SUSTAINABILITY Report

2018 SUSTAINABILITY report

4 SUSTAINABILITY report 2018 SUSTAINABILITY 2018 report 1 2 SUSTAINABILITY report 2018 CONTENTS 7 4 1 162 96 92 82 20 18 14 12 08 04 SCOPE SCOPE JOINT COMMITTEES OCCUPATIONAL HEALTH SAFETY HEALTH ANDSAFETY OCCUPATIONAL RISKS ANDCHALLENGES CORPORATE BEST PRACTICES MANAGEMENT CORPORATE GOVERNANCE SUSTAINABILITY STRATEGY ABOUT ARAUCO CHAIRMAN’S STATEMENT ABOUT US 2 8 5 54 48 44 24 174 168 166 112 106 102 EFFICIENCY OUR PRODUCTS INNOVATION PERFORMANCEFINANCIAL OUR BUSINESSES GLOBALIZATION AND GLOBAL GRIINDEX MEMBERSHIP ANDNETWORKS ARAUCO SUBSIDIARIES ANDSHARES PARTICIPATION PROCESSES AND DIALOGUE COMMUNITY PROGRAMS COMMUNITY, PARTICIPATION ANDDIALOGUE APPENDICES COMMUNITY

6 3 144 126 78 74 70 60 EXCELLENCE PEOPLE OF MANAGEMENT ENVIRONMENTAL ENVIRONMENTAL MANAGEMENT ININDUSTRIAL FACILITIES ENVIRONMENTAL MANAGEMENT INTHEFORESTRY BUSINESS CONTRACTS ANDCOLLECTIVE AGREEMENTS IDENTITY, COMMITMENT ANDCLIMATE COMPREHENSIVE DEVELOPMENT OUR TEAM 3 4 SUSTAINABILITY report 2018 have alsoenacted the expansion project ofTeno, Chi- and Montenegro (PB), acquired inDecember 2017. We incorporating two inBrazil: Mills Ponta Grossa (MDF) beginoperationswill in the first quarter of2019. We are ticleboard inGrayling, Mill Michigan, UnitedStates,and the textile industry. Constructioncontinues at the par allowwill us to produce sustainableraw materialfor Valdivia, whichprovides adifferent usefor and cellulose In addition, we startedadissolving pulpinitiative in is Mill the industrialfacility where the company began. since the company bears the samenameandArauco there isacloserelationship andsense ofbelonging, moving forward inArauco commune, inChile,where largest investment in the history of the company, isnow sion Project ofArauco (MAPA). Mill MAPA, whichis the them is the approval of the ModernizationandExpan- of several initiatives that pointin that direction. Oneof emphasis wasplaced this year on the implementation is at the heartofour strategic development. Thus,special Promoting the useofarenewable resource suchaswood out withhighstandards by anexceptional workforce. ourselves. We are aglobalplayer, thanks to work carried we are part.Thishasallowed us to continue to position development of the industry and the communities ofwhich deepened commitments andprojects, contributing to the For ARAUCO, 2018 wasaspecialyear, duringwhichwe CHAIRMAN`S STATEMENT - to meet ofasustainableworld.the challenges ving people’s lives anddeveloping forest products and advancesduring2018, aimed toward impro- find more information about the company’s projects I inviteyou to explore this report, where you will communities from our positionas arenewable industry. lancing the requirements ofshareholders, employees and which we canproject ourselves into the future, while ba- all the peoplewhoare members of the company, through so Ideeply appreciate the commitment andparticipation of achievements that allow us to berecognized in the world, its people,whohave beenafundamentalpillar to reach the At ARAUCO we are certain that the company ismadeby le deepeningour commitment to sustainability. operate andwith the communities we relate to, whi- gration among the different countries inwhichwe on forest resources; working for anefficient inte- term vision, generating products ofexcellence based We have developed all these advanceswithalong- Viento Sur windfarm, located inArauco commune, Chile. Environmental ImpactAssessment Serviceof the Wind presentation of the environmental impactstudy to the and the process of voluntary citizenparticipationand Mexico, Durango andZitacuaro at the beginning of2019, le; the purchase of two Masisaindustrialcomplexes in Manuel EnriqueBezanilla ARAUCO Chairman 5 SUSTAINABILITY report 2018 01 ARAUCO about 8 SUSTAINABILITY report 2018 ARAUCO about protection andresponsible forest management. of corporate governance, environment, quality, healthandsafety and internationalstandards related to the managementofaspects ARAUCO’s forestland andindustrial facilities are certified to national quality, so that our products are always the superior choice. added value, the highestsustainability standards andafocus on products that are called to innovate, withnewsolutions that deliver le andsustainablecompetitive advantagesover time, to develop Part ofour growth isbasedon the creation ofeconomies ofsca- and renewable energy businesses. world, withpresence in the forestry, pulp,wood, panelsandclean aimed atimproving the quality ofpeoplearound oflifemillions the renewable forest resources, whichinspire us to create solutions Along withour work andinnovation, we develop products basedon ging, furniture andenergy industries. of sustainable,quality products for the paper,construction, packa- We are aglobal,diversified forestry company offering awide variety hectares offorestland in SouthAmerica. 1.8 MILLION OVER

17,252 Production facilities in sale through distribution centers andpointsof supplymanagement, to Logistics chainanddistribution 11 COUNTRIES. 208 28 agents andsalesoffices in guided by one vision Productssold through representatives, sales and sharedand values. 4,446 EMPLOYEES CUSTOMERS COUNTRIES. in 5continents. PORTS. Over 9 10 SUSTAINABILITY report 2018 3) Acquired inearly2019. 2) SONAEARAUCOoperations. 1) Considers50%ofoperations, landandplantations. • • MÉXICO • USA 2 Resin Mills Panel Mills 2 7 Panel Mills 7

3 • facilities including4remanufacturingSawmills 7 • • • • CHILE 10 Power10 Mills Panel Mills 4 Pulp Mills 5 1,130,618 ha(2,793,817 acres) offorestland • 1Resin Mill • 2Panel Mills CANADA

URUGUAY • • • 1 Power1 Mill Pulp Mill 1 125,842ha (310,962 acres) offorestland • • • • • • ARGENTINA • • • BRAZIL 2 Power2 Mills 1 remanufacturing facility Sawmill that includes 1 Resin1 Mill Panel Mills 2 Pulp Mill 1 of forestland 263,213hha (650,413 acres) 1 Resin1 Mill Panel Mills 4 of forestland 249,324 ha(616,093 acres) 1

• China • Australia • Middle East • CostaRica • Argentina • Brazil • Colombia • Mexico • Chile • Peru • Holland • Canada USA • SALES OFFICES • SOUTH AFRICA PORTUGAL • • • GERMANY • • SPAIN 2 Panel Mills 2 1 Sawmill Panel Mills 2 Panel Mills 4 1 Resin Mill 2 PanelMills 2 2 2

• Indonesia • Bangladesh • Pakistan • India • Turkey • Malaysia • SaudiArabia • UnitedArab Emirates • China • Japan • Australia • SouthKorea SALES REPRESENTATIVES

• Philippines • Vietnam • Thailand 11 12 SUSTAINABILITY report 2018 sustainability STRATEGY 2. 4. 3. 1. and economic development. operations, to become anactive agentfor their social Being a virtuous actor in the areas where we maintain our customers. materials that alwaysaim to be the superior choicefor Developing highstandard, quality-orientedproducts and development of the peoplewhowork atARAUCO. environmental practices andpromoting the safety and Responsibly managingour operations using the best unfold potential ofourthe full plantations. Combining science, technology andinnovation to maximum value from our forestland. management ofour operations andby creating of peoplearound the world, through the sustainable products that improve the quality oflife ofmillions resources, whichare the foundation to develop We work to buildaneconomy basedonrenewable challenges ofasustainableworld.challenges by developing forest products for the To contribute to improve people’s lives improve people’s lives. We create products that participating inglobalmarkets. embraces of the challenges We are aglobalcompany that renewable forest resources. We produce andmanage VISION our and createand value we respect the environment good we want to bebetter excellence together we are more teamwork we work withpassion commitment always apriority safety

citizenship VALUES

and

innovation our 13 14 SUSTAINABILITY report 2018 GOVERNANCE corporate Shareholders Meeting atleastonceayear. ness areas. Under Chile’s Corporation Law,ARAUCO mustholda information on the company’s managementandARAUCO’s busi- the President andChiefOperating Officer, whoprovide updated The Board regularly meetswith the ChiefExecutive Officer and executive positionwithin the company. three years andcanbereelected. NoBoard Member holdsan The Board iscomprised ofninemembers whoholdoffice for social, environmental andeconomically responsible management. company’smaximize the is to S.A. valuethroughConstitución The key mission of the Board ofDirectors ofCelulosaArauco y the fishingandminingsectors. rests in the forestry sector, infueldistributionbusinesses, andin by Empresas CopecS.A.,aholdingcompany withprimary inte- Arauco y ConstitucionS.A.Today, 99.98% ofARAUCO isowned Since then, the company operates under the legalnameCelulosa Development Agency. tución S.A.,whichwere founded by Corfo, the ChileanEconomic merger ofcompanies Celulosa Arauco S.A.andCelulosaConsti- it isknown today, wasestablishedinSeptember 1979, through the Sánchez, the corporation CelulosaArauco y ConstituciónS.A.,as deed registered before SantiagoPublicNotary Ramón Valdivieso back to October 28, 1970, whenitwasconstituted by apublic traded companies. While the company’s initialfoundation dates information anddisclosure requirements whichapply to publicly ARAUCO isaclosely heldcorporation that issubject to certain SHAREHOLDERS 113,134,814 EMPRESAS COPECS.A. 24,746 ANTARCHILE S.A. SHARES: SHARES: SHARES: CHILUR S.A. 95 99.98% 0.00% 0.02%

TIMOTHY C. PURCELL EDUARDO NAVARRO FRANCO MELLAFE JUAN IGNACIO LANGLOIS ALBERTO ETCHEGARAY JORGE BUNSTER Second ViceChairman JORGE ANDUEZA First ViceChairman ROBERTO ANGELINI Chairman of the Board MANUEL ENRIQUEBEZANILLA 15 16 SUSTAINABILITY report 2018 MANAGEMENT senior work relationships. performance, aswell asoccupational healthandsafety, and relating to the company’s economic, social,andenvironmental members, whoare responsible for the implementationofactions ARAUCO’S Board designates the company’s Senior Management ARAUCO NorthAmerica,UnitedStatesandCanada ARAUCO ArgentinaandARAUCO doBrazil Senior Vice-President Timber andPanels In addition, the Company’s management Senior Vice-President Pulp&Energy President &ChiefOperating Officer Senior Vice-President International Senior Vice-President International Senior Vice-President Forestry Montes delPlata,Uruguay & Business Development FRANCO BOZZALLA Chief Executive Officer CRISTIÁN INFANTE MATÍAS DOMEYKO DIEGO WOLLHEIM GONZALO ZEGERS PABLO MAINARDI KELLY SHOTBOLT abroad isheadedby: ANTONIO LUQUE PABLO FRANZINI CAMILA MERINO CAMILA MERINO SONAE ARAUCO RUI CORREIA

General Counsel FELIPE GUZMÁN Senior Vice-President HumanResources IVÁN CHAMORRO Senior Vice-President Comptroller ROBINSON TAJMUCH Chief FinancialOfficer GIANFRANCO TRUFFELLO Senior Vice-President Commercial &Corporate Affairs CHARLES KIMBER 17 18 SUSTAINABILITY report 2018 management ofbest CORPORATE PRACTICES tions, the CrimePrevention Modelfor CelulosaArauco y Likewise, inongoingcompliance withcurrent regula - ted by the Boards ofARAUCO’s different companies. through CrimePrevention directors whoare designa- lulosa Arauco y ConstituciónS.A.anditssubsidiaries, me Prevention Model(CPM)program establishedby Ce- In addition, ARAUCO continues to implement the Cri- on the Intranet or atARAUCO’s website (www.arauco.cl). be anonymously madeby in filling the form that isavailable found inaudits,accounting andinternalcontrols. Reports can including butnotlimited to reports concerning irregularities parties regarding violations to the company’s CodeofEthics, by employees, customers, suppliers, shareholders and third ceive, investigate and, ifneeded,actuponreports submitted ARAUCO hasaFraud Reporting Procedure inplace to re- dership for EnhancementandDevelopment) program. ined in the company’s principles through the LEAD(Lea- Likewise, employees at ARAUCO NorthAmericaare tra- also governed by aCodeofBusiness Conduct. nagement andsupervision.InBrazil the company is ness ethicsandlays the foundation for soundma- additionally adopted,whichaims to promote busi- In Argentina, the “Corporate Governance Code”was Code ofEthicsand the Market Disclosure Manual. ments andguidelines,especially those outlinedin the values, andmustcomply with the company’s commit- its subsidiariesare inspired by ARAUCO’s vision and The directors andemployees of the company andall the company’s website, amongothers. Thiscampaign videos of the Code’s mainaspectsand publicationson cludes mailings,posters, dashboards, publicationsonTV it contains are constantly beingdisseminated. Thisin- In addition, the CodeofEthicsand the principlesand values tory E-learning training continued onapermanentbasis. ce-to-face training sessions for specificareas, andmanda- of training, the modelwasreinforced withdifferent fa- training for EPDsandcreate synergies. Inaddition, in terms ze crimeprevention concepts at the regional level, provide United States.Theobjective of this event was to standardi- representatives from Brazil, Argentina,Mexico and the sh), involving the participationof the corporate team and Integration ofCrimePrevention Officers (EPDinSpani- ghlight in2018 was the first Corporate Workshop for the In terms ofdissemination andcontinuous training, ahi- ments to the respective CrimePrevention Models. directors at the different companies are makingadjust- tion, inalready disclosedLaw20.393, CrimePrevention tible negotiation,misappropriation andunfair administra- crimes, suchascorruption amongindividuals,incompa- Code introduced through Law21.121, incorporating new Regarding amendments to Law20.393 and the Criminal Acercaredes Foundation andArauco NutrientsSpA. pany started the diagnosis andcertificationprocess for an independentcertifyingbody. Inaddition, the com- in 2018. Theprocess wasexecuted and validated by Constitución S.A.anditssubsidiarieswasrecertified ding crimesoutlinedinLaw20.393. No complaints were received in2018 regar ble to workers andpeopleoutside the company. is aconfidential andanonymousmechanismavaila- structures inplacefor countries. all Theprocedure The CodeofEthicsand the CPMhave reporting ble at the website andCorporate Intranet. ARAUCO maintainsreporting systems availa- As suggested by goodcorporate practices, licy, andaCommunity ContributionsPolicy inChile. ment, Quality, andOccupational HealthandSafety Po- Relationship Policy; aBiodiversity Policy; anEnviron- a Market Disclosure Manual;aMapuchecommunity Regulations ComplianceProgram; aFinancePolicy; The company hasaFree CompetitionPrinciplesand actions in the UnitedStates,Brazil andArgentina. has beencarried outinChile,andhasalsoinvolved REPORTING PROCEDURES - 19 20 SUSTAINABILITY report 2018 CHALLENGES risks and tives have beencarried outwith the Business Management financial accounting focus. Along these lines,several initia - the managementandmonitoringofriskscontrols with a to promote the useof the GRC Process Control 5 tool for different areas of the company play initsmanagement,and importance of this modelatARAUCO and the role that the purpose of this planis to disseminate, train andfurther the of the company’s accounting financialinformation. The Internal Controls Model4, that focuses on the reliability out anintensive dissemination planfor the SOX Corporate information, during2018, ARAUCO developed andcarried Regarding the risks that address the reliability ofaccounting ness continuity plansisbasedonstandard ISO22.301. and COSO ERM.Thedevelopment of the company’s busi- national RiskManagementstandards suchasISO31.000 risks. Thesepoliciesandprocedures are basedoninter Framework andaCorporate RiskMatrixfor highimpact Management Policy inplace,aCorporate RiskManagement bility of the risksitisexposed to, the company hasaRisk sustainability aswell.To minimize the impactandproba- affect notonly the company’s financialperformance, butits ARAUCO isexposed to several different risks,whichcan - role according to the globalcontext. ThelatestCOSO constantly evolving, taking onagreater or lesser leading Impact levels andprobability ofoccurrence ofrisksare operational risksidentifiedduring2014-2015 in2019. halt ofitsindustrialfacilities. ARAUCO update will the te change,odor emissions and temporary production natural disasters, fires, environmental damage,clima- on itsfacilities, suchassevere andfatal accidents, to prevent the occurrence of,or reduce the impacts 2015, ARAUCO hasbeenexecuting specificwork plans Based on the operational risksidentifiedduring2014- as natural disasters andforest fires, constitute risks. complex. Likewise, factors outside the operation, such of aprocess area or even anentire industrialforestry rials whoselackcanputastop to the regular operation ty. Wood, water,steamandelectricpower are inputmate- and equipment that are essential for operational continui- dependsonpeople, inputmaterial,processes,trial mill In terms ofoperational risks, the production ofanindus- and Argentina to address the issues mentionedearlier. units andTransversal ManagementunitsinChile,Brazil with applicablelawsandregulations safeguarding assets. effectiveness andefficiencyofoperations, information reliability, compliance assurance astotheachievementofobjectives withinthefollowingcategories: management andtherestofanentity’sstaff, designedtoprovidereasonable establishes thatitisaprocesscarriedout by theBoardofDirectors, senior of SponsoringOrganizationstheTreadway)asaframereference, which 4) TheCorporateSOX InternalControlModelisbasedonCOSO(Committee of our industrial firefighting crew were enhanced. were improved and the andequipment technical skills of fire protection andcombat, maintenanceprograms investment plan for significantimprovements in the level lities, ARAUCO continued the execution of the 2018 In this sameline,butinrelation to our industrialfaci- similaractivities, throughinitiatives. various with communities, itsforest managementandother suppression measures, the company’s relationship As aresult, ARAUCO reinforced itsfire prevention and the lackofrain inChile’s central andsouthernareas. 2017, fueledpartly by extreme weather conditions and munities were significantly affected by forest fires in the localcontext. Our forestland andneighboringcom- Changes in the globalriskscenarioare notforeign to treme weather conditions, andcyber frauds andattacks. focus hasmigrated to risks related to water supply, ex economic andsocialriskswere leading,while today the outlook onrisksat the globallevel, where years ago World Economic Forum, highlights the evolution of the ERM committee publication,basedonareport by the controls withfocusonthereliabilityoffinancial accountinginformation. corporate repositoryforthemanagementandadministrationofrisks 5) GRC ProcessControlSAP:ERPtoolthatmaintainsARAUCOasasingle - 21 02

globalization and EFFICIENCY 2018 report

forestry SUSTAINABILITY BUSINESS 1.8 Native forests and protected MILLION hectares (4.44 areas account for million acres) of forestland in Chile, Argentina, Brazil Forestry is the foundation of all ARAUCO’s business areas. The forestland in Chile, Argentina, Brazil and Uruguay is managed under and Uruguay. Responsible Forest Management practices and is primarily inten- ded to meet the company’s own industrial needs. These forests are sustainably managed and the production processes are certified to the highest global standards. The native forest and high social and environmental value areas are duly protected. During 2018, 22.3 million m3 of logs were harvested. 25% OF THE FORESTLAND. 75,900 HECTARES (187,552 acres) planted during 2018.

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• Recertification of the FSC® Forest Management standard in Chile (Forestal Arauco FSC License Code: FSC-C108276) and Brazil (Arauco Florestal Arapoti FSC License Code: FSC-C010673; Arauco Forest Brazil Tunas FSC License Code: FSC-C116843; Arauco Forest Brazil C. SUSTAINABILITY Tenente E Senges FSC License Code: FSC-010303). • PEFC/CERFOAR Sustainable Forest Management Certifica- tion Arauco Argentina. • Operations in the Northern and Central Region of Argentina were unified under the same FSC ® Forest Management certification (FSC Misiones License Code: FSC-C128100). MILESTONES • In Argentina, the Central Region was certified to the OHSAS 18.001 standard, and unified with the Northern Region certification. 2018 • In Chile, in order to add greater value to the forestland, share best practices and take advantage of synergies, an internalization process was developed for the operations of the Quivolgo, Horcones and Los Castaños nurseries, where 750 people work. • Creation of the new Unified Fire Station in Chile, concentrating the functions of fire detection and resource deployment in one place. • Re-organization of the forestry business by functional areas to unify and accelerate decision-making. • Progress continues with the implementation of the Lean Philosophy in all forestry operations. During 2018, work was carried out on bidding processes and harvests in land areas.

26 27 2018 report

pulp SUSTAINABILITY BUSINESS Pulp5 MILLS Woodpulp produced by ARAUCO is the basic raw material used to in Chile. manufacture several types of printing and writing papers, tissue paper, packaging material, filter paper and fiber cement products, diapers and feminine hygiene products, among others. Pulp MILLS During 2018, 3.8 million tons of bleached and unbleached softwood in Argentina. pulp, bleached eucalyptus Kraft pulp and fluff pulp were produced, with sales for US$ 3,045 million. Products were mainly sold to Asia and Europe. 1 Pulp MILL in Uruguay through a oint operation between ARAUCO and Stora Enso (Swedish-Finnish 1 Company).

28 29 2018 report SUSTAINABILITY

• In Chile, the Board of Directors approved the development of the Modernization and Extension of Arauco Mill (MAPA in Spanish), a project that involves an investment of WOODPULP PRODUCTION BY PRODUCT (in ADMT) US$2.35 billion. This project is estimated to be operational (As of December 31, 2018) during the second quarter of 2021. MILESTONES • Construction of the Dissolving Pulp project began in Valdi- Product 2016 2017 2018 via, Chile, which will be the first to produce a product that Bleached Pine 1,531,089 1,441,910 1,448,600 provides a different use to woodpulp, as a raw material for (BSK=BKPR+BKPT) the manufacture of viscose or rayon fabric. This project Bleached Eucalyptus represents an investment of US$190 million, and maintains 1,526,333 1,662,565 1,672,241 2018 (BEK) the authorized annual production level of 550,000 ADMT. Unbleached Pine (UKP) 429,947 435,051 522,395 • PEFC - Chain of Custody certification for the Pulp mill Fluff 208,129 155,153 147,824 in Argentina.

Total 3,695,498 3,694,679 3,791,060 • In Chile, the update process of ISO 9001 and ISO 14001 certifications to version 2015 at Licancel and Constitución * ARAUCO owns 50% of Montes del Plata. The table only indicates ARAUCO’s production volume. mills was completed. • Licancel and Nueva Aldea mills in Chile, conduct the recertification processes for the Certfor Forestry Chain of Custody System and FSC®, respectively.

30 31 2018 MAPA report INCREASED PRODUCTIVITY An increase in pulp production at the Horcones complex mill and strengthening ARAUCO’s and MAPA Chile’s competitiveness in global markets. ARAUCO MILL ENVIRONMENTAL EFFICIENCY Incorporation of the most modern technologies MODERNIZATION will provide even greater efficiency to the facility’s SUSTAINABILITY environmental performance. MAPA is the largest investment program in the history of ARAUCO and will be developed in a commune with RENEWABLE ENERGIES which we have a long and close relationship, a sense Clean and renewable energy generation, with an of belonging, since it is located in the area where the energy surplus available to be delivered to the company began. National Electric System. At production level, the project includes termination of line 1, which dates to the 1970s, the modernization CLIMATE CHANGE of current production line 2 and the construction of a MAPA is developed under the Clean Development new line (line 3) with an annual production capacity Mechanisms (CDM) of the 1997 Kyoto Protocol. of approximately 1,560,000 tons and state-of-the-art technology. This, in addition to a new and modern effluents treatment Mill. The project includes a set of environmental management measures, such as an ecosystem research TOTAL ESTIMATED PRODUCTION EMPLOYMENT program, comprehensive monitoring plans (air, water, 2,100,000 annual tons. The construction of the project will be a relevant source noise, etc.) and social-environmental measures of employment. that directly benefit local communities, including ENERGY GENERATION commitments to Mapuche people, communities and In addition to self-supplying the mill with clean energy, REVITALIZATION OF THE LOCAL ECONOMY associations. a surplus of 166 MW will be produced, which will be Important opportunity for productive linking with delivered to the National Electric System (SEN). local activities. The project will allow the company to continue to generate clean and renewable energy with the START-UP CONTRIBUTION TO LOCAL DEVELOPMENT construction of a forest biomass-based electric Second quarter of 2021. Project portfolio that aims to contribute to local cogeneration system, producing an energy surplus of development in infrastructure, equipment, production about 166 MW that will be delivered to the National EMPLOYMENT DURING CONSTRUCTION PHASE development, education and culture. Electric System (SEN in Spanish), through a power line 4,000 to 5,000 jobs during construction, with a whose construction is also part of the project. maximum of 8,000. Having a qualified and committed team will be essential to address this challenge. To this end, a special training program and several initiatives are being developed, in order to rely on all the new local capabilities and embrace this challenge with excellence

33 2018 report

wood SUSTAINABILITY BUSINESS

ARAUCO is one of the primary producers of wood at the global level, manufacturing a wide variety of sawn timber products, plywood, fiberboard and particleboard, remanufactured wood and moldings Panel MILLS. with different finishes, appearance and value adding processes, for the architecture, design, construction, packaging and remodeling industries. The company has a production capacity of 12.5 million m3. ARAUCO’s MDF, MDP, HB and plywood panels supply the furniture and construction industries, and are recognized for their wide range 21 of products, availability and quality. ARAUCO’s timber offers solutions in terms of quality and durability for the construction, furniture and packaging industries. The company’s moulding brand, ARAUCO Moulding or ARAUCO Molduras are a decorative and finishing ele- SAWMILLS, including ment in homes and several spaces. 5 remanufacturing In 2018, sales reached US$2,762 million, mainly in the United States, facilities. Brazil, Asia and Chile. 8

34 35 2018

report • Purchase of two Mills in Brazil: Ponta Grossa MDF mill and Montenegro PB mill, which were acquired in December 2017 with an annual installed capacity of 800,000 m3. • Construction of the Grayling Particleboard Mill in Michigan, USA, with a production capacity of 800,000 m3, of which about 300,000 m3 will be melamine laminate. The Mill came into operation in the first quarter of 2019.

SUSTAINABILITY • Reconstruction of SONAE ARAUCO Mills located in Portugal, 2018 WOOD PRODUCTION BY PRODUCT Mangualde and Oliveira Hospitales, which were damaged (Thousands of m3) by a fire in 2017. In addition, a new MDF line was put into operation in Mangualde. • In Chile, the Teno mill expansion project began, a US$ 20 3,500 million investment that will increase the production capacity 3 3,000 of raw panels to 340,000 m and 100% of its production will MILESTONES be thermally fused melamine laminate. 2,500 • In January 2019, the company acquired two industrial com- 2,000 plexes in Mexico, in the areas of Durango and Zitacuaro, 1,500 for US$ 160 million. Both complexes combined have three 2018 particleboard lines with an annual installed capacity of 1,000 339,000 m3; an MDF panel line with 220,000 m3; two mela- 500 mine laminate lines with an installed capacity of 309,000 m3; - a chemical Mill to process resins and formalin, and treatment lines. • In the United States, the company purchased Panolam’s industrial assets in Albany, Oregon, which include two PLYWOOD PB PANELS HB PANELS thermally fused laminate lines with an installed capacity of MDF PANELS 212,000 m3, and two treatment lines. GREEN LUMBER

KILN DRIED LUMBER • Renewal of carbon neutral certification for VESTO Melamine, produced at Teno mill, in Chile.

REMANUFACTURED LUMBER REMANUFACTURED • Operations in Chile, Argentina, Brazil and North America were recertified to the ISO 14001 standard, version 2015. • Grayling Particleboard and Albany Treating and Lamination were added to the FSC® multi-site certification of Arauco in North America. • All Mills in North America obtained TSCA VI certification.

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energy

SUSTAINABILITY industrial FACILITIES and 2 BUSINESS back-up units in Chile.

ARAUCO, in keeping with its commitment to high environmental 8 standards, embraced more than twenty years ago, the challenge to produce clean and renewable energy from forest biomass, which is achieved through virtuous cycles with nature. Guided by the provisions of the Clean Development Mechanism (CDM) of the Kyoto power MILLS Protocol, the company has been investing in additional generation capacity, going above and beyond usual industry practices. in Argentina. In doing so, the company meets its own energy needs and contributes surplus energy from its industrial facilities to the power grids of the countries where it maintains operations. Today, ARAUCO is one 2 of the primary producers of Non-Conventional Renewable Energy (NCRE) in Chile, with an installed capacity of 606 MW and a capacity of 219 MW to be contributed to the National Electric System (SEN). Additionally, the company has an installed capacity of 82 MW in Argentina and an installed capacity of 91 MW in Uruguay. power MILLS 1 in Uruguay.

38 39 2018

report GHG emission

REDUCTION • ARAUCO’s power Mills delivered a total annual net energy surplus of

SUSTAINABILITY 951 GWh, 6% more than the previous year. • Total physical sales for 1,533 GWh, 1.9% higher than sales registered PROJECTS in 2017. • In Chile, surplus production in 2018 accounted for approximately 1.3% of total SEN energy generation and rated power accounted for 0.9% of ARAUCO has historically contributed to the combat the system’s total rated power. against climate change, certifying emissions reductions from residual forestry biomass based MILESTONES • In 2017-2018, ARAUCO contributed 7.8% of worldwide accumulated cogeneration projects in five power Mills in Chile certified emissions reductions in the residual biomass-based energy and one in Uruguay (a Joint venture with Stora generation projects category registered under the CDM standard. Enso). These power Mills are registered under • ARAUCO projects in Chile issued 754,364 CER’s, of which 506,776 internationally recognized standards such as the 2018 CER’s were issued under the Verified Carbon Standard (VCS) and Clean Development Mechanism (CDM), and annually 247,588 were issued under the CDM standard. offset about 650,000 tons of CO2. In addition, the Viñales cogeneration project is registered under the • The Punta Pereira project, located in Uruguay, issued its first carbon Verified Carbon Standard (VCS). credits under the CDM standard, for 66,006 CERs. • Sale of 658,512 CERs, issued by projects registered under the CDM standard, traded on the European Union Emission Trading Scheme and the global voluntary market.

40 41 43WIND TURBINES With a rated power capacity of up to 200 MW. 220Kv/60km power line on ARAUCO forest property.

TOTAL INVESTMENT Power line EL PARQUE EÓLICO VIENTO SUR (VIENTO SUR US$250 million WIND FARM) will generate clean electric energy to be delivered to the National Electric System (SEN), thus SIZE contributing to diversify Chile’s energy matrix. Horcones Industrial 43 wind turbines with an installed capacity of up to Forestry Complex In 2018, the new wind farm, which is estimated will 200 MW. generate enough power for 540,000 homes, carried out Route 160 a Voluntary Early Citizen Participation process and LENGTH OF POWER LINES Arauco submitted an Environmental Impact Assessment (EIA) commune before the Environmental Impact Assessment Service 60 kilometers between the wind farm and the in March 2019. substation MAPA/ Horcones Mill. Wind Farm Las ENERGY DELIVERED TO SEN Route P-40 Corrientes Equal to the energy needed to power 540,000 homes.

CONSTRUCTION PERIOD Power line Up to 2 years since obtaining the RCA. Route P-30

Curanilahue commune 2018 report FINANCIAL INDICATORS (in US$ million)

2016 2017 2018 Sales 4,761 5,238 5,955 financial Adjusted EBITDA 1,067 1,353 1,851

SUSTAINABILITY EBITDA Margin 22.4% 25.8% 31.1% PERFORMANCE Net Income 218 270 727 Financial Debt 4,481 4,274 4,510 Net Financial Debt 3,889 3,687 3,434 Financial Costs 258 288 215 In 2018, the company’s profit was US$ 727 million, 169% Investments 665 654 921 higher than in 2017. This is mainly attributed to higher margins due to better pulp prices, which remained at a good level for Net Debt/EBITDA 3.64 2.72 1.86 most of the year. The timber business also had a better 2018, EBITDA/Interests 4.13 4.70 8.62 increasing sales volumes compared to 2017. Adjusted EBITDA: Is EBIT + harvest cost or fair value + income from changes in the fair value of biological assets plus exchange difference + others.

EBITDA for 2018 was ECONOMIC VALUE GENERATED AND DISTRIBUTED AS OF DECEMBER 2018 (isn US$ millions)

2016 2017 2018 Total income 1,851 Net Sales 4,761 5,238 5,955 million Income from financial investments 30 20 21 Income from sales of fixed and intangible assets 19 9 5 During 2018, ARAUCO renewed a US$ 200 million, five-year Economic value generated 4,810 5,267 5,981 loan that expired in September 2018. Additionally, in October,

two bond issues were placed in the local market for a total of 8.5 million UF, whose funds are part of the financing for the Operational cost / production cost* 2,791 2,842 3,000 Modernization and Expansion of Arauco Mill (MAPA) project. Payment to capital suppliers 1,034 1,787 947 Wages and benefits 533 563 563 Taxes** 46 -31 227 Investments in the community *** 10 13 14 Economic value distributed 4,415 5,174 4,751 Economic value retained 396 93 1,230

* Refers to cost of sales net of depreciation, and wages. ** Includes expenses from income tax. 44 *** Includes donations, contributions and scholarships. 45 2018

report SUPPLY CHAIN

ARAUCO has suppliers of services, input material, raw material and spare parts that impact the company’s value chain.

