Sustainability Report 2018

SUSTAINABILITY REPORT 2018

The future is present in every action 7 ABOUT THIS REPORT 9 MATERIAL ISSUES 13 MESSAGE FROM THE EXECUTIVE MANAGEMENT 15 ORGANIZATIONAL PROFILE 16 Mission 16 Vision 16 Principles and Values 17 Activities 18 MAIN RESULTS 20 GOVERNANCE

21 Ethical Principles and Code of Conduct 21 Chain of Command and Decision-Making Structure 23 General Meetings of the Shareholders 23 Advisory Council 23 Executive Management 25 Internal Audit 25 Secretarial Office for Management Meetings 25 Compliance 25 Risk Management 25 Anticorruption Practices 25 Fines, Grievances, Complaints, and Lawsuits 26 MANAGEMENT AND STRATEGY

28 Integrated Management System (IMS) 28 Certifications 29 Sustainability 29 Commitment to Sustainable Development 52 Strategy 52 Objectives and Goals 53 Research, Development and Innovation

54 COMPETITIVENESS AND ECONOMIC PERFORMANCE

55 Economic Scenario 55 Market Scenario 55 Forestation and Wood Supply 56 Pulp Production 56 Sales 56 Performance Analysis 56 Capital Investments 57 Financial Management 57 Wealth Generation and Distribution 57 Tax Incentives 58 SOCIAL PERFORMANCE

61 Community Relationship 61 CENIBRA Institute 62 Institutional Relations 63 Professional Training Projects 63 Specific Communities 63 Forestation Incentive Program 64 Supplier Relationship 65 Customer Relationship 67 Pulp Logistics 68 Human Capital Management 70 Training and Development 72 Quality of Life Program - Living Better 74 Occupational Safety and Health 75 Compensation and Benefits 75 Relationship with Unions 76 ENVIRONMENTAL PERFORMANCE

77 Forest Stewardship 77 Wood Supply Logistics 78 Water Resources Management 78 Environmental Recovery 79 Biodiversity 82 Private Natural Heritage Reserve (PNHR) - Macedonia Farm 83 Industrial Operations 83 Atmospheric Emissions 83 Greenhouse Gas Emission Inventory (GHG) 85 Water and Liquid Effluents 86 Solid Waste 87 Materials and Energy

90 GLOBAL REPORTING INITIATIVE (GRI STANDARDS) CONTENT INDEX CHAPTER 1 ABOUT THIS REPORT Sustainability Report 2018 1 About this Report 8

CENIBRA’s Sustainability Report is issued annually with an There were no significant changes in scope or comprehen- aim to provide our stakeholders with information about the siveness in relation to the previous issue of this report. In Company’s corporate strategies and operations focused on the case of historical data series whose figures are different sustainable development. This report contains consolidated from those previously disclosed, the report provides the cor- data (from CENIBRA and its affiliated companies) relative to responding explanations about data revision or changes in the fiscal year from 1st January through 31st December 2018 the measurement processes. and supersedes the 2017 Sustainability Report. Suggestions or requests for additional clarification with The financial and economic data are disclosed in accordance respect to this Report should be addressed to CENIBRA’s with Brazil’s Securities and Exchange Commission’s regula- Corporate Communication department at comunicacaocor- tions and take into consideration the directives, guidance, [email protected]. and interpretations issued by the Accounting Procedures Committee. Moreover, they comply with the standards issued by the International Accounting Standard Board (IASB). All economic and financial data were previously audited by Ernst & Young.

The reporting of non-financial data follows the guidelines of the Global Reporting Initiative (GRI), an international entity known worldwide as a benchmark in sustainability reporting. In preparing this Report, we used the latest GRI standards, which favor the monitoring of the Company’s sustainability management evolution. The report structure seeks to reach the “core” option of content definition.

The Sustainability Report was worked out in a multidisciplinary approach under the coordination of the Governance Advisory Service (ASGOV), and relied on effective cooperation among the Company’s organizational units. CHAPTER 2 MATERIAL ISSUES Sustainability Report 2018 2 Material Issues 10

The Sustainability Report was supported by the corre- of the shareholders, executive management, middle man- sponding Materiality Matrix, which was updated in 2019 agement, customers, suppliers, community, local adminis- through consultation with stakeholders and relied on trations, workers unions, third sector, media, forestry part- support by BSD Consulting. As an initial step, an inter- ners, and industry experts. The work detected 27 priority nal workshop was held with an aim to get the Company’s subjects, taking into account their level of influence on leaders involved in the process of identifying and prior- the stakeholders’ evaluation (vertical axis of the matrix) of itizing external stakeholders to be consulted and in the the importance for the Company (horizontal axis) of social, validation of the list of issues for the materiality test. The environmental, and economic impacts. second stage consisted of interviews with representatives

Workers' health and safety Water and effluent Biodiversity conservation management and protection Economic and financial performance High Innovation, technology and new products Sustainable forest stewardship Regional socioeconomic development

Transport and logistics management Employee training and Ethics in business and development grievance mechanisms Emission management Supplier evaluation and Customer satisfaction and Adaptation to climate qualification confidence change Medium Waste management Development of small suppliers Significance to stakeholders

Relationship with shareholders Institutional relations with government Diversity and inclusion Sustainability governance Labor Relations Legal compliance and Efficient raw material management management

Low Respect for human rights Land management Energy management Raw material availability and storage capacity

Low Medium High

Importance of economic, social, and environmental impacts Sustainability Report 2018 2 Material Issues 11

Taking the 27 priority matters as a basis, 10 Material Issues were selected as benchmarking elements for the definition of the report content and as a beacon to CENIBRA’s sustainability strategy in the coming years:

Material Issues Related GRI Topic Chapters Origin of Impact

Environmental Performance: 1. Water and effluent 103 - Management Approach Forestry and Industrial »» Water Resources and management 303 - Water Operations Effluent Management

Economic Performance and 2. Economic and 103 - Management Approach Competitiveness: Company Operations financial performance 201 - Economic Performance »» Wealth Generation and Distribution

103 - Management Approach Social Performance: Relationships; 308 - Environmental Assessment »» Supplier Relationship Purchasing Transactions of Suppliers

Governance: »» Fines, Grievances, 3. Sustainable forest Complaints, and Lawsuits stewardship 103 - Management Approach Management and Strategy: Forestry Operations 307 - Environmental Conformity »» Certifications

Environmental Performance: »» Forest Stewardship and Wood Supply Logistics

Relationships; Job and Income Generation 103 - Management Approach Social Performance: Projects and Programs; 413 - Local Communities »» Community Relationship Forestry and Industrial Operations.

103 - Management Approach Social Performance: Relationships; 4. Regional 204 - Procurement Practices »» Supplier Relationship Purchasing Transactions. socioeconomic development

Social Performance: »» Institutional Relations Relationships; Impact management; 103 - Management Approach Economic Performance and Infrastructure investments; 203 - Direct Economic Impacts Competitiveness: Forestry and Industrial »» Wealth Generation and Operations. Distribution Sustainability Report 2018 2 Material Issues 12

Material Issues Related GRI Topic Chapters Origin of Impact

5. Biodiversity 103 - Management Approach Environmental Performance: Forestry and Industrial conservation and 304 - Biodiversity »» Biodiversity Operations protection

6. Emission 103 - Management Approach Environmental Performance: Industrial Operations management 305 - Emissions »» Atmospheric Emissions

7. Adaptation to climate 103 - Management Approach Environmental Performance: Forestry and Industrial change 305 - Emissions »» Atmospheric Emissions Operations

103 - Management Approach Environmental Performance: Industrial Operations 301 - Materials »» Materials 8. Efficient raw material management 103 - Management Approach Environmental Performance: Industrial Operations 302 - Energy »» Energy

103 - Management Approach Social Performance: Relationships; 9. Workers’ health and 403 - Occupational Health and »» Occupational Health and Occupational Health and safety Safety Safety Safety

10. Innovation, Management and Strategy: technology and new 103 - Management Approach »» Research, Development Company Operations products and Innovation CHAPTER 3 MESSAGE FROM THE EXECUTIVE MANAGEMENT Sustainability Report 2018 3 Message from the Executive Management 14

In CENIBRA’s history, 2018 may be described as a year of The year 2018 was also marked by measures aimed at im- significantly positive results and major accomplishments. proving our management model, governance, and corpo- Even though it was a challenging year for Brazil, the Com- rate essence, expressed by our Mission, Vision, Principles, pany was prepared and strong enough to face the challeng- and Values. Among the 2018 initiatives, improvements in es, despite the country’s political and economic scenario. our “Management by Guidelines” and “Daily Routine Man- agement” programs should be highlighted, particularly the The year began with all efforts aimed at enhancing the redefinition of standards for the preparation and monitor- business competitiveness, in pursuit of efficient production ing of targets and their respective indicators. In addition, processes, cost control, and strong financial discipline. In we have reinforced our ethics, integrity, and anti-corruption this respect, measures were taken to efficiently support principles through continued compliance training. operations throughout the year, along with employee engagement and dedication. Highlights included the R$1,321 2018, the year in which CENIBRA turned 45, saw our com- million operating profit, the Company’s best result ever, and mitment to sustainability be further bolstered through the an increase in Adjusted EBITDA (cash generation) from R$ updating of our long-term plan set up in 2013 (CENIBRA 905 million in 2017 to R$1,614 million in 2018, leading the 40-50 Plan). However challenging it may be to plan for the EBITDA margin to rise from 41% to 53%. Moreover, im- years ahead, we understand the necessary changes will portant investments in the business were completed, such take place gradually and we must look at reality with new as the modernization of the wood chipping system and one lenses, adopting a pragmatic approach from the begin- of the pulp bleaching lines. ning of any action.

We did not overlook our responsibility to remain and evolve For CENIBRA, the future is present in every action. Our lead- on the road to the sustainable development of our opera- ership is confident and our teams are motivated to make tions, either. Issues such as integrated management, busi- transformation happen. We wish to continue our history ness and process efficiency, product quality, concern about with attitudes and actions that will certainly lead to opti- employees’ and contractor personnel’s safety and appreci- mum market share, growth, and results. Because the road ation, care for the environment, support to the socioeco- to sustainability is a collective construction, we will seek to nomic development of communities within the Company’s attract shareholders, customers, employees, and business areas of operation, personnel qualification, and permanent partners to join us in the pursuit of our objectives and imple- dialogue with our stakeholders are on our strategic agenda. mentation of our actions, with an aim to share the responsibility for achieving excellent results and the commitment to Another noteworthy initiative was the organizational cli- create value for the entire production chain. mate and engagement survey, which involved all employees. Higher than the market level, CENIBRA’s 89% Favora- bility Index consolidates its strategy of building a better and safer work environment.

Kazuhiko Kamada CEO and Administrative and Financial Officer Fumihiko Yamada Júlio César Tôrres Ribeiro Commercial Director Industrial and Technical Director CHAPTER 4 ORGANIZATIONAL PROFILE Sustainability Report 2018 4 Organizational Profile 16

Mission Principles and Values

Generate and distribute wealth in a sustainable manner by processing planted trees. »» Ethics: be respectful and truthful in all relationships; »» Commitment to results: value employees engagement, Vision innovation, and personal skills; »» Excellence: strive for quality, reliability, and competi- Be an everlasting company admired by everyone. tiveness; »» Sustainability: ensure competitiveness while meeting society’s needs and preserving the environment; »» Entrepreneurship: act today while aiming at the future. Sustainability Report 2018 4 Organizational Profile 17

Activities municipalities, where it is engaged in several social and environmental projects, partnerships with local entities, and Founded on September 13, 1973 in eastern Minas Gerais, other integration and income-generating initiatives with an Celulose Nipo-Brasileira S.A. (CENIBRA) is a privately-held aim to support the region’s development. company controlled by Japan Brazil Paper and Pulp Resourc- es Development Co., Ltd. (JBP). The main shareholders of JPB are Oji Holdings Corporation and Itochu Corporation.

CENIBRA’s industrial plant is located in Belo Oriente, state of Minas Gerais. It comprises two bleached short-fiber euca- CENIBRA’S FORESTATION INCENTIVE lyptus pulp production lines with a total installed capacity of PROGRAM FOR FARMERS IS 1.2 million tons/year and three regional forest stewardship IMPLEMENTED IN units, also in Minas Gerais (Guanhães, Nova Era, and Rio Doce). Moreover, it has a dedicated port terminal in Barra do Riacho (ES), in which it holds a 49% interest, and a corporate and commercial office in Belo Horizonte (MG), the state capital. CENIBRA ships 98% of its production to foreign markets, 87 mainly Asia, Europe, and North America. Distribution centers and representation & sales offices are established in these areas to meet the customers’ requirements. MUNICIPALITIES The industrial plant is supplied with wood from the Compa- ny’s own land and leased land, as well as from small farmers IN MINAS GERAIS that plant eucalyptus under a Forestation Incentive Arrange- ment (the latter answered for 17% of the plant’s wood consumption in 2018). With a headcount of 7,618 employees and contractors’ personnel, the Company operates in 54

ASIA

EUROPE

JAPAN NORTH AMERICA

BRAIL

Markets Corporate Office Portocel Industrial Plant Regional Forest Stewardship Units CHAPTER 5 MAIN RESULTS Sustainability Report 2018 5 Main Results 19

Main Indicators 2016 2017 2018 General Data Installed Capacity (ADt) 1,200,000 1,200,000 1,200,000 Number of Employees 4,112 4,197 4,302 Outsourced Personnel 3,227 3,243 3,316 Pulp Production (ADt) 1,200,894 1,220,638 1,200,380 Economic Dimension Net Revenue (R$ thousand) 1,911,411 2,193,882 3,035,582 EBITDA adjusted (R$ thousand) 678,583 905,429 1,627,700 Net Profit (R$ thousand) 490,845 439,751 766,659 Total Assets (R$ thousand) 4,047,762 4,444,617 5,654,234 Stockholders’ Equity (R$ thousand) 2,826,393 3,174,180 4,341,668 Investments (R$ thousand) 1 389,149 529,308 401,056 Current Liquidity (Current Assets/Current Liabilities) 1.30 1.22 2.32 Indebtedness - Liabilities/Total Assets (%) 30.17 28.58 23.21 Return on Stockholders’ Equity (%) 17.37 13.85 17.66 Environmental Dimension Purchased Energy Consumption (KWh/ADt) 65.18 63.44 54.23 Fuel Oil Consumption (kg/ADt) 9.46 10.40 10.91 Water Consumption (m3/ADt) 38.00 37.33 36.20

CO2 Emissions - Carbon Dioxide (kg/ADt) 2,726 3,116 3,377

SO2 Emissions - Sulfur Dioxide (kg/ADt) 5.33 0.83 0.29 TRS Emissions - Total Reduced Sulfur (kg/ADt) 0.54 0.02 0.02 Suspended Particulate Matter Emissions (kg/ADt) 1.51 1.56 1.29 COD - Chemical Oxygen Demand (kg/ADt) 9.90 8.65 9.47 TSS - Total Suspended Solids (kg/ADt) 1.52 1.42 1.42

BOD5 - Biochemical Oxygen Demand (kg/ADt) 1.11 0.87 1.01 AOX - Adsorbable Organic Halides (kg/ADt) 0.08 0.07 0.08 N - Nitrogen (kg/ADt) 0.007 0.003 0.003 P - Phosphorus (kg/ADt) 0.017 0.010 0.012 Generated solid wastes (kg/ADt) 208 208 241 Social Dimension Turnover 2 (%) 0.71 0.72 0.65 Work Accidents in the Company 3 3 5 1 Total Events (with and without time lost) 26 28 21 Average Accident/Employee 0.006 0.006 0.006 Investment per Employee (R$) 337 230 304 Training Hours per Employee 54 54 58 Ratio 4 (%) 1.66 1.62 1.74

1 Values different from those previously disclosed due to improvements in the measuring processes. 2 Dismissed Employees/Total Employees. 3 With leave. 4 Takes into account work hours lost due to both excused and unexcused absences/Available Hours. CHAPTER 6 GOVERNANCE Sustainability Report 2018 6 Governance 21

Ethical Principles and Code of Conduct »» Set-up of a formal ombudsman body, ensuring CENIBRA values ethical and moral principles in its relations greater transparency, security, and improvement and respects the laws and regulations applicable to its busi- of information received through the Ethics and ness. Such a culture stems from the joint behavior of its Whistleblowing Channels made available by the employees, through the practical implementation of funda- Company; mental values of truth, transparency, justice, loyalty, mutual appreciation, responsibility, integrity, and participation. Em- »» General restructuring of the Company’s organizational ployees formally renew their commitment to the Code of units’ functional duties, with the resulting Conduct’s principles and values every year. strengthening and enhancement of synergy between processes and the respective teams; CENIBRA’s Code of Conduct is constantly being updated and disseminated to all employees in a continuing educa- »» Replacement and new assignments for positions of tion process, through institutional and onboarding training governance agents in certain areas of the Company. of newly-hired employees. The following communication channels are made available to record suggestions, complaints, and grievances:

»» Ethics Channel (e-mail: [email protected] or telephone +55 31 3829-5236);

»» Whistleblowing Channel (e-mail: [email protected] or telephone 08002835199).

Chain of Command and Decision- Making Structure

The governance model is founded on a clear definition of the roles and duties of the Advisory Council and Executive Management in the conception, approval, implementation, monitoring, and observance of the Company’s business guidelines and applicable laws.

The adopted governance model and policies have driven the Company’s growth over its more than 45 years of history. As a result of the specific features of its structure and culture, like compliance and management by consensus, the Company’s procedures are based on principles such as transparency, equality, corporate responsibility, and ac- countability, which aim at orienting the relations among the shareholders, executive management, middle management, and stakeholders.

All members of the governance management act according to legal requirements and the conditions set out in our various internal policies are in line with the Code of Con- duct, which details our ethical principles and is applicable to all employees. These guidelines apply to all forestry and industrial operations and promote respect for the applicable legislation and human rights.

In 2018, CENIBRA introduced major changes in its chain of command and decision-making structure, including functional changes in its organizational units’ structures, such as:

»» A new Industrial and Technical Director took over due to the retirement and resignation of the previous director; Sustainability Report 2018 6 Governance 22

A highlight in 2019 was the implementation by CENIBRA of an important change in its command and decision-making structure. In June, a new Chief Executive Officer took over as a result of the previous Director’s retirement and resignation. The new CEO also temporarily holds the position of Administrative and Financial Director of the Company.

Shareholders’ General Meeting

Advisory Council

Board of Directors

Secretarial Office for the Internal Audit Management’s Department Meetings

Compliance Ombudsman

CEO

Director Vice President

Technical Administrative Commercial and Industrial and Finance Director Director Director Sustainability Report 2018 6 Governance 23

General Meetings of the Shareholders »» Representation of the Company before any federal, state, and local government agencies. The Annual General Meeting of the Shareholders is held at CENIBRA’s headquarters within four months from the »» Corporate communication processes and the end of the previous fiscal year. Special General Meetings of Company’s social and institutional relations. the Shareholders may be convened whenever necessary for »» Negotiations with workers unions and other trade the shareholders to express their will, in the interest of the associations. Company. »» Management of the processes related to the Company’s Internal Audit. Advisory Council »» Management of the processes related to the The Advisory Council is a committee made up of five mem- Company’s legal issues. bers chosen at the Annual General Meeting of the Share- holders for a one-year term, reelection allowed. Voting »» Corporate planning management. takes place every year in March. The Advisory Council’s duty »» Dealing with issues raised during Executive is to provide Executive Management with collective guid- Management meetings. ance on the following matters: »» Compliance issues. »» Planning of long-term measures taking into account »» Process risk management. the Brazilian and international pulp market scenario. »» Management of decision-making and regulatory »» Long-term production, sales, and investment policies. instruments. »» General policy with respect to dividends and »» Process chain management. capitalization of reserves.

»» Mortgage of properties at CENIBRA’s convenience. Director Vice President: The Director »» Disposal of substantial items of CENIBRA’s properties. Vice President’s duties comprise: »» Proposals of amendment to the Articles of Association, to be submitted at the Annual General Meeting of the Shareholders. »» Assistance to the Director President. »» Relevant matters in connection with interest in »» Performing the duties of the Director President in the companies of which CENIBRA might become a absence of the latter or when so requested by the shareholder or a partner. latter. »» General policy for land acquisition and forest planting. Industrial and Technical Director: In Executive Management charge of the technical management of industrial and forestry processes, com- Executive Management consists of five directors, namely: prising: Director President (CEO), Director Vice President, Industrial and Technical Director, Administrative and Financial Direc- »» Forestry products. tor, and Commercial Director. Executive officers must be resident in Brazil and they may or may not be sharehold- »» Pulp production. ers. They are chosen during the Annual General Meeting of »» Forest and industrial maintenance. the Shareholders, and may be dismissed at any time. They are elected for a one-year term, reelection allowed. Voting »» Environment and quality. takes place every year in March. Executive Management is collectively in charge of the overall management of CENI- BRA and has powers to review and make decisions on any Administrative and Financial Director: matter of interest to the Company. Responsible for the administrative and financial management of the Company, comprising the following processes: Director President (CEO): In addition to the powers and specific duties in connection with the General Meetings »» Control and finance. of the Shareholders and Executive Man- agement meetings, the Director Presi- »» Human resources. dent has the following responsibilities: Sustainability Report 2018 6 Governance 24

»» Procurement. f. People Management Committee: Provides Executive Management with support in strategic human resources »» Telecommunications and information technology. matters related to career, talent retention, renewal and succession, motivation, organizational climate, health, and quality of life. This committee is made up of repre- Commercial Director: Answers for sentatives with skills in the human resources, corporate pulp sales and shipping management, planning and governance, economic, financial, forestry, including the following processes: and industrial fields.

g. Sustainability Committee: Provides Executive Man- »» Pulp sales and marketing. agement with support in the establishment of sustain- »» Pulp distribution logistics. able development guidelines and principles, taking into consideration the economic, environmental, and social »» Technical support to customers. aspects that might have impacts on the medium- and long-term results. This committee is made up of representatives with skills in corporate planning and governance, Executive Management relies on strategic support from sev- economic, financial, forestry, industrial, social, environ- en Committees: mental, and technological fields, and investor relations.

a. Crisis Management Committee: Provides Executive As a general rule, matters submitted to Executive Manage- Management with support to properly manage crisis sit- ment have already been reviewed by the corresponding uations in a preventive and corrective approach, aimed committees. at avoiding deleterious repercussions and/or mitigating negative internal and external impacts from the econom- Composition of Governance Bodies: ic, environmental, social, ethical, and moral standpoints. This committee is made up of representatives with skills in the human resources, corporate communication, legal, environmental, forestry, and industrial fields. 2016 2017 2018

b. Investment Analysis Committee: Provides Executive Executive Management Management with support in investment analysis during Gender the planning and implementation stages. Investment decision-making is based on a long-term view to deliver op- Men 3 3 3 erational competitiveness under varied market scenarios. Women 0 0 0 This committee is made up of representatives with skills in the economic, financial, forestry, industrial, and tech- Total 3 3 3 nological fields, and investor relations. Age Group c. Customer Support Committee: Provides Executive Under 30 years of age 0 0 0 Management with support to ensure excellence in meet- Between 30 and 50 ing possible customer requirements and actual demands. 0 0 1 This committee is made up of representatives with skills years of age in the commercial, environmental, quality, industrial, and Above 50 years of age 3 3 2 research & development fields.

d. Ethics Committee: Provides Executive Management GRI 405-1 Management advisory committees with support in compliance with the Code of Conduct, caring for proper personal and professional conduct Gender of employees and business partners. This committee is Men 19 27 27 made up of representatives with skills in the legal, corporate governance, human resources, forestry, and in- Women 2 5 5 dustrial fields. Total 21 32 32

e. Risk Management and Compliance Committee: Pro- Age Group vides Executive Management with support in the implementation of strategies and guidelines related to the cul- Under 30 years of age 0 0 0 ture of internal controls, risk mitigation, and adherence Between 30 and 50 11 18 15 to applicable regulations and legislation. It is made up of years of age representative with skills in legal, audit, corporate governance, information technology, environment, and quality Above 50 years of age 10 14 17 fields, and investor relations. Sustainability Report 2018 6 Governance 25

Internal Audit Risk Management

The Internal Audit department is an independent Execu- In 2018, CENIBRA reviewed and validated, along with the tive Management support unit in charge of reviewing and various organizational units, the Corporate Risk mapping of providing guidance on the company’s internal processes, processes (considering aspects related to economic, social, as well as checking for compliance with corporate policies, environmental, legal, and image impacts) and completed its regulations, and operating and control procedures adopted implementation in the technological platform. In its pursuit in the management of the Company. In addition, Internal of acculturation of managers and improvement of risk mon- Audit answers for the Whistleblowing System and the suit- itoring tools, CENIBRA updated the Corporate Risk Man- ability of internal controls, and plays a part in the enhance- agement Procedure to make it more straightforward. It also ment of productivity and loss prevention processes. involved meetings with managers and coordinators, as well as training for facilitators directly involved in the process. In 2018, the Internal Audit Department included Risk Man- The adopted method allows identifying risks, following up agement indicators in its auditing planning so as to priori- their assessment, and mitigating them by setting up, de- tize internal controls and processes to be audited. During veloping, and implementing action plans, which are moni- the year, it carried out 25 audits in connection with corpo- tored from time to time. New revisions of risk plans will be rate, forestry, and industrial processes, including nine spe- conducted every two years or whenever required by each cial reviews related to complaints made through the Whis- organizational unit. tleblowing System and requests by management. Review results and the corresponding action plans are reported to Executive Management. The status of action plans is monitored on a monthly basis, with an aim to ensure their imple- Anticorruption Practices mentation and effectiveness. Risks in connection with corruption, fraud, misappropriation, and property damage involving the Company’s pro- Secretarial Office for Management Meetings cesses and compliance with the Code of Conduct’s criteria are assessed by the Internal Audit department with an aim The Secretarial Office for Management Meetings assists Ex- to mitigate violations. CENIBRA adopts specific policies to ecutive Management when holding its meetings and pre- combat corruption and makes available a Whistleblowing pares the agenda in coordination with managers, covering Channel as a tool to record any grievances, while ensuring all subjects to be discussed in a straight, objective manner. greater information transparency, secrecy, and confidenti- Moreover, it monitors all subjects discussed and pending ality. In 2018, the Internal Audit department evaluated six decisions, aiming to ensure an effective decision-making reports of suspected fraud and misappropriation of assets, process at the top management level. four of which were deemed valid, but they were not considered corruption cases or relevant for the business.

Compliance Fines, Grievances, In 2018, CENIBRA enhanced its Compliance Program Complaints, and Lawsuits through an extensive internal campaign to disseminate the

subject, using billboards, internal newspaper, a theater play, As a result of its permanent pursuit of excellence in all its and wallpaper at work stations. A highlight was the distri- operations, no significant fines or non-monetary sanctions bution of the newsletter “A Word from the CEO – Interior were applied to CENIBRA for non-compliance with econom- Quality” among all employees. Additionally, onboarding ic and social regulations and laws applicable to the pulp training was given to newly hired employees and refresh- and paper industry in 2018. Similarly, no lawsuit was filed ment training was provided to existing employees and con- against the Company during the reporting period in contractors’ personnel in the industrial and forestry areas. These nection with unfair competition, trust, or monopoly, and initiatives are evidence of the governance model’s maturi- no claims or complaints were made with respect to envi- ty stage, an evolution resulting from the already existing ronmental labor practices and any kind of discrimination culture of conformity. The purpose is to make clear what whatsoever. is expected from each one in the organizational context. Compliance actions are taken with an aim to strengthen As far as product responsibility is concerned, no significant adherence to controls and ensure their consistency with the fines or non-monetary sanctions were applied to CENIBRA Company’s strategy. for non-compliance with laws and regulations applicable to the supply and use of pulp, or substantiated complaints related to breaches of customer privacy in 2018. CHAPTER 7 MANAGEMENT AND STRATEGY Sustainability Report 2018 7 Management and Strategy 27

CENIBRA adopts a strategic management approach based sustainable goals in the future. This method includes the on the concepts of Management by Guidelines and Man- establishment of CENIBRA Sustainability Index (CSI) and its agement by Routine, which give priority to results evolu- breakdown into four elements of sustainability: Economic, tion and make use of performance evaluation tools. In Social, Environmental, and Institutional. Indicators were as- 2018, CENIBRA continued to implement its Sustainability signed to each element, and their weights and results make Index (CSI) method as a support tool to assess and mea- up the CSI. sure process performance and define and implement more

CENIBRA’s Sustainability Map

Creating Sustainable Value CENIBRA Sustainability Index (%)

ECONOMIC SOCIAL ENVIRONMENTAL INSTITUTIONAL

Encouraging a fairer and more Using natural Enhancing a culture of Increasing profitability. equitable social environment. resources efficiently. sustainable development.

Economic Performance Social Performance Environmental Performance Institutional Performance Index – EPI (%) Index – SPI (%) Index – EPI (%) Index - IPI (%)

Sustainability Directive Corporate Result Indicator

Corporate Objective Corporate Performance Indicator Sustainability Report 2018 7 Management and Strategy 28

Integrated Management System (IMS) Maintaining a permanent dialogue with customers, suppliers, employees, commu- CENIBRA adopts an integrated management approach nities, and other stakeholders. to quality, environment, safety, and occupational health through its Integrated Management System (IMS), which is evaluated by means of internal audits. Auditors are vol- Moreover, CENIBRA encourages the engagement of its em- unteer employees selected and trained by the Company’s ployees in the improvement of production processes, with own management team with support by a consulting firm. positive results in terms of personal and technical develop- To ensure compliance with IMS requirements, the follow- ment. The following initiatives deserve to be highlighted: ing control measures are taken: internal legal compliance audits, integrated audits of suppliers, external audits by CENIBRA Suggestion Program (CSP): certifying entities, and critical analysis by IMS’s top man- The purpose of this program is to value agement, which is made up of the Industrial and Technical the operational employees’ skills, innova- Director and managers from the administrative, industrial, tion, contribution, and commitment to the and forestry processes. The IMS policy comprises the follow- improvement of the Company’s processes ing commitments: through individual suggestions. The program ended the year with 409 propositions Promoting the integrated management of submitted and 122 propositions awarded; quality, environment, safety, occupational health, ethics, and social and financial responsibility as they are deemed key el- Quality Control Circles (QCC): These are ements in the permanent pursuit of com- groups of employees that seek self-de- pliance with stakeholders’ requirements, velopment, propose creative solutions to corporate excellence, continuous improve- operational and production problems by ment, and superior performance of the means of quality management tools, and company’s processes and integrated man- provide better working conditions and agement system; quality of life. The results from the implemented projects include operational and productivity gains, as well as encouragement to teamwork, synergy among differ- Knowing, observing, and complying with ent process areas, improved work safety legislation, standards, regulations, and rates, and employee’s personal growth. In th other requirements and/or commitments 2018, the 20 Quality Seminar was held of mandatory or voluntary application, and implemented projects delivered excel- taking into consideration the aspects of lent return from the financial, safety, quali- quality, environment, ethics, social re- ty, and environmental standpoints. sponsibility, and risks and hazards related to occupational health and safety in every Certifications activity carried out by CENIBRA employees and its service providers; CENIBRA’s management systems are certified to standards that attest its adherence to good practices in its production process. The Company is audited by certifying entities on a yearly basis to check for compliance with standards and Optimizing and reducing the consumption ensure continuous process improvement. Such certifications of natural resources in its processes, pre- ensure the availability of forest resources and business con- venting, eliminating, or minimizing pollut- tinuation, enhance the relationship with stakeholders, and ing emissions and occupational disease and consolidate and upgrade CENIBRA’s image as a responsible injury risks that could harm the environmen- company in the quality, social, safety, health, and environ- tal protection and individual and collective mental areas. CENIBRA holds the following certificates: well-being, or adversely affect the stakeholders and the Company’s or third parties’ properties; »» Quality Management System: ISO 9001 (since 1993); »» Environmental Management System: ISO 14001 (since 1997);

Incorporating into the Company’s forest »» Laboratory Quality Management System: ABNT NBR stewardship activities and chain of custo- ISO/IEC 17025 (since 2008); dy the principles, requirements, and criteria established by the Forest Stewardship »» Forest Stewardship FSC® - Forest Stewardship Council® - FSC® and the Forest Certifica- Council® (since 2005); tion Program CERFLOR; Sustainability Report 2018 7 Management and Strategy 29

»» Forest Stewardship CERFLOR – recognized by ties located in the surroundings of its activities. Keeping an the Programme for the Endorsement of Forest eye on the excellence of its processes and the relationship Certification (PEFC) (since 2005); and dialogue with this public, the Company seeks to mitigate its impacts and enhance its contribution to society at ® ® »» Chain of Custody FSC - Forest Stewardship Council large. With this objective in mind, CENIBRA continuously (since 2005); invests in sustainable forestry practices and ecological efficiency of its industrial operations and logistics. The essence »» Chain of Custody CERFLOR – recognized by of the business is producing wood and pulp in a sustainable the Programme for the Endorsement of Forest way, while respecting life. Certification (PEFC) (since 2005).

Commitment to Sustainable Development All these standards have their own principles, criteria, indicators, and independent certification systems. CENIBRA supports initiatives to promote sustainable devel- License number: FSC-C008495 opment and integrates them into its routine operations and License number: FSC-C021201 business strategy in order to strengthen its sustainability practice. The following are the main actions taken: In 2018, external audits were conducted on the certification to the above-mentioned Management System standards, with the resulting recommendation to maintain the respec- a. Global Voluntary Commitments tive certifications. Additionally, in an unprecedented initiative, an internal audit was conducted on the Forest Stew- Global Compact: The United Nations Organization’s (UNO) ardship certification, which is not a mandatory requirement. Global Compact relies on the engagement of the international corporate community to advance social and environmental responsibility practices aiming at a more sustainable Sustainability and inclusive global economy. CENIBRA is not a signatory of this initiative, but its ethical principles and code of con- CENIBRA is one of the links of an extensive production chain duct are in line with the Global Compact principles, among that starts with the forest and extends to end consumers of which are the commitments to protect human and labor different segments. In this context, the Company interacts rights, environmental preservation, and the fight against with various stakeholders, including several rural communi- corruption.

Global Compact Principles Relation to GRI Standards Pages

Businesses should support and respect the protection of 103-2; 410-1; 411-1; 412-1; 412-2; 1 25, 63, 64, 70 internationally proclaimed human rights. 412-3; 414-1

Make sure that they are not complicit in human rights 103-2; 410-1; 411-1; 412-1; 412-2; 2 25, 63, 64, 70 abuses. 412-3; 414-1

Businesses should uphold the freedom of association 3 and the effective recognition of the right to collective 407-1 64 bargaining. 4 The elimination of all forms of forced and compulsory labor. 409-1 64 5 The effective abolition of child labor. 408-1 64 The elimination of discrimination in respect of 6 406-1 25 employment and occupation. Businesses should support a precautionary approach to 103-2 and all topics reported from 25, 64, 79, 83, 7 environmental challenges. 301-1 to 308-2 85, 86, 87, 88 Undertake initiatives to promote greater environmental 103-2 and all topics reported from 25, 64, 79, 83, 8 responsibility. 301-1 to 308-2 85, 86, 87, 88 Encourage the development and diffusion of 103-2 and all topics reported from 25, 64, 79, 83, 9 environmentally friendly technologies. 301-1 to 308-2 85, 86, 87, 88

Businesses should work against corruption in all its 10 205-1 to 205-3 20, 21, 25 forms, including extortion and bribery. Sustainability Report 2018 7 Management and Strategy 30

Sustainable Development Goals (SDGs): Similarly, the Company supports sustainable development goals, a challenge to build a fairer and more inclusive world through concrete actions and projects carried out by CENIBRA Institute.

Social and Environmental Responsibility – Synergy with the Sustainable Development Goals (SDGs)

Project PARTNERSHIPS WITH BEEKEEPERS

Objective / description CENIBRA Institute has entered into partnership agreements with beekeepers associations according to which beekeepers are granted access and allowed to use Permanent Preservation Areas and areas close to eucalyptus plantations to install beehives. This Project has great social, economic, and environmental impact, as it creates new jobs and income for beekeepers and their families, while preserving the environment. CENIBRA’s share of the output is distributed among employees, visitors, and customers. This program relies on support from local administrations, SENAR (National Rural Education Service), and EMATER (Rural Technology Support Company of Minas Gerais State).

Target audience Beekeepers from 13 associations located in areas in which the company operates.

2018 actions »» Beehive mapping. Sustainability Report 2018 7 Management and Strategy 31

Project FARMING PARTNERSHIPS

Objective / description This partnership among CENIBRA Institute, municipal administrations, and rural unions aims at generating income and job opportunities for family farmers and improve their living conditions by granting land areas for cultivation. EMATER (Rural Tech- nology Support Company of Minas Gerais State) provides the necessary technical support, while local administrations supply agriculture inputs and implements.

Target audience Family farmers from the municipalities of Belo Oriente, Caratinga, Coluna, Ipaba and Virginópolis.

2018 actions »» Soil analysis in areas under farming partnership agreements;

»» Training on forestry agribusiness systems for farmers from Belo Oriente;

»» Training courses on plague control and good stewardship practices;

»» Assistance in land preparation, purchase of seeds, donation of fencing materials, and repair of fences on properties under the program, and technical support to farmers.

Project SCHOOL OF LIFE

Objective / description The School of Life Project for environmental education aims at raising environmental awareness and showing how to cherish nature. Implemented in 1996, the Project provides capacity-building activities to teachers from the 1st to 5th grades of public elementary schools. As a result of the Project, both teachers and students engage themselves in environmental education, urban garbage control, selective waste collection, and ecologic campaigns.

Target audience Public school teachers in the municipalities of Senhora do Porto and Santo Antônio do Itambé.

2018 actions »» Development of a theme focused on regional flora and wildlife, ecology, integral health, school, and community. Sustainability Report 2018 7 Management and Strategy 32

Project COMPANY-COMMUNITY INTEGRATION UNITS (UNIECO)

Objective / description The concept of Company-Community Integration Units (UNIECO) is founded on environmental education and experience centers. The goal is to enhance the community’s awareness of the importance of cultural, social, and educational issues through access to reading material and digital rooms and reflection on multidisciplinary subjects such as citizenship, environment, ethics, education, and health, in line with the community’s interests. The expected outcome is an improvement in the quality of life of people attending the Project. CENIBRA has two structured units, namely: Private Natural Heritage Reserve (PNHR) Macedonia Farm in Ipaba (MG) and another unit in Peçanha (MG).

Target audience Teachers, students, and community in the municipality of Peçanha.

2018 actions »» Aluminum-Lit Christmas Project - Workshop with prisoners at Peçanha penitentiary for confection of Christmas decoration items using recycled material;

»» Fostering a feeling of respect, citizenship, and belonging among those attending the UNIECO through daily activities.

Project FAMILY FARMERS ASSOCIATION OF IPATINGA - AAGRIFIPA

Objective / description The partnership agreement between CENIBRA Institute and the Family Farming Association of Ipatinga (AAGRIFIPA) covers the purchase of equipment to increase and diversify the production of bread, cookies, cake, and pastries, increasing the members’ income. The Association relies on support from Emater and the municipal administration of Ipatinga.

Target audience Men and women from the municipality of Ipatinga.

2018 actions »» Upgrading of the factory in line with the public health inspection report. Sustainability Report 2018 7 Management and Strategy 33

Project HANDICRAFTS HOME - MATIZES

Objective / description The partnership between CENIBRA Institute and SEBRAE (Brazilian Micro and Small Business Support Service) enabled the Matizes Project to participate in Sebrae’s Handicrafts Program in Ipatinga, Minas Gerais. This was a joint initiative by Ipatinga’s Development Agency, the Municipal Administration, and local artisans (Group of Artisans of Ipatinga Matizes).

Target audience Men and women from the municipality of Ipatinga.

2018 actions »» Participation in the 4th Steel Valley Tourism Fair;

»» Exhibition and sales of products in school fairs and street markets in Ipatinga;

»» Participation in CENIBRA’s Culture Week Fair;

»» Decoration of Santa Claus House in Ipatinga.

Project COMMUNITY ACTION

Objective / description A partnership between CENIBRA Institute and Unileste (University Center of Eastern Minas Gerais) provides consulting services to three community associations in the town of Periquito (MG). The target is to develop and formalize group interaction and learning, and support the organization of entities involved in job and income generation for families in these communities.

Target audience Women from the district of São Sebastião do Baixio, municipality of Periquito.

2018 actions »» Capacity-building workshop on pricing, equipment layout, and internal regulation;

»» Guidance on and follow-up of the application of funds allocated by Furnas;

»» Organization of the Association’s documentation. Sustainability Report 2018 7 Management and Strategy 34

Project COTTA’S BAKERY ASSOCIATION

Objective / description CENIBRA Institute entered into a partnership with Cotas Community Association, Peçanha (MG), to develop a social project whose purpose is to provide training and capacity building to community members. It also contributes to the purchase of equipment and construction of facilities in accordance with public health regulations applicable to bakery production and sales. Baked goods are produced by women from the community and sold in the region of Peçanha.

Target audience Women from the town of Peçanha.

2018 actions »» Participation in CENIBRA’s Culture Week Fair;

»» Support by CENIBRA Institute to enhance productivity and increase production.

Project HANDICRAFT GROUP OF CACHOEIRA ESCURA - GRACE

Objective / description The GRACE handicrafts project is the result of a partnership involving CENIBRA Institute, SEBRAE, Ágape Welfare Association, and craftswomen from Cachoeira Escura. Its purpose is to foster the use of primary treatment pulp fiber as a raw material for handcrafts with a focus on culture as a transformation factor. In addition, the project has become an environmental benchmark in the use of an industrial by-product to produce sustainable goods. GRACE craftswomen have participated in several fairs and events to sell their products and develop new partnerships.

Target audience Men and women from the municipality of Belo Oriente.

2018 actions »» Psychosocial intervention workshops;

»» Participation in CENIBRA’s Culture Week Fair;

»» Participation in the 4th Steel Valley Tourism Fair;

»» Organization of the Association’s administrative structure;

»» Construction of a space for handicraft production. Sustainability Report 2018 7 Management and Strategy 35

Project SOLIDARITY TASTE

Objective / description The Solidarity Taste project contributes to local, integrated, and sustainable development by strengthening the Solidarity Econ- omy Group of Açucena (MG). Capacity-building courses are given in partnership with CENIBRA Institute and the municipal administration of Açucena to improve the business management.

Target audience Men and women from the municipality of Açucena.

2018 actions »» Training to improve and increase the output;

»» Expansion of the production and sales area;

»» Donation of equipment to improve and increase the output.

Project WEAVERS OF BRUMAL

Objective / description This project is an initiative of the local administration and the Residents’ Association of Brumal, along with CENIBRA Institute, to develop and value the local culture through woven handicraft items. With an aim to foster job and income generation, several items are produced, including: rugs, cushions, purses, table cloths, and door stops.

Target audience Women from the municipality of Santa Bárbara (Brumal).

2018 actions »» Meetings with participants to follow up the handicraft work and raise issues to be worked out with the whole group;

»» Purchase of equipment;

»» Participation in CENIBRA’s Culture Week Fair;

»» Participation in the Santa Bárbara Multi-sectoral Fair. Sustainability Report 2018 7 Management and Strategy 36

Project HEALTH CAMPAIGNS

Objective / description Disease prevention campaigns and actions (shows and lectures).

Target audience Youths and teenagers from seven towns where the Company operates.

2018 actions »» Dynamics on the subjects addressed by the theater play and workshop.

Project ENVIRONMENT AND ARTS

Objective / description The purpose of the Environment and Arts Project is to encourage new reflexive human/education/culture/environment relations for the construction of a critical consciousness through theater plays and lectures on forest fires and myths and truths about eucalyptus forests.

Target audience Communities of Antônio Dias, Cantagalo, Catas Altas, Ferros, Guanhães, Iapu, Mesquita, Naque and Peçanha.

2018 actions »» Nine sessions were held in nine municipalities. Sustainability Report 2018 7 Management and Strategy 37

Project CENIBRA MOBILE

Objective / description Besides disseminating information about products manufactured from eucalyptus and the socio-environmental projects in which CENIBRA is engaged, the CENIBRA Mobile Project promotes environmental education in communities and at the Compa- ny. It helps create citizens that are aware of the importance of environmental preservation and provides information on social, economic, and environmental actions of a forest-based enterprise. CENIBRA’s Mobile Community Integration Unit is a vehicle equipped with the necessary infrastructure for the presentation of theater plays, shows, videos, and lectures.

Target audience Participation in fairs in Belo Horizonte (Expo Minas), Timóteo (Expo Inox), and in schools of Belo Oriente and Ipaba.

2018 actions »» Participation in fairs and campaigns;

»» Exhibition in schools.

Project OPEN DOORS

Objective / description Visits to the Private Natural Heritage Reserve (PNHR) Macedonia Farm, where visitors are given information about socio-environmental education (Mutum Project) and walk along an ecological trail. Moreover, the industrial plant, seedlings nursery, and operational units are open to scheduled visits, giving the company an opportunity to highlight the environmental, economic, and social importance of a forest-based industry.

Target audience Teachers, students, and communities in several municipalities.

2018 actions »» Visit by public school students and teachers to the Butterfly Valley, environmental conservation unit in Catas Altas, Macedonia Farm (Ipaba), and the industrial plan (Belo Oriente). Sustainability Report 2018 7 Management and Strategy 38

Project ACTION AND CITIZENSHIP

Objective / description A partnership involving CENIBRA, local administrations, and educational institutions, the project is a social promotion initiative comprising educational, leisure, and health-related activities with an aim to further enhance the Company/ community relationship.

Target audience Students and communities from 18 municipalities in the Nova Era, Guanhães and Rio Doce Regional Units.

2018 actions »» Change in the Project format;

»» Integration with the municipal departments of Health, Education and Welfare in the various Municipalities, as well as with the state Civil and Military Police;

»» Activities focused on well-being, recreation, health, culture, and environment.

Project CULTURAL PROJECTS

Objective / description Sponsorship of cultural projects with an aim to upgrade education and enhance access to culture in the towns where the company operates, under the Culture Incentive Act.

Target audience 16 communities and municipalities within CENIBRA’s area of operation.

2018 actions »» Cultural presentations to the community;

»» Introduction to music;

»» Encouragement to reading and cultural production;

»» Reinforcement to the importance of reading as a development tool;

»» Construction of cultural space based on a concept of sustainable architecture for cultural actions. Sustainability Report 2018 7 Management and Strategy 39

Project EFFECTIVE COUNCIL – CHILDHOOD AND ADOLESCENCE

Objective / description CENIBRA allocates part of its income tax to the Childhood and Adolescence Fund and encourages its employees to allocate the legal 6% deduction from their income tax to the Fund. The proceeds help maintain the Effective Council, which provides training to the Municipal Councils for the Rights of the Children and Adolescents and strengthens the role of such councils in the management of funds, control of public policies, and monitoring of and influence on the public budget.

Target audience Municipal Children and Adolescents Rights Councils, Guardianship Advisers, and Social Operators in the System for the Assurance of the Children and Adolescents Rights in 56 municipalities.

2018 actions »» Creation of the Effective Council Program;

»» Seminars, symposiums, and training courses to representatives of municipalities participating in the project;

»» Questionnaire survey on the situation of the system of guaranteeing the rights of children and adolescents in the municipalities in which the project operates.

Project SPORTS

Objective / description Encouraging sports practice, social integration, and recreation through the Sports Incentive Act and company funds. The project provides children and teens with classes in judo, volleyball, soccer, indoor soccer, and jiu-jitsu. In addition, the project provides all resources required, such as uniforms, balls, mats, and instructors.

Target audience Children and teens in the municipalities of Antônio Dias, Belo Oriente, Guanhães, Naque, Ipatinga, Periquito and Santana do Paraíso.

2018 actions »» Participation in competitions, exchanges, and festivals;

»» Graduation of participating students. Sustainability Report 2018 7 Management and Strategy 40

Project FAMILY FARMING - UNAIR

Objective / description In partnership with UNAIR - Family Farmers Association of Iapu, CENIBRA Institute has promoted job and income generation through donation of a tomato processing machine and a banana ripening chamber. The objective is to improve the work conditions and ensure greater opportunities to local farmers under federal incentive programs.

Target audience Men and women from the municipality of Iapu.

2018 actions »» Production and sales monitoring;

»» Capacity-building courses.

Project JORGES

Objective / description CENIBRA Institute entered into a partnership with the Jorges Community Association of Peçanha (MG) to conduct actions aiming at job and income generation by giving training to community members. It has also helped to implement a community vegetable garden and build a shed for the production of seasonal and produce items to be marketed in the region of Peçanha.

Target audience Men and women from the municipality of Peçanha.

2018 actions »» Support to cultural rescue activities and recognition as a remnant Quilombola community. Sustainability Report 2018 7 Management and Strategy 41

Project INDAIÁ

Objective / description Founded on the cultural and economic specificities of the region of Antônio Dias (MG), CENIBRA Institute entered into a partnership agreement with the local Handcrafters’ Association and University Center of Eastern Minas Gerais (Unileste) to organize and promote job and income generating activities, in addition to structuring a sustainable Indaiá straw stewardship plan.

Target audience Craftswomen from the municipality of Antônio Dias.

2018 actions »» Meetings with craftswomen to monitor the handicraft work development and identify demands to be addressed with the group;

»» Consulting by SEBRAE on the Culture of Cooperation;

»» Participation in CENIBRA’s Culture Week Fair;

»» Participation in the 29th National Handicraft Fair in Belo Horizonte;

»» Exhibition and sales of products in the 4th Steel Valley Tourism Fair.

Project SEPTIC TANKS

Objective / description CENIBRA Institute entered into a partnership with the municipal administrations of Divinolândia de Minas (MG) and Ipatinga (MG) to build septic tanks. This initiative is part of a municipal project to revitalize local water streams and improve water quality and availability based on education, sanitation, and environmental recovery. Septic tanks are built in the communities in accordance with a design developed by Embrapa Instrumentação Agropecuária, an agency of the Agriculture Ministry.

Target audience Families from the communities of Braúnas and Virgolândia.

2018 actions »» Donation of materials to build septic tanks. Sustainability Report 2018 7 Management and Strategy 42

Project PROFESSIONAL EDUCATION

Objective / description A partnership among CENIBRA, CENIBRA Institute, SENAR, SEBRAE, associations, and suppliers from the municipalities of Belo Oriente, Joanésia, Mesquita, Naque and Periquito (all in the state of Minas Gerais) provides guidance, training, and monitoring to improve and grow local businesses. The work plan includes sales techniques, financial management, and business prospecting.

Target audience Associations and small businessmen from the municipalities of Belo Oriente, Joanésia, Mesquita and Periquito.

2018 actions »» Implementation of the supplier qualification plan by Sebrae in Belo Oriente;

»» Courses given by SENAR in Belo Oriente, Joanésia, Mesquita, Naque, and Periquito.

Project MULTIFUNCTION PARK

Objective / description The Multifunction Park comprises a playground, a space for the elderly, jogging track, football fields, restrooms, and water fountains, in addition to extensive green areas. A library and a theater are being built. The Park is used mainly by the community of Cachoeira Escura and communities around CENIBRA’s plant.

Target audience Communities from the municipality of Belo Oriente and other municipalities around the industrial plant.

2018 actions »» Execution of the Living Park Program, including sports, cultural, and leisure activities involving the entire community. Sustainability Report 2018 7 Management and Strategy 43

Project EFFECTIVE COUNCIL – THE ELDERLY

Objective / description CENIBRA assigns up to 1% of its Income Tax to the Elderly Fund. The funds are used to implement the Excellence Council Proj- ect, a partnership with the Ágape Welfare Association. The project provides training to the Municipal Councils for the Rights of the Elderly and strengthens the role of such councils in the management of funds, control of public policies, and monitoring of and influence on the public budget.

Target audience Members of municipal councils for the Rights of the Elderly, elderly and managers from 10 municipalities.

2018 actions »» Creation of the Effective Council Program;

»» Seminar, symposiums, and training courses;

»» Survey on the elderly in the municipality of Belo Oriente.

Project SEWING FACTORY – NEIGHBORHOOD ASSOCIATION OF AVIAÇÃO - AMA

Objective / description CENIBRA Institute entered into a partnership with AMA to encourage job and income generation in the community of Aviação, municipality of Belo Oriente (MG), including training and donation of machinery for a sewing factory.

Target audience Men and women from the municipality of Belo Oriente.

2018 actions »» Training on planning and entity organization;

»» Donation of equipment to expand and improve the production. Sustainability Report 2018 7 Management and Strategy 44

Project ALLIANCE OF GOOD PROJECT

Objective / description CENIBRA Institute entered into a partnership with CAIS (House of Arts and Social Inclusion), Coronel Fabriciano (MG), with an aim to prevent crimes through planned, continued actions intended to strengthen community and family ties, training, and income generation initiatives.

Target audience Mothers of students participating in the Alliance of Good Project.

2018 actions »» Provision of training to women.

Project PALM HEART PROJECT

Objective / description Partnership among SEBRAE, CENIBRA Institute, municipal administrations of Ipatinga and Inhapim, and Coopeleste (Cooperative of Dairy Producers and Exporters of East Minas Gerais) to organize and structure the Cooperative to become a large supplier of peach palm heart as an alternative source of income for family farmers and small producers in the Steel Valley Metropolitan Belt.

Target audience Regional palm heart producers from Belo Oriente, Bugre, Caratinga, Coronel Fabriciano, Iapu, Inhapim, Ipatinga, and Marliéria.

2018 actions »» Technical mission to Barro Alegre Farm (large-scale production);

»» Engagement of technical consulting and monitoring services at properties;

»» Contract with the Federal University of Viçosa for a market study. Sustainability Report 2018 7 Management and Strategy 45

Project FLOUR OF INDAIÁ

Objective / description CENIBRA Institute entered into a partnership with the United Quilombos Association of Barro Preto and Indaiá to build a shed and purchase shelves and a packing machine to produce manioc flour.

Target audience Quilombola families from the municipality of Antônio Dias.

2018 actions »» Beginning of partnership agreement.

Project FAMILY FARMING - COCAIS DOS ARRUDAS

Objective / description CENIBRA Institute entered into a partnership with the Residents’ Association of Santa Vitória de Cocais dos Arrudas, Emater, and the municipal administration of Coronel Fabriciano (MG) to provide technical support to small farmers and purchase soil correction agents.

Target audience Family farmers from the city of Coronel Fabriciano.

2018 actions »» Purchase of agricultural silicon;

»» Distribution of soil correction agent;

»» Technical support to producers;

»» Soil analyses. Sustainability Report 2018 7 Management and Strategy 46

Project BOM JARDIM DE TRONQUEIRAS

Objective / description CENIBRA Institute entered into a partnership with the Community Association of Bom Jardim, Peçanha (MG), to carry out actions intended to promote job and income generation and enhance collective well-being.

Target audience Men and women from the municipality of Peçanha.

2018 actions »» Construction of a space for meetings and training courses.

Project FRUIT PULP FROM PEDRA REDONDA

Objective / description CENIBRA Institute entered into a partnership with the Municipal Administration of Coroaci and the Family Farmers Association of Pedra Redonda to set up a fruit pulp factory with an aim to diversify income and generate jobs for farmers from the Pedra Redonda community.

Target audience Family farmers from Coroaci.

2018 actions »» Beginning of construction of a space to install a small fruit pulp factory. Sustainability Report 2018 7 Management and Strategy 47

Project LIVING MARKET

Objective / description Partnership between CENIBRA Institute, the Municipal Administration of Sabinópolis and the Handicrafters and Marketers As- sociation of Sabinópolis to implement the Living Fair project with an aim to work with the entire production chain, from planting to sales of products to final consumers, resulting in additional income to participants.

Target audience Marketers of Sabinópolis.

2018 actions »» Purchase of stalls and workshop on proper product exhibition at the Market.

Project ARTS AND FAIR IN THE SQUARE - FEIRARTE

Objective / description In 2018, CENIBRA Institute entered into a partnership with the Municipal Administration of Mesquita and the Rural Workers Union of Mesquita to upgrade the Arts and Fair in the Square project (FEIRARTE) through the purchase of stalls for exhibition and sales of local handicraft and produce.

Target audience Marketers of Mesquita.

2018 actions »» Purchase of stalls for exhibition of local handicraft and produce. Sustainability Report 2018 7 Management and Strategy 48

Project SOCIAL FISH FARMS

Objective / description Partnership between CENIBRA Institute, the Municipal Administration of Periquito (MG) and the Fishers and Friends of Doce Riv- er Association (APARD) to improve the working conditions of fishers from the Pedra Corrida community and provide equipment to increase the income of participant families.

Target audience Fishermen from the municipality of Periquito.

2018 actions »» Beginning of partnership upon the agreement signature in 2018;

»» Upgrading of the production area and fishermen accommodations;

»» Purchase of equipment to improve the production.

Project THE ART OF HANDS

Objective / description Partnership between CENIBRA Institute and the Municipal Administration of Naque (MG) for a handicraft capacity-building project. Ninety women will have new job and income generation opportunities. Participation in regional and local fair for handicraft exhibition and sales.

Target audience Women from the municipality of Naque.

2018 actions »» Beginning of partnership upon the agreement signature in 2018;

»» Capacity-building workshops;

»» Completion of the training course;

»» Participation in CENIBRA’s Culture Week Fair and exhibition in the municipality of Naque. Sustainability Report 2018 7 Management and Strategy 49

Project ASSOCIATION OF RECYCLABLE MATERIAL COLLECTORS OF BELO ORIENTE - ASCABEO

Objective / description Partnership between CENIBRA Institute and the Municipal Administration of Belo Oriente (MG) and the Association of Recy- clable Material Collectors of Belo Oriente (ASCABEO) to build a containment wall at the recyclable material screening shed. Recyclable paper was donated to increase collectors’ income.

Target audience Waste collectors form the municipality of Belo Oriente.

2018 actions »» Donation of recyclable paper;

»» Donation of timber and other materials to build walls and sheds for screening and storage of recycled items.

Project CLEAN TOWN

Objective / description Partnership between CENIBRA Institute, the Municipal Administration of Ipaba and Ebenezer Welfare to provide support to horse-drawn cart drivers who collect debris and waste in the town of Ipaba (MG) and take them to intermediary stockyards. These workers’ income stems from the transportation of disposed materials and items, keeping the town cleaner.

Target audience Horse-drawn cart drivers from the municipality of Ipaba.

2018 actions »» Beginning of partnership with Ebenezer Welfare and Municipal Administration of Ipaba;

»» Revamp of horse-drawn carts. Sustainability Report 2018 7 Management and Strategy 50

Project SOCIAL SEWING

Objective / description Partnership between CENIBRA Institute and the Municipal Administration of Pingo D’Água for patchwork handicraft and sewing capacity-building project to enhance professionalization and job and income generation. Particpating women are trained and qualified to improve their activity and income. They learned how to make clothing and handicrafts.

Target audience Women from the municipality of Pingo D’Água.

2018 actions »» Beginning of partnership agreement;

»» Capacity-building course for women at the patchwork and sewing workshops.

Project YOUNG ENTREPRENEURSHIP CENTER - NEJ

Objective / description Partnership between CENIBRA Institute, the Municipal Administration of Belo Oriente (MG) and SEBRAE (Brazilian Micro and Small Business Support Service) for the implementation of a technical administration and management course using SEBRAE’s proprietary method of young entrepreneurship and promotion of socio-economic development in the municipality of Belo Oriente.

Target audience Youths from the municipality of Belo Oriente.

2018 actions »» Beginning of partnership upon the agreement signature in 2018;

»» Student selection;

»» Inaugural class of technical course;

»» Conduction of the first course module;

»» Promotion of events: Corporate Breakfast and Companies of Minas Gerais;

»» Promotion of the Social Entrepreneur’s Legacy. Sustainability Report 2018 7 Management and Strategy 51

b. National Voluntary Commitments Forestry Dialogue: Created in 2005 in Brazil, the Forest- ry Dialogue gathers together forestry-related companies Charter of Principles of the Brazilian Tree Industry and environmental organizations with an aim to dissemi- (Ibá) Association: The Association’s objective is to foster nate economically-feasible actions and enhance the scale a reflection on initiatives and practices that legitimate the of efforts and results in terms of environment conservation. sustainability attributes of the planted tree industry and its CENIBRA joined the National Dialogue in 2005 and the Re- commitments to a greener economy. The Charter sets forth gional Minas Gerais Forum in 2009. ethical, governance, and corporate responsibility principles, as well as good practices to be adopted by the different Moreover, CENIBRA is a member of the following entities segments in the planted tree production chain. and associations:

Entity / Association CENIBRA Representative Position

Ibá - Brazilian Tree Industry Júlio César Tôrres Ribeiro Member of the Deliberative Council

Member of the Communication Ibá - Brazilian Tree Industry Leida Hermsdorff Horst Gomes Committee

Member of the International Trade Ibá - Brazilian Tree Industry Adermo Oscar Costa Committee

Member of the Government Relations Ibá - Brazilian Tree Industry Vitor Alderico de Menezes Marques Committee

AMS - Forestry Association of Minas José Márcio Cardoso Member of the Management Gerais

FIEMG - Industry Federation of the Júlio César Tôrres Ribeiro Member of the Strategic Board State of Minas Gerais

Minas for Peace Institute Adermo Oscar Costa Deputy Member of the Audit Committee

ABTCP - Brazilian Technical Pulp & Ronaldo Neves Ribeiro Member of the Executive Council Paper Association

Brazilian Forestry Dialogue Jacinto Moreira Lana Member of the Coordination Board

IPEF - Forest Research Institute José Márcio Cardoso Member of the Board of Directors

Sinpapel - Pulp, Paper and Cardboard Association of the State of Minas Adermo Oscar Costa Market Director Gerais

Valia - Vale do Rio Doce Social Security Vitor Alderico de Menezes Marques Member of the Deliberative Council Foundation Sustainability Report 2018 7 Management and Strategy 52

Strategy main challenges in terms of sustainability and the business existence. It was a challenging process that put together In 2018, CENIBRA reaffirmed its commitment to sustainabil- the interdisciplinary views of different internal leaderships ity by updating its long-term “CENIBRA 40-50 Plan” to bea- in connection with economic, social and environmental is- con the Company’s path over the next five years. Worked sues. A large number of ideas and shared points of view out in a participative approach, this plan is the outcome of a resulted in the updating of the Plan with 13 long-term com- number of debates involving different organizational areas. mitments. The works were coordinated by the Sustainability Commit- tee with the support of a team dedicated to incorporating sustainability into the Company’s management and pro- Objectives and Goals cesses. In 2018, CENIBRA established business sustainability objec- Based on the principle that the future is uncertain and tives, which were unfolded in goals for the whole company, changes are inevitable, the team in charge reviewed the the most important of which are listed below:

Element Corporate objective Material issue Goal Accomplishment

Goal achieved: Total pulp cost reduction 100.67% Financial and Profitability Goal not achieved: Economic Economic Product quality improvement increase 91.90% Performance Increasing the yearly pulp output Goal not achieved: beyond the budget 99.92%

Employee Health Extend the Safe Behavior Program Goal achieved: and Safety up to September 2018 100.00%

Fostering a fairer social Reaching 40% of procurement Goal achieved: Social environment and from local suppliers in 2018 100.00% equality Regional Socioeconomic Development Creating self-sustainability indicators for projects implemented Goal achieved: by the Company up to October 100.00% 2018

Water and Effluent Reduction of in-take water Goal achieved: Management consumption (m3/Adt) 100.88%

Efficient use of natural Sustainable Forest Ambiental resources Stewardship Preparation of stewardship plans for conservation of water springs Goal achieved: Biodiversity that are socially relevant up to 100.00% Conservation and November 2018 Protection

Strengthening of a Innovation, Updating the CNB 40-50 Plan up to Goal achieved: Institucional culture of sustainable Technology and New September 2018 100.00% development Products

The initiatives and programs directly related to the material issues 6 (Emissions Management), 7 (Adaptation to Climate Change), and 8 (Efficient Energy Use) were dealt with under process management in the following sections: “Atmospheric Emissions” (pages 83 to 85) and “Materials and Energy” (pages 87 to 89). Sustainability Report 2018 7 Management and Strategy 53

Research, Development and Innovation Implementation of the Sociall System for the management of the CENIBRA CENIBRA continued to allocate funds and resources to con- Institute’s actions – Corporate Social duct studies on the improvement of wood quality, forest Investment; productivity increase, and industrial production process efficiency. Such efforts take the form of activities at the Company’s laboratory and partnerships with universities, suppliers, and research institutes. Among the main projects carried out in 2018, the following stand out: Upgrading of the Forest Process Management system through the implementation of forest mobility in »» Forest protection, soil, quality, and genetic the harvest and infrastructure areas; improvement studies;

»» Harvesting studies (operational development and mechanization);

»» Characterization of commercial clones (2018 pre- Improvements in the SAP Document harvesting); Management System (DMS);;

»» pH adjustment strategy in the D0 stage; »» Study on alternatives to control the white liquor sulfidity and assess the effects of its variation on Implementation of phase two of the production process (pulping, pre-bleaching, and the electronic monitoring service at bleaching stages); regional offices; »» Study on the use of magnesium hydroxide to partially replace sodium hydroxide in the control of pH in the alkaline stages of bleaching;

»» Study on the removal of chloride and potassium salts Implementation of the electronic from electrostatic precipitators’ ash in recovery boilers; monitoring service around the perimeter of the Seedlings Nursery; »» Studies on the self-purification of the Doce River.

In addition, CENIBRA has invested in information technology resources to ensure its production and managerial com- Implementation of two modules petitiveness. Among the main projects carried out in this of the SPED Digital Bookkeeping area in 2018, the following were a highlight: System: Digital Bookkeeping System for Tax, Social Security, and Labor Obligations (eSocial) and the Digital Tax Withholding and Other Tax Information System (Reinf);

Launch of the CENIBRA APP for cell phones;

Improvements to the Laboratory Information Management System (LIMS) solution; Intranet upgrading with the creation of the Corporate Portal;

Deployment of a disaster recovery site. CHAPTER 8 COMPETITIVENESS AND ECONOMIC PERFORMANCE Sustainability Report 2018 8 Competitiveness and Economic Performance 55

Economic Scenario Forestation and Wood Supply

2018 started with encouraging economic outlooks, especially after overcoming one of the biggest recessions in Brazilian history. However, favorable market expectations IN 2018, THE TOTAL VOLUME turned around in the first half of the year as increasing un- OF WOOD DELIVERED TO THE employment, high personal loan interest rates, declining PLANT WAS family consumption, stagnant economic agenda, low public investments, and the lack of progress in the Social Security Reform, a key component for the restructuring of government accounts, took center stage. Furthermore, the road transport shutdown due to a truckers’ strike driven by high fuel prices played a leading role in reducing the Brazilian Gross Domestic Product (GDP) during all quarters after the stoppage. In short, it was an odd year. 4.7 In the international scenario, investor confidence dropped as industrial output and global trade slowed down as a re- CUBIC METERS, sult mainly of the U.S. application of trade tariffs to China MILLION and the subsequent retaliation of the world’s second-largest OUT OF WHICH 83% ORIGINATED FROM CENIBRA’S economy, causing the Chinese economic growth to slack- OWN FORESTS AND THE REMAINING 17% FROM en. Supported by the government’s tax easement, the U.S. PLANTATIONS UNDER THE FORESTATION grew at a strong pace in 2018, favoring a rise in local inter- INCENTIVE PROGRAM est rates. Large, emerging economies did not keep up with the vigorous U.S. growth and felt the effects of the U.S. dollar appreciation.

According to the IMF (International Monetary Fund), emerg- The handled area totaled 16,300 hectares of eucalyptus for- ing and developing countries will be the engine driving ests, with 8,700 hectares planted and 7,600 hectares regen- global economic growth in 2019, mainly South Africa and erated. The seedling nursery produced 13.8 million seedlings, India. In the case of Brazil, the IMF forecasts advances with having reached a rooting rate of 87.4%, which indicates a the implementation of new policies, such as the approval of highly efficient seedling production process. A number of im- the Social Security Reform and a possible deepening of the portant actions were taken in the operational area aimed at Labor Reform. lowering costs and improving forestry processes.

Market Scenario

The global pulp market experienced constant demand in 2018, resulting in an upward price move in almost every month throughout the year. Important factors were the re- strictions imposed by the Chinese government on issuing im- port licenses for low-quality recycled paper and the surprising halt of road transport in Brazil (truck drivers’ strike) in the second quarter, which led to a setback in pulp output. Ac- cording to industry analysts, the world demand for eucalyptus pulp grew 5.1% in 2018 when compared to the previous year. Among the major world markets, Asia (Japan excluded) grew 9.6%, followed by Latin America (Brazil excluded) with 8.3%, Europe with 5.9%, and Japan with 1.0%. Estimates point to a 3.6% growth in demand for eucalyptus pulp by 2022, while supply is expected to grow just 2.4% (source: Pulp and Paper Products Council, November 2018). Sustainability Report 2018 8 Competitiveness and Economic Performance 56

Pulp Production Sales Breakdown

CENIBRA’s pulp output totaled 1,200,380 tons in 2018, 0 which is lower than the budget figure. This result was influ- atin enced by the stoppage of road transport (truckers’ strike) in 11 America 2 the second quarter of the year and caused a production loss orth omestic of 22,538 tons. Over the following quarters, the Compa- America Maret ny endeavored to recover output and maintain operational stability, which delivered a positive result. Finished product quality reached 95.8% of the index previously set as the Earnings and Profit Sharing Program criterion. The higher use of debarked wood and increased recovery boiler effi- 46 ciency contributed to lower specific consumption of wood Asia and fuel oil, respectively, when compared to the budget for the year. 41 Europe

Production Growth (in 1,000 ADt)

, ,99 , , Performance Analysis

The net operating revenue amounted to R$ 3,036 million, a 38.87% jump from the 2017 figures, driven by a higher ,93 net average price in U.S. dollars and the appreciation of the U.S. currency against the Brazilian Real. The R$ 767 million net income was 74.33% higher than that of the previous year. Cash generation (adjusted EBITDA) ended the year at R$ 1,614 million, up 78.22% from the 2017 EBITDA of R$ 905 million. The performance of these indicators is also ex- plained by factors that impacted the net operating revenue.

Capital Investments

CENIBRA’s capital investments amounted to R$401 million in 2018. The following projects and investments stand out:

2014 2015 2016 2017 2018 »» Investment in forest formation – forestry process; »» Harvesting equipment modernization;

»» Modernization of the bleaching process;

»» New Chipping Line; Sales »» Bark washing system; »» Exchange of superheater pipes in recovery boilers #2 CENIBRA’s sales totaled 1.201 million tons in 2018, in line and 3; with the budget. Export shipments amounted to 1.172 million tons, or 98% of the overall sales, whereas the domestic »» Exchange of the 3rd effect evaporator’s upper cap; market took 29,000 tons. From a sales strategy point of view, it was possible to allocate important volumes to mar- »» Automatic cutting system for the drier of pulp kets that, despite the logistics challenges, provided a bet- machines #1, 2 and 3. ter financial return and manage inventories so as to ensure regular supply to all domestic and international customers. In terms of final use, the sanitary paper segment answered for 54% of the 2018 sales, followed by special papers with 40%, and printing & writing and packaging with 3% each. Sustainability Report 2018 8 Competitiveness and Economic Performance 57

Financial Management

CENIBRA achieved solid financial liquidity in 2018. The cash and cash equivalents position at 2018 yearend was R$ 692 million, a staggering 549.49% growth from the 2017 level. Such an increase in Brazilian currency stems from the indebtedness reduction policy implemented by the Compa- ny’s shareholders, which led to “zero debt”.

Wealth Generation and Distribution

Figures in R$ thousand

2018 Value Added Distribution 1,582,145

Personnel and Charges 345,084

Taxes, fees and contributions 360,760 GRI 201-1 Accrued interests and rentals 109,642

Retained earnings 766,659

Tax Incentives

Figures in R$ thousand 2016 2017 2018

Tax incentives related to sponsorships and support actions1 2,304 4,585 12,559

Innovation Act (deduction of research and technological innovation 1,260 1,171 1,715 expenditures from the Income Tax and Social Contribution calculation basis)2

Workers’ Nourishment Program (PAT)3 1,008 3,055 7,369 Payroll taxation relief program4 28,483 29,906 15,956 Total 33,055 38,717 37,599 GRI 201-4 1 Income tax incentive relative to the Culture Incentive Act, Sports Act, National Elderly Fund, Children’s and Teenagers’ Rights Fund, PRONON/PRONAS; 2 Innovation Act: Expenditures related to technological innovation research & development can be excluded from the Income Tax and Social Contribution calculation basis - Act 11.196/2005, Art. 17 I, art. 19; 3 Corporate income tax incentive relative to the Workers’ Nourishment Program; 4 Act no.12.546 of December 14, 2011, as amended by the Provisional Measure 582 of September 20, 2012, and enacted as Act 12.794 in April 2013, includes the pulp industry in the payroll tax reduction system. CHAPTER 9 SOCIAL PERFORMANCE Sustainability Report 2018 9 Social Performance 59

CENIBRA disseminates its values and principles with an aim to enhance sustainability awareness with a focus on ethics and transparency, while taking into account its stakeholders’ requirements and realities.

Customers uality product, safety, and customer solution development Communities ustainaility Shareholders (partnership and nowledge and respect in social technology actions) echange

Governments artnerships to support the regional, Market media state and national Corporate communication development with ethics, transparency and respect for the Suppliers and ournalists. Forestry Partners est management practices in the production chain

Environmental Management Agencies and Employees ialogue and guidance rofessional evelopment, to comply with the health, wor safety, and environmental legislation, dialogue with a sustainale vision

Third sector Comprehensive partnership with reputale s to Competitors promote sustainale Ethics and respect, actions in compliance with oth local and international laws, regulations, and rules Unions Ethics, transparency and dialogue in the negotiations on ehalf of employees Sustainability Report 2018 9 Social Performance 60

Dialogue with stakeholders is the foundation of CENIBRA’s sustainability. For that purpose, the Company makes use of a variety of communication media and tools, as listed in the following table:

Media / Tool Title Description Periodicity

Release of corporate information on boards placed Bulletin Board CENIBRA Acontece in areas of heavy pedestrian traffic at the Plant and Weekly Regional Units.

Newspaper oriented to employees, the media, Printed service providers, shareholders, suppliers, educational FIBRA Bimonthly newspaper institutions, public entities and communities. It covers the Company's main forestry and industrial activities.

On-line communication to provide the external audience www.cenibra.com.br Internet with information about the Company’s processes and - www.institutocenibra.org.br social investments.

www.twitter.com/cenibra www.facebook/cenibra CENIBRA’s corporate profile on the social networks to https://plus.google.com/ Internet disclose institutional information and the Company’s - +celulosenipobrasileiracenibra position with respect to corporate matters. https://www.instagram.com/ cenibra_celulose/

Internal on-line communication channel. The intranet Corporate Portal platform provides employees with access to regulatory Intranet - Department Portal documents, corporate data, operating information, and other corporate management systems.

Corporate e-mail with specific information about the Digital notices - - Company’s procedures and actions.

On-line bulletin sent to those who have signed up on Newsletter CENIBRA News CENIBRA website. It provides a summary of the main Semimonthly actions taken by the Company and CENIBRA Institute.

Corporate videos on industrial and forestry safety Vídeos - training, equipment tests, and specific activities by the - Company departments. Talk to CENIBRA - Toll-free Community-oriented communication channel through a Telephone - phone toll-free phone number. Publication oriented to employees, the media, educational institutions, local administrations, city Special Interação Newspaper - councils, and communities in the company’s areas of Quarterly Publications CENIBRA and Community operation. The periodical releases information about CENIBRA’s institutional relations with communities and CENIBRA Institute’s projects. Integrated communication actions to disseminate Communication - corporate messages in line with the Company’s - Campaigns institutional positioning.

Corporate Events to maintain the organizational climate and foster - - Events both in-company and external integration/relationship.

Visit to CENIBRA’s facilities to provide the visitors with Visitor’s - information about the Company’s industrial, forestry, - Reception administrative, and social-environmental activities. Sustainability Report 2018 9 Social Performance 61

Community Relationship 2018 External Social Investiments

CENIBRA carries out its operations in 54 municipalities in Minas Gerais and is aware of the influence of its activities on local communities. The Company presence gives rise to Values in numerous opportunities for local social and economic de- Description R$ million velopment, job and income generation, professional qualification, and support to a number of programs in the areas Sociocultural 6.60 of education, culture, sports, and others. Environment 2.11

CENIBRA Institute Health 1.62

CENIBRA relies on CENIBRA Institute to support its social Education 0.46 initiatives, particularly the management, impact evaluation, and implementation of projects. For the past 17 years, the GRI 203-2 Economic Development 0.29 Institute has been responsible for the Company’s social ori- entation and qualification of its social investments. It has been engaged in 50 socio-environmental projects in the Sports 1.57 fields of education, environment, digital inclusion, job and income generation, cultural rescue, sports, and citizenship. Childhood and Adolescence Funds 3.19 In addition to its own projects, the Institute also supports a number of initiatives by civil society organizations and the Others 0.08 executive, legislative, and judicial branches. Total 15.92 In 2018, the Institute carried out a number of public infrastructure works in partnership with municipalities and conducted several cultural and sports projects in the communities in which it operates with an aim to value and improve relations with various segments of society. Local demands were met and funds and sponsorships were made available under federal incentive laws. Initiatives in the areas of health, education, economic and socio-cultural development, environment, sports, and citizenship are estimated to directly and indirectly impact around 100,000 people in municipalities in which the Company operates. 20

10 41

10 13

ociocultural Economic evelopment

Environment ports

ealth Childhood and Adolescence unds

Education Sustainability Report 2018 9 Social Performance 62

Institutional Relations »» Technical, Economic, Environmental, Social, Safety and Occupational Health Planning: This CENIBRA recognizes the significant impacts of its operations is a multidisciplinary planning tool that seeks to on the socioeconomic and environmental dynamics of com- minimize the impacts of forestry activities on both the munities located within its area of influence. In this sense, communities and the environment. it has created a number of tools to manage the impacts of its operations and promote an effective relationship with CENIBRA’s Management System includes formal proce- communities. Such tools are: dures covering the entire relationship with neighboring communities in a structured manner:

»» Communication with Stakeholders: Any complaint submitted through the Company’s communication »» Procedure for Communication with Stakeholders; channels is given transparent, methodical attention and is recorded in the Quality Management System. »» Procedure for Communication with Communities; This system issues a notice to the manager in charge »» Press Service Procedure. of the sector that gave rise to the complaint for proper treatment. The complainant is given access to information about the actions underway during the As far as the development and impact of infrastructure entire treatment process. Once the proposed action investments are concerned, CENIBRA entered into part- plan has been completed, the complainant is visited nerships with local administrations in the municipalities in by an employee from the Corporate Communication which it operates and invested R$3.5 million in 2018. These department to check the solution effectiveness, and funds were allocated to access ways and road improvement the complainant can declare whether the measures works, including asphalt paving of three kilometers in the taken were satisfactory or not. Moreover, statistics municipality of Antônio Dias (Minas Gerais) at a cost of are prepared about the complaints in order to provide R$3.4 million. In addition, the Company invested around input for continuous improvement of controls and R$7.5 million in logistic infrastructure (external roads), com- production processes; prising bridges, prime coat, and road maintenance. Such »» Corporate Group for Communication with investments have effectively contributed to smooth the so- Stakeholders: Several other companies, particularly cial-economic flows and the interaction between the com- in the mining and steel industry, operate in the same munities and neighboring towns. towns and cities in which CENIBRA carries out its activities. Thus, in order to make partnerships feasible, a Corporate Group for Communication with Stakeholders was set up. Its members are officers in charge of such activity in each of the companies. The objective is to share strategic information about the relationship with communities and community leaders, which creates a good opportunity for the development of closer institutional relations among the companies and sharing the costs to meet the community requirements. Group meetings are held when necessary;

»» Toll-free Phone – Talk to CENIBRA: Communication channel made available to the community for effective access to the Company. The toll-free number 0800- 2831291 can be used to provide information about forest fires, whereas the number 0800-2833829 is used for information about wood sale and transportation, ”How’s my Driving” program, and other information;

»» “Knowing CENIBRA” Project: Speeches about the Company and its forestry activities, with a focus on the myths and truths about eucalyptus, are given to students from the 6th to the 9th grades. After the speech, the students are invited to prepare an essay to record their understanding of the speech content and their impressions about the information given. The best essay gets an award; Sustainability Report 2018 9 Social Performance 63

Professional Training Projects Specific Communities

CENIBRA is engaged in actions intended for professional CENIBRA’s land is not occupied by quilombolas or indige- training and labor qualification as part of its social responsi- nous communities, but the company has a good relation- bility approach. Highlights are: ship with and respect for those communities located in the municipalities where it operates. CENIBRA promotes events Young Apprentice Program: This Program is a partner- in the communities through partnerships, on top of also ship between CENIBRA and SENAI (Brazil’s Industrial Ap- providing support through sponsorships and donations. prenticeship Service) in the Steel Valley with the objective of giving the apprentices (youths from 16 to 24 years of age) their first professional opportunity. In 2018, 36 young Forestation Incentive Program apprentices were hosted by CENIBRA for hands-on training in industrial electric installations, administrative processes, Since 1985, CENIBRA’s Forestation Incentive Program for industrial mechanical maintenance, IT, and computer and Farmers brings farmers into the Company’s production network installation and maintenance. Theoretical classes chain as wood suppliers. Aiming to strengthen CENIBRA’s were given by SENAI; role of economic, social and environmental development agent in the regions where it operates, this Program adopts Professional of the Future - CENIBRA Internship Pro- criteria for technology transfer (services and inputs), financ- gram: This program offers technical and college students ing and technical assistance to wood production. the opportunity of consolidating their academic education by means of practical activities in their respective fields of in- Such long-term partnerships allow integrating the commu- terest, which adds value to their professional development. nity into the forestry business, contribute to job and income CENIBRA has entered into agreements with approximately generation, result in a better quality of life, and favor envi- 60 educational institutions, comprising 35 different cours- ronmental preservation and countryside development. es in several fields. Based on a differentiated development plan, this Program includes a number of development and They also mitigate land concentration, enable local activi- training activities and permanent follow-up by a supervi- ties, and create and diversify income-generation opportu- sor, besides offering students the opportunity of present- nities for farmers. In addition, they bring resources to the ing their projects during a Technical Internship Seminar. In municipalities in which the program is implemented, foster 2018, 74 interns participated in the program in 146 differ- compliance with applicable legislation and workers’ rights, ent development and training activities. and enhance relationships with neighbors and communities. Currently, 663 farmers participate in the program through 1,133 contracts. Sustainability Report 2018 9 Social Performance 64

Supplier Relationship IN 2017, CENIBRA’S PURCHASES FROM LOCALLY-BASED SUPPLIERS CENIBRA relies on a diversified and extensive supply chain, AMOUNTED TO R$ from small farmers to large Brazilian and multinational companies. It includes suppliers of materials, equipment, raw materials, chemicals, and utilities, as well as logistics and service providers. Negotiations and contracting comply with the applicable qualification, evaluation, and selection criteria, particularly in the case of strategic supply chain players. 1,107 At CENIBRA, the appreciation of companies located within its area of operations is a permanent concern, as this is an MILLION effective way of enhancing community development and quality of life. (73% OF THE OVERALL EXPENDITURES)

Figures in R$ thousand 2016 2017 2018

Spending with locally-based suppliers* 624,570 860,136 1,107,112

Total spending with suppliers 1,247,094 1,379,922 1,524,339

GRI 204-1 Percentage of purchases from locally-based suppliers 50 62 73

*Place = State of Minas Gerais

CENIBRA works to build relationships based on ethics and »» Human Rights: All contracts include provisions relative long-term partnerships with its suppliers, and encourages to human rights, like non-discrimination under any them to adopt sustainability practices and spread informa- excuse, either on grounds of race, gender, skin color, tion and knowledge about this matter among all parties of age, religion or any other reason, including disability, the value chain. It must be pointed out that all contracting provided there is no hindrance to the performance of and procurement procedures describe the applicable prac- the required tasks and no risk to the employee’s physical tices in detail. Any company that meets the product or ser- integrity; vice quality requirements and the registration criteria and whose values are similar to CENIBRA’s is a potential supplier. »» Sociais: Prevention of any potential impact on society Among the main selection parameters, the following are in accordance with the list of selection aspects, such as worthy of mention: environment, labor practices, and human rights.

»» Environment: Any supplier whose operations In order to develop and qualify its suppliers, CENIBRA has involve environmental risks shall only be selected set forth measures to control the process, with the con- upon submission of all applicable licenses, particularly sequent cost reduction, higher user confidence, improved those related to natural resources and environment quality and safety, and lower risk of inappropriate service. preservation; Supplier qualification and evaluation are among the most important measures. »» Labor Practices: All contracts include provisions relative to enforcement of the rights stipulated in the Consolidated Labor Act (CLT) and occupational health and safety practices according to CENIBRA regulations; Sustainability Report 2018 9 Social Performance 65

The qualification program aims at providing evidence that Moreover, there was no record of a supplier identified as a the supplier complies with CENIBRA’s quality requirements. risk in terms of child labor and forced or compulsory labor It also covers legal aspects, tax and labor compliance, and in 2018. CENIBRA takes the necessary measures to prevent the supplier’s economic, financial, and technical capabili- such kind of risk. Inspections are conducted from time to ties. The entire process is designed to qualify the supplier time by human resources specialists and work safety and to participate in tenders for the procurement of materials nurse technicians to monitor the employees’ work condi- and services, as well as to ensure its status as a registered tions, including accommodations, sanitary facilities, meals, supplier. Both current and new suppliers go through the protection equipment, and working period. qualification process. In addition, CENIBRA is certified to different standards, In addition, suppliers are evaluated once a year by contract whose principles and criteria specifically address labor and managers and procurement analysts, including criteria such occupational health and safety issues. Such principles and as socio-environmental responsibility, safety, human re- criteria are a benchmark for the yearly certification mainte- sources, and quality. Those suppliers that stand out accord- nance audits, when compliance by the Company is checked. ing to such criteria are granted the “Outstanding Supplier” award by CENIBRA, as recognition for their good perfor- It must be pointed out that CENIBRA ensures its suppliers mance. the right to freedom of association and collective bargaining, in an approach of respect and ethics in line with the CENIBRA adopts an integrated auditing approach to assess Company’s Code of Conduct. its suppliers. Such audits are conducted in accordance with Procedure P0556 (criteria for supplier selection, qualification, monitoring, and re-evaluation). If necessary, improve- Customer Relationship ment opportunities and non-conformities in relation to the audited parameters are recorded in the audit report. CENIBRA seeks to have a transparent, long-lasting relationship with its customers along the entire service chain. In 2018, CENIBRA evaluated 93 suppliers through integrat- Through its Commercial Mission, the Company adopts, ed auditing and did not identify significant negative im- both internally and externally, three pillars to support this pacts, either potential or actual, as far as environment, labor relationship: practices, human rights, and social aspects are concerned.

»» Excellent quality in every aspect;

»» Quick (efficient) response to customers;

Number of Number »» Ensured supply. Evaluated suppliers of non- aspects evaluated conformities

Environmental 63 4 impacts

Labor practices 88 91

Practices (occupational 88 180 health)

Practices (safety) 88 248

All non-conformities are dealt with through the e-Suppli- er system, through which the auditor who has recorded a non-conformity may follow up and approve the corresponding correction. Sustainability Report 2018 9 Social Performance 66 Sustainability Report 2018 9 Social Performance 67

For these three pillars to remain solid and meet both the of product the customer bought. Company and the customers’ expectations, one fundamen- tal aspect must be there: close relationship. In order to constantly increase customer satisfaction, a survey is conducted every two years and its results are used The following structure is in place to meet the customers’ as guidance for the implementation of both preventive and requirements: corrective measures. Such surveys assess the performance of sales servicing, pulp integrity and characteristics, envi- a. Customer Technical Support Committee: Provides Ex- ronmental requirements, quality of logistics and technical ecutive Management with support to ensure excellence in services, and trouble-shooting effectiveness. The customers meeting possible customer requirements and actual de- make the evaluations and state their level of satisfaction mands. This committee is made up of representatives with and the importance of each item. Moreover, the customers skills in the commercial, environmental, quality, industrial, rank CENIBRA among the other world pulp & paper indus- and research & development fields: try players.

»» Evaluating and proposing alternatives to meet the customers’ demands and expectations related to CENIBRA’s product and service quality; Pulp Logistics

»» Proposing research and studies for the improvement of processes and products; Pulp Transportation (by road)

»» Assessing risks and opportunities related to market CENIBRA has a long-term contract with a reputable trans- trends and potential demands with respect to technical, port company, whose fleet is made up of new vehicles sub- environmental, legal, and social requirements, eco ject to strict pollution emission and maintenance controls. labels, and others. It means that the vehicles are technologically in line with the most recent Brazilian regulations issued by the corre- b. Customer Technical Support Group: CENIBRA has a sponding agencies. The transportation service providers are multidisciplinary technical support team to handle custom- evaluated from time to time according to sustainability and ers’ requests, questions, complaints, and specifications, as safety parameters. well as develop projects and studies in partnership with customers. Although customer technical support func- tions have been in place since the Company started its Pulp Transportation (railway) operations, the formalization of the Customer Technical Support Group in 2017 made the members’ goals and re- Periodic measurements are made of the gas emission levels sponsibilities clearer. to ensure compliance with legislation. Biofuel already an- c. Sales offices: Visit to customers, sales contract negoti- swers for 5% of the fuel consumption. ations, inventory management, technical support, and other commercial routines are among the sales offices’ main duties.

As far as product use is concerned, CENIBRA provides its customers with a Material Safety Data Sheet (MSDS) containing technical information about safety, storage, and handling. There were no records of non-conformity with regulations and voluntary codes in connection with impacts caused by products and services on customers’ health and safety in 2018. It must be pointed out that CENIBRA’s product is odorless, neutral, and non-polluting.

By conducting research laboratory studies, the Company is always endeavoring to mitigate any negative impacts that may threaten its customers or the environment. Throughout the year, CENIBRA makes visits to customers to enrich the information exchange and improve communication.

CENIBRA’s pulp bales feature the Company’s logo, product description, ISO 9001 and ISO 14001 certification stamps, lot number (through which it is possible to track down information such as production date, quality, and other data), as well as a bar code, which contains full information. In- formation on FSC® and Cerflor/PEFC certifications are not shown on pulp bales. Instead, statements are included in the sales documents (DANFE/Invoice) according to the type Sustainability Report 2018 9 Social Performance 68

Pulp Transportation (maritime):

CENIBRA charters the most modern ships dedicated to for- Number of est-related products. These ships are fueled with low sulfur employees 2016 2017 2018 content fuels in line with the legislation in force. Executive management 3 3 3

Middle Management 22 22 22 Human Capital Management Heads and 31 32 32 The Company’s core guideline in 2018 was to act as a trans- Coordinators formation agent aiming at process excellence through mod- Technicians and ern management practices with respect to talent identifica- 328 337 333 tion and training and professional development programs. supervisors As support to this process, CENIBRA relied on suitable tools and practices to ensure employees’ physical integrity and Administrative 145 146 149 good working conditions. The outcome was the achievement of an 89% Favorability Index, according to an Orga- Operational 3,583 3,657 3,715 nizational Climate and Engagement Survey. Higher than the market level, this figure reflects employees’ good per- Trainees 0 0 48 ception of product quality and work safety and stresses the role played by the straightforwardness of and trust in the Total 4,112 4,197 4,302 communication process, management models, and people management policy. Number of outsourced personnel 2016 2017 2018

Total 3,227 3,243 3,316 GRI 102-8

Job placement programs 2016 2017 2018

Young Apprentice 32 36 34

Interns 85 87 74

Total 117 123 108

Work period 2016 2017 2018

Full-time * 4,144 4,233 4,336

Part-time ** 85 87 74

Total 4,229 4,320 4,410

* Young Apprentice + employees ** Interns Sustainability Report 2018 9 Social Performance 69

Ratios of standard entry level wage compared to local mini- Total number and rates of new employee hires and employ- mum wage at significant locations of operation: ee turnover by age group and gender:

Number of new Figures in R$ 2016 2017 2018 employee hires by age group 2016 2017 2018 Entry level wage 1,037 1,064 1,111 Under 30 years of age 139 218 260 Minimum wage 880 937 954 GRI 202-1 Between 30 and 50 years 110 175 115 Percentage 18 14 16 of age Above 50 years of age 9 13 8

Total 258 406 383

Number of new Proportion of senior management hired from the local com- employee hires by munity at significant locations of operation: gender 2016 2017 2018

Women 14 18 13

Men 244 388 370 2016 2017 2018 Total 258 406 383 Number of senior management GRI 401-1 employees recruited 0 0 1 Turnover rate by from the local age group 2016 2017 2018 community* Under 30 years of age 136 78 74 Number of senior

GRI 202-2 Between 30 and 50 years management em- 202 134 116 5 5 5 of age ployees hired by the company Above 50 years of age 122 109 89

Percentage 0 0 20 Total 460 321 279

*Place = State of Minas Gerais Turnover rate by gender 2016 2017 2018

Note: CENIBRA’s senior management is made up of five Ex- Women 65 35 19 ecutive Directors. Three out of the five positions are current- Men 395 286 260 ly occupied, and they have been defined by shareholders. Total 460 321 279 Sustainability Report 2018 9 Social Performance 70

Return to work and retention rates after parental leave, by Training and Development gender: CENIBRA has reaped the benefits of constant training and highly qualified employees in the form of increasing effi- 2016 2017 2018 ciency. The main catalysts of this process are the “Strategic People Management” and “Managerial Development” Pro- grams. Men 121 143 138 Number of The former offers growth opportunities and prepares ta- employees that lented people to take over managerial and strategic posi- Women 29 27 22 were entitled to tions, aimed at ensuring the business sustainability, while parental leave the latter enhances team commitment by encouraging the Total 150 170 160 leaders’ self-knowledge and creating more effective leadership behaviors.

Men 121 143 138 Training was given in 2018 with a focus on the “Strategic Number of People Management” and “Managerial Development” pro- employees that grams, as follows: took parental Women 29 27 22 leave »» Specialization in Pulp and Paper: Employees are Total 150 170 160 trained to meet the labor market requirements by updating their knowledge and techniques in industrial Men 121 143 137 development and projects, and enhancing their potential Number of for technological dissemination and performance in the employees who Company. Thirty people completed this course in 2018; returned to work Women 21 18 17 after parental »» MBA in Business Management: Development of a leave ended Total 142 161 154 strategic vision and personal communication, planning, and leadership skills. The course also seeks to structure and synthesize information related to the administration Men 120 138 131 area and provide participants with the necessary tools Number of for more efficient decision making; employees who Women 27 24 15 returned to work »» Skills Development: This program’s purpose is to lead GRI 401-3 after parental participants to reflect on the importance of interpersonal leave ended relationships and teamwork in the performance of who were still their roles in the Company. Self-knowledge and employed 12 communication techniques to facilitate relationships Total 147 162 146 months after their were presented; return to work »» Experiential Outdoor Training: Based on experiential outdoor activities, this training brings benefits such as problem-solving, education of reason and emotion, Men 100 100 99 teamwork, leadership development, and fostering Return to work strategic thinking; rate of employees who took parental Women 72 67 77 »» Coaching: Development of specific skills for leave (%) performance (achievement of goals) and career (personal satisfaction) improvement;

»» Organizational Culture: Promotes the alignment of Brazilian and Japanese cultures with a focus on diversity, Men 99 97 95 skills, values, and behaviors.

Retention rate of In 2018, the Company continued the training focused on employees who Women 93 89 68 the Compliance Program, work safety, and technical qua- took parental lification. leave (%) Sustainability Report 2018 9 Social Performance 71

Average hours of training in 2018 per employee and by employee category:

Total Total hours of employees by Hours per Employee Category Gender training category employee

Women 0 0 0 Executive Management Men 151 3 50

Women 0 0 0 Middle Managers and Advisors Men 1,632 22 74

Women 201 3 67 Heads and Coordinators Men 4,457 29 154

Women 6,277 75 84 Technicians and Supervisors Men 26,974 258 105

Women 1,957 71 28 Administrative GRI 404-1 Men 2,515 78 32

Women 11,515 233 49 Operational Men 169,598 3,482 49

Women 4,360 15 291 Apprentices Men 10,537 21 502

Women 444 5 89 Trainees Men 5,382 43 125

Women 4,240 34 125 Interns Men 5,959 46 130

Total 256,199 4,418 58 Sustainability Report 2018 9 Social Performance 72

Quality of Life Program – Living Better

The Program continued in 2018 in its objective of creating a culture of quality of life as an important value for employees, their families, and outsourced personnel. The Living Better Program puts a focus on activities that foster a change in people’s behavior and life style in such areas as health, education, leisure, and interpersonal relationships.

SPORTS STORK INCENTIVE PROJECT

PROJECT The project’s purpose is to gather together pregnant women (both employees and Encouragement and support to the employees’ wives) for speeches about company teams of football, women’s pregnancy, labor, and care with the com- volley, tennis (SESI Project), and races. ing baby with an aim to lessen the stress and facilitate the understanding of the process of change through which the cou- ple and family members go, to everyone’s benefit. More than 100 people attended the Project activities in 2018.

TEENAGER PROJECT

This Project enables teenagers to reflect on their values and attitudes, which contributes to their personal growth and better family relationships. As a differential in 2018, the Program included visits to universities in the region in which the Company operates. Sustainability Report 2018 9 Social Performance 73

FAMILY/COMPANY LIVE LIFE INTEGRATION PROJECT

PROJECT This project’s objective is to prepare employees and their families for the retirement period. This project aims at providing the necessary conditions for employees’ families to participate in the Company’s social life, including visits to the Seedling Nursery and information about the pulp production process, social and environmental projects, and the Company’s health plan. Sustainability Report 2018 9 Social Performance 74

Occupational Safety and Health plying with all applicable legal and technical requirements. Among the many training courses offered by the Company, CENIBRA is committed to its employees and outsourced the following are worthy of mention: personnel’s health and safety. In this respect, it has implemented actions in line with the best market practices aimed Safe Behavior Workshop: In an effort to at preventing occupational diseases and incidents. Such ac- enhance employee awareness of the im- tions strengthen the Company’s Occupational Health and portance of being motivated to perform Safety System, whose structure is based on the Employment their everyday activities in a safe way, the Ministry’s Regulatory Standards, ABNT (Brazilian Technical Company continued this program, which Standards Association), standard OHSAS 18001, and sustai- began in 2017. The Workshop addressed a nable forest stewardship certifications. number of topics, including the Recording Near Misses and Right to Refuse to Work CENIBRA encourages and values the actions taken by the programs, feedback on safety solutions, in- Internal Accident Prevention Committee and the Internal creased risk perception, active care, and the Rural Work Accident Prevention Committee with a view to importance of safe behavior; reinforce the safety culture among employees. Contractors’ personnel also are encouraged to participate in such formal Safety Leadership: In line with the safe committees to foster good occupational safety and health behavior program, this training was pro- practices and achieve the zero accident target. These com- vided to leaders in the production and mittees hold meetings from time to time to review work maintenance areas, seeking to make them accidents, propose preventive and corrective actions, and aware of the importance of being motivat- establish measures to improve health and safety conditions ed to perform their daily activities safely; for both employees and outsourced workers. They rely on support by the Specialized Work Medicine and Safety Engi- Emergency Response Plan and Hazard- neering Service and the Specialized Work Safety and Health ous Product Storage and Handling: Pro- Service. All occupational health and safety actions taken in vided to the entire work safety team and the forestry and industrial processes rely on support of top areas involved in the Emergency Response management and middle managers. Plan, this training aimed to qualify those directly and indirectly involved in actions un- In 2018, a lost-time work accident was recorded. The cor- der the emergency assistance plan and draw responding Lost-Time Work Accident Frequency rate was attention to risks when handling chemicals; 0.12. In addition, there were 20 no-time-lost work accidents, resulting in a Frequency Rate of 2.40. CENIBRA en- Work Accident Prevention (SIPAT) ded the year with a significant reduction in work accident Week: The Company sought to raise em- indicators. ployees’ awareness by highlighting the family as an essential element of safety; CENIBRA maintains a team of specialized occupational health professionals made up of doctors, nurses, nursing tech- Employment Ministry’s Regulation No. nicians, dentist, speech therapist, ergonomist, and physical 13 - Safety in Boiler, Pressure Vessel, education instructor. This team systematically monitors em- and Pipeline Operation: The objective of ployees’ health through the Occupational Health Medical this course was to facilitate contact with Control Program, periodically conducts occupational medi- specialists in this field, who described in cal examinations on all employees, studies the ergonomi- detail the premises taken into account in cs of workplaces and work environments, and implements the 1994, 2013 and 2017 revisions of the improvements as required and indicated by such studies. In Employment Ministry’s Regulation No. 13 addition, CENIBRA grants employees a comprehensive he- on Safety in Boiler, Pressure Vessel, and alth plan, extended to legal dependents. This plan includes Pipeline Operation. medical, dental, pharmaceutical, and hospital assistance. CENIBRA currently has 11,801 lives in its health plan and Compensation and Benefits 577 accredited service providers in its area of operation. CENIBRA’s compensation policy is based on collective bar- Formal agreements with unions cover matters related to gaining agreements and yearly market surveys conducted workers’ health and safety, and they have specific clauses by the industry players’ Human Resources Group. In addi- on the provision and use of Personal Protection Equipment tion to fixed remuneration, the Company offers incentive (PPE). Moreover, CENIBRA and unions have a common com- programs linked to the achievement of established goals, mitment to join forces to disseminate the importance of including Earnings and Profit Sharing. With an aim to im- complying with occupational health and safety regulations. prove its employees’ quality of life, CENIBRA offers additional benefits, like school kit, day-care allowance, gifts, CENIBRA provides capacity-building activities and training Christmas baskets, cafeteria meals, transport, school ex- in occupational health and safety to all employees, aiming pense reimbursement, and private pension fund. to ensure proper, safe execution of all activities and com- Sustainability Report 2018 9 Social Performance 75

Benefits provided to employees:

Figures in R$ 2016 2017 2018 thousand

Christmas baskets 582 603 727

Toys 139 150 153

School kit 144 252 120

Medical and Dental 15,716 17,538 18,251 Assistance

Meals / Basic food 28,291 30,210 35,683 basket

GRI 401-2 Private Pension Fund 5,104 5,239 5,275

Funeral and Life 308 263 703 Insurance

Transportation 22,852 23,363 23,466

Day Care Allowance 162 172 166

Quality of Life 125 148 254 Program

Total 73,423 77,938 84,798

Relationship with Unions

CENIBRA’s employees are represented by unions and benefit from collective bargaining agreements and similar contracts. Matters like collective bargaining, base date, definition of work shifts, and many other demands are negotiated directly between the Company and unions on behalf of their members. Bargaining agreement provisions are strictly fulfilled by the Company. Union representatives participate in the employees committee that negotiates the Earnings and Profit Sharing items.

CENIBRA adopts a modern labor relations system founded on dialogue, ethics, and transparency in the relationship with the workers’ unions. Accordingly, when hiring new employees, CENIBRA informs them about the unions that represent their professional categories and that they may chose to be a member of one of these unions. The Com- pany does not dismiss or adopt any kind of retaliation against employees who take over a management position in unions to which they are a member. These professionals are ensured all legal labor rights during the period they hold a management position in a union.

Except for executive management, all CENIBRA employees are covered by collective bargaining agreements. CHAPTER 10 ENVIRONMENTAL PERFORMANCE Sustainability Report 2018 10 Environmental Performance 77

The definition of environmental guidelines takes into consi- ysis of specific fuel consumption by trucks and earth- deration the need for ensuring proper operation of the in- moving machines, driveability systems, use of wood dustrial plant and the Integrated Management System (IMS) hauling trucks below five years of age, optimization of in line with international quality (ISO 9001), environmental implement transportation assembly with the lightest (ISO 14001) and forest stewardship standards. tare, which leads to a reduction in fuel consumption, a fuel monitoring network that enables action to be Forest Stewardship taken at the origin (plantations), satellite monitoring of wood hauling trucks, and construction of deviations The overall objective of the Forest Stewardship Plan con- and cloverleaves to reduce the Average Distance of sists of defining actions to be taken by the Company to Transport (ADT) with the resulting reduction in fuel oil ensure both the current and future production capability consumption; founded on the following assumptions: growth with profitability, socio-environmental development, technological »» Particulate matter emissions: Aspect relative to the development, organizational modernization, and quality emission of black fumes by trucks and equipment used improvement. in transportation and infrastructure. Mitigation: This item is monitored by means of black CENIBRA’s land totals 253,665.84 hectares, allocated as smoke emission measurement using the Ringelmann follows: scale and in terms of compliance with contractual clauses and submission of technical evaluation reports »» 123,385.85 hectares of commercial plantations for each vehicle; (eucalyptus).; »» Noise pollution: Aspect relative to the generation »» 7,477.52 hectares of land on stand-by; of noise by machines and equipment, which causes discomfort to communities. »» 89.48 hectares of land available for plantation; Mitigation: The Corporate Communication area re- ceives complaints from communities and submits them »» 105,445.72 hectares of Legal Reserves, Permanent to the Company’s logistic department for checking and Preservation areas, and native vegetation; corrective actions;

»» 17,267.27 hectares for infrastructure and other uses. »» Water use: Aspect relative to the use of a natural resource to wet the roads and reduce dust generated by truck traffic. Wood Supply Logistics Mitigation: Daily control of water intake for the forestry process, use of a water spray system in the tank trucks, CENIBRA always looks for feasible, low environmental im- road paving, use of soil stabilizers and anti-dust agents pact alternatives to convey wood up to its industrial plant. (on a trial basis) to improve the ground load supporting In 2018, 20% of the 4.7 million cubic meters of wood deliv- capability and reduce dust generation, and installation ered to the plant were transported by rail. This is equivalent of water sprays at railroad wood stockyards with an to saving approximately 22,000 road train travels and means aim to significantly reduce water consumption;

less interference in the communities, lower CO2 emissions, and less road traffic. The remaining 80% of wood volume »» Lubrication oil leaks: Aspect relative to soil was shipped to CENIBRA plant by truck, as the road sys- contamination. tem is Brazil’s main means of transportation. Transportation Mitigation: Use of vacuum pumps in harvesting ma- is carried out by specialized contractors, and important fac- chines (harvesters and forwarders) and containment tors in this activity are transportation safety, respect for the basins, and removal of contaminated soil for proper communities, use of suitable trucks, and compliance with disposal; environmental legislation and requirements. The average distance from the forests to the plant was 110.4 km in »» Use of gravel: Aspect relative to the reduction of a 2018. Out of the total wood volume, 83% originated non-renewable natural resource. from CENIBRA’s own land and the remaining 17% from Mitigation: Reuse of material used in forest projects in plantations under the Forestation Incentive Program. previous years, purchase of blast furnace slag, improvement in construction methods based on material par- Significant environmental impacts of wood transportation ticle size studies and definition of compaction degree, (by road): reuse of crushed stone removed from railroads, recovery of gravel pits by means of revegetation through hy- »» Fuel oil: Aspect relative to the use of a non- drosowing, and construction of settling tanks; renewable natural resource in trucks employed in the transportation, loading and discharge of wood, and »» Earthmoving: Aspect relative to the possibility of earthmoving machines used in road construction and erosion. maintenance. Mitigation: Construction of suitable slopes, gabion Mitigation: This impact is monitored through the anal- walls, revegetation, stockades, and other measures. Sustainability Report 2018 10 Environmental Performance 78

Water Resources Management rest Institute, the company Metalúrgica Moran, and farmers. One hundred eighty water springs in third-party lands have CENIBRA is an important water producer in its more than been fenced, which greatly contributes to the environmental 105,000 hectares of native vegetation land, with the number protection of water sources to supply Peçanha. of springs and fountainheads estimated at more than 4,500. They are properly protected and usually represent the only source of water for dozens of farmers and rural communi- Biodiversity ties. Additionally, water used by the Company in its operational processes is covered by the corresponding water intake Biodiversity conservation and protection are some of CENIBRA’s grants, which, along with institutional initiatives and measu- sustainability strategy priorities. The Company’s biodiversity res intended to enhance the scale of environmental recovery asset consists of around 105,000 hectares of forests that in the Doce River Basin, are significant indicators of business sustain varied wildlife and abundant water resources, and sustainability. CENIBRA is engaged in several initiatives in line with its In- tegrated Management System (IMS) to preserve it. Guide- In 2018, water resource monitoring continued to be carried lines and goals are references for the development of envi- out through Unileste (University Center of Eastern Minas ronmental projects to monitor and improve the Company’s Gerais). The study cycle compares runoffs under different environmental performance, as well as to ensure that the stewardship conditions, such as stream slope, percentage necessary resources will be allocated, the responsibilities of eucalyptus plantation, percentage of conservation areas, identified, and the results monitored and critically evaluated. density of roads, classes of soil slope, altitude, and operations in watercourses. Comparing the quality and quantity of water runoff under varied conditions indicates which operations and stewardship intensities have a greater effect on water resources, in addition to providing inputs to work out impact mitigation or elimination actions. This monitoring is carried out on a monthly basis and includes two hydrogra- phic micro-basins where quantitative monitoring is already conducted. The following main parameters are monitored: rainfall, water stream flow, and groundwater level.

Referenced quantitative data are used in bio-monitoring analyses by Unileste’s Environmental Engineering Depart- ment, resulting in inputs for more complex analyses of the results. The most recent results do not provide any evidence of significant impacts of the Company’s forest operations on the water resources in the areas where it operates.

Environmental Recovery

Preserving the environmental quality of CENIBRA’s forests and lands ensures the sustainability of its business. By adopting this vision, the Company has been engaged in an environmental recovery program that includes native vegetation enrichment, restoration of landscape near communities, erosion control, maintenance of roads and fire protection clearing, and environmental monitoring. In 2018, work was carried out on 446 hectares, which involved the eradication of eucalyptus in legal reserves and permanent preservation areas undergoing environmental recovery and planting of 36,410 seedlings of 40 different native species.

On top of promoting environmental recovery in its properties, CENIBRA has entered into a number of partnerships with the ultimate objective of increasing water availability and improve water quality in the municipalities within its area of operation. A good example is the Living Water Pro- ject, which consists of fencing Permanent Preservation Areas containing waterheads in the Suaçuí Pequeno River basin, municipality of Peçanha (MG). This project is a partnership with the Municipal Administration of Peçanha, the State Fo- Sustainability Report 2018 10 Environmental Performance 79

Legal aspects, impact assessment, surveys and monitoring, prevention, measures against forest fires and wood theft, and society’s and academic and scientific communities’ environmental education program, support to studies con- demands are among the parameters taken into account ducted by universities and research centers, sustainable use when defining such projects and establishing their priori- of native forest resources, and development of ecotourism ties. Some examples are the flora and fauna monitoring activities in a beautiful wild scenario. projects, endangered bird reintroduction program, native vegetation stewardship (including enrichment by planting Location and size of land owned, leased, managed in, or native species seedlings and control of invasive plants and adjacent to, protected areas and areas of high biodiversity weeds), recovery of eroded areas, illegal hunting and fishing value outside protected areas:

2016 2017 2018

Conservation Unit UC UC UC

Geographic Location MG MG MG

Position in relation to protected area (in the area, adjacent to or containing portions of protected areas) 103,384 103,462 105,446 and areas of high biodiversity value outside protected areas

Size of operation site in km2 (*) (**) 2,540 2,540 2,540

Biodiversity value characterized by: Terrestrial Terrestrial Terrestrial ecosystem ecosystem ecosystem • The attribute of the protected areas and areas GRI 304-1 CONAMA CONAMA CONAMA of high biodiversity value outside protected areas 392/2006: 392/2006: 392/2006: (terrestrial, freshwater, or maritime ecosystem); Regeneration Regeneration Regeneration • Listing of protected status (e.g.: IUCN Category, stages stages stages Ramsar Convention, national legislation, Natura 2000 Initial = 6% Initial = 5% Initial = 5% website, etc.). Medium = 48% Medium = 49% Medium = 49% Advanced = 41% Advanced = 41% Advanced = 41% Others = 5% Others = 5% Others = 5%

(*) Measuring unit = ha (hectare) (**) Aggregate of permanent preservation and reserve areas. Sustainability Report 2018 10 Environmental Performance 80

The disclosed figures refer to areas covered by native fo- to land use reclassification, particularly with respect to the rests and take into consideration the aggregate of perma- designation of swamps and marshes as permanent preser- nent preservation areas and legal reserve areas in CENIBRA vation areas. properties. Such figures increased from 2017 to 2018 due Habitats protected or restored:

If restored, were the results of the Status (at the end remediation measures Area/ Size of the reporting approved by external Partnerships (to Project (hectares) Location period) specialists? protect or restore)

2016

Environmental Police of Yes, the entire Minas Gerais environmental recovery Federal University of Viçosa Forests Reserve and work is based on MG State Institute of Forests predominantly Permanent Minas scientific guidance from Unileste - University Center 103,384 in medium and Preservation Gerais universities and validated Eastern Minas Gerais advanced stages of Area by certifying entities and State Park of Rio Doce regeneration environmental licensing Relictos Foundation agencies Wildlife Research and Stewardship Society - Crax

2017

Environmental Police of Yes, the entire Minas Gerais

GRI 304-3 environmental recovery Federal University of Viçosa Forests Reserve and work is based on MG State Institute of Forests predominantly Permanent Minas scientific guidance from Unileste - University Center 103,462 in medium and Preservation Gerais universities and validated Eastern Minas Gerais advanced stages of Area by certifying entities and State Park of Rio Doce regeneration environmental licensing Relictos Foundation agencies Wildlife Research and Stewardship Society - Crax

2018

Environmental Police of Yes, the entire Minas Gerais environmental recovery Federal University of Viçosa Forests Reserve and work is based on MG State Institute of Forests predominantly Permanent Minas scientific guidance from Unileste - University Center 105,446 in medium and Preservation Gerais universities and validated Eastern Minas Gerais advanced stages of Area by certifying entities and State Park of Rio Doce regeneration environmental licensing Relictos Foundation agencies Wildlife Research and Stewardship Society - Crax Sustainability Report 2018 10 Environmental Performance 81

The biodiversity values determined by means of monitoring Direct and indirect impacts: activities are similar to those found in full protection conservation units and much higher than those found in other The direct and indirect impacts of activities carried out at land uses prevailing in the region in which the company CENIBRA’s properties on biodiversity are predominantly operates. The operations do not cause any significant, per- positive in comparison with other forms of cultivation ceptible impacts in terms of biodiversity reduction. Althou- (pasture and intensive agriculture), particularly due to the gh certain aspects of the production process could affect maintenance of a high proportion of protected areas and biodiversity, like atmospheric emissions and noise, environ- the low intensity, extent, and duration of environmental mental monitoring does not point to negative effects as far impacts. biodiversity is concerned. »» Species affected: Species whose habitats are forests Types of impact: and that benefit from the adopted stewardship practices and the maintenance of extensive protected areas; »» Construction or use of manufacturing plants, mines, and transport infrastructure: The industrial »» Extent of areas impacted: The positive impacts spread site is surrounded by a green belt, and the plant size across the whole property, which is characterized is relatively small when compared to the whole land by low environmental impact stewardship and high area, for which reason its effects on biodiversity are not percentage of protected areas; significant. The transport infrastructure is characterized by low intensity of use and low-speed traffic, which »» Duration of impacts: Impact duration is limited to poses no threat to wildlife; one-seventh of the time, when the harvesting and plantation renewal processes take place; »» Pollution: Emissions by the manufacturing process are isolated events and do not influence biodiversity »» Reversibility of impacts: Impacts are highly reversible of protected areas and areas of high biodiversity value. because the large proportion of protected areas and Forestry process emissions are characterized by low impact concentration in seven-year intervals ensure intensity and short duration, as they occur only at the high ecosystem resilience and provide conditions that end of a forest cycle (seven years) and, therefore, do favor the recovery and protection of both vegetation not pose a threat to biodiversity; and wildlife populations once impacts cease.

»» Introduction of invasive species: Although eucalyptus is not native to the local ecosystem, it is not deemed an invasive species. Moreover, the adopted stewardship practices include extensive control of invasive herbaceous species, particularly when compared to other land uses in the region in which the Company operates;

»» Reduction of species: Biodiversity monitoring shows that species richness in the Company’s properties has increased over time;

»» Habitat conversion: Habitat conversion takes place in two different ways on Company land: conversion of degraded areas into planted forests and conversion of degraded areas into native forests. Both cases result in improved biodiversity conservation;

»» Changes in ecological processes outside the natural range of variation: The ecosystem in the region where CENIBRA’s land is located was originally a native forest. Therefore, cultivating trees is the activity that is most similar to the original conditions when compared to short-cycle annual crops with intensive use of natural resources and the consequent environmental impacts. For this reason, tree cultivation keeps the ecological processes within their natural ranges of variation. Sustainability Report 2018 10 Environmental Performance 82

»» Use of low environmental impact stewardship Total number of IUCN (International Union for Conserva- practices: As wood harvesting and plantation renewal tion of Nature Red) List species and national conservation activities are concentrated at 7-year intervals, low- list species with habitats in areas affected by operations, by intensity forest stewardship creates very favorable level of extinction risk: conditions for biodiversity conservation, on top of providing a long period for re-adaptation of species;

»» Environmental education: Projects oriented to Endangered Wildlife employees, outsourced personnel, and communities in the Company’s area of operation; public school teachers List and students are a preferred audience. The program Category makes available training courses, interpretative visits, State National IUCN and recreational activities to enhance awareness of the Critically importance of wildlife and vegetation conservation and 6 2 0 endangered the sustainable use of natural resources; GRI 304-4 »» Species reintroduction project: This project started Endangered 10 4 5 in 1990 with the purpose of reproducing bird species in danger of extinction and reintroducing them in the Vulnerable 12 10 4 original ecosystem, which increases their chances of survival;

»» Property security and protection against hunting: Security system made up of monitors equipped with motorized means of transportation and communication Endangered Vegetation system to prevent hunting, illegal fishing, native tree cutting, plant collection, and animal capture; it also List provides property security; Category State National IUCN »» Forest Fire Prevention and Fighting System: The Critically forest fire fighting and prevention system consists of 0 0 0 endangered watch towers equipped with high-resolution, long-

GRI 304-4 range cameras for real-time monitoring, closed-circuit TV monitoring teams, fire brigades, fire detection Endangered 1 2 4 devices, communication facilities, and firefighting equipment. Vulnerable 2 3 6

Private Natural Heritage Reserve (PNHR) - Macedonia Farm The indicator “Number of endangered species” for the Company’s preserved areas has remained unchanged. This Located on the right bank of Doce River, in the municipality figure is influenced by protection and conservation actions of Ipaba, eastern Minas Gerais, the farm has a total area of and by the comprehensiveness of the monitoring sampling approximately 3,000 hectares, out of which around 50% as well. This indicator attests the good quality of CENIBRA’s are native woods. The rest of the area is planted with eu- stewardship practices and the effectiveness of its protection calyptus trees using state-of-the-art techniques to produce and conservation measures. CENIBRA’s main conservation wood while preserving the production capability of the en- strategies related to nature, natural resources, and endan- vironment. Macedonia Farm’s protected area is one of the gered species are as follows: main Atlantic Forest remnants in the state of Minas Gerais. Part of this farm (560 hectares) is recognized by the Brazi- »» Maintenance of a high percentage of preserved lian Environment and Renewable Resources Institute (IBA- areas: Native vegetation areas in wood production MA) as a Private Natural Heritage Reserve (PNHR). lands correