with regulations by the company in any of the countries in which it operates

129

Sustainability Report 2010 130 2010 Sustainability Report protocols and GRIG3Guidelines. 2010 according to the Global Reporting Initiative (GRI) economic, environmental and socialperformance during report provides acomprehensive review of the company’s annual Corporate Sustainability Reports since 2004.This Celulosa Arauco yConstitución S.A.(ARAUCO) hasprepared

About this Report

The contents of this report were defined according to GRI Reporting Framework principles and guidelines for the preparation of Sustainability Reports.”

7 7. About this Report 132 2010 Sustainability Report 3.1/3.2/3.3 gri 3.5/3.6 gri period January 1throughDecember31, January 2010. period since2004. SustainabilityReports Corporate thetime covers This report Celulosa yConstituciónS.A.Arauco (ARAUCO) haspreparedannual About thisReport et ae vial oln a www.arauco.cl at online through theInvestor Relationslink. available are ments Standards) report. cial and Reporting These docu- Finan- (International in ARAUCO’sIFRS and 20-F Form annually,in publishedJune, is in governance corporate its and performance financial and mic econo- company’s the on information Additional pective codes. res- their by report the throughout identified are content the in covered indicators GRI The G3 Guidelines for SustainabilityReports. GRI the by defined were indicators and contents the and protocols, Initiative porting Re- Global following written was report This infcn eooi, oil n environmental and social economic, significant reflect that indicators and topics ARAUCO’son While preparing this report, emphasis was placed • Materiality established by GRIG3, asfollows: wereprinciplesdefinedContents to according holds 50%. which ARAUCOUruguay,in venturein joint a Corporation Plata del Montes regarding tion - informa background includes also report This Brazil, and Argentina. Chile, in operations business its of formance per social and environmental economic, the and approach management company’s the of review comprehensive a provides report This SustainabilityReports. for Framework Reporting GRI theof guidelines and principles the to cording ac- defined were report this of contents The Boundary Scope and - the following table. in detailed as CSR, in specializing ganizations or by provided feedback on based ment,and engage- and communication of means various through expressed stakeholders of pectations ex- and interests the of consideration in port re- this in included are issues and Contents • Stakeholder Inclusiveness ofthisreport. ed isfor theentiretimeperiod report- control. information and management The ownership through influence significant exercises it which in corporations and ations company’sthe topics.of lity oper-all covers It sustainabi- of range wide a covers report This • Completeness the company operates. whichin industries, markets the and of countries presented within a isbroad context of sustainability performance ARUACO on information The • SustainabilityContext sustainability. company’sthe to issues these of relevance the on a review of media coverage 2010 during and based was content report addition, In cisions. de- and assessments stakeholders’ on influence substantial have could that those and impacts Sustainability Reports. Frameworkthe GRIReporting for andguidelinesof to theprinciples report report The contentsofthis were definedaccording - 3.7 gri 4.17 gri Sustainability Report Stakeholders ExpectationsRegarding solidation of certain data at the corporate level. dataatthecorporate solidation ofcertain fic indicators was not available, preventing the con- ARAUCO. by However, operated in some cases, the information for speci- and managed directly activities and assets businesses, all for indicators the on possible as information much as obtain to were guidelines report. The this of boundary and scope the regarding limits set not did ARAUCO Accion RSE Civil Society Internal Audience ARAUCO’s Stakeholders contest. in Acción RSE’sparticipation annual sustainabilityreport ARAUCO received threedocumentsthroughits Acción RSE, Chile Fourth Version -2010BestSustainability Report Award, were includedinthesurvey.the businesses whosereports aspects ofbusiness. Attendees includedrepresentatives of to improve futurereports,andways tomanagethesocial Foundation and The GlobalCompacttoidentifygaps, ways researchwithRedPuentes,results ofSurvey the Avina todiscussthe inaworkshop ARAUCO participated Feedback Workshop and businesses. aneffectivegenerate exchangeofideasbetween society containedinthesereports,orderto information help civilsocietyunderstand, analyze andassessthe Business Behavior. oftheprojectwasto The purpose in 2009by theNGO, RedPuentes’ ResearchCenteron oftenChileanbusinesses conducted sustainability reports wasincludedinastudyonthe ARAUCO’s 2008report Benchmarking Reports get feedback onthe2009SustainabilityReport. business units, andvarious levels withintheorganization to sample of82 ARAUCO workers, representingdifferent ofarandom ARAUCO conductedanonlinesurvey Online Survey Consultation Mechanisms •“Review of ARAUO SustainabilityReport”. Report”. •“Jury •“Pre-assessment Results”, ananalysis conducted by representatives ofotherbusinesses. ’s Arauco’s impact is material to the company’s performance. and size the which in entities other and diaries subsi- ventures,corporations, joint includes This management. senior and Board its by managed andS.A.directed Constitución are y and Arauco and activities that are owned directly by Celulosa businesses on information contains report The the areasinwhichitoperates. on thecompany’s indirectimpactonsocietyin coverage ofSociety, providing moreinformation Governance;coverage ofCorporate and (for example,Clarity theuseofvisualresources); improvement infuturereports:Balanceand suggestedanumber ofareasfor The jury ARAUCO’s toothers: report,incomparison The mainconclusionsof Acción RSEwere that The mainareastobeimproved were: Among itsconclusionsarethefollowing: published in August 2010. of Reports Ten BusinessesinChile” Large was The “Assessment SynthesisofSustainability with thecommunities anditslaborpractices. of socialissues, including ARAUCO’s relationship People suggestedbroadercoverage surveyed Interests andExpectations CHAPTER 7AboutthisReport • Has gaps regarding its strategy andrelations • Hasgapsregardingitsstrategy ofthe • Presentsanoutstandingdescription • Isabove average regarding the application • UNGlobalCompact:on Report • CivilSociety: in Add relevantindicators • HumanRights: Broadencoverage using ofthequalitycontent,• Interms andaccessibility, ofform • Interms the with stakeholders. environmental performance. company’s profileanditseconomic of theGRIprinciples;. of theUNGlobalCompact. ofthetenprinciples interms performance addition tothoseincludedinGRI. the relevantindicators. indicators. consumer affairs human rights, and practices fairoperational isneededintheareasof more information for improvement. orareas donotpresentshortfalls reports 3.8 gri 133 2010 Sustainability Report 134 2010 Sustainability Report 3.10 gri 3.9 gri UN Global Compact Principles - GRI Indicators: Cross Reference UN GlobalCompact Principles-GRIIndicators:CrossReference Table tion areidentified andexplained. Any corrections in - previously informa reported areas.and performance forregulations topicsand the standards of each company,internationalthe specific by on based used are that systems management and logies methodo- the follow report this in calculations ofbases the and techniques measurement Data GRI-indicator-related toreport. information little very was there phase, development the in to commence in 2013. Because this project is still expected is operation its and 2011, in begin to field pulp mill. The mill’s is expected construction established in 2009 to build and operate a green- of was Plata Enso.del ventureMontes Stora and ARAUCO joint 50/50 a in owned and naged ma- is which Corporation, signif- Plata del Montes on and information size specific included its ARAUCO icance, considering addition, In Anti-corruption Environment Labor Human Rights

Topic extortion andbribery. extortion inallitsforms,against corruption including Principle 10-Businessesshouldwork environmentally technologies. friendly the development anddiffusionof Principle 9-Businessesshouldencourage environmental responsibility. initiatives topromotegreater undertake Principle 8-Businessesshould challenges. approachtoenvironmental precautionary a Principle 7-Businessesshouldsupport employment andoccupation. inrespectof elimination ofdiscrimination Principle 6-Businessesshouldupholdthe effective abolitionofchildlabor. Principle 5-Businessesshouldupholdthe labor.compulsory offorced and the eliminationofallforms Principle 4-Businessesshoulduphold bargaining. tocollective recognition oftheright freedom ofassociationandtheeffective Principle 3-Businessesshouldupholdthe abuses. that theyarenotcomplicitinhumanrights Principle 2-Businessesshouldmake sure proclaimed humanrights. and respecttheprotectionofinternationally Principle 1-Businessesshouldsupport Global CompactPrinciple

section. found in the GRI Index later that in appears this becan referencedtherein indicators GRI the of rence table follows. content for The eachreport principles.Compact Global with cross-refeThe - Connection,”the “Making indicators GRI link to tool, table equivalence an used has ARAUCO on Progress. Communication annual an provide to mitment company’scom- the fulfill to intended is report Compact.This Global UN the to its commitment affirmed formally ARAUCO 2010, During time.has beenincludedfor thefirst Uruguay in Corporation Plata del Montes the of operations on information the that except report, this in applied methods measurement orscope, the boundaries in made were periods reporting previous from changes significant No SO2 -6 EN30, SO5 EN2, EN5-7, EN10, EN18, EN26-27, EN1 -30, SO5, RP3-4 EC2, EN18, EN26, EN30, SO5 EC7, LA2, LA13-14, HR1-4, SO5 HR1 -3, HR6, SO5 HR1 -3, HR7, SO5 LA4 -5, HR1-3, HR5, SO5 .HR1 -9, SO5 SO5, RP1-2, RP8 EC5, LA4, LA6-9; LA13-14, HR1-9, Pertinent GRIIndicators 3.11 gri 3.4 gri 3.13 gri [email protected] Telephone: 56(2)4617236 ARAUCO Communications Assistant Manager Soledad Vial regardingthisreport,contact: For information Contact ARAUCO did not request external assurance for thisReport. assurance ARAUCO didnotrequestexternal of itscontentsinaccordancewithGRI Application Levels, asdetailedinthefollowing table. verificationcomprehensive after report an B as Level Application report this ARAUCOself-declared Application Levels andExternal Assurance Standard Disclosures Performance Indicators Performance Indicators & Sector Indicators &Sector G3 Management G3 Management G3 Performance G3 Performance

Levels Report Application Supplement Supplement Disclosures Disclosures G3 Profile G3 Profile Approach Approach

Output Output Output

and Environmental. of: Economic,Social, at leastonefromeach Indicators, including of 10Performance Report onaminimum Not required 4.1- 4.4,4.14-4.15 3.1- 3.8,3.10-3.12 2.1- 2.10 1.1 Report on:

Report Externally Assured Responsibility Society, andProduct Human Rights,Labor, Environmental, each of:Economic, at leastonefrom Indicators, including of 20Performance Report onaminimum Category for eachIndicator Approach Disclosures Management 4.5 -4.13,4.164.17 3.9, 3.13 1.2 listed forLevelCplus: Report onallcriteria CHAPTER 7AboutthisReport

*Final versionoftheSupplementSector Report Externally Assured for its omission. for itsomission. b) explainingthereason Indicator or a) reportingonthe by either: to theMaterialityPrinciple Indicator withdueregard and SectorSupplement Report oneachCoreG3 Category for eachIndicator Approach Disclosures Management Level B Same asrequiredfor

Report Externally Assured 135 2010 Sustainability Report 136 2010 Sustainability Report GRI Table GRI Indicator 4.2 4.1 Governance, Commitments, andStakeholder Engagement 3.13 3.12 3.11 3.10 3.9 3.8 3.7 3.6 3.5 3.4 3.3 3.2 3.1 ProfileReport 2.10 2.9 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2.1 Perfil delaEmpresa 1.2 1.1 Indicate whetherthe Chairofthehighestgovernance bodyisalsoanexecutive officer. under highestgovernment body. oftheorganization:Governance structure highestgovernance bodyandcommittees assurance.External Table. or measurementmethodsappliedinthereport. inthe scope, periods boundary,Significant changesfrompreviousreporting and thereasons. reports, Explanation ofanyprovided re-statementsofinformation inearlier Data measurementtechniquesandthebasesofcalculations. onjointventures. Basis for reporting ofthereport. Limitations onthescopeorboundary ofthereport. Boundary content.Process for definingreport Contact pointfor questionsregardingthereport. cycle. Reporting Date ofmostrecentpreviousreport. period. Reporting Awards received in201060-61. Significant changesin ARAUCO regardingsize andstructure. organization: Numberofemployees,Scale ofthereporting netsalesandtotalassets. served. Markets andlegalform. Nature ofownership operates. wheretheorganization Countries Location of ARAUCO’s headquarters. companies, subsidiaries, andjointventures. oftheorganization, structure includingmaindivisions,Operational operating brands, products,Primary and/orservices. Name oftheorganization. Company’s sustainabilitystrategy. Statement fromthemostseniordecisionmaker oftheorganization. Description 20, 22-23, 26-33 20, 49-50 Book Flap Book Flap 136 -142 133 -134 60 -61 24 -25 36 -37 34 -35 40 -44 14 -19 4 -11 Page 135 134 134 134 133 132 132 135 132 132 132 49 24 21 GRI Indicator EC4 EC3 EC2 EC1 Aspect: EconomicPerformance Performance Indicators 4.17 4.16 4.15 4.14 Stakeholder Engagement 4.13 4.12 4.11 Commitments toExternalInitiatives 4.10 4.9 4.8 4.7 4.6 4.5 4.4 4.3 Significant financial assistancereceived from government. Coverage of ARAUCO’s definedbenefitplan obligations. climate change. for ARAUCO’s andopportunities Financial implicationsandotherrisks activitiesdueto • Payments togovernments (taxes) • Payments (interests) tocapitalproviders • Retainedearnings • Donationsandothercommunity investments • Employee compensation costs • Operating • Revenues anddistributed,Direct economicvaluegenerated including: hasresponded. the organization thathave throughstakeholderKey topicsandconcerns engagement, beenraised andhow Approaches tostakeholder engagement. withwhomtoengage.Basis for identificationandselectionofstakeholders List ofstakeholder groupsengagedby theorganization. inassociations.Memberships orendorses. subscribes initiatives towhichtheorganization developedExternally economic, environmental, principles, andsocialcharters, orother 15oftheRioPrinciples). (Article principle Precautionary environmental, andsocialperformance. Processes for evaluatingthehighestgovernance body’s regardingeconomic, performance of economic, environmental, andsocialperformance. Procedures ofthehighestgovernance bodyfor theorganization’s overseeing management Statements ofmissionorvalues, codesofconduct, andprinciples. economic, environmental, andsocialaspects. ofthehighestgovernance bodyon ofthemembers Qualifications andexpertise avoided.. Processes inplacefor thehighestgovernance bodytoensureconflicts ofinterestare managers, andexecutives andtheorganization’s performance. ofthehighestgovernance body,Linkage between compensationfor members senior Mechanisms for employees tocommunicate withthehighestgovernance body. members. ofthehighestgovernance bodythatareindependentand/ornon-executiveMembers Description CHAPTER 7AboutthisReport 54 -55, 133 33, 71 - 72 70 -71 58 -59 56 -57 49 -50 N/A N/A Page 51 51 51 49 49 48 49 49 50 50 49 137 2010 Sustainability Report 138 2010 Sustainability Report GRI Table GRI Indicator EN15 EN14 EN13 EN12 EN11 Aspect: Biodiversity EN10 EN9 EN8 Aspect: Water EN7 EN6 EN5 EN4 EN3 Aspect: Energy EN2 EN1 Aspect: Materials Environmental Performance Indicators EC9 EC8 Aspect: Indirect EconomicImpacts EC7 EC6 EC5 Aspect: Market Presence habitats inareasaffected by operations. listspecieswith Number ofIUCN Red Listspeciesandnationalconservation Strategies, actions, current andfutureplansfor managingimpactsonbiodiversity. Habitats protectedorrestored. valueoutsideprotectedareas. in protectedareasandofhighbiodiversity ofsignificantimpactsactivities,Description products, onbiodiversity andservices valueoutsideprotectedareas.and areasofhighbiodiversity Location andsize oflandowned, leased, managedin, or adjacentto, protectedareas Percentage andtotalvolume ofwaterrecycledandreused. Water sourcessignificantly affected ofwater.by withdrawal Total by waterwithdrawal source. consumptionandreductionsachieved..Initiatives toreduceindirectenergy requirementsasaresultoftheseinitiatives.services, andreductionsinenergy Initiatives basedproductsand orrenewable toprovide energy energy-efficient andefficiencyimprovements. savedEnergy duetoconservation source. consumptionby primary Indirect energy source. energy consumptionby primary Direct energy Percentage usedthatarerecycledinputmaterials. ofmaterials usedby weightMaterials orvolume. extent ofimpacts. significantindirecteconomicimpacts, anddescribing Understanding includingthe for public benefitthroughcommercial,primarily inkind, orprobonoengagement. provided investments andservices Development andimpactofinfrastructure atlocationsofsignificantoperation. Procedures for localhiring locations ofoperation. Policy, atsignificant ofspendingonlocally-based suppliers practices, andproportion significant locationsofoperation. level wagecomparedtolocalminimum wageat Relation between standardentry Description 87 -88 82 -88 81 -82 72,116 32, 79 N/A Page 82 81 80 80 80 79 79 78 78 78 73 73 73 72 GRI Indicator LA4 Aspect: Labor/Management Relations LA3 LA2 LA1 Aspect: Employment Labor PracticesandDecent Work Performance Indicators EN30 Aspect: General EN29 Aspect: Transport EN28 Aspect: Compliance EN27 EN26 Aspect: Products andservices EN25 EN24 EN23 EN22 EN21 EN20 EN19 EN18 EN17 EN16 Aspect: Emissions, Effluents, and Waste Percentage of employees covered by agreements.. collective bargaining employees,or part-time by majoroperations. Benefits provided to full-timeemployees thatarenotprovided totemporary Total ofemployee number andrate turnover by agegroup, gender, andregion. Total by workforce employment type, employment contract, andregion. Total environmental protectionexpendituresandinvestments by type. of theworkforce. usedfor and materials ARAUCO’s members operations, andtransporting productsandothergoods Significant environmental impactsoftransporting for noncompliancewithenvironmental laws sanctions valueofsignificantfinesandtotal number ofnon-monetary Monetary by category. Percentage thatarereclaimed ofproductssoldand theirpackagingmaterials of impactmitigation. Initiatives tomitigateenvironmental impactsofproductsandservices, andextent runoff.habitats significantly affected ofwaterand by discharges Identity, size, protectedstatus, valueofwaterbodiesandrelated andbiodiversity oftheBaselConvention.under theterms Weight imported,exported,ortreatedwastedeemedhazardous oftransported, Total number andvolume ofsignificantspills. Total weight ofwasteby typeanddisposalmethod. Total by qualityanddestination. waterdischarge NO, SO, andothersignificantairemissions by typeand weight. Emissions ofozone-depleting substancesby weight. Initiatives toreducegreenhousegasemissionsandreductionsachieved. Other relevantindirectgreenhousegasemissionsby weight. Total directandindirectgreenhousegasemissionsby weight. Description CHAPTER 7AboutthisReport

95 -96 89 -90 N/A N/A Page 97 95 95 81 90 89 89 89 89 89 89 88 88 88 88 139 2010 Sustainability Report 140 2010 Sustainability Report GRI Table GRI Indicator HR5 Aspect: Freedom of Association andCollective Bargaining HR4 Aspect: NonDiscrimination HR3 HR2 HR1 Aspect: Investment andProcurement Practices Human RightsPerformance Indicators LA14 LA13 Aspect: Diversity andEqualOpportunity LA12 LA11 LA10 Aspect: Training andEducation LA9 LA8 LA7 LA6 Aspect: OccupationalHealthandSafety LA5 rights. risk, may these collective beatsignificant bargaining andactionstaken to support right toexercise identified freedomofassociationand inwhichthe Operations Total andactionstaken. number ofincidentsdiscrimination trained. thatarerelevanttooperations,human rights includingthepercentageofemployees Total aspectsof ofemployee onpoliciesandproceduresconcerning hours training andactionstaken. on humanrights thathave screening undergone Percentage andcontractors ofsignificantsuppliers screening. clausesorthathave humanrights human rights undergone Percentage andtotalnumber ofsignificantinvestment agreementsthatinclude ofmentowomen by employeeRatio ofbasicsalary category. of diversity. according togender, agegroup, group membership, minority andotherindicators Composition ofgovernance bodiesandbreakdown ofemployees percategory reviews. Percentage ofemployees andcareerdevelopment receivingregularperformance employability ofemployees andassisttheminmanagingcareerendings. thecontinued forthatsupport skillsmanagementandlifelongPrograms learning peryear peremployee oftraining Average by hours employee category. Health andsafety unions.. topicscovered agreementswithtrade informal diseases. members,assist workforce theirfamilies, regardingserious orcommunity members Education, training, counseling, prevention, inplaceto programs andrisk-control related fatalitiesby region. Rates ofinjury, occupationaldiseases, lostdays, andabsenteeism, andnumber ofwork and safety programs. health andsafety committeesthathelpmonitorandadviseonoccupationalhealth Percentage jointmanagement–worker representedinformal oftotalworkforce specified incollective agreements. changes, regardingoperational Minimum noticeperiod(s) includingwhetheritis Description 102 -108 100 -101 98 -100 Page 127 109 109 127 108 108 108 102 101 97 98 97 GRI Indicator PR1 Aspect: CustomerHealth andSafety Product ResponsibilityPerformance Indicators SO8 Aspect: Compliance SO7 Aspect:Behavior Anti-Competitive SO6 SO5 Aspect: PublicPolicy SO4 SO3 SO2 Aspect: Corruption SO1 Aspect: Community Society Performance Indicators HR9 Aspect: IndigenousRights HR8 Aspect: SecurityPractices HR7 Aspect: Forced Labor HR6 Aspect: ChildLabor categories subjecttosuchprocedures.categories assessed for improvement, andpercentageofsignificant productsandservices are Life cyclestagesinwhichhealthandsafety impactsofproductsandservices for noncompliancewithlaws andregulations. sanctions valueofsignificantfinesandtotal numberofnon-monetary Monetary andtheiroutcomes. practices Total number of legalactionsfor anticompetitive behavior, anti-trust, andmonopoly related institutionsby country. Total topoliticalparties,politicians, valueoffinancialandin-kindcontributions and inpublic policydevelopment andlobbying. Public policypositionsandparticipation Actions taken inresponsetoincidentsofcorruption. and procedures. Percentage ofemployees in trained policies ARAUCO’s anti-corruption to corruption. Percentage andtotalnumber of ARAUCO’s business unitsanalyzed related for risks oncommunities,the impactsofoperations includingentering, operating, andexiting. Nature, scope, thatassessandmanage andeffectiveness andpractices ofany programs actions taken. Total number ofincidentsviolationsinvolving ofindigenouspeopleand rights thatarerelevanttooperations. aspectsofhumanrights concerning in trained PercentageARAUCO’s personnel ofsecurity policiesorprocedures labor, labor. totheeliminationofforced orcompulsory andmeasurestocontribute identified ashavingriskOperations forincidentsof forcedorcompulsory significant totheeliminationofchildlabor.measures taken tocontribute identified ashavingriskOperations forincidentsofchildlabor, significant and Description CHAPTER 7AboutthisReport 127 -128 112 -127 108, 129 44 -45 Page 129 129 129 128 128 127 109 109 109 141 2010 Sustainability Report 142 2010 Sustainability Report GRI Table NA: Notavailable GRI Indicator PR9 Aspect: Compliance PR8 Aspect: CustomerPrivacy PR7 PR6 Aspect: Marketing Communications PR5 PR4 PR3 Aspect: labeling Product andservice PR2 concerning theprovision anduseof concerning ARAUCO’s productsandservices. valueofsignificantfines fornoncompliance with laws andregulations Monetary and lossesofcustomerdata. Total number ofsubstantiatedcomplaintsregardingbreachescustomerprivacy by typeofoutcomes.sponsorship communications, marketing codes concerning includingadvertising, promotion, and Total number ofincidentsnon-compliancewithregulationsandvoluntary communications, includingadvertising, promotion, andsponsorship. for adherencetolaws,Programs standards, codesrelatedtomarketing andvoluntary customer satisfaction. relatedtocustomersatisfaction, Practices measuring includingresultsofsurveys andlabeling, information by productandservice typeofoutcomes.concerning Total codes number ofincidentsnon-compliancewithregulationsandvoluntary requirements. subjecttosuchinformation of significantproductsandservices Type requiredby information procedures, ofproductandservice andpercentage by typeofoutcomes. theirlife cycle, during healthandsafety impactsofproductsandservices concerning Total codes number ofincidentsnon-compliancewithregulationsandvoluntary Description Page 45 45 45 45 45 45 45 45 Appendices

Business Offices Addresses Glossary Certifications Environmental Permits 144 2010 Sustainability Report Business Offices e-mail: [email protected] Fax Tel. Suite 500, Atlanta, GA30328, USA 5901 Peachtree Dunwoody RoadNE. USA e-mail: [email protected] Fax Tel. Buenos Aires, Argentina López (B1638AEC) Vicente Gdor. Valentín Vergara 403, Piso3 Argentina e-mail: araucodistribució[email protected] 50530,Casilla Central Santiago Fax Tel. Lampa, Santiago, Chile Av. PresidenteFreiMontalva21100 Arauco DistribuciónS.A. e-mail: [email protected] Casilla 880, Santiago Fax Tel. Las Condes, Santiago, Chile Av. ElGolf150, Piso14 Head SalesOffice Chile

: : : : : : : :

(1-770) 350-1658 (1-770) 350-1659 (54-11) 5556-6017 (54-11) 5556-6000 (56-2) 425-8109 (56-2) 425-8000 (56-2) 698-5967 (56-2) 461-7200 Fax Tels. Bogotá, Colombia Calle 98, N˚21-50, Of. 801-802 Colombia e-mail: [email protected] Fax Tels. C.P. 45010 Zapopan, Jalisco, México Torre Corey, ColoniaCiudadGranja, Av. 6503,Vallarta Piso5 Mexico e-mail: [email protected] Fax Tel. Tokyo 107-0052, Japan 7-3-9 Akasaka,Minato-Ku Akasaka SanshinBuilding, 2 Japan Fax Tel. Mob. P.R. China Huangpu District, Shanghai200002, 222 Yan An Rd. East RM1816, 18FBundCenter, China

: : : : : :

: : : (57-1) 805-2611 (57-1) 742-9282/742-9283 Ext. 103 (52-33) 3110-0235/3793-01463110-0467 (81-3) 3583-7352 (81-3) 358-7020

(86-21) 6335-1336 (86-21) 6132-3877 (86-159) 2182-1750 nd Floor Tel. Australia Sydney-NSW2060 North Level 6, 90MountStreet Australia e-mail: [email protected] Fax Tel. Netherlands Leiden, The Schipholweg 114, 2316XD Europe e-mail: [email protected] Fax Tel. Miraflores, Lima, Perú Av. 830, SantaCruz Oficina301 Peru e-mail: [email protected] Fax Tel. Curitiba, Paraná, Brasil CEP 81610-180 Hauer160,Rua Roberto Vila Hauer Brazil

: : : : : : :

(61-2) 9956-8874 (31-71) 7890299 (31-71) 789-0250 (51-1) 222-0420 (51-1) 319-0850 (55-41) 3217-7227 (55-41) 3217-7171 145 2010 Sustainability Report 146 2010 Sustainability Report Tel. Las Condes, Santiago, Chile Av. ElGolf150, Piso14 Headquarters Main Offices Addresses Fax Tel. Concepción, Chile Los Canelos71, SanPedro deLaPaz Concepción Fax Tel. Buenos Aires, Argentina López (B1638AEC) Vicente Gdor. Valentín Vergara 403, Piso3 Argentina Fax Tel. Curitiba-PR-Brasil Vila Hauer, CEP81610-180 Hauer160 Rua Roberto Brazil Fax Tel Montevideo, Uruguay Complejo WTC, Torre 3, Piso9 1248 deHerrera Luis Alberto Uruguay Fax Tel. Concepción, Chile 553,San Martín PlantaLibre Bío-Bío Region Offices Public Affairs Fax Tel. Talca, Chile Edificio PlazaCentro 801,1 Norte Piso12 Maule Region Fax Tel. Valdivia, Chile Independencia 501, Oficina502 Los RíosRegion Fax

: : : : : : : : : : : : : : : :

(56-2) 461-7200 (56-2) 698-5967 (56-41) 286-7800 (56-41) 237-2693 (54-11) 5556-6000 (54-11) 5556-6057 (55-41) 3217-7280 (55-41) 3217-7212 (598-2) 623-6300 (598-2) 623-6301 (56-41) 286-7750 (56-41) 286-7771 (56-71) 233-737 (56-71) 233-737 (56-63) 271-350 (56-63) 271-351 Fax Tel. Nueva Aldea, Ránquil, Chile Autopista delItata, Km. 21 Mill Nueva Aldea Fax Tel. Constitución, Chile Av. Mac-Iver 505 Constitución Mills Fax Tel. Licantén, Curico, Chile Camino aIloca, Km. 3 Planta Licancel Pulp Mills Fax Tel. Coronel, Chile Camino aCoronel, Km. 15s/n Bioforest S.A. Investigaciones Forestales Fax Tel. Casilla 215Constitución, Chile Av. Schepeler515 Gregorio Fax Tel. Casilla 442Chillán, Chile 986 Norte Panamericana Forestal Celco Fax Tel. Chile Valdivia, Casilla 347SalidaNorte, s/n Camino SantaElvira Forestal Valdivia Fax Tel. Arauco, Chile Los Horconess/n Bosques Arauco Forestry

: : : : : : : : : : : : : : : :

(56-41) 286-2013 (56-41) 286-2000 (56-71) 671-036 (56-71) 200-800 (56-75) 460-028 (56-75) 205-000 (56-41) 272-8801 (56-41) 272-8800 (56-71) 671-903 (56-71) 200-900 (56-42) 272-717 (56-42) 204-200 (56-63) 209-300 (56-63) 209-200 (56-41) 250-9116 (56-41) 250-9100 Fax Tel. Yungay, Chile Camino Cholguáns/n Trupán CholguánMill Panel Mills Fax Tel. Misiones, Argentina CP 3374ZCH,Libertad Puerto Ruta 12, Km1612 Bossetti Sawmill (Anexo 201) Fax Tel. Argentina Piray,Puerto Misiones 16),(ex ruta Km. 1, Av. Goycochea s/n Alto ParanáSawmill Fax Tel. Concepción, Chile Los Canelos7, SanPedro deLaPaz Concepción Sawmills Fax Tel. Misiones, Argentina CP 3378,Esperanza Puerto Ruta NacionalNº12, Km. 1588 Alto ParanáMill Fax Tel. Valdivia, Chile San JosédelaMariquina Ruta 5Sur, Km. 788 Valdivia Mill Fax Tel. Arauco, Chile Los Horconess/n Arauco Mill

: : : : : : : : : : : : : :

(56-41) 286-4429 (56-41) 286-4600 (54-3757) 496-600 (54-3757) 496-600 (54-3751) 460-011 (54-3751) 460-500 (56-41) 237-2693 (56-41) 286-7800 (54-3757) 488-099 (54-3757) 488-000 (56-63) 631-412 (56-63) 631-700 (56-41) 250-9401 (56-41) 250-9400 Fax Tel. Curitiba, Paraná, Brasil CEP 81610180 Hauer160,Rua Roberto Vila Hauer Curitiba PBMill Fax Tel. Jaguariaiva, Brasil CEP 84200-000 Rodovía PR092, Km. 228,5 Jaguariaiva MDFMill Fax Tel. Buenos Aires, Argentina CEP 2800 deZárate Parque Industrial Camino delaCostaBravas/n Zárate PBMill (Anexo 201) Fax Tel. Argentina Piray,Puerto Misiones 16),(ex ruta Km. 1, Av. Goycochea s/n Piray MDFMill Fax Tel. Nueva Aldea, Ránquil, Chile Autopista delItata, Km. 21 Nueva Aldea Plywood Mill Fax Tel. Arauco, Chile Los Horconess/n, Acceso Sur Arauco Plywood Mill

: : : : : : : : : : : :

(55-41) 3217-7212 (55-41) 3217-7280 (55-41) 3217-7613 (55-43) 3535-1870 (54-3487) 444-040 (54-3487) 444-000 (54-3751) 460-011 (54-3751) 460-500 (56-41) 286-2707 (56-41) 286-2700 (56-41) 257-1155 (56-41) 226-0600 147 2010 Sustainability Report 148 2010 Sustainability Report treatment plants. ten usedtogaugetheeffectiveness ofwastewater asaresult.dissolved inthereceivingwaters Itisof- posed by biological organisms, consuming the oxygen compounds found inwastewaterthat canbedecom- thatidentifies theamountoforganic A parameter (Biochemical OxygenDemand) BOD papermaking. compounds towhitenthecolorofpulpusedin chemical orotherinorganic A processusingchlorine Bleaching using chemicals. has been improved brightness Pulp in which natural Bleached Pulp tocreateenergy.pulping processorburned torecovercentrated thechemicalsfor reuseinthe hemicelluloses, chemicals)thatiscon- andinorganic An aqueousbyproduct (consisting ofligninresidues, Black Liquor livingorganisms. porting and atmospherecapable ofsup- oftheearth The part Biosphere production. dustrial thatcanbeusedasfuelorfor in- Biological material Biomass species (geneticdiversity). within andthevariety of species(speciesdiversity) ofecosystems(ecosystemdiversity),riety thevariety oflife onthreelevels: tothevariety Refers theva- Biodiversity matterinpulpmillwastewater.ded organic bromine andiodine)boundtodissolved orsuspen- Measure of the total amount of halogens (chlorine, (Absorbable OrganicHalogens) AOX Glossary of Terms of Glossary carbon dioxide orcarbondioxide equivalent(CO of the level of emissions of ten expressed in terms caused by anorganization, event orproduct. Itisof- The totalsetofgreenhousegas(GHG)emissions (see alsoGreenhouse Gases) Carbon Footprint Change. developed by Panel the Intergovernmental on Climate more widely acceptedprotocolsfor thismeasurewas effect of carbondioxide.global warming Oneofthe hexafluoride (SF hexafluoride carbons (HFCs), perfluorocarbons(PFCs)andsulfur (methane (CH potentialoffive differentwarning gaseouscompounds oftheglobal A measurethatallows thecomparison storing that carbon for years tocome. thatcarbonfor years storing (or a matureforest andactsasarepository “sink”) by trees, bindscarbon dioxide more efficiently thandoes the wood fiber. A young forest, composedofgrowing or decomposition of it is released through the burning sugars. This carbonremainsstored(or “bound”) until sis,” plants store thiscarbon as cellulose, starches, and atmosphere. Through aprocesscalled “photosynthe- Trees andotherplantsabsorbcarbondioxide fromthe Carbon StorageandSinks duct managementcanbedevised. gical developments and /orbetterprocessandpro- is known, thatemploys technolo- areductionstrategy sions assessment. Oncethesize ofacarbonfootprint a GHG emis- event canbemeasured by undertaking ofanindividual,The carbonfootprint or organization Carbon Dioxide Equivalent(CO ofvegetableburning matter, amongotherprocesses. a byproduct ofthecombustion offossil fuelsorthe sis to make sugars. as Carbon dioxide is generated Carbon dioxide photosynthe- isusedby plantsduring atoms covalently bondedtoasinglecarbon atom. A chemicalcompoundcomposedoftwo oxygen (See alsoGreenhouse Gases) Carbon Dioxide (CO EmissionReductioncredits) (see Certified Carbon Credits 4 ), nitrousoxide (N 6 ) asexpressedinequivalencetothe 2 ) 2 e) 2 O), hydrofluoro - 2 e). lent (CO of carbondioxide (CO ton represents a reduction in emissions of one metric of greenhouse gas reductions achieved. Each credit Mechanism-registered projectsbasedontheamount ofCleanDevelopment CERs areissuedtooperators (CERs or “Carbon Credits”) EmissionReductionCreditsCertified NGO. by FundaciónChile, anationaltechnology-transfer tainable management of plantation forests, developed Chileannationalstandardfor the sus- The voluntary (See alsoSustainableForest Management.) CERTFOR nical Standards, anon-governmental organization. cation, developed by theBrazilian Association of Tech- - standardfor forest managementcertifi The Brazilian (See alsoSustainableForest Management.) CERFLOR effort tocombatglobalclimatechange. effort duced emissionofgreenhousegasses(GHG)inan lished by theKyoto Protocoltoincentivize there- One ofthethreeflexiblemechanismsestab- market Clean Development Mechanism(CDM) bleaching agentanddisinfectant. A heavy, reddish-yellow gasusedinsolutionasa Chlorine Dioxide (ClO quality ofwater. matter found ineffluents. Itisusedtomeasurethe theamountoforganic todetermine A parameter Chemical OxygenDemand(COD) to thefinalendproduct. through from its origin ponent of a product is traced processbyThe step-by-step whichacom- monitoring Chain ofCustody(CoC) 2 e). 2 2 ) orcarbondioxide equiva- ) and entrepreneurgrowth withintheprovince. business gional government. istofurther Itspurpose the province’s businesses and the re- forestry Arauco ince. by non-profitentitysupported This isaprivate for theDevelopment of Corporation prov- Arauco CORPARAUCO business. sionals relatedtotheforestry tion, ofcompanies, comprised executives andprofes- associa- trade Chile’s forest-industry leadingprivate (Corporación ChilenadelaMadera) CORMA business development. agencypromotinginvestmenternment andsmall- Chilean EconomicDevelopment Agency, agov - CORFO in whichgenetically-modified treeshave beenplanted. ecosystems, fromnatural-forest verted orfromforests forests,from high-conservation-value fromareascon- tained illegally, orcivilrights, inviolationoftraditional auditor must that the wood verify has not been ob- ensure CWcompliance, anFSC-approved, third-party holder,certificate not the wood supplierorFSC. To (CW) standardisthe responsibility ofthe FSC CoC products. Adherence to the FSC Controlled Wood wood inmixed-wood-content ned withFSC-certified tobeunacceptable sourcesisnotcombi- considers that mandates verification wood fromwhatthe FSC A ForestStewardshipCouncil(FSC)standardwhich Controlled Wood Chile’s NationalEnvironmental Commission CONAMA over timeperiods." comparable observed variability climate atmosphere andwhichisinadditiontonatural thecomposition of theglobal man activitythatalters directly orindirectlyclimate whichisattributed to hu- mate Changedefines climatechangeas"a of Convention on Cli- The UnitedNationsFramework Climate Change 149 2010 Sustainability Report 150 2010 Sustainability Report be met before a facility can be certified as compliant.be metbefore afacilitycanbecertified rigorous requirementsthat dard thatspecifiesmust QualityManagementSystemstan- An international (International Standards Organization) ISO-9001 andestablished businessespreneurial alike. innovation inentre- research andfurthering porting withsup- The mainChileanpublic agencycharged INNOVA CHILE importance. critical are consideredtobeofoutstandingsignificanceor habitatswhichpossessareasthat that containnatural meaning,taken onamoregeneral toforests referring published in1999.and first Over time, has thisphrase developed by theForestStewardshipCouncil(FSC) The conceptofHighConservation Value Forestswas High Conservation Value Forest -HCVF in theatmosphere. hasincreasedthelevels ofgreenhousegases century activitysincethemid-eighteenth man industrialization bon dioxide; methane; nitrousoxide; andozone. Hu- atmosphereare:gases intheEarth’s car watervapor; ing at the surface of a planet. The main greenhouse within thesurface-tropospheresystemcausingheat- heat that trap range infrared tion within the thermal - Gases inanatmospherethatabsorbandemitradia (see alsoCarbonFootprint) Greenhouse Gases(GHG) toFSCstandards. under certification 130 millionhectares(320acres)offorest were standards.tion toitsendorsed At theendof2010, - certifica ble forest managementthroughthird-party a globallytopromoteresponsi- recognized program thatoperates non-profitorganization An international Forest Stewardship Council(FSC) and theenvironment. cludes respectfor ethicalvalues, people, communities to a vision of business that in- refers generally term Though thereisstillnosingleaccepteddefinition, this Corporate SocialResponsibility(CSR) Glossary of Terms of Glossary - NO andcoveragebeyond greaterthan25%. two meters tum isconstitutedby native species, reachingheights native- forest isanecosysteminwhichthearborstra Corporation,According toChile’sa NationalForestry Native Forest pliant. ascom- must bemetbefore afacilitycanbecertified rigorous requirementsthat standard thatspecifies Environmental Management System An international (International Standards Organization) ISO-14001 tion processesandproducts. business production, aswell asthequalityofproduc- competencies inordertoimprove force and work istopromotethedevelopment oflabor Its purpose National Skills-trainingandEmployment Service SENCE fied forests asofDecember31, 2010. - than 570millionacres(230hectares)ofcerti schemesthataccount for more national certification system, endorsement recognizing25 rest certification threshold requirements. fo PEFCistheworld’s- largest schemesasmeetingcertain tional forest certification na- Schemes(PEFC) endorses of ForestCertification for theEndorsement Programme The international Schemes) Certification (Programme for theEndorsementofForest PEFC ascompliant. be metbefore afacilitycanbecertified requirements which must dard thatspecify rigorous Occupational Health and Safety stan- An international (Occupational HealthandSafety Assessment Series) OHSAS 18001 photochemical smog. toproducing ozone andcancontribute in to acidrain ing nitrogen are burned. Nitrogen dioxide contributes whenfuelscontain- Chemical compoundthatoccurs (Nitrogen Dioxide) 2

(ClO dioxideBleaching chemicalusedfor makingchlorine Sodium Chlorate manufacture ofpulp, paperorboard. Wood fiber thathasnotbeenpreviously usedinthe Virgin Fiber and/ornationally acceptedstandards. internationally accordingto ment offorest managementpractices schemesrequireindependent assess- Certification economic andsocialvalues. The more-credible SFM cally takes intoaccountabalanceofenvironmental, tainable forest management.typi- SFMCertification aimed at promoting sus- instrument A market-based Sustainable Forest Management(SFM)Certification present andfuturegenerations. mental, for economic, opportunities social and cultural the benefitofalllivingthingswhileproviding environ - healthofforest ecosystemsfor enhance thelong-term thatmaintainand Management planningandpractices Sustainable Forest Management physical, natural, andhumancapital. bility, whichcanbeachieved bymanaging rationally includes economic, environmental, andsocialsustaina- Sustainable development peopleface." portunities andenhancetheop- ofassetstopreserve portfolio sustainable development is"aprocessofmanaging a According toadefinitionused by the Bank,World Sustainable Development ing ozone inphotochemicalsmog. toproduc- andcancontribute toacidrain contributes contains sulfur, typically coalandoil. Sulfurdioxide Chemical compoundproducedbyfuelthat burning Sulfur Dioxide (SO dominant bleaching agentinusetoday. 2 ) tobleach pulp. dioxide isthepre- Chlorine 2 ) 151 2010 Sustainability Report 152 2010 Sustainability Report Forestry Business:CurrentCertifications (Chile) Certifications (4) Chain ofCustody, the Pulpmill,managedby GOF. for FSCSTD40-004and FSCSTD40-005. (forestryoperationspurchasedEufores from EnceinUruguay),andwhicharenow (3) tocertificatesawarded inthe tablerefer areas(FM/CoC)identified The FSCcertified (2) CERFLOR/PEFC. (1) Controlled Wood FSCSTD30-010. BrazilandUruguay)(Argentina, Forestry Business:CurrentCertifications (2) areaincludes Forestal (1) Certified Valdivia and Forestal delSurproperty. Alto Paraná (Forestal Misiones) ARGENTINA (Joint Forestry Business) Montes delPlata Country /Company Forestal Celco&F. Cholguán CHILE Country /Company Florestal Arapoti FAPLAC, (Bosques) Alto Paraná (Forestal Misiones) URUGUAY Forestal Valdivia

Arauco doBrasil BRAZIL

Forestal LosLagos Bosques Arauco The certified area refers only to ARAUCO-operated forests and does not include anyforests anddoes notinclude arealeased tothird toARAUCO-operated only parties. arearefers The certified part ofMontesdelPlata. Today, as anentityinandofitself. stillexistsasalegalentity andthesecertificatesarevaliduntil MontesdelPlataiscertified Eufores ownedbyany Forestal LosLagos. forest areamanagedbyTotal Arauco(proprietary+FRGagreementleasedABP)doesnotinclude allforest asofDecember2010.Includes forestland (3) (1) Certification Certification FSC FSC FSC FSC FSC CERTFOR FSC FSC FSC CERFLOR FSC CERTFOR FSC CERTFOR CERTFOR CERTFOR FSC FSC FSC FSC FSC CERTFOR Program Program (2)

(2) Certification Certification MF/MC CoC MF MF/COC CoC MF FM/CoC MF/CoC CoC MF/COC CoC /CW MF MFS MFS CoC CoC CoC CoC CW CoC /CW CoC /CW MFS (As ofDecember31,2010) (1) (3) (4) N/A 46,392 acres 18,774 ha 658,318 acres 713,900 acres 1,383,536 acres 559,897 ha 266,412 ha N/A N/A N/A N/A N/A N/A N/A 288,905 ha Certified Area Certified Area 101,660 acres 41,140 ha N/A 297,910 acres 120,560 ha 122,144 acres 49,430 ha 298,914 acres 120,966 ha N/A 122,144 acres 49,430 ha 15,805 acres 6,396 ha N/A (2) (2) (2) First Certification First Certification 2003 -2008 2009 -2014 2008 -2013 2003 -3008 2004 -2009 2004 -2009 2009 -2014 2002 -2007 2009 -2014 2002 -2008 2003 -2008 2003 -2008 2003 -2008 2008 -2013 2004 -2009 2004 -2009 2004 -2009 2008 -2013 2009 -2014 2008 -2013 Date Date (As ofDecember31,2010) Re-certification Re-certification 2008 -2013 2008 -2013 2009 -2014 2009 -2014 2014 -2019 2008 -2013 N/A 2008 -2013 2008 -2013 2008 -2013 2008 -2013 2008 -2013 2009 -2014 2009 -2014 2009 -2014 2008 -2013 N/A N/A Last Last Production Businesses:CurrentCertifications (Chile) (2) (1) Other Forestry BusinessCertifications 8 SawMills Business Sawn Timber (Hardboard) Trupan (MDF)-Cholguán Nueva Aldea-Plywood Horcones -Plywood Panel Business 4 RemanufacturingFacilities Valdivia PulpMill Nueva AldeaPulpMill Licancel PulpMill Constitución PulpMill Arauco PulpMill Pulp Business (Joint Forestry Business) Montes delPlata URUGUAY Florestal Arapoti Arauco doBrasil BRAZIL Forestal Celco&Cholguán CHILE Country /Company Business /Facility Alto Paraná (Forestry) ARGENTINA Forestal LosLagos Forestal Valdivia Bosques Arauco and has not been certified asanentityinandofitself.and has notbeencertified The integrationprocessofthesesystems began inlate2009. ascomplianttoISO14001andOHSAS18001.MontesdelPlataisajoint-venturecompany operationsarecertified Former StoraEnsoUruguayandEufores Zárate. Misiones.Doesnotinclude Only (2)

(1) CERTFOR Chain of Custody X X X X X X X X X X ISO 14001 X X X X X FSC Chainof SGS COC6456 SGS COC5376 SGS COC6455 Custody

(As ofDecember31,2010) ISO 14001 OHSAS 18001 X X X X X X X X X X X X X X OHSAS 18001 X X X X X (As ofDecember31,2010) ISO 9001 X X X X X ISO 9001 ISO 17025 X X

153 2010 Sustainability Report 154 2010 Sustainability Report (3) asCARB PhaseforallMDFproductthicknesses. The 1compliant, Piênfacilityiscertified (2) asCARBPhaseforallproductthicknesses. The 2compliant, Jaguariaivafacilityiscertified AirResourcesBoard. (1) California (1) Thefor ResponsibleCareoftheEnvironment since1995. AltoParaná ascompliantwiththeProgram ChemicalPlantalsohas beencertified This programismanaged by the Production Businesses:CurrentCertifications (Argentina) Production Businesses:CurrentCertifications (Brazil) Alto Paraná -ChemicalPlant Panel Business Piray -Remanufacturing Bossetti -Sawmill Piray -Sawmill Business Sawn Timber Alto Paraná Pulp Business Zárate -Particleboard Jaguariaiva -MDF Piray -MDF Araucaria -ChemicalPlant Piên -MDFandParticleboard Curitiba -Particleboard Panel Business Facility Business /Facility Chemical and Petrochemical Industry Chamber (CIQyP), and is an initiative to achieve continuous improvement in environmental health and safety issues. Chemical andPetrochemicalIndustryChamber (CIQyP),andisaninitiativetoachievecontinuousimprovement inenvironmentalhealthandsafety (2) (1) (3) CERTFOR Chain CERLFOR of Custody X SW COC1150 SW COC1149 SW-COC-000706 FSC Chain of Custody SGS COC6261 FSC Chain of Custody ISO 14001 X X ISO 14001 X X X X X X X OHSAS 18001 X X OHSAS 18001 (As ofDecember31,2010) (As X X X X X X X (As ofDecember31,2010) ISO 9001 X X X X ISO 9001 CARB X X X X X X X X (3) (2) (1) Environmental permits,processedandapproved in2010,by country (3) (2) (1) CHILE New particleboard panel millin Teno, Chile Expansion ofElColoradoSawmill Country /ProjectName Investment ProjectEnvironmental Permits FiledDuring2010 CHILE CHILE Country /Project Investment ProjectEnvironmental Permits Approved During2010 New pulpmill,energyplantandportfacilitiesatPuntaPereira New duty-freeportatPuntaPereira URUGUAY New MDFline(#2)atJaguariaíva New treatmentlineandpanel pressingline2atJaguariaíva BRAZIL for the treatedeffluents Valdivia Mill New underwaterpipelinefor Extraction andprocessingofaggregate:ElDescabezadoQuarry Extraction andprocessingofaggregate:ElBoldoQuarry Increase inextractionandprocessingofaggregate:LosPinosQuarry Increase inextractionandprocessingofaggregate:QuirihueQuarry Increase inextractionandprocessingofaggregate:PobreNegroQuarry Increase inextractionandprocessingofaggregate:Forel Quarry Increase inextractionandprocessingofaggregate:SantaMartaQuarry Increase incapacity throughNuevaAldeaPulpMilloptimization New blackliquoraccumulatingtankatValdivia Mill Non-hazardous solidwastedisposalsite Increase capacity ofValdivia PulpMillpower boiler New particleboard panel milin Teno, Chile Expansion ofElColoradoSawmill Increase capacity ofValdivia PulpMillpower boiler Non-hazardous industrialsolidwastedisposalsite Construction ofSanJoséMill Plywood Increase incapacity throughValdivia Milloptimization management facilityattheAltoParaná PulpMill theconstructionofasolidwaste Revision toprojectfor at AltoParaná PulpMill theconstructionofanauxiliarypool Revision toprojectfor ARGENTINA assurance ofcompliance withtheenvironmentalandtechnicalrequirements requestedduringthesecond stage. permit; thencomesthe technicalapprovalthat allowstheproject tobeginconstructionandlast,theapproval permitwithwhichtheenvironmental authorityconductsfield assuranceofcompliancewiththeenvironmentalandtechnical requirements requestedduring thesecondstage. authority conductsfield the locationpermit;secondphase awardstechnical approvaltobeginconstructionandthelaststage providestheapprovalpermitwithwhichenvironmental Environmental Impact Statements(EIS)orEnvironmental Impact Assessments(EIA). The bothprojects.InUruguay, constructionpermitis approved for investmentprojects that generateenvironmentalimpact gothroughthreephases. The firstisthelocation The bothprojects. InBrazil,investmentprojectsthat constructionpermitisapprovedfor generateenvironmentalimpact gothroughthreephases. The firstphase grants In ChilethereisanEnvironmentalImpact System that allowsprocessingofinvestmentprojects.According totheirimpact, theseprojectscanbepresentedas (1) (1) (2) (3) Status asof12/31/10 Sawn Timber Panel Panel Pulp Pulp Pulp Pulp Pulp Under evaluation Under evaluation Type ofPermit Approval in Approval in Approved Approved Approved Approved process process Sawn Timber Business Forestry Forestry Forestry Forestry Forestry Forestry Forestry Panel Panel Panel Pulp Pulp Pulp Pulp Pulp Pulp Pulp Environmental Impact Assessment(EIA) Environmental Impact Statement(EIS) Types ofprojects EIA EIS EIS EIS EIS EIS Type ofPermit EIA EIA EIA EIA EIA EIS EIS EIS EIS EIS EIS EIS EIS EIS EIS EIS EIS EIS 155 2010 Sustainability Report 156 2010 Sustainability Report As ofDecember31, 2010and2009 Financial ConsolidatedStatements ThU.S.$ IFRIC IAS IFRS - - - - Thousands of U.S. dollars Reporting Standards Interpretations CommitteeoftheInternationalFinancial International AccountingStandards International FinancialReportingStandards

157 2010 Sustainability Report 158 2010 Sustainability Report Assets Consolidated BalanceSheets Assets Total Assets Current Assets Total Non-Current Assets Deferred Tax Assets TaxDeferred Biological Assets,Non-Current Property, PlantandEquipment Goodwill Intangible Assets Investment in Associates Accounted for UsingEquityMethod Investment inAssociatesAccountedfor Other Non-CurrentandNon-FinancialAssets Other Non-CurrentFinancialAssets Total Current Assets Distribution toOwners or asHeldfor Sale Non-Current AssetsorDisposalGroupsClassifiedasHeldfor Sale Non-Current AssetsorDisposalGroupsClasiffiedasHeldfor Other CurrentNon-FinancialAssets Cash andEquivalents Trade andOtherReceivables-Net Other FinancialCurrentAssets Inventories Related Party Receivables Biological Assets,Current Tax Receivables to Owners Classified asHeldfor SaleorasHeldfor Distribution Total Current AssetsOther Tan AssetsorDisposalGroups 12,506,332 12/31/2010 9,354,216 3,152,116 3,138,008 ThU.S.$ 3,446,862 5,088,745 1,043,834 125,323 498,204 177,140 774,289 727,535 344,096 14,108 14,108 66,231 11,127 52,352 65,372 18,074 50,131 2,909 11,413,827 12/31/2009 9,141,514 2,272,313 2,272,313 ThU.S.$ 3,446,696 4,969,753 109,760 476,101 534,199 118,133 558,441 620,058 310,832 105,897 63,776 11,154 35,196 29,078 16,327 8,426 0 0 Equity andLiabilities Equity andLiabilities Non-Current Liabilities Liabilities Total NetEquityandLiabilities Net Equity Total Liabilities Total Non-Current Liabilities Other Non-CurrentFinancialLiabilities EmployeeNon-Current Provisionfor Benefits Other Non-CurrentProvisions Other Non-CurrentFinancialLiabilities Total Current Liabilities Deferred Tax Liabilities TaxDeferred Current Liabilities Total NetEquity Non-Controlling Interest Net EquityAttributabletoParent Company in DisposalGroups Classified asHeldfor Sale Total Current LiabilitiesOtherthanIncluded Other CurrentFinancialLiabilities Current Provision for EmployeeCurrent Provisionfor Benefits Tax Liabilities Other Provisions,Current Related Party Payables Trade andOtherPayables Other FinancialLiabilities,Current Other Reserves Accumulated Earnings Issued CapitalStock 12,506,332 12/31/2010 1,209,061 5,665,757 4,456,696 1,209,061 6,840,575 6,732,194 2,909,429 ThU.S.$ 1,369,489 6,320,264 134,205 210,956 362,182 554,673 108,381 353,176 35,964 62,887 58,754 7,609 3,312 5,842 9,209 11,413,827 12/31/2009 5,031,394 4,079,981 6,382,433 6,268,593 ThU.S.$ 2,678,010 951,413 951,413 1,256,090 5,893,799 111,123 321,892 535,557 113,840 353,176 25,295 74,085 10,136 21,618 9,463 2,372 2,202 5,169 159 2010 Sustainability Report 160 2010 Sustainability Report Consolidated StatementsofIncome Income Statement Income AttributabletoEquityHolders Basic EarningsperShare Earnings perDilutedShares Net Income Net Income Incomefrom ContinuingOperations Income Before Income Tax Revenue Cost ofSales Gross Income Other OperatingIncome Distribution Costs Administrative Expenses Other OperatingExpenses Other Income(Loss) Financial Income Financial Costs Accounted Through EquityMethod Participation in(Loss)IncomeAssociatesandJoint Ventures Exchange RateDifferences Income Tax Income Attributable toParent Company Income Attributable toNon-Parent Company Earnings perShare fromContinuingOperations Basis earningspershare Earnings perDilutedShare fromContinuingOperations Basic EarningsperDilutedShare 0.0061399 0.0061399 1,490,163 (2,298,191) 0.0061399 0.0061399 ThU.S.$ 898,767 700,749 700,749 700,749 3,788,354 (379,579) (323,916) (213,912) (198,018) 2010 (50,642) (16,288) 378,188 694,750 (7,693) 22,154 5,999 292 0.0026592 0.0026592 (2,152,535) 0.0026592 0.0026592 ThU.S.$ 960,510 358,133 304,596 304,596 304,596 3,113,045 (388,535) (249,340) (193,872) 2009 (59,681) (53,537) 181,383 300,898 64,102 19,313 17,632 6,621 3,698 Comprehensive IncomeStatements Accounted for UsingEquityMethod Accounted for Participation inOtherComprehensiveIncomeAssociatesandJoint Ventures CashFlowHedges,Before Gain (Loss)for Tax Cash FlowHedges Net Income Income Tax RelatedtoCashFlowHedgesonOtherComprehensiveIncome Income Tax RelatedtoOtherComprehensiveIncome Other Comprehensive Income, Netof Tax Before ExchangeGain (Loss)for Differences, Tax onConversion Exchange Difference Other ComprehensiveIncome, Net of Tax Total Comprehensive Income Other Comprehensive Income Total Comprehensive Income Comprehensive IncomeStatementAttributable toControllingInterest Comprehensive IncomeStatementAttributable toParent Company Comprehensive IncomeStatementAttributableto ThU.S.$ 700,749 739,807 739,807 2010 37,162 39,058 (11,155) 731,886 47,070 1,247 1,896 7,921 ThU.S.$ 304,596 173,575 174,562 479,158 479,158 2009 177,480 461,754 (5,807) 17,404 1,902 987 161 2010 Sustainability Report 162 2010 Sustainability Report Consolidated StatementsofChangesinNetEquity Share Capital Conversion Hedge Reserves Other Other Reserves Accumulated Equity attributable Non-Controlling Equity Total ThU.S.$ Reserves ThU.S.$ ThU.S.$ Total Earnings to Parent Interest ThU.S.$ ThU.S.$ ThU.S.$ ThU.S.$ ThU.S.$ ThU.S.$ 12/31/2010 Opening Balance at 01/01/2010 353,176 27,551 (4,820) (1,113) 21,618 5,893,799 6,268,593 113,840 6,382,433

Changes in Equity

Comprehensive Income Statement

Net Income 0 0 0 0 0 694,750 694,750 5,999 700,749

Other Comprehensive Income, Net of Tax 0 45,148 (9,259) 1,247 37,136 37,136 1,922 39,058

Comprehensive Income 0 45,148 (9,259) 1,247 37,136 694,750 731,886 7,921 739,807

Dividends 0 0 0 0 0 (268,285) (268,285) 0 (268,285)

Total Changes in Equity 0 45,148 (9,259) 1,247 37,136 426,465 463,601 (5,459) 458,142

Closing Balance at 12/31/2010 353,176 72,699 (14,079) 134 58,754 6,320,264 6,732,194 108,381 6,840,575

Share Capital Conversion Hedge Reserves Other Other Reserves Accumulated Equity Attributable Non-Controlling Equity Total ThU.S.$ Reserves ThU.S.$ ThU.S.$ Total Earnings to Parent Interest ThU.S.$ ThU.S.$ ThU.S.$ ThU.S.$ ThU.S.$ ThU.S.$ 12/31/2009 Opening Balance at 01/01/2009 353,176 (136,223) 0 (3,015) (139,238) 5,675,616 5,889,554 117,682 6,007,236

Changes in Equity

Comprehensive Income Statement

Net Income 0 0 0 0 0 300,898 300,898 3,698 304,596

Other Comprehensive Income, Net of Tax 0 163,774 (4,820) 1,902 160,856 160,856 13,706 174,562

Comprehensive Income 0 163,774 (4,820) 1,902 160,856 300,898 461,754 17,404 479,158

Dividends 0 0 0 0 0 (82,715) (82,715) 0 (82,715)

Total Changes in Equity 0 163,774 (4,820) 1,902 160,856 218,183 379,039 (3,842) 375,197

Closing Balance at 12/31/2009 353,176 27,551 (4,820) (1,113) 21,618 5,893,799 6,268,593 113,840 6,382,433 Consolidated StatementsofCashFlows-Direct Method Cash andEquivalents, attheEndofPeriod Cash flows from (usedin)FinancingActivities of ExchangeRateChanges Net Increase (Decrease) inCashandEquivalentsBefore Effect Cash Flows from (usedin)FinancingActivities Cash Flows used inInvesting Activities Cash Flows from (usedin)Investing Activities Net CashFlows from OperatingActivities Classes ofCashPayments Flujos deEfectivo por(Utilizadosen)Operaciones, MétodoDirecto Classes ofCashReceiptsfrom OperatingActivities Cash Flows from (usedin)OperatingActivities Cash andEquivalents,attheBeginning ofthePeriod Other Inflows ofCash,Net Other Inflows Net Increase(decrease)ofCashandEquivalents ofExchange RateChangesEffect onCashandEquivalents Dividends Paid Loan Repayments Total Loans Short-Term Long-term Loans Other Outflows ofCash,Net Other Outflows Cash ReceiptsfromRepayment ofAdvancesandLoansMadetoOtherParties Purchase ofBiologicalAssets Proceeds fromSaleofOtherFinancialAssets Purchase ofIntangibleAssets Purchase ofProperty, PlantandEquipment Proceeds fromSaleofProperty, PlantandEquipment Capital Contributions toJoint Ventures Other CashPayments toAcquireEquityorDebtInstrumentsofOtherEntities Cash FlowsUsedtoPurchase inAssociates Cash FlowsUsedtoObtainControlofSubsidiariesorOtherBusinesses Cash FlowsfromLosingControlofSubsidiariesorOtherBusinesses Other (Outflows) Inflows ofCash,Net Inflows Other (Outflows) Income Taxes Refund(Paid) Interest Received Interest Paid Dividends Received Other CashPayments fromOperating Activities Payments toandBehalf ofEmployees Payments GoodsandServices toSuppliersfor Other CashReceiptsfromOperatingActivities Receipts fromPremiumsandClaims,AnnuitiesOtherPolicyBenefits Receipts fromSalesofGoodsandRenderingServices 12/31/2010 1,043,834 1,137,275 (669,414) (2,877,218) ThU.S.$ 501,713 3,984,173 (158,781) (634,146) (116,191) (516,001) (190,351) (263,151) 33,852 (39,559) 534,199 509,635 825,268 212,865 612,403 172,278 292,240 (1,791) (1,594) (8,000) (6,977) (2,203) (2,338) 10,559 10,964 1,511 7,922 1,471 8,669 6,528 6,353 0 0 12/31/2009 (717,291) (2.785.842) ThU.S.$ 534,199 302,372 336,106 751,025 1,181,963 1,181,963 3,675,727 (135,175) (746,531) (275,151) (128,279) (174,111) (152,343) (190,821) (92,002) (51,225) 167,308 366,891 147,533 (1,343) (1,378) (3,915) 30,785 16,326 18,601 17,084 2,115 2,185 4,006 8,675 0 0 0 7 0 163 2010 Sustainability Report 164 2010 Sustainability Report RUT: 10.739.973-9 Alejandro JoignantP. Financial ReportingStandards. comprehensive incomeandcashflowsfortheyearsthenended,inaccordancewithInternational and subsidiariesasofDecember31,20102009, therelatedconsolidated statementsof material respects, theconsolidatedfinancialpositionofCelulosaArauco yConstituciónS.A. In ouropinion, theconsolidatedfinancialstatementreferredtoabove presentfairly, inall our auditsprovideareasonablebasisforopinion. management, aswellevaluating the overallfinancialstatementpresentation. We believethat audit alsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadeby on atestbasis, evidencesupportingtheamountsanddisclosuresin financialstatements.An whether thefinancialstatementsarefreeofmaterialmisstatement. An auditincludesexamining, Those standardsrequire thatweplanandperformtheaudittoobtain reasonable assuranceabout We conductedourauditsinaccordancewithauditingstandardsgenerallyacceptedChile. consolidated financialstatementsbasedonouraudits. responsibility oftheCompany’smanagement. Ourresponsibilityisto express anopiniononthese years thenended.the Theseconsolidatedfinancialstatements(including theirrelatednotes)are theequityfor income, changesinandcashflows comprehensive statements of consolidated Arauco yConstituciónS.A. andsubsidiariesasofDecember31, 2010 and2009 andtherelated We haveauditedtheaccompanyingconsolidatedstatementsoffinancialpositionCelulosa Celulosa AraucoyConstituciónS.A. To theShareholdersandDirectors Santiago, March4,2011 (Traslation fromtheoriginalinSpanish) REPORT OFINDEPENDENTACCOUNTANTS www.pwc.cl Teléfono: (56)(2)9400000 Las Condes Av. AndrésBello2711 -Pisos2, 3, 4y5 Santiago -Chile RUT.: 81.513.400-1 PricewaterhouseCoopers Growing theFuture

13229 JUNE 11

2010 sustainability report Growing the Future

Corporate Legal Information Name : Celulosa Arauco y Constitución S.A. Tax Identification Nº : 93.458.000-1 Address : Av. El Golf 150, 14th Floor, Las Condes, Santiago, Chile Type of Entity : Corporation Inscription in Securities Registry : N° 042 on July 14, 1982

Celulosa Arauco y Constitución S.A. was constituted under Public Act on October 28, 1970 before Public Notary Ramón Valdivieso Sánchez, later modified through Public Act dated May 6, 1971 held before Public Notary Sergio Rodríguez Garcés.

The company’s existence was authorized on August 18, 1971 through Resolution N° 300-S of the Chilean Securities and Insurance Supervisor, inscribed in sheet 6,431; N° 2,993 of Santiago’s 1971 Real Estate Registry Trade Record. The respective extract was published in the Official Daily on September 4, 1971.