MAIN SUPPLIERS OF INPUTS, MATERIALS AND SPARE PARTS SUSTAINABILITY PROJECTS AND INVESTMENTS IN CHILE

According to ARAUCO is a global company that evolves and is permanently embracing the challenges of Business distribution of Supplier Product participating in global markets. In 2018, the company invested US$ 921 million; the main projects area the reported are the Modernization and Expansion of Arauco Mill in Chile and the construction of the Grayling segment Particleboard Mill in Michigan, United States. In addition, the company also has several invest- Pulp COMPAÑÍA DE PETRÓLEOS DE CHILE S.A. 17% Oil Nº6 and Diesel Oil ment projects in development. EKA CHILE S.A. 11% Sodium chlorate • MODERNIZATION AND EXPANSION OF THE ARAUCO MILL (MAPA), CHILE OCCIDENTAL CHEMICAL CHILE LIMITADA 11% Caustic Soda

• GRAYLING PARTICLEBOARD MILL, UNITED STATES Timber OXIQUIM S.A. 16% Adhesive Mixtures (Resin) • PURCHASE OF MASISA ASSETS IN MEXICO AND BRAZIL Forestry COMPAÑÍA DE LEASING TATTERSALL S.A. 27% Vehicle Leasing • DISSOLVING PULP PROJECT IN VALDIVIA PULP MILL, CHILE In order to support local development, ARAUCO works with suppliers from local areas where the • PROJECT TENO 340, CHILE company maintains industrial and forestry operations. These suppliers provide quality products and services such as inputs, spare parts, equipment, raw materials and a few services, thus • VIENTO SUR WIND FARM, CHILE contributing to the social and economic development of these communities. During 2018, the company made purchases from local suppliers for US$2,068 million in all the countries in which it operates.

Purchases from local suppliers % of total purchases from ARAUCO

(in US$ million) suppliers in 2018 Chile 1,214 55%

Argentina 310 90%

Brazil 247 74%

North America 297 33%

46 47 2018 report SUSTAINABILITY INNOVATION BIOFOREST: EXCELLENCE AND RESEARCH

Innovation is an essential part of ARAUCO’s strategy, and involves In 1990, ARAUCO created Bioforest, a scientific and technological the combination of ideas, technology, process optimization, creati- research center unique in South America that develops and applies vity and ventures to develop new and improved solutions that meet the best technologies to maximize the productivity of the company’s people’s needs, as well as initiatives that aim to further social and forest and industrial resources, developing research on processes environmental sustainability. for the Forestry, Pulp and Timber business areas in the different countries where it operates. Today, Bioforest has 51 highly specialized researchers and a technological network of open collaboration with experts in the different research areas, and participates in several national and international organizations that are at the forefront of industrial forestry scientific knowledge.

Specialization of knowledge enables the transformation of research into innovation.

48 49 2018 report SUSTAINABILITY

• Continued development of the genetic quality of ARAUCO plantations. INNOVA ARAUCO • Continued development of new forestry tools to express the growth potential of ARAUCO plantations. ARAUCO has been able to lead, materialize and promote important • Generation of background information for the Ecosystem Manage- projects that have reinforced ways to work in open and collaborati- ment of the company’s forestland. ve innovation, such as promoting the use of wood in construction; MILESTONES protection and sustainable management of native forests; innova- • Development of new tools for pest and disease control in nurseries, tion in panel production, and driving Social Innovation and Shared plantations and in the company’s forest products. Value projects. 2018 • In Pulp, results were developed that provide new efficiencies in the The company’s innovation model is based on three pillars: value operation of mills and the development of new validated technolo- creation for the company and its environment, the development of gies to be incorporated in Pulp mill operations in the future. a culture of innovation and maintaining a virtuous relationship with • In Timber, new adhesive formulations were developed and options the innovation ecosystem. for greater efficiency in the production process of sawn timber and MDF and MDP panels were generated. • A timber laboratory was built and offices were remodeled. • Bioforest’s seventh scientific committee was held, with two national experts and six international ones.

50 51 2018 report SUSTAINABILITY

• Launch, execution and implementation of 10 prototypes linked to the 2018 Open Innovation challenge, in relation to “how do I apply AGREEMENT WITH MIT technology to work.” • Creation of E2E, a business that aims to manufacture and sell TO BE PART OF MILESTONES innovative and sustainable construction solutions in wood (Joint ‘THE INDUSTRIAL LIAISON Venture between ARAUCO and Etex group). PROGRAM’ • Sale of “+Maqui” in New York, a commercial test that validated 2018 this product in the American market. • Incorporation of Lookid in the interactive center of Universidad ARAUCO took an important international step forward in de Concepción. innovation, by partnering with the Massachusetts Institute of Technology (MIT) in the Industrial Liaison Program (ILP). • Definition of a digital road map for the Timber and Panels business area, currently working on two projects. The program, which aims to strengthen the competitive position of businesses using new technologies and synergies, will • Association agreement with MIT, one of the main innovation allow the company to continue to develop and strengthen its ecosystems in the world. work in innovation, through participation in several activities, forums, access to research, and other MIT resources to address present challenges and anticipate future needs. The company has currently invested about US$ 20 million in innovation and a systemic approach that encompasses six areas: R&D; new products, services and business models; the incorporation of technology at the operational level; promotion of its social innovation area; the internal environment through programs for the innovation culture; and the external environment by building a virtuous relationship with the innovation ecosystems of the world, starting with Chile.

52 53 2018 report

PULP TIMBER our SUSTAINABILITY PRODUCTS

ARAUCO uses brands for relevant product-market categories, all of which are backed by the ARAUCO corporate brand. The company aims to be recognized in the market as an expert in significant segments and to make processes easier for customers (go to www.arauco.cl).

54 55 2018 report PRODUCT LABELING NEW PRODUCTS

The labeling and marketing-communication processes related to • In Chile, 5 new Vesto Melamine designs were launched under the ARAUCO’s products follow the regulations of the country of origin Artisan concept, 2 wood designs --Espresso and Alaska- and 3 and the country of destination. The purpose of labels is to commu- textile designs -Seda Notte, Seda Giorno and Lino Chiaro- with a new nicate the features, composition and technical specifications of the OVER thread finish.

SUSTAINABILITY company’s products and the regulations and standards that products comply with, in accordance to each country’s definition. • In Peru, 6 Vesto Melamine designs were launched, 3 wood designs -Venezia, Jerez and Espresso- and 3 textile -Seda Notte, Seda Giorno 400,000 and Lino Chiaro. CUSTOMER SATISFACTION MELAMINE SAMPLES • In Colombia, Vesto Melamine launched 3 new designs - Jerez, All of ARAUCO’s businesses have developed Complaint Management distributed to furniture Espresso and Seda Giorno - under the Legacy concept. Systems to respond to customer requirements. Communication me- manufacturers, designers and chanisms range from telephone calls to direct contact. Everything is specifiers across all markets. • In Brazil, the Lihat collection was launched with 4 new melamine managed through standardized systems which allow the company to designs - Norus, Nimbus, Lotus and Zenrys - which generated the conduct follow-ups and improve operations, products and services, highest sales from design in the history of ARAUCO in this country. through ongoing improvement or of the preparation of annual plans. MORE THAN • In Mexico, Vesto Melamine was launched under the concept ‘a por- CUSTOMER ENGAGEMENT trait of nature’, with 3 new designs: Alaska, Riviera and Nativa. Another mechanism the company uses to engage with different au- • In Argentina, 6 new designs were launched, 3 for the Nature line diences is ARAUCO’s active participation in trade fairs, such as the 22,000 -Gaudi, Caju and Mont Blanc- and 3 for the Urban line - Moscow, Sodimac training fair simultaneously held in Chile, Peru and Colom- PEOPLE Prague and Vienna. bia, Wood Week in Chile, the Furniture and Wood Fair in Colombia, participated in training, Expo AQP in Peru, and Revestir and ForMobile 2018 in Brazil. clinics and seminars for • In North America, AraucoPly Color Shield was launched, along with 16 new exclusive Prism TFL designs and 2 new Prism TFL textures Additionally, the company participated in several trade fairs in North end customers. (Velvet and Boreal). InCopper TM antimicrobial technology was also America, such as IWF Atlanta, the WMA annual convention in Mem- introduced to the North American melamine market; and TFL Shiplap phis, DesignExpo in Winnipeg, DesignDC in Washington, and others. was exclusively launched at The Home Depot.

Also, the new website, www.arauco.cl, was launched in 2018, which concentrates the world of products and solutions into a single experience and unifies company messaging across 11 markets. Meanwhi- le, the company continued to increase social network communities and website sign-ups reaching 352,000 followers on different social networks and 134,000 website signups.

56 57 03

people of EXCELLENCE 2018 report

our SUSTAINABILITY TEAM

ARAUCO’s business strategy includes working with People of Ex- cellence, because they provide the company with a distinctive seal 17,252 in terms of an organizational culture that is able to embrace future EMPLOYEES challenges. A culture that achieves results sustainably, that places the safety of people as its priority and that aims to develop together with its environment; in a setting based on trust, with work teams that are empowered and responsible for their management; with leaders who develop effective teams and are capable of integrating several points of view to achieve shared objectives; that question the present and challenge the future, and that dare to take risks and innovate. To move forward with this challenge, work was done in several areas in 2018, such as the installation of the Together for a Better Life Model, that aims to empower work teams in their safety management; changes to the Performance Management process to establish it as an ongoing process, which leverages the organizational 23,673 culture required by the company; the new integrated training model that seeks to prepare our workforce for the challenges required by CONTRACT WORKERS the industry and markets, and strengthening of the inclusion pro- employed through contractor companies gram that the company has been promoting in recent years.

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SUSTAINABILITY ARAUCO EMPLOYEES BY TYPE OF CONTRACT AND COUNTRY WORKFORCE

Workforce 2016 2017 2018 Men Women Total Employees 14,239 15,379 17,252 Country Indefinite Fixed-term Indefinite Fixed-term Indefinite Fixed-term Indirect contract workers 22,165 21,208 23,673 Chile 8,082 666 1,418 79 9,500 745 (contracting businesses)

Argentina 1,285 111 129 10 1,414 121

ARAUCO WORKFORCE BY GENDER Brazil 2,561 2 310 - 2,871 2

Workforce 2016 2017 2018 North America 1,558 - 307 - 1,865 -

Women Men Women Men Women Men Others 477 3 246 8 723 11 TOTAL 1,675 12,564 1,857 13,522 2,507 14,745 Total 13,963 782 2,410 97 16,373 879 Executives 67 383 71 427 56 392

Professionals and technicians 892 3,300 984 3,469 1,234 3,825

Workers 716 8,881 802 9,626 1,217 10,528

62 63 2018 report SUSTAINABILITY

RECRUITMENT

ARAUCO aims to maintain the best conditions to attract ARAUCO promotes equal opportunity in work teams In 2018, the company strengthened its inclusion program talent, incorporating people with the skills and com- 3,538 through its Recruitment and Selection Policy, conside- by training people management teams and leaders, pro- petencies required to perform successfully in diffe- people were hired in 2018 IN THE ring several principles that aim to ensure non-discrimi- moting the work of people with disabilities, and offering rent roles. To do so, the company employs selection DIFFERENT COUNTRIES where nation and carrying out these processes with criteria in a special benefits plan. methods that allow us to identify the capabilities of accordance to the skills and competencies required by ARAUCO operates. The company has 92 accredited people working in each role that contribute to the different challenges of the position’s profile, and the values of the organization. ARAUCO’s facilities in Chile as of December 2018. the Business and a Recruitment and Selection Policy The company has a formal inclusion program in place in place that favors equal opportunity and provides a At the same time, ARAUCO aims to actively contribute to that promotes the work of differently abled people and standard that promotes transparency, efficiency and employability in the areas where its facilities are loca- provides support, including a benefit plan that reinforces fairness in all the company’s recruitment processes, ted, relying on direct communication channels with the the benefits already delivered by the state. In addition, it ensuring that vacant positions are filled with the Municipal Office for Labor Intermediation and Industrial Consolidated turnover rate of includes accompanying support of external specialists, best and most suitable applicants, in accordance to Schools, through which it seeks to advertise job oppor- within the different areas of the organization. ARAUCO’s profiles and values. 4.8% tunities and identify applicants from different areas.

64 65 2018 report SUSTAINABILITY In addition, the company promotes local employability • Promotion of Mapuche employment, for Mapuche com- through several initiatives: munities neighboring ARAUCO’s forestland; by implementing a participation and consultation process on forestry • Work Training, to produce training plans for the neigh- operations, these communities are informed of activities to bors of new industrial projects, to provide them with the be developed and are offered the option of participating in skills and knowledge needed to be hired by the company. them through a specific training program. • Tendering for new projects, in which ARAUCO is In Brazil, the company employs 124 people with disabilities committed to contracting a percentage of local labor (e.g., who work in different areas of the company. ARAUCO res- MAPA project). pects their individuality and limitations in order to promote • Improvement of employability through training courses their development. for the community in order to strengthen their work training and job placement.

PEOPLE RECRUITED IN 2018 PEOPLE WHO LEFT IN 2018 Country Women Men Total Women Men Total

Chile 725 1,657 2,382 150 821 971

Argentina 26 112 138 16 69 85

Brazil 101 452 553 119 420 539

North America 79 386 465 87 279 366

66 67 2018 report SUSTAINABILITY

COMPENSATION AND BENEFITS • Standardization of selection process management in the different areas and countries. ARAUCO provides its employees with wages and • Recruitment and selection of people who will be part of the MAPA benefits in accordance to the market, considering project in Chile. opportunities for each person’s development in rela- MILESTONES tion to their performance. • In Chile, the Timber business maintenance work teams are inter- nalized, involving a total of 481 workers and 715 business nursery Every year, the company reviews the compensation workers from the Forestry business. structure in order to adjust the wage levels to the dynamics of the labor market in each country, while 2018 • 639 workers are integrated through the acquisition of two industrial also considering the development opportunities of Mills in Brazil. each person in relation to their performance. In addition, ARAUCO set a base pay that exceeds the minimum legal wage, according to the conditions of each country. ARAUCO also offers its employees additional benefits, which vary according to the business, country and reality of each area of operation. These benefits include food, transportation, life and health insurance, scholarships, and agreements with retail stores, local institutions, and others.

68 69 2018 report

comprehensive

SUSTAINABILITY DEVELOPMENT

TRAINING AND LEARNING TRAINING

Investment Average training ARAUCO’s challenging goals, in addition to the high le- Participants Man hours vel of specialty in job positions, gives way to a training (millions hours and learning plan that ranges from technical courses to Chile 6,940 177,247 $ 792 17.3 the development of interpersonal skills and leadership. During 2018, the company worked on a new Technical Argentina 978 15,815 $ 40 10.3 Training Model, which aims to prepare workers for the Brazil 3,251 128,955 $ 211 44.2 challenges that the industry and markets demand from the company. The new model considers educating high-performance workers by establishing a permanent and ongoing training cycle linked to the professional development of employees and using an on-the-job learning method, taking advantage of internal knowledge, and responding to the business strategy. Additionally, ARAUCO aims to implement a participatory training strategy between business areas, to ensure a range that goes from the development of basic technical and soft skills, to the implementation of comprehensive programs to work on competencies that contribute added value to our employees and the organization.

70 71 2018 report SUSTAINABILITY

PERFORMANCE MANAGEMENT

• Creation of Technical Training Management to establish per- ARAUCO has positioned Performance Management as tain operations, with a new model that focuses on five manent training cycles with development perspectives, and the most important process to advance the development competencies that represent the behaviors the company MILESTONES consequently train high-performance workers. of our people, installing it as a Business process. wishes to foster. In order to do this, the assessment tool was simplified to achieve deeper, relevant and timely • Definition of the training program prior to the implementation Aiming to make feedback a continuous and timely conversations, concentrating on the competencies that of project MAPA. process that promotes recognition, the Performance make the difference. Assessment process was modified in 2018, establishing • First generation of Campus ARAUCO graduates: 83 2018 a single process for all the countries where we main- students of Maintenance, Administration and Risk Prevention programs. • Completion of the Young Professionals and Leadership PERCENTAGE OF THE WORKFORCE THAT PARTICIPATES Development Program training programs. IN PERFORMANCE ASSESSMENTS • Implementation of the Continuous Improvement module at the Technical School level for industrial Mills. 2016 2017 2018

• Integration of the Supervision level in the Leaders Chile 78% 93% 91% Development Program (training of 120 supervisors). Argentina 38% 50% 48% • Restructuring of internship programs that focus on project management: project management training and guidance on Brazil 10% - 9% continuous improvement projects in areas of action. North America 28% 40% 31% • Restructuring of the trainee program.

72 73 2018 report identity, commitment and

SUSTAINABILITY CLIMATE

ORGANIZATIONAL CLIMATE A good work climate is part of the business strategy, because it 2016 2017 2018 requires people that are committed to their work and to the com- Response Global Response Response Global Participation Participation Global result Participation pany’s development. rate result rate rate result

The climate survey is now established as a global process that Chile and sales 7,805 91% 68 7,944 94% 71 8,651 94% 73 helps to provide an understanding of the organization, find stren- offices

gths and opportunities for improvement and provides leaders Argentina 1,090 72% 59 1,088 76% 66 1,038 70% 65 with information to optimize team management. The climate survey was conducted in November 2018 in Chile, Brazil 1,604 95% 76 1,784 92% 80 2,440 92% 73 Brazil, Argentina, North America and Sales Offices in Peru, Mexico, Colombia and Holland. North America 1,224 74% 66 1,172 73% 66 1,230 79% 66 During 2019, emphasis will be placed on maintaining and propa- gating good practices that were identified in areas with the best organizational climate, as well as installing the leader support method at a global level for the climate management of their teams.

74 75 2018 report

SUSTAINABILITY ORGANIZATIONAL COMMUNICATION AS THE FOUNDATION FOR COMMITMENT AT ARAUCO INNOVATION During 2018, the company held the third ARAUCO Open In- The company seeks to foster open, timely, transparent commu- novation Challenge to find ideas that will contribute new and nication as a key element to maintain an organization that is CHALLENGE inventive technological solutions for our processes. aligned and committed to new challenges, and to express Workers from Chile, Brazil, Argentina and North America par- the desired organizational culture through the company’s corpo- 2018 ticipated in this initiative through an interactive platform that rate values. operated in all countries. ARAUCO’s internal communication strategy favors direct com- A total of 215 ideas were submitted: 154 from Chile, 18 from munication, for which several initiatives have been developed Argentina, 26 from Brazil, 15 from the United States and 2 to strengthen the efforts of head supervisors and leaders to from Canada. There were 7,468 interactions between emplo- develop their role as effective communicators. This work is yees and ideas received 1,072 “likes”. complemented by the operation of an internal media multi-pla- The four winning projects were Uber for trucks, a cargo mana- tform that includes Intranet, bulletin boards, local magazines, a gement platform that increases the offer and competitiveness weekly newscast, e-mail, social networks, posters and videos, of freight carriers; Outlet Pipe Inspection, to reduce the impact to ensure timely and efficient dissemination of the company’s of spills by measuring noise and temperatures from potential relevant topics. outcrops; IOT Smart Sensors, to create smart earwigs with sensors to capture information from the pruning process, which would decrease rejections and loss of value for raw material; and Survival Assessments, to perform an automatic assessment of plantation survival using UAVs and Deep Learning.

76 2018 report SUSTAINABILITY

COLLECTIVE CONTRACTS AND AGREEMENTS COLLECTIVE AGREEMENT INDICATORS

ARAUCO promotes mutual respect, openness and N° of unions % of workers in collective bargaining agreements transparency as aspects that guide its relationship with employees, negotiating groups, unions and their Chile 31 57% representatives. Argentina 4 49% To promote a good relationship, the company fosters Brazil 8 9% an environment of collaboration and participation, in accordance to the Code of Ethics, internal regulations No information available for North America and current labor laws.

78 79 SUSTAINABILITY report 2018 04 HEALTH AND SAFETY occupational 82 SUSTAINABILITY report 2018 SAFETY team work. development ofasafety culture basedon the value ofpeopleand to consolidate habitsandpractices andinstall to advance the more involved inriskmanagement.Inaddition, work bedone will and offices, so that they can take onagreater role andbecome focus onreinforcing the empowerment ofsafe teams atfacilities Similarly, the next for challenges ARAUCO in terms ofsafety will role in their own safety, through self-care and mutualcare. empower work teams, so that they can take onamore prominent ced and16work areas that organize the initiatives, whichaim to in amodelcomprised offour commitments that mustbe embra- To doso, the conditions provided by the organizationare summed their coworkers. in aleadingrole inrelation to hisor her own safety and that of into account, the modelplaceseachperson working atARAUCO kforce, safe teams andwork welldone.Taking these principles The modelestablishes three guidingprinciples:empowered wor “Together for abetter life”. for safety basedon the value ofpeopleand teamwork, called priority. Work has been doneonacorporate managementmodel fore, we continue to decidedly focus on the value ofSafety asa At ARAUCO, the heartof the company liesinour people.There- - 83 SUSTAINABILITY report 2018 MANAGEMENT PROGRESS IN THE SAFETY THE SAFETY MODEL

Done: workthatisbothsafeandproductive. part ofanorganizationthatfostersconditionsforWork Well and, aboveall, mutualcare. At thesametime, thisSafeTeam is But wealsoneedateamthatprovidesguidance, friendship so, wemustunderstandourworkandtherisksprevent. ARAUCO; wemustbesafeworkers, awareofourself-care. To do At thecore ofthisModeliseachoneuswhoworksat of workteams. Model, whichisbasedonbestpracticesandtheempowerment have contributedtothedevelopmentofManagement Hundreds ofemployeesfromallARAUCO’s businessareas

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P E R R E A P 86 SUSTAINABILITY report 2018 expansion process. in lessonslearnedwhichwerethenusedtoinitiatethe Pilot programsweredevelopedforallMillsthatresulted luation toolcalledABC, thatSafeTeams applyinallshifts. del’s principleswerematerializedusingacultureself-eva- through eachofthestagesthatweredetermined. Themo- method fortheSafeTeams andaworkbooktoguidethem During 2018, theTimberbusinessdevelopedwork members oftheCulturalChange Committees. clear newslettercommunicating theactionscarriedoutby the modeltocontractors, andproductionofasimple site recognitionofworkwelldone;communication different unitstolearnaboutthemodelonpremises; cess ofculturalchange, suchascrossvisitsbetweenthe initiatives werealsoimplementedtoadvancethepro- Bioforest, nurseriesandharvestingareasbegan. Several In theForestrybusiness, theformationofSafeTeams for cultural change. assisted inordertoembodythekeybehaviorsaimedat highlighted throughvisibleleadership, andleaderswere all Mills;theimportanceofHighPotential Incidentswas ped atdifferentmanagementlevelstodeploythemodelin ty CultureatAllLevels”. To doso, astructurewasdevelo- was linkedtothestrategiccoreidea “Strengthen theSafe- The model’s progressinthePulpandEnergyBusinesses WERE FORMEDIN2018 THE FOLLOWINGSAFETEAMS 258 523 (Chile, ArgentinaandBrazil). (Chile, ArgentinaandBrazil). SAFE TEAMSinTimber in Pulp SAFE TEAMSinPulp

144 (Chile, ArgentinaandBrazil). SAFE TEAMSinForestry 87 88 SUSTAINABILITY report 2018 a company that provides services to Arauco PulpMill. Arauco; andCarlosPainemanPeña, anemployee atAndritzChile, lando Alfredo Arevalo Mora, whichprovides services to Forestal derio SegundoNeira Rivas,adriver at transport company Ro- provide services to ARAUCO due to work-related accidents: Desi- loss of two contract workers from contracting companies that However, during this sameperiod, the company had to mourn the re (USA), Mill Biscoe (USA) Mill (Canada). andSt.StephenMill so doSul(Brazil), (USA), EugeneMill Malvern (USA), Mill Moncu- do Tenente (Brazil), Ponta Grossa -Florestal (Brazil), MatoGros- Araucaria (Brazil), ChemicalMill Florestal Arapoti (Brazil), Campo than oneyear withoutaccidents: ElColorado (Chile), Sawmill In addition, asofDecember 31, 2018, 11facilities registered more (Chile). Licancel PulpMill (Canada);and (Argentina);SaultSte.MarieMill Chemical Mill (Brazil);cal Mill (USA); EugeneMill Malvern (USA); Mill PGSM (USA); Moncure (USA); Mill Bioforest (Chile);Araucaria Chemi- (Canada);ElColoradoStephen Mill (Chile);Biscoe Sawmill Mill zil; Grayling Project Mill (USA); CholguanComplex (Chile);St. at World Class level: Ponta Grossa (Brazil); Mill Florestal Bra- In 2018, 15facilities registered severity and/or frequency rates and Accident Severity Rate 2by 55%compared to 2017. In 2018, ARAUCO reduced the Accident Frequency Rate by 27% 2018 SAFETYINDICATORS and contract workers). • maintenance managementlevel (Timber Business Chile). • gement level (Timber Business Chile). • The main training initiatives are: The company isconstantly training itsworkers insafety. Chile Chile Consolidated North America Brazil Argentina Safety Orientation for newworkers all (own employees Excavation safety workshop for the engineeringand Riskmanagementworkshop for the engineeringmana- SAFETY TRAINING ACCIDENT FREQUENCYRATE BYBUSINESSANDCOUNTRY Forestry 3.4 0.7 3.9 1.7 - Pulp workers inproduction processes • Chile). • roles within the organization. • 4.0 4.0 3.7 Operational andemergency procedures, for general Safety leader coaching (PulpandForestry Businesses ISO14001:2015 refresher course for workers indifferent - - Wood 2.2 3.2 5.7 3.5 1.6 CONSOLIDATED 3.2 3.6 3.8 1.5 1.5

89 90 SUSTAINABILITY report 2018 MILESTONES 2018

• • • • •

hour to reflect onandreaffirm their commitment to Safety. and Argentina(about2,500people)simultaneously take an nesses. All the SafeTeams atfacilities andoffices inChile “Safety Hour” wascarried outat the PulpandEnergy Busi- facilitate this process ofchangewithin the organization. San Andrés Building.Themainrole of these committees is to business, four zoneoffices, oneatBioforest andoneat the Six cultural changecommittees were formed in the Forestry contractor companies. Forestry business, Safe Teams have beenformed mainly in vements. Itshouldbenoted that due to the nature of the which led to reflection and the implementationofimpro- work or activitiesconsidered unsafeor risky by workers, This wasdemonstrated, for example, in the suspensionof Formation ofSafeTeams, whichempowered employees. the process ofcultural changeat the company. several different practices in their work areas to contribute to lities and, through these, the SafeTeams. Thelatter installed foundation to constitute Cultural ChangeCommittees atfaci- ral ChangeCommittees for the business areas, whichare the (Chile, ArgentinaandBrazil), through the formation ofCultu- different industrialandforestry operations inLatinAmerica Implementation of“Together for aBetter Life”Modelat the gement asoneofitscomponents. employees, specifyingOccupational HealthandSafety mana- Adjustment of the annual managementbonusfor company all • • • • • •

improving safety. issues they presented related to eradicating baddrivingpractices and in Chile.Thepurposewas to raise awareness among truck drivers on “Yo Elijo”(IChoose)safety campaignfor drivers in the Forestry business develop aculture ofsafety levels. atall was outlinedin the Pulpbusiness, whichgenerate sustainableimpact to of prevention activitiesof the supervisor role; key leadership behavior leaders; IGPRS inTimber inChile, to plan the execution andfollow-up cascading safety inBrazil, to defineaminimumsafety agendafor Development ofprograms to strengthen safety leadership, suchas: and standardize andincorporate new technologies inOHS management. technical managementunit,whosepurposeis to transfer goodpractices, Creation of the Environment, Occupational HealthandSafety (EOHS) management levels in the Timber andForestry businesses. Integration ofHumanResources andOccupational HealthandSafety to make them clearer and more visible to workers. (HPI) andcriticalrisksidentifiedinprocesses, andsimplify documents mary riskcontrols. Thesecards originatedfrom HighPotential Incidents businesses. This tool standardizes tasks andequipment,focusing onpri- The useofSafety Cards in wasinstalled the Timber,PulpandEnergy participated in this initiative forming 306 circles. “Circles ofTrust” to reflect onSafety. InChile,3,235 peopleactively facilities andoffices were simultaneously stopped for onehour to form In the Timber business inChile,ArgentinaandBrazil, industrial all 91 92 SUSTAINABILITY report 2018 occupational HEALTH vance ofactions. at the workplace to ensure worker representation and the rele- coordinating and validating the interventions beingimplemented implement this program. Thesecommittees are responsible for Health culture committees have beenformed ateachfacility to remain in the company. and integral development ARAUCO’s ofall peoplewhile they gram, whichaims to foster conditions that allow for the healthy Health promotion iscarried out through the HealthCulture pro- ges ahealthy lifestyle. mote illness-free operations, andahealthy culture that encoura- healthy working conditions for workers’ highperformance; pro - Occupational Healthinall the company’s processes; generate ARAUCO isdetermined to ensure the regulatory framework for family-oriented sportsactivities. sports clubs)into the Healthy Culture program; suggest Integration ofsportsactivities(includingfacilities and PHYSICAL ACTIVITY educational tips andusefuladvice. Improvements incafeterias,activitiesandhealthy options; FOOD children (vacations). cooking workshops, andactivities for workers’ Celebrations withhealthy options;contests for kids; FAMILY related risks,adviceandsuggestions. Committees; Policy dissemination, andeducationon Formation ofPrevention Teams and training for Joint WORKPLACE ALCOHOL ANDDRUG-FREE occupational exams andepidemiological surveillance. improvement ofwork conditions andcompliance with set by the Ministry ofHealthinChile;ergonomic Aims to comply withOccupational Healthprotocols HEALTHY WORK ENVIRONMENT

94 SUSTAINABILITY report 2018 protective equipment. signs, warningsandexposure time controls, andpersonal engineering controls), administrative measures suchas rate the work-related illness, source replacement and strong measures (removal of the source that cangene- control hierarchy, whichprioritizes the implementationof The implementationofmeasures isinlinewith the risk ment control measures to mitigaterisks. present; develop environmental assessments, andimple- is to properly identify the agentandareas inwhichitis The way to mitigaterisks related to occupational illnesses exposed to work-related illnesses. veillance, whichinvolves medicalevaluations ofworkers identification, evaluation andcontrol) andmedicalsur in Occupational Health:environmental surveillance (risk given by the correct implementationof two key stages In addition, the prevention ofoccupational illnesses is - activities. to determine their healthfitness to safely perform such who are partofindustrialcrews are medically examined ghts, inconfined spaces,drivingmobileequipment,and Workers atindustrialfacilities whoperform work athei- of suffering anoccupational illness. posed to and the measures available, to mitigate the risk workers are trained to understand the risks they are ex In addition, aspartof the control implementationprocess, surveillance examinations. ce agency or other competent bodies through medical nal illness are medically evaluated by the healthinsuran- Similarly, workers all exposed to the riskofanoccupatio- - • • • • •

healthier workers. facilities andforestry areas inChile,order to count on comprehensive evaluations ARAUCO’s inall industrial protocols establishedby the Ministry ofHealth;and of jobpositionsby implementingOccupational Health Within the healthy work environment improvement pillar, tional examinations. for workers whowere contraindicated by their occupa- Implementation ofComprehensive HealthEvaluations ber andForestry Businesses. Health Culture diagnosisfor 2,859 workers in the Tim- their respective actionplans. Formation of21HealthCulture Committees, eachwith industrial facilities andforestry areas inChile. Implementation of the HealthCulture program inall MILESTONES 2018

• • • • • •

standards for quality andsafety infood handling. are inproper condition and that suppliers meet the highest inspected to improve food serviceensuring that facilities Within the food cafeteriashave pillar, beenperiodically challenge challenge to consume healthier food. Fruit delivery for facilities all to contribute to the national evaluations, andother activities. tation andsamplingofhealthy products, offering nutritional Sodexo to implementhealthy fairs, whichinvolve the presen- In Chile’s Arauco area, wasestablishedwith analliance tions inChile. suppliers locatedinareas where ARAUCO maintainsopera- AcercaRedes Foundation, whichoffer several products from Implementation ofemporiummarkets launchedby the San Andrés offices, Arauco, Valdivia). thons (Nueva Aldea), andsportsOlympics(SanPedro and only; 22 teams, 440players and32soccer matches), mara- golf tournaments (Constitution),soccer cups(Timber area yees, suchasbikeathons (ConstitutionandTrupan areas), In Chile,many sportsactivitieswere organizedfor emplo- Arauco), andfamily medicalcare (Valdivia). (Cholguan), classes(Constitutionand onnutritionallabelling In Chile,cooking classes were offered to employee wives 95 96 SUSTAINABILITY report 2018 COMMITTEES joint in in 37 9 NORTH AMERICA CHILE in ARGENTINA in 9 6 BRAZIL and active participationincultural changecommit- implementation ofcertifiablemanagementstandards operation, andexcellence in their mission through the tees isfor them to achieve maturity full during their The company’s purposeinrelation to JointCommit- actions ofjointcommittees. These countries have legalbodies that regulate the dangerous work-related accidents andillnesses and NorthAmericawhichidentify, analyze andprevent Safety (CPHS inSpanish)ChileArgentina,Brazil ARAUCO maintainsJointCommittees onHealthand (view table). standard applicable to committees advancedin2018 In addition, the certificationprocess of the management safety plansateachfacility andforestry site. actively participatingin the definitionandmonitoringof a fundamentalrole in the cultural changecommittees, During 2018, JointHealthandSafety Committees played ARAUCO’s safety culture. which are concrete contributions to the consolidation of tees definedinour “Together for aBetter Life”model, 97 98 SUSTAINABILITY report 2018 PULP LEVEL OFDEVELOPMENT BUSINESS EXCELLENCE INTEGRATED REGULATED FORESTRY EXCELLENCE INTEGRATED PLANNED REGULATED WOOD EXCELLENCE PLANNED INTEGRATED TOTAL REGULATED TYPE OFJOINTCOMMITTEE Contractor 23 24 14 10 61 15 2 2 2 4 2 8 6 9 1 Internal 33 10 18 12 4 4 4 5 3 3 1 1 1 32 33 29 94 Total 12 14 13 13 15 6 3 3 7 7 1 MILESTONES 2018

• • • • • •

in Chile. ther for aBetter workers Life”amongall of the ElColorado Sawmill, to promote the principlesof the corporate managementmodel“Toge- Development of the “BuenaPerro” (Way to go,Dog) safety campaign, with service-providing companies. Joint HealthandSafety Committees atArauco Plywood inChile, mill Development ofsafety inspectionandobservationscampaignsledby direct supervisors. than 1,000 dayswithoutaccidents inameetingwith the manager and Joint Committee recognizes the areas and teams that achieve more awarding acommemorative plaqueandafamily dinner. Similarly, the began the quarterly recognition ofoutstandingworkers insafety by During 2018, the JointCommittees atHorcones inChile, IISawmill, Your Treasures” Awareness Workshop for newpersonnel. all manufacturing facility inChile,implemented andsawmill the “Valuing The JointHealthandSafety Committees atHorcones Complex re- with acommitment to safety andself-care. which employees and their families mustdealwithand that ends the Safety Tunnel, asimulator that presents three risksituations invited workers’ families to participateinseveral activities suchas The JointHealthandSafety Committees ofArauco inChile, PulpMill del’s guidingprinciplesduringageneral facility shutdown. held on-siterecognition for SafeTeams that bestpracticed the mo- The JointHealthandSafety Committee atValdivia inChile, PulpMill 99 05

community, participation AND DIALOGUE 2018 report

community, Over participation SUSTAINABILITY AND DIALOGUE

ARAUCO’s Local Development Strategy aims to contribute to the 50PROGRAMS in development. development of local communities through programs that generate shared value, using a model based on dialogue and participation, the development of projects with high standards and technical excellence, collaboration and development of alliances and work Community engagement from and for the territory. with more than To do so, to the company implements programs, installs capaci- ties and establishes alliances, contributing to the well-being and development of communities and to business sustainability. These programs are categorized into work areas defined according to the reality of each country where ARAUCO maintains operations and aim to foster instances for transparent and honest communication with relevant stakeholders. The company maintains ongoing dialogue with its neighbors to identify and reduce possible negative impacts derived from its 220 COMMUNES. operations and seeks opportunities to increase its contribution to About US local development. Dialogue processes and programs are implemented, measured and managed to generate results that add value to all stakeholders. In Chile, the company implemented the Local Reputation Index in priority communities to assess its reputation and learn about how its neighbors evaluate the present and future of their communes. This information became input material for the company’s business management. 14million in ANNUAL SPENDING.

102 103 2018 report

SUSTAINABILITY sustainable

Shareholders development goals and investors

AT ARAUCO ARAUCO Communities AND ITS The Sustainable Development Goals aim to officially implement STAKEHOLDERS Employees and the 2030Agenda for Sustainable Development. This agenda collaborators encourages countries and businesses to initiate efforts to achieve the 17 Sustainable Development Goals (SDGs) in the Suppliers next 15 years. ARAUCO promotes the participation of its ARAUCO different stakeholders and considers their ARAUCO, through its many sustainability initiatives, has perceptions, interests and expectations. identified opportunities to increase its contribution to the For these purposes, the company has Authorities following SDGs, integrating this challenge into the company’s established several formal and permanent sustainability strategy. dialogue mechanisms.

Opinion leaders

Associations, unions and NGOs

104 105 2018 report local ARAUCO EDUCATIONAL DEVELOPMENT FOUNDATION – CHILE SUSTAINABILITY This program aims to place teachers at the center, as PROJECTS essential actors of educational changes Its focus has been to strengthen the competencies and practices of practicing teachers, which ultimately leads to an improvement in student learning. CUCHA CUCHA NETWORK – CHILE CAMPUS ARAUCO – CHILE In 29 years, the Foundation has carried out several educa- This initiative aims to strengthen the local wine-producing tion programs in 34 communes, benefiting 575 schools and An education center that combines education and practical businesses of Itata Valley (where Chilean wine originates), 5,120 principals and teachers who have annually provided training in the workplace through a strategic alliance between furthering the area’s development to gain global recognition and/or provide education to about 100,580 students. ARAUCO and Duoc UC. This initiative aims to generate options for its wines and tourism. for technical and professional education. In 2018, Campus Arauco held its first graduation ceremony, with 83 graduates ACERCA REDES FUNDATION – CHILE who earned their degree. BIOBÍO THEATRE AGREEMENT – CHILE This initiative offers a quality work and meeting space, This alliance will offer more than 40 performing arts HOUSING PROGRAM – CHILE while promoting partnerships between local busi- presentations in the communes of Concepción, Arauco and nesspeople and technical, production, union, cultural, Curanilahue during 2019, in addition to generating decentra- To promote access to housing for workers, workers of servi- academic, corporate and commercial organizations. lized artistic training processes in the Biobío Region. ce-providing businesses and families living in the company’s The purpose is to accelerate innovation processes and area of influence, ARAUCO provides support during the public business partnerships that can significantly impact housing applications process, during the hire of third party ex- local development. MATAQUITO THEATER – CHILE perts and for the search for land and its technical evaluation. Agreement with the Municipality of Licantén and La Fuente The company is currently working with 11 committees, which Foundation, to provide the architectural design of the futu- involve 2,846 people, of whom 2,236 are direct and indirect re Mataquito Theater in Licanten, with participation of the workers and 610 people are community family members. local community and cultural and artistic organizations.

106 107 2018

SANTA OLGA

report RECONSTRUCTION PLAN – CHILE

After the fires during the 2016-17 season, ARAUCO signed an agreement with the Chilean government to work on the reconstruction of towns Santa Olga, Los Aromos and Alto Los Moran, in Constitution. The plan included many programs to provide drinking water su- ONGOING TEACHER TRAINING pply, civil works, fire protection strips and firebreaks. SUSTAINABILITY PROGRAM – BRAZIL In addition, land was made available for emergency equipment: A Fire Station and a modular nursery This program provides ongoing training to teachers in the school. The company also financed the construction of municipal education network to improve their pedagogical the Santa Olga soccer field. practices and therefore help to maintain and/or improve the Basic Education Development Index. (IDEB) Brazil - ONCOL LIVING CLASSROOM GREEN CLUB ARGENTINA SCHOLARSHIP PROGRAM The program is developed with municipal education secre- PROGRAMS – CHILE – ARGENTINA tariats and has performed 26 actions in 15 municipalities. This program aims to create awareness among children In 2018, 3,581 teachers participated. This environmental education program involves peda- and promote the idea of sustainability, by giving them Initiative designed to support the different school le- gogical sessions at Oncol Park for 4th grade leading roles in caring for the natural resources of the vels of young people: secondary, tertiary and universi- students, to address issues on environmental care province. For the fourth consecutive year, the General ARAUCO ENVIRONMENTAL ty. The program includes tutors for scholarship holders and conservation. Council for Education of the Misiones Province declared who, with the company, monitor each student. In 2018 EDUCATION PROGRAM – BRAZIL this program of interest. In 2018, the Green Club visited there were a total of 47 scholarship holders, 9 from 4 50 schools, reaching 30,000 children. Guaraní communities, and 28 ARAUCO tutors. The program aims to disseminate social/environmental ONCOL LIVING CULTURE – CHILE values, knowledge and attitudes regarding environmental CHARITY MARATHON – ARGENTINA conservation and provide information on forestry practices. Cultural and recreational activities program at FORESTA WORLD (TRAVELING The environmental education program has been developed Oncol Park, to showcase the park. In 2018, the park Project driven by a group of company volunteers VAN) – ARGENTINA held seven activity sessions for more than 200 adults in seven municipalities in Brazil and 1,013 students in the benefitting institutions located in the northern area of municipal education network participated in 2018. and children. the Misiones province. It has become the area’s most This itinerant van was created so that the com- important social and sports event. About 4,700 people pany can be present at the main celebrations, fairs participated in the September 2018 marathon; there and events of communities where it maintains were 300 ARAUCO volunteers and 187 community insti- operations. The van is a didactic and entertaining tutions were benefited. experience where neighbors learn about the characteristics of the forestry activity through the latest technology. In 2018 there were 9,884 visitors and 41,956 registered visitors since it was launched in 2015.

108 109 2018 report

SUSTAINABILITY COMMUNITY WORK PROGRAMS – CULTURAL CIRCUIT – BRAZIL NORTH AMERICA

The cultural circuit provides opportunities for children in By working with different organizations, ARAUCO public elementary schools and the community to gain access has contributed to the development of projects to culture, knowledge and art, while disseminating ideas and that aim to improve the quality of life and access values on education and environmental conservation. to opportunities for communities located near the company’s facilities in North America. Company In 2018, the program was developed in eight municipalities employees get involved in the design and/or imple- and 7,050 students and community members participated. mentation processes of these projects.

EDUCATION – NORTH AMERICA

ARAUCO aims to support technical schools that provide industrial training, donates materials and supplies, and encourages the development of projects that apply innovation at company facilities or other industrial operations.

110 111 2018 report SUSTAINABILITY Over participation AND DIALOGUE

ARAUCO’s sustainability strategy is based on participation and dialogue as tools to interact with different stakeholders. Its participation33 and dialogue essential purpose is to engage the company with its stakeholders INITIATIVES were developed. through consultation and dialogue processes, meetings and visits to company operations, thus promoting interaction, learning about community needs and receiving and including their concerns.

More than 77,000 PARTICIPANTS INVOLVED.

112 113 2018

FORESTRY DIALOGUE – CHILE report A work method that is carried out in several regions of the world that allows relevant actors of the territory to observe and discuss forest management practices together. Roun- participation dtables are currently being held in Empedrado (Maule) and and dialogue Nahuelbuta (Arauco Province). SUSTAINABILITY OPEN HOUSE – CHILE INITIATIVES A participatory mechanism carried out in five-year cycles that has become an opportunity for direct dialogue with local communities and workers about the challenges we DIALOGUE WITH PUERTO PIRAY face. During 2018, 44 Open Houses were held with 3,401 AND PUERTO ESPERANZA EARLY CITIZEN PARTICIPATION participants in 38 communes where the company main- NEIGHBORS – ARGENTINA PROCESS FOR VIENTO SUR PROJECT tains Forestry and Industrial operations, to record and discuss the issues of interest for nearby communities. Based on queries and concerns from neighbors, the Initiative conducted to directly involve the community in the de- company decided to hold meetings to listen to neighbors’ velopment of the wind farm and to integrate visions that nourish ROUNDTABLES – CHILE expectations and report on the company’s management, and improve the project’s advancement. The process included which created links between the business and the communi- approaching the community, establishing open dialogue, iden- We currently participate in three roundtables with the ty, as well as shared value. In 2018, two meetings were held tifying opportunities and ongoing dissemination. A total of 128 Agency for Sustainability and Climate Change in which at Puerto Piray, attended by 82 neighbors and two meetings meetings were held with neighbor associations and Mapuche we have adhered to Voluntary Basin Management Agree- were held at Puerto Esperanza for 115 neighbors. communities, visits to eight schools and three community ments in the Itata Valley (Ránquil - Ñuble); Vichuquen clinics, and 18 communication meetings for company workers, (Maule) and Picoiquen (Araucanía). reaching 3,789 people. We also actively participate in local territory roundtables FORESTRY-ENVIRONMENTAL where we join neighboring communities, local authorities DIALOGUE – ARGENTINA SOCIALIZATION OF THE DISSOLVING and other companies to discuss issues of interest to all participants. These include Cartago (Pemuco), Cayucupil PULP PROJECT – CHILE The purpose of this initiative is to strengthen ties with the (Cañete), Rucamanque (Temuco), and others. community in the region of Alto Paraná, in Misiones, creating During 2018, several meetings and gatherings were held with an instance to share ideas with the sector’s different actors regional and local authorities, community representatives, and to generate an agenda for the region’s sustainable deve- research center professionals and several stakeholders. lopment. Two meetings were held in 2018 with more than 30 organizations and 80 participants.

114 115 2018

report GUARANÍ COMMUNITY RELATIONSHIP PROGRAM – ARGENTINA

This program aims to build a relationship between the company and the community within a framework of respect for the Mybá Guaraní culture. There are

SUSTAINABILITY currently 33 Mybá Guaraní Communities that circulate and make use of resources within ARAUCO forestland, which accounts for 30% of the indigenous population in Misiones. The program has created several instan- COMMUNICATION CHANNELS ces to engage and develop projects. AND RESPONSE MECHANISMS

CONSULTATION AND MONITORING ARAUCO has developed, and actively manages, a num- PROCESS OF SOCIAL IMPACTS DERIVED ber of channels, platforms and tools to maintain ongoing and open communication with its different stakeholders, FROM OPERATIONS – BRASIL which facilitates the dissemination of information of interest and the timely reception of questions and concerns. This initiative aims to identify the impacts derived from Telephone lines, websites, e-mail addresses and social the company’s forestry operation and involves plantation network accounts on Facebook, Youtube and Twitter are pre-operation, during operation and post-operation. Com- available to the public. munities and their residents are informed at all planting stages and consulted on possible impacts resulting from The Integrated Management System used in Chile, which forest management activities. They can also submit sug- involves a call-center and website platform, received gestions to reduce, eliminate or mitigate impacts. 3,521 contacts in 2018.

116 117 2018 report

CHANNEL Nº OF CONTACTS

SUSTAINABILITY Chile and corporate corporate Facebook.com/AraucoSolucionesSostenibles 263,225 followers YouTube Arauco 17,634 followers www.arauco.cl 856,960 visits commitments to Línea 800 370222 3,521 contacts e-mails 2,014 contacts EXTERNAL Argentina 0800 888-2772 21 calls INITIATIVES [email protected] 230 e-mails Brazil [email protected] 56 contacts ARAUCO recognizes the value of working in partnership with other actors, particularly when addressing complex Telephone line 27 contacts challenges that have multiple points of view. Specific form 45 contacts The company maintains a permanent relationship with Norteamérica academic institutions, NGOs and trade unions, with whom it www.arauco.cl 270,953 visits aims to strengthen networks and multi-sector cooperation.

118 119 2018 report SUSTAINABILITY

PARTICIPATION IN PUBLIC POLICIES

ARAUCO participates in the discussion of issues relating to In Brazil, the company presents its ideas to national trade its business and to any of the aspects contained in its Sus- chambers, such as the Brazilian Trees Industry (IBÁ). Con- tainability Strategy. The company also presents its position tacts in the Paraná area are made through the Association regarding regulations that may influence its operations or of Forestry Businesses of Paraná (APRE). In North Ame- economic performance through trade associations in which rica, ARAUCO offers input into the National Formaldehyde it participates in Chile, such as the Chilean Wood Corpo- rulemaking process, the CARB ATCM rulemaking process ration (CORMA) and the Chilean Federation of Industry and LEED workshops. (SOFOFA). During 2018, in Chile, the company was invited to participa- MEMBERSHIPS te in the National Commitment to Education roundtable. The objective of this initiative is to develop joint work between ARAUCO actively participates in more than 115 trade asso- the public sector, academia, civil society, the private sector ciations and social organizations in Chile, Argentina, Brazil, and citizens, to address the 16 issues proposed by the Mi- Uruguay, Mexico, Peru, Holland, the United States, Canada, nistry of Social Development in the 2018 Vulnerability Map. Colombia and Australia. In addition, the company works closely with universities, communication media, scientific In Argentina, the company actively participates in the Ar- centers, NGO’s and local governments. gentinean Forestry Association, the Argentinean Pulp and Paper Producers Association, as well as in FSC® Interna- tional and its national initiative.

120 121 06

environmental MANAGEMENT 2018 report

environmental SUSTAINABILITY body; and begin to report to the Carbon Disclosure MANAGEMENT Project to provide greater visibility to the company’s actions on climate change mitigation and adaptation, thus providing potential investors with more information on the risks and opportunities The manufacture of products derived from renewable resources, CARBON the company faces with regards to climate change our global presence, the sustainable management of resources and systematize CDP reporting to also improve the and the implementation of management standards that ensure FOOTPRINT company’s business areas internal organization to ongoing improvement of our environmental performance are the gather the information. foundation of the company’s environmental management. ARAUCO In addition, the company’s leadership position in optimization of hydric resources, clean energy and carbon credits are some of the initiatives in place to face climate change. In 2018, the company measured its carbon footprint for 2017 Results by Scope (tCO2e) ARAUCO’s forestland fulfills the natural function of carbon stora- 2017, based on the GHG Protocol for scopes 1, 2 and 3, reaching a total of 4,219,132 tCO2e. The measurement 1,241,591 ge, sequestering CO2 from the atmosphere and releasing oxygen Scope 1 reports 1,194,479 tCO2e (from CH4 and NO2 gas emis- (does not include fires) into the air, thus contributing to reduce greenhouse gases and sions) attributable to the fires in 2017, and 19,075,590 their effects. tCO2e from biogenic emissions. Scope 2 472,196 The company also drives scientific research programs in a joint The next challenges for ARAUCO’s carbon footprint effort with universities, public institutions and NGO’s; promotes aim to set reduction targets by business area; assure Scope 3 2,505,345 innovation through project development and manages environ- the carbon footprint measurement with an external 4,219,132 mental monitoring activities related to biodiversity, air emissions, Total (does not include fires) water basins, water bodies and research programs related to compliance with environmental commitments In addition, the company strictly complies with applicable environmental regulations, including the principles of the Rio Declara- tion contained in the laws we are subject to.

124 2018

report environmental management in the FORESTRY SUSTAINABILITY BUSINESS

On the understanding that the foundation of ARAUCO’s business is the production and management of renewable forest resources, caring for the environment and its natural resources is highly important. Planning the forestry cycle is the cornerstone of the company’s operational activities, timber marketing and industrial facilities supply. ARAUCO manages its forestland in adherence to responsible forest management, committing its operation to the highest international standards on environmental, social and financial matters. In Chile, the company maintains an ongoing Monitoring and Assessment System, to establish work plans and specific actions that promote continuous improvement of its processes. In Chile and Brazil, ARAUCO participates in the Forestry Dia- logue, which joins forestry businesses, NGO’s and universities and other stakeholders to promote effective actions related to forestry production, broadening the scale of environmental conservation and restoration efforts, generating benefits for Dialogue participants and society in general.

126 127 2018 report SUSTAINABILITY

NATIVE FOREST PROTECTION AND VALUE PROPOSITION BIODIVERSITY MONITORING

ARAUCO is committed to the protection of native forests Preservation Areas and legal Reserves. HCVA’s of biologi- ARAUCO’s forestland includes conservation areas that The areas that are the most critical and significant are on its land, understanding that the sustainability of its cal importance have been identified within native forests, are distributed in sections of different sizes that are designated as High Conservation Value Areas (HCVA). connected by protection zones located alongside water production processes is closely tied to the biodiversity which are managed in terms of research, monitoring The company’s commitment to non-conversion of native bodies. These remnant sections of vegetation are repo- and ecosystem services found on its territory. (fauna and flora), protection against illegal activities and forests and its restoration program will allow conserva- sitories of biodiversity and plantations that often act as prevention of wildfires. tion areas to increase in the future, benefiting threatened In Chile, the native forest is managed through High Con- buffers for the biodiversity within. servation Value Areas (HCVAs), Protection and Restora- In Argentina, ARAUCO owns over 118,000 ha that are species, areas that are essential for biodiversity or very tion Zones, further increasing a landscape-scale planning conserved as natural areas comprised of native forests, The challenge for ARAUCO is to maintain and improve important to communities or interested parties. the biodiversity resident in its forestland. To do so, the approach with stakeholder participation. This process HCVAs, ecological strips, wetlands, drainage areas and In addition, ongoing effort is made to monitor and identi- company implements a Biodiversity and Ecosystem Ser- begins with gathering information and monitoring the protective forests. This area accounts for about 45% fy the presence of threatened flora and fauna species in vices Policy that emphasizes the assessment and ma- state of vegetation and native fauna, identifying threats, of its forestland. Actions developed in these areas are the company’s forest plantations. Specific measures are nagement of possible effects on diversity derived from and classifying for management plans. fundamentally for forestland protection, research projects, taken when these species are found or seen in produc- production, through research programs and biodiversity conservation and environmental education. tion areas. In Brazil, ARAUCO owns more than 98,000 ha of native and ecosystem services management protocols. forest protected by the Brazilian Forestry Code – Federal The company also performs monitoring activities of This is achieved through a permanent effort to identify Law 12.651/2012, which are designated as Permanent biodiversity, water and other elements in relation to its biodiversity elements (species, ecosystems, large nuclei operations, aiming to identify possible impacts or gaps with little anthropogenic intervention, wetlands) and the and mitigate them as needed. subsequent preparation of management and monitoring plans emphasizing threat control.

128 129 2018 report

SUSTAINABILITY NUMBER OF SPECIES INCLUDED IN CONSERVATION LISTS (IUCN AND OTHERS) FOUND ON ARAUCO LAND

CHILE ARGENTINA BRAZIL

Category Fauna Flora Fauna Flora Fauna Flora

Critically endangered 0 3 0 1 3 1

Endangered 31 32 3 3 9 12

Vulnerable 1 1 31 0 29 10

Near threatened 0 0 18 2 37 6

Least concern 3 7 50 0 496 30

Provincial protection 0 0 9 7 0 0

IUCN Least Concern (LC): A taxon is classified as Least Concern when it has been evaluated but it does not comply with any of the criteria that define categories Critically Endangered, Endangered, Vulnerable or Near Threatened. The Least Concern category includes taxa that are abundant and broadly distributed.

130 131 2018 report

SUSTAINABILITY HIGH NATIVE FOREST % OF NATIVE CONSERVATION COUNTRY SURFACE FOREST OVER HCVA’S VALUE AREAS HIGH CONSERVATION (ha) FORESTLAND VALUE AREAS (HCVA’s) (ha) Social, cultural or Biological ARAUCO’s forestland contains multiple social and envi- religious ronmental values, some of which are especially signifi- 63 cant and critically important, and are therefore designated Biological high conservation CHILE 218, 516 19% 59,820 37 90 as high conservation values (HCV). The objective for value AREAS. these HCVs is to identify, maintain and/or improve them. To do so, the company’s planned activities aim to increase ARGENTINA 118,582 45% 55,771 16 31 the attributes that define high values for biological HCVs, ecosystem services and cultural services.

The process to define HCVAs begins with initial studies BRAZIL * 98,962 40% 10,4 34 10 7 for the characterization of flora, fauna and the spatial distribution of conserved fragments. The identification and characterization of HCVAs should follow the premise *Brazil has 15 HCVA’s in total; two of them combine the characteristics of both a biological and social HCVA. of FSC Principle 09 and the PROFOREST Guidelines that describe the entire methodology to identify attributes 128 and areas. Public consultations are carried out with Social, cultural or religious high communities and experts to identify HCVAs with social conservation value AREAS. characteristics.

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2018 report

• Increase of the physical restoration area by 2,399 hec- • Continued development of studies and monitoring of fauna (mam- tares in Chile, of which 446 hectares were implemented malian and birds) in ARAUCO’s natural forests.

SUSTAINABILITY in compensation format and in a participatory manner. In • Start of water basin monitoring in Mahal and Novo Oeste in Brazil. total, ARAUCO in Chile has 4,399 hectares being restored. • In Argentina, work continued with the Swamp Project to study deer • In Chile, the Biodiversity Advisory Council was reinforced populations in a joint effort with the National Council for Scientific with relevant stakeholders to gather and share different and Technical Research and the Swamp Deer Committee. points of view. • In Argentina, the Yaguareté Monitoring Project in ARAUCO forest- • In the Arauco area in Chile, a few potential Cultural HC- land was initiated through an agreement with the Atlantic Forest VAs are in the process of identification. MILESTONES Research Center (Ceiba in Spanish). • Part of the Natri site in the Arauco commune in Chile, • In the Misiones province, Argentina, the Pitoco Fox Project (Saint was incorporated into the restoration plan. Several high Louis Zoo-Wild Care Institute) is being developed to identify habitat conservation value amphibians live here, and it is a poten- corridors for this endangered species, which has been declared a tial habitat for Darwin’s fox. 2018 natural monument. • Community members enhanced a few areas at Traytrayko • In Argentina, camera traps installed in the San Jorge Reserve and de Yane HCVA with Nalca seedlings they collected. This Campo Los Palmitos have taken 60 independent records of yagua- Mill is a source of income for communities. reté jaguars in the last five months, including two different females • Research agreement with the University of Concepción, photographed with cubs in the San Jorge Reserve. in Chile, to study Valdivia gayana., a unique HCV that is present in five HCVAs in the Valdivia area. Research work will provide key data for its conservation.

134 135 2018 report SUSTAINABILITY

FORESTLAND PROTECTION AND FOREST FIRE PREVENTION

ARAUCO strives to sustain the integrity of the company’s Fire protection belts in inhabited areas are an outstanding The different measures have been developed with the active par- forestland, protecting forest plantations as well as con- example. They aim to protect residential areas located ticipation of communities and different public and private actors, servation set-asides and their biodiversity. To do so, the next to forest plantations, and include fuel breaks and pre- since there is consensus that the way to reduce the occurrence of company has developed and implemented programs for ventive forestry actions. In total, ARAUCO maintains 485 fires is to work together. the protection of forestland and for fire prevention kilometers of protection for towns and localities. Another In Brazil, the actions taken to prevent forest fires range from and suppression. measure is the structural protection network that has providing training to fire combat leaders and crews and a contact added 4,300 km of fuel breaks within our plantations. The fires of previous seasons have allowed us to rein- and support network comprised of other forestry companies for force a strategy that comprehensively and profoundly • Detection: The objective is to reinforce fire detection surveillance and firefighting, to campaigns, communication with addresses fire prevention and firefighting with measures tasks by incorporating new technological tools, such as neighbors and environmental education. for the short and long-term that aim to be a direct contri- the creation of a new unified fire station that collects all In Argentina, ARAUCO has a fire detection and warning system in bution to both the country and the forestry sector. the information on detection and resource deployment, place. If a fire is confirmed, Operation Centers immediately coor- concentrating these functions into a single unit, equipped To do so, the fire prevention and suppression plan in Chile dinate the allocation of necessary resources for its suppression. with modern technology for monitoring and early detec- has been organized into four core aspects: Impacts and measures required to improve, or implement are tion of disasters using fixed and robot cameras, and the then analyzed. • Occurrence: The objective is to work with neighbors on timely deployment of fire combat resources. prevention through joint efforts such as the Community Last, the Forestland Protection program that involves forest ran- • Combat: Considers the injection of new resources Prevention Network, which articulates the formation of gers and area supervisors, who provide important logistic support to quickly contain the initial phase of outbreaks, which Local Prevention Committees in which neighbors, authori- to the Forest Fire Program and other areas, and a Phytosanitary translates into the use of air and ground resources, the ties and companies work together to prevent fires. Today, Protection program whose activities are based on Integrated deployment of night firefighting crews and the gradual ARAUCO participates in 252 fire prevention committees. Pest Management. The purpose of this program is to prevent increase in water capacity. financial damage resulting from the presence of pests in the com- • Propagation: The idea is to take measures to reduce the pany’s forestland and includes surveillance activities, diagnosis intensity and speed of fires once there is an outbreak. and control.

136 137 2018 report SUSTAINABILITY FOREST FIRE PROTECTION PLAN RESOURCES

Type of resource Chile Argentina Brazil

Lookout Towers 120 19 15

Observation Cameras 24 3

Surveillance and 147 14 98 prevention staff

Fire crews 129 6 16

N° of firefighters and fire 1550 35 390 lookouts

Trucks 68 9 13

Skidders 10 1

Airplanes 13 0

Helicopters 15* 0

Supporting vehicles 116 5 27

Total budget (in US$ dollars) 48 million 855,000 4.9 million

*Includes two mega helicopters, with a capacity for 10,000 liters of water.

138 139 2018 report SUSTAINABILITY

WATER MANAGEMENT

One dimension of ARAUCO’s Integrated Management At the same time, the increase in temperature produces Considering that ARAUCO’s forests and plantations are facilitate the visibility and implementation of projects, System focuses on water management and the protection higher evapotranspiration rates and reduces the possibili- generators of several different ecosystem services and studies and investments in a local development stra- of watercourses, because, within the hydrological cycle, ty for seepage. For example, as a consequence of climate that one of the most important ecosystem services for tegy that promotes innovation and technology transfer plants, soil and subsoil play an essential role in the regula- change, the rise in the height at which precipitation falls communities is water supply, the company has propo- for the development of quality infrastructure. tion of water. as snow (zero isotherm), decreases the snow reserve sed a Management Strategy for this resource based on In Brazil, the company has been implementing an that contributes by melting to maintain summer water three pillars: Forests prevent erosion by decreasing the speed of sur- ongoing monitoring program for water basins in the flows. On the other hand, the concentration of precipita- face runoff thus helping water seep into the soil, allowing First, knowledge as the foundation to understand all Paraná province since 2011. The purpose is to assess tions (same amount in less time) generates less seepage aquifers to refill and increasing or maintaining water re- the phenomena and interactions that occur in the ba- the effects of land use and forestry management and increases the possibility of mudslides or sediment serves in watersheds. In addition, they are very important sins where forestry activities take place. operations on the availability, quality and consumption dragging, thus affecting the quantity and quality of availa- for the improvement of water quality, both surface and of water by forest plantations. To date, monitoring ac- ble water. Second, Preventive Planning, promoting forestland groundwater, by preventing erosion and sedimentation tivities do not indicate any significant impact on water management that includes prevention and mitigation and therefore reducing the number of dissolved particles In many places, the climate change scenario and the from forestry management. of possible operational impacts and monitoring the in surface water courses. On the other hand, forest roots increase in the demand for water in populated areas have supply/demand ratio of water in the basins. In Argentina, in 2018, the company continued to carry help to filter the water that leaks into the soil, providing caused a shortage that can only be solved by improving out actions to recover water basins and other critical a better-quality resource to groundwater reserves, and an historically deficient infrastructure, thus allowing the Third, work with our communities through actions that or sensitive areas related to steep slopes, watercour- improving the water available for human consumption. use of water provided by forests in territories where contribute to find solutions the lack of water availabili- ses, and/or biological corridors necessary to provi- In addition, by providing shade, forests help to regulate these populations live. ty. To do so, ARAUCO offers the community its “Water de continuity and prevent landscape fragmentation. water temperature, which also improves its quality. Challenge” program, an initiative that aims to contribu- In Chile, the challenge has been to promote and participa- ARAUCO has recovered more than 3,200 hectares in te to improve the living conditions of neighboring com- In the current context of climate change, water resources te with the academic world, NGOs and stakeholders in the 15 years. munities, generating collaborative solutions to facilitate have become increasingly critical and pressure on them discussion of options for forest ecosystem management their access to water in a climate change scenario. The has increased. Chile is not foreign to the global reduction and its relationship to water resources, gathering the program seeks to make our technical and management of rainfall. Recent years have seen less surface flow and, lessons of these last five years and the concerns of local skills available to neighbors, identifying synergies that therefore, less water reaches aquifers. stakeholders and decision makers.

140 141

2018 report

SUSTAINABILITY ENVIRONMENTAL RESEARCH INVESTIGACIÓN AMBIENTAL PROGRAMS OR INITIATIVES IN 2018

ARAUCO conducts environmental research as part of • Restoration in Arauco Zone. INFOR - doctoral thesis University a long-term work strategy, aiming to better understand of Freiburg, Amphibians in Nahuelbuta mountain range with ecosystems and their function, and to advance in their Universidad de Concepcion, in Chile. adequate protection and management. • Pantano project, in Argentina, comprised of five complemen- tary lines of research to diagnose the current state of marsh deer in the delta and support management needs to improve its conservation in the future. This project is developed by the National Council for Scientific and Technical Research (Conicet). • Yaguareté Monitoring Project, in Argentina, which aims to know the population of yaguareté’s that inhabit or use the San Jorge Forest Reserve and other conservation areas. Project by the Atlantic Forest Research Center (Ceiba). • Project for the Identification of habitat corridors that reduce human-wildlife conflicts and increase species mobility through the interior Atlantic forest landscape, in Argentina. Better known as the Pitoco Fox Project, since it is one of the species being monitored. The fifth stage of on-site work was developed in 2018, in the Misiones province that included the collection of feces from five carnivore species and four of their prey species. This study has confirmed the presence of the Pitoco fox in different forestland areas. Project by the Saint Louis Zoo-Wild Care Institute and the Subtropical Biology Institute.

142 143 2018 environmental report management at INDUSTRIAL

SUSTAINABILITY FACILITIES

Environmental management in industrial processes is a key topic for ARAUCO. The company centers its activities on environmental monitoring, regulatory compliance, management and ongoing improvement, especially regarding odors, air emissions, and liquid and solid waste. In addition, the company has embraced the challenge of developing initiatives to improve the categorization and recovery of solid waste, increase reuse, recycling and therefore reducing waste generation; conducting online studies to determine potential impacts on operations from climate change; active participation in the development processes of new regulations; and the adaptation of models, if necessary, to ensure facilities comply with new regulations. In the Timber business, the company has set the challenge of increasing the recycling effort at the Mill, through staff training and improvements in categorization. In 2018, the company made environmental investments for US$ 94.7 million, mainly due to the construction of the new effluents treatment plant at Arauco mill in Chile, improvements and opti- mizations in the TRS gas capture and treatment systems of pulp mills, and other initiatives.

144 145 2018 report

TOTAL VOLUME OF WASTE BY DESTINATION AND SUSTAINABILITY ENVIRONMENTAL MONITORING TREATMENT METHOD IN THE PULP BUSINESS (2018)

All of ARAUCO’s facilities maintain environmental The result of monitoring activities, as well as specific Type t/year Destination / disposal method and treatment indicators related to the consumption of input material environmental information, is provided to environmen- and raw material, solid and liquid waste generation, tal authorities as established in the respective Environ- PULP water and energy use, and others. The company also mental Qualification Resolutions (RCAs). Environmental performs ongoing monitoring activities of effluents and monitoring and follow-up activities are also conducted Hazardous waste 6,207 Transfer to authorized waste depots for storage and disposal. emissions and analyzes the quality of different matri- at the company’s Timber business facilities. Non-hazardous recoverable Recovered with authorized companies for reception and storage. ces such as air, soil and water, to ensure fulfillment of 100,707 waste Composting and manufacture of products for agricultural use. its environmental commitments and suitable environ- WASTE MANAGEMENT Non-hazardous waste delivered mental surveillance. 274,067 Final disposal in solid industrial waste deposits authorized at each facility. to internal deposits The company’s pulp mills conduct monitoring, sur- Waste generated by the company’s industrial Mills is veillance and/or environmental research activities to hazardous and non-hazardous. The removal, transpor- Other non-hazardous waste 10,704 Domestic waste or garbage in general. properly follow-up on the quality of water bodies re- tation and disposal of hazardous waste is carried out ceiving treated effluents, both fluvial and marine water by specialized businesses that are authorized to per- bodies. These programs are implemented according to form such activities, which are reported to authorities WASTE (TON) BY BUSINESS the frequencies and timelines previously determined by in accordance to applicable regulations. environmental authorities. Business Aspect 2016 2017 2018

Hazardous waste t/year 6,666 5,787 6,207 PULP Non-hazardous waste t/year 391,374 358,024 385,478

Hazardous waste t/year 4,525 4,122 5,336 TIMBER Non-hazardous waste t/year 107,861 109,955 113,241

146 147 2018 report

• In Chile, the Pulp business achieved the goal of recove- ring 29% of non-hazardous solid industrial waste. An example of this is joint work with waste recovery SUSTAINABILITY • Constitución pulp mill, in Chile, supported the first company VerdeCorp, which has been able to transform campaign for electronic waste recycling promoted by waste that was traditionally disposed of in sanitary lan- the Municipality. In addition, a campaign to recycle used dfills, into raw material to manufacture base substrate cooking oil was promoted, which is a joint initiative and pH regulator for agricultural soils. with the Municipality, the Rendering company and local In addition, initiatives for the recovery of ash from the authorities, for the community of Constitución and cement industry are being developed and industrially endorsed by the Environmental Regional Ministerial WASTE RECOVERY IN THE tested. MILESTONES Secretariat. For 2019, the company set a goal to recover 45% of in- • Training on hazardous and non-hazardous waste mana- dustrial solid waste based on what is delivered to each NEGOCIO DE CELULOSA facility’s waste deposit. gement took place at the Trupan panel Mill in Chile. 2018 • At the Jaguariaíva panel Mill in Brazil, 50,000 m³ of industrial waste (sludge, ash and organic waste) were reduced in a project to recover the composting area. Non-hazardous waste from the pulp industry consists mainly of ashes, sand, solid waste from the causticizing • At the Arauco plywood mill in Chile, initiatives were process, lime carbonate, sludge from effluent treatment carried out to reincorporate discarded veneer into the plants, bark that is not suitable for burning, and others, process by making lower quality panels (which are later which are mostly disposed of in non-hazardous waste used as covers), reducing waste generation from 700 landfills. ton/year in 2016 to 450 ton/year in 2018. The company’s objective in this area is to make new • The recovery of lubricating oil from the chains of the by-products that serve, for example, as inputs for other production processes. For this reason, it has been stren- MDF 2 press at the Trupán Mill in Chile, reducing this gthened and work has continued in the research and type of waste generation by 30%. development of new alternatives for use. • At the Araucaria Mill in Brazil, resin produced during In 2018, 29% of non-hazardous industrial solid waste the cleansing of the discharge line were reused. from the pulp business was delivered to external companies for recovery for alternative uses, such as to improve agricultural soils, composting, and other uses. .

148 2018 report

• North America reduced energy consumption by more than 8% compared to 2015, including an overall net reduction in energy use combined with increased production in all operations. ENERGY MANAGEMENT • Replacement of equipment and process redesign at Nue- va Aldea Pulp Mill in Chile, reducing consumption heat SUSTAINABILITY In a context in which the energy offer is limited, re- Several initiatives were implemented in 2018 to opti- and energy loss of, and reducing steam consumption. newable energy generation and its efficient use are a mize energy consumption, which focused on reducing challenge for the company. the consumption of steam and electricity. An example • Advances in Chile’s Dissolving Pulp Project will increa- is Valdivia Pulp mill, in Chile, where a continuous se the availability of clean energy to be delivered to the By using biomass in its boilers, ARAUCO provides monitoring plan has been established that involves National Electric System. energy for its own industrial needs, and contributes steam generation, consumption and potential devia- an energy surplus to the country’s power grid. In • The Nueva Aldea pulp mill in Chile reduced specific tions from the design. This has allowed the company addition to energy generation, the company’s recovery energy consumption by 16 KWh/ADt, equivalent to 2.8% to identify and manage deviations, to optimize electri- boilers recover inorganic compounds that are part of compared to the previous year. cal energy generation. MILESTONES the process. • An improved steam temperature control pump at Arauco ARAUCO also promotes greater efficiency in its plywood mill in Chile, for greater energy efficiency and a processes to reduce energy consumption and improve 30% decrease in consumption. environmental performance. 2018 • Changes in the sawmill drying process, to perform the wood heating stage without water in the vats, generating savings in steam consumption and less industrial ENERGY CONSUMPTION liquid waste. • At the Ponta Grossa Mill in Brazil, a change in the type of Unit of measurement 2017 2018 segment used to defiber wood reduced the equipment’s specific energy consumption. PULP 93.2 (94% from renewable 96.1 (95% from renewable • At Eugene MDF Mill in North America, the old dual fuel Energy consumption Million GJ sources) sources) boiler burner was replaced by a single fuel burner and suspension of the dry resolution system while running Energy Intensity GJ/ADt 31.0 30.6 the PMDI product, achieved significant energy savings. TIMBER • At the St. Stephen Mill in North America, a comprehensi- Energy consumption Million GJ 6.1 4.4 ve energy management system was implemented, improving electricity use per m3 produced by 21% compared to 2015.

150 151 2018 report

WATER CONSUMPTION TOTAL VOLUME OF WATER CATCHMENT (MILLIONS M3)

SUSTAINABILITY Continuous improvement and efficient use of water resources are important tasks at ARAUCO, 2017 2018 2017 2018 in addition to monitoring the availability of water in the basins that supply the company and conducting PULP TIMBER several initiatives to maximize its use and studying Surface water, including water from wetlands, rivers, lakes and 156.1 153.6 3.4 3.9 the effects of climate change on the watersheds oceans. that are sources of supply. Groundwater. 1.6 3.1 1.5 1.5

Rainwater directly collected and stored by the organization. 0 0

Wastewater from another organization. 0 0

Municipal water supply or from other water companies. 0 0 3.3 2.3

Unit of measurement 2017 2018

PULP

Millions m3/year 156.1 153.6 Specific water consumption m3/ADt 51.9 49.0

TIMBER

Specific water consumption Millions m3/year 8.8 8.0

152 153 2018 report

EFFLUENTS

SUSTAINABILITY A large percentage of the company’s industrial mills In Argentina, Piray mill treats its effluents in a bio- • Final works on the new effluents treatment plant at Arau- generate liquid industrial waste, which is continuously logical reactor, sedimentator and equalization pool. co mill in Chile; by the first half of 2019 the treatment monitored to ensure the right emission levels and re- The treated effluents are then discharged into the Los plant will improve effluents treatment standards for gulated by specific environmental standards. All of the Angelitos creek. The Chemical Division Mill discharges the current pulp mill and its expansion established in company’s Pulp mills implement primary and secondary its effluents into the Parana River after biological treat- Project MAPA. effluents treatment, and two of them include tertiary ment. The company’s panel mills in Brazil and North treatment: Valdivia on a permanent basis, and Nueva America use biological treatment systems and their • Pilot plant studies of alternatives for the treatment of Aldea, when effluents are discharged into the river effluents are discharged into nearby rivers or water internal effluent currents at pulp mills, which will allow instead of the ocean. treatment systems. MILESTONES them to be reused, even as irrigation water. Timber business mills also treat their effluents, either in • Implementation of projects to improve the Effluents pulp mill systems or their own treatment systems. Treatment Plant at MDF mill in Puerto Piray, Argentina. 2018 • In Argentina, bypass installation to direct industrial effluents generated at Piray Sawmill to the effluents treatment plant at Puerto Piray MDF mill. Unit of measurement 2017 2018 • Maintenance of the emergency lagoon at Pién Mill, Brazil. PULP • Project development for the installation of a new 3 Millions m /year 125,0 127,7 Effluents Treatment Station at Ponta Grossa Mill, in Bra- Effluents produced zil, with a capacity of 36 m³/h. m3/ADt 41,6 40,7

MADERAS

Effluents produced Millions m3/year 5,3 4,7

154 155 2018 report

AIR EMISSIONS AND ODORS

SUSTAINABILITY TRS gas emissions from the pulp mills are continuously • In Pulp, the number of TRS gas vents was reduced by monitored. In addition, operational controls are main- approximately 28% and investments were made for more tained to minimize odor incidents related to TRS gas than US$ 13 million to improve the system to capture and emissions into the atmosphere and to fully comply with treat dilute and concentrated non-condensable gases. current regulations on emission standards and the envi- • At the Jaguariaiva mill in Brazil, a gas abatement system ronmental qualification resolutions of each facility. was implemented in the treatment machines, reducing for- Particulate matter is controlled through mitigation equi- maldehyde emissions. pment such as gas scrubbers and electrostatic preci- MILESTONES • Puerto Piray MDF Mill, in Argentina, developed a project for pitators with efficiency close to 100%. Fine wood-dust the treatment of gaseous emissions, specifically for particu- emissions from remanufacturing and sawing processes late matter. are reduced by using bag filters that collect the saw- dust, which is then used as biomass fuel. 2018 In addition, as part of the company’s investment plan, relevant investments continue to be made either to improve the performance of emission abatement equipment or to install new equipment, such as a new Elec- trostatic Precipitator for Recovery Boiler 2 at Arauco Pulp mill in Chile.

156 157 2018 report

EMISSIONS LEAKS AND SPILLS

SUSTAINABILITY During 2018, there was a minor incident concerning a 2017 2018 treated effluent leak from the outlet pipe at Nueva Aldea PULP Pulp Mill, due to a leak in the bolts of a flange connec- tion, which required repairs on a small section and the NOx ton 7,501 8,240 replacement of two flanges for welded joints. This was a minor incident considering it involved properly treated SO ton 2,350 2,342 2 effluents and was detected early on, following the proto- Total Particulate Matter (PM) ton 3,292 4,760 cols outlined in the environmental permit.

TIMBER In Brazil, there was a spill of industrial effluents into the rainwater channel at the Ponta Grossa Mill. As a result of

SO2 ton 208 48 this incident, a level sensor was installed in the untreated liquid industrial waste tank. NOx ton 3,340 1,464

MP10 ton 792 849

VOC ton 2,119 2,106

CO ton 1,055 7,262

158 159 SUSTAINABILITY report 2018 07 SCOPE 162 SUSTAINABILITY report 2018 SCOPE ce of this report. Core option.Thecompany didnothire anexternal body for assuran- This report wasprepared inaccordance with the GRIStandards using the average dollar value during the reporting period. This information ispresented inUS dollars andwascalculated standards suchas the FinancialandReporting Standards (IFRS). formance wasreported usinginternationally accepted accounting vironmental information are basedonGRIprotocols. Financialper Data measurement techniques andcalculationsfor social anden- when appropriate. projects ofMontesdelPlataandSONAE ARAUCO are described which the company exercises control; however, operations and are excluded because this report only informs onpartnerships in performances ofMontesdelPlataandSONAE ARAUCO operations reviewed, compiled andpresented to prepare this document.The of Chile,Argentina,Brazil, the UnitedStatesandCanadawas Consolidated information on the industrialandforestry operations ble Development Objectives. of the company’s commitment to the GlobalCompactandSustaina- December 31, 2018. Thisreport isalsoacommunication ofprogress environmental performance for the periodbetween January 1and presenting information on the company’s economic, socialand This isARAUCO’s twelfth consecutive Sustainability Report, - • Employment • Participationanddialogue • Products • Waste • Fire protection • Globalizationandefficiency • Safety Temas materialesidentificados: the pagesasindicated. broad beaddressed categories,whichwill indepth different stakeholders andclassified them intoseven company to identify several aspects that are relevant to This consultation andreview process enabled the company were alsoreviewed. Reputation Index Newsarticlesrelated (INRELA). to the particularly those identified through ARAUCO’s Local including issues raised by the company’s stakeholders, External sources ofinformation were alsorevised, results of the company’s climatesurvey. articles publishedininternalmedia,addition to the strategy, expressed incorporate presentations and Report involved asystematic revision of the company’s The development of the materiality process for this CONTENT DEFINITION our website www.arauco.cl. were printedinEnglish. TheReport isalsoavailable at were printedinSpanish andanadditional 700 copies This year, 2,700 copies of the 2018 Sustainability Report DISPONIBILIDAD 163 SUSTAINABILITY report 2018 08 APPENDICES 166 SUSTAINABILITY report 2018 20,27 50 50 20 1 99 98 arauco’s subsidiariesandshareholders Investigaciones Forestales Puertos y Logística S.A Forestal Cholguán S.A. Consorcio Tenológico Maderas Arauco S.A. Ovejera delSur SpA Servicios Logísticos Inversiones Puerto Arauco Bioenergía 45 Bioenercel S.A. EKA ChileS.A Bioforest S.A. Parque Eólico Coronel S.A. Arauco S.A. E2E S.A. S.A. 50 50 2 99 1 55 99,9995 99,9995 99,9993 0,005 99,9200 90,5988 99,9885 20 Portuaria Lirquén S.A. Depósitos Portuarios Muellaje CentralMuellaje S.A. Puerto Lirquén S.A. Puerto Central S.A. Compañía Puerto Compañía Puerto Genómeca Arauco S.A. Coronel S.A. Lirquén S.A. Forestal Arauco S.A. Sercor S.A. 99,9484 80 99,9995 Fitosanitaria Forestal S.A. 0,08 Forestal LosLagos S.A. Consorcio Protección 25 0,8000 51,2300 31 /12/2018 0,005 0,005 Sonae Arauco Arauco NutrientesNaturales 5,3200 SPA 100 Ongar S.A. 50 100 56,1106 50 Terminal Logística eInd. 99,9994 14,5385 Celulosa Arauco y ConstituciónS.A. 100 Arauco IndustriadePaineis Novo OesteGestaodeAtivos Plorestal Vale doCorisco Mahal Emp.ePart.S.A. M´Bopicuá S.A. Eufores S.A. Santa CruzLtda. GreenAgro S.A. Emp. Florestais Florestais S.A. Savitar S.A. Ltda. S.A. 100 1,9814 99 El Esparragal Asoc.Agraria Punta Pereira S.A. Zona Franca 92,6108 de R.L. 43,8894 3,0700 2,9557 Arauco ColombiaS.A. 6,7888 49 98 85,4615 71,6700 43,2112 Unilin Arauco PisosLtda. 1,4778 Inversiones Arauco 1,4778 Internacional Ltda. Leasing Forestal S.A. Celulosa y Energía Punta Pereira S.A. 50 98,01862 Sra. delCarmenS.A. Forestal Nuestra 46,8123 2 1,4778 3,1977 98 90,0057 99,9980 99,9995 98,9319 99,9987 87,1586 99,4311 23,9999 74,1662 99,99 100 100 100 100 100 80 Profesionales S.A.deC.V. Arauco Middle EastDMCC Arauco Forest Brasil S.A. Arauco Australia Pty Ltd. Araucomex S.A.deC.V. Forestal ConoSur S.A. Arauco Argentina S.A. Agenciam. y Servicios Forestal Talavera S.A. Arauco doBrasil S.A. Arauco Wood (China) Stora EnsoUruguay Company Limited Arauco Perú S.A Cooperatief U.A. Arauco Florestal Maderas Arauco Forestales Ltda. Costa RicaS.A Arauco Europe Serv. Aéreos North America,Inc Arapoti S.A. Company Limited 50,00 Flakeboard Arauco 76 25,8338 100 0,0005 0,0020 0,5689 0,0013 9,7714 1,0681 0,01 0,00010 9,9753 167 168 SUSTAINABILITY report 2018 & NETWORKS membership • • • • • • • • • www.afcparg.org.ar • • ARGENTINA Argentina Green BuildingCouncil(AGB) Institute ofForestais Research andStudies(IPEF) Centre for Forest Research andExperimentation(CIEF) Subtropical Biology Institute(IBS) www.ceiba.org.ar Atlantic Forest Research Center (CEIBA) Industrial Union Argentine-Chilean Chamber ofCommerce UIA-Argentine www.cadamda.org.ar Related Products Argentine Chamber ofWood, ofSawmills Warehouses and (CAIMA) Argentine Chamber of the Agglomerate Wood Industry www.faima.org.ar (FAIMA) Argentine Federation of the Wood andAllied Industries (AFCP) Pulp andPaper Manufacturers Association, Argentina www.afoa.org.ar Argentine Forestry Association (AFOA) www.argentinagbc.org.ar

• • • • • • • • • • • • • • • • FSC Iguazu Forest Protection Consortium National InstituteofAgricultural Technology (INTA) Cooperative CAMCORE Cooperative -GeneticImprovement andForestry Yaguaroundí Reserve Argentine WildlifeFoundation Mediterranean Foundation A ChristmasEve for All Dignified HousingFoundation Equity Foundation of Misiones Ranger Corpsof the Ministry ofEcology of the Province www.temaiken.com.ar Temaiken Foundation www.proyungas.org.ar Proyungas Foundation University Faculty ofExactandNatural SciencesofBuenosAires Faculty ofChemicalandNatural Sciences(UNaM) Faculty ofForest Sciencesof the NationalMissions University Chamber ® International,member of the SouthernEconomic

• • • • • • • • • • www.uatre.org.ar • • www.gltaa.com • •

AUSTRALIA National ParksAdministration Curindy Reserve Forests andForest Spaces. Civil Association Councilfor Responsible Managementof Management) contributing to aresearch project onIntegrated Pest (We participateinAPF through AFoA. APSA iscurrently APF -Forest Productive Agglomerate Missions andCurrents ofForestCollege Engineers Association ofVoluntary Firefighters ofFreedom North Currents Forest Concortium Tupicuá Creek Water BasinCommittee Tabay Creek Water BasinCommittee Argentine UnionofRural Workers andStevedores Friends ofGuapoy Association Argentine Birds -LaPlataOrnithological Association Guira Oga Glue LaminatedTimber Association ofAustralia www.chilechamber.com Australia-Chile Chamber ofCommerce

169 170 SUSTAINABILITY report 2018 • • • • • • • • • • •

BRAZIL Associação Brasileira deNormasTécnicas www.apreflorestas.com.br Associação Paranaense deEmpresas deBaseFlorestal (APRE) Associação das Empresas daCidadeIndustrialdeAraucária Associação deUsuários deInformática eTelecomunicações www.abnt.org.br www.aeciar.com.br Federação da Agricultura ePecuária doestadoMato Indústria Brasileira deÁrvores (IBÁ) www.iba.org Federação dos trabalhadores nasIndústriasdoEstado Paraná Associação Sul-Mato-Grossense deProdutores eConsumido www.sucesu.org.br Sindicato dosOficiaisMarceneiros eTrabalhadores doEstado Grosso doSul-FAMASUL Forest Stewardship Council(FSC)www.fsc.org www.dialogoflorestal.org.br Diálogo Florestal Paraná –SantaCatarina res deFlorestas Plantadas (REFLORE) www.reflore.com.br do Paraná -SOMPAR

• • • • • • • • •

COLOMBIA MADEIRA DEPONTA GROSSA -SINTRAMADEIRA PG DORES NASINDS. EDEMOVEIS DESERRARIAS DE SINDICATO DOSOFICIAIS MARCENEIROS ETRABALHA- STICM Sindicato Trabalhadores Ind.Construção Civil edo Mobiliário – Farmacêuticas doestadoParaná -STIQFEPAR Sindicato dosTrabalhadores nasIndústriasQuímicase SOMSJOP Sindicato dosOficiaisMarceneiros deSãoJosédosPinhais- Similares deJaguariaíva-PR -SITIM Sindicato dosTrabalhadores nasInd.Madeireiras, Moveleiras e Madeira doEstadoParaná -SITIEMP Sindicato dos trabalhadores nasIndústriasdaExtração de www.colombochilena.com Colombo-Chilena Chamber ofCommerce www.fedemaderas.org.co Fedemaderas

• • • • • • • • • • • CHILE www.chicit.cl and Tourism Chilean-Chinese Chamber ofCommerce, Industries www.britcham.cl Chilean BritishChamber www.camarachilenobrasileña.cl Chilean-Brazilian Chamber of Commerce www.auscham.cl Chilean-Australian Chamber ofCommerce www.camarco.cl Chilean-Argentine Chamber Chilean Chamber ofConstructionValdivia www.cchc.cl Chilean Chamber ofConstruction www.accionempresas.cl Action Companies www.juntaadelantodelmaule.cl Maule AdvancementBoard, MauleRegion www.asicent.cl Association ofCentral Industrialists,MauleRegion www.atcp.cl Pulp andPaper Technical Association

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www.corparaucania.cl Corporation for the Productive Development ofLaAraucanía www.corma.cl Chilean Wood Corporation www.corparauco.cl of Arauco www.cct.cl Wood Technology Transfer Centre www.cidm.cl Wood Innovation andDevelopment Center www.genomica.cl Forest GeneticImprovement Cooperative www.cpf.cl Forest Pest Controllers www.bioenercel.com Bioenercel Consortium www.cep.cl Centre for PublicStudies,Commission on the Environment www.cciv.cl Chamber ofCommerce andIndustry ofValdivia www.camit.cl Italian Chamber ofCommerce ofChile www.amchamchile.cl Advancement andDevelopment Corporation of the Province Chilean-American Chamber ofCommerce

171 172 SUSTAINABILITY report 2018 • • • • • • • • • • • •

Valdivia Development Corporation Industrial Corporation for Regional Development ofBiobío www.codeproval.cl Forest Productivity Cooperative (USA) www.cidere.cl Genómica Forestal S.A www.integrare.cl Integrare Foundation www.beleneduca.cl Belén EducaFoundation www.forestproductivitycoop.org Prohumana www.icare.cl Icare www.genomica.cl A Roof for Chile www.sofofa.cl Manufacturers’ Association www.pactoglobal.cl Chile GlobalCompactNetwork www.prohumana.cl Pontificia Universidad CatólicadeChile www.untechoparachile.org www.uc.cl www.uc.cl

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• • • UNITED STATES www.visionvaldivia.cl www.visionvaldivia.cl Valdivia Vision www.udt.cl Concepción Unidad deDesarrollo Tecnológico UDT delaUniversidad de www.udec.cl Universidad deConcepción www.ucsc.cl Universidad CatólicadelaSantísimaConcepción www.ciencias.uchile.cl/ciencias Universidad deChileFacultad deCiencias www.fen.uchile.cl Universidad deChileFacultad deEconomía y Negocios www.dii.uchile.cl Universidad deChileFacultad deIngenieríaIndustrial www.lumber.org North AmericanWholesaleLumber Association www.compositepanel.org Composite PanelAssociation www.awfs.org Association ofWoodworking &Furnishings Suppliers

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MEXICO www.thegbi.org GBI -Green BuildingIniciative www.newh.org (supported individualmemberships) The Hospitality Industry Network www.iida.org (supported individualmemberships) International Interior DesignAssociation www.kcma.org Kitchen CabinetManufacturers Association worldmillworkalliance.com WMA -World Millwork Association www.anafata.com.mx National Association ofManufacturers ofWooden PanelsA.C. www.cnim.mx National Chamber of the Wood Industry www.camaramexicanachilena.com.mx Mexican Chilean Chamber ofCommerce andInvestment www.imexfor.com of Forest Products A.C. National Association ofImporters and Exporters

• • PERU www.camaraperuchile.org Peruvian-Chilean Chamber ofCommerce www.capeco.org Peruvian Chamber ofConstruction

173 174 SUSTAINABILITY report 2018 CORE OPTION ANDGLOBAL COMPACT GRI CONTENT INDEXFORTHE“INACCORDANCE” 102-15 Mainimpacts,risksand opportunities 102-14 Statementfrom senior decision-makers STRATEGY G4-16 Memberships andnetworks principles or programs G4-15 Externally developed economic, environmental andsocial addressed G4-14 Whether andhow the precautionary approach or principleis 102-13 Association membership 102-12 Externalinitiatives 102-11 Precautionary Principleor Approach 102-10 Significantchanges to the organizationanditssupply chain 102-9 Supply chain 102-8 Employee andother worker information 102-7 Sizeof the organization 102-6 Markets served 102-5 Ownership andlegalform 102-4 Locationofoperations 102-3 Locationof the organization’s headquarters 102-2 Activities,brands, products andservices 102-1 Nameof the organization ORGANIZATION PROFILE GENERAL STANDARD DISCLOSURE 9-11; 44-45;166-167 14-15; backcover 24-41;54-55 back cover back cover 168-173 119-120 98-137 60-63 24-47 Page 20-21 9-11 107 124 47 24 4 Global CompactPrinciple P1; P4;P5;P6 P10 P9 P7 102-56 Externalassurance 102-55 GRITable ofContents 102-54 Claimsofreporting inaccordance with the GRIStandards 102-53 Contactpointfor report questions 102-52 Reporting cycle 102-51 Dateoflastreport 102-50 Reporting period 102-49 Changesinreporting 102-48 Restatement ofinformation 102-47 Listofmaterialitems 102-46 Contentdefinitionofreports and topic coverage 102-45 Entitiesincludedin the consolidated financialstatements REPORTING PRACTICES 102-44 Key topics andconcerns raised 102-43 Approach to stakeholder engagement 102-42 Identifyingandselectingstakeholders 102-41 Collective bargaining agreements 102-40 Stakeholder list STAKEHOLDER ENGAGEMENT G4-21 Coverage ofmaterialaspectsoutside the organization 102-16 Values, principles,standards andnormsofbehavior ANDINTEGRITY ETHICS GENERAL STANDARD DISCLOSURE No external assurance applied back cover 102-105 102-105 162-163 162-163 162-163 162-163 162-163 162-163 162-163 162-163 162-163 112-118 Page 78-79 12-13 105 174 141 Global CompactPrinciple P1; P2 P2 P3 175 176 SUSTAINABILITY report 2018 SPECIFIC STANDARD DISCLOSURES GRI 201: ECONOMIC PERFORMANCE GRI 306: EFFLUENTS ANDWASTE Material Aspect Water dischargeaccording to quality Waste by type anddisposalmethod Direct economic value generated defined benefitplanobligations Water bodiesaffected by water Coverage of the organization’s Risks andopportunities posed Transport ofhazardous waste Financial assistance received discharges and/or run-offs Management approach Management approach Management approach fromgovernment the by climatechange Significant spills and indicators and destination and distributed 306-4 306-5 306-2 306-3 201-4 201-2 201-3 306-1 201-1

RECEIVE FINANCIAL RECEIVE FINANCIAL ARAUCO DOES NOT AID FROM THE GOVERNMENT 146 -154 Page 154 147 159 20 44 45 IT ISNOT MATERIAL IT ISNOT MATERIAL IT ISNOT MATERIAL NOT REPORTED, AS NOT REPORTED, AS NOT REPORTED, AS Omissions Global Compact Global Compact Principle P8 P7 GRI 401:EMPLOYMENT GRI 403: OCCUPATIONAL HEALTH ANDSAFETY Material Aspect risk ofdiseasesrelated to their activity Workers withahighincidenceor high Health andsafety issues addressed in diseases, lostdays,andabsenteeism, formal agreements withlabor unions Representation ofworkers onformal not given to part-timeor temporary and total number ofwork-related Benefits for employees full-time New recruitments ofemployees Rates ofinjury, occupational Management approach worker-employer health Management approach Management approach and safety committees and staffand turnover and indicators Parental leave employees fatalities 403-4 403-2 403-3 401-2 401-3 403-1 401-1

82; 92 88-89 64-67 84-87 96-99 94-97 Page 60 68 IT ISNOT MATERIAL NOT REPORTED, AS Omissions Global Compact Principle P6; P3

177 178 SUSTAINABILITY report 2018 CONSTITUTION legal the Official JournalonSeptember 4,1971. of Santiago.Therespective extract wasalsopublishedin Commercial Register of the Real EstateRegistry Office deeds were recorded inFolio 6.431, N°2.993 of the 1971 N° 300-S,issued onAugust 18,1971. Extracts of these Insurance Superintendent (SVS) through Resolution existence wasauthorizedby the ChileanSecuritiesand public notary SergioRodríguez Garcés. Thecompany’s by publicdeedonMay 6,1971, issued by Santiago public notary Ramón Valdivieso Sánchez,andmodified by publicdeedissued onOctober 28, 1970, by Santiago Celulosa Arauco y ConstituciónS.A.wasestablished • Email:[email protected] • Telephone: 56-2-24617200 Communications Assistant Manager • For more information, pleasecontact: SoledadVial, • Printing:Ograma Digital • VisualConceptandDesign:Procorp • Photography: ARAUCO Archive • Report production: SoledadVial Assistant Manager • Coordination andGeneral Supervision:Communications certified paper. This Sustainability Report hasbeenprintedonPEFC 1982 • Inscriptionin the SecuritiesRegister: No.042, July 14, • Type ofEntity:Corporation Santiago, Chile • LegalAddress: Av. ElGolf150,piso14,LasCondes, • ChileanTax IdentificationN°(RUT): 93,458,000 -1 • Company Name:CelulosaArauco y ConstituciónS.A. 179 180 SUSTAINABILITY report 2018 181 182 SUSTAINABILITY report 2018 183 SUSTAINABILITY report 2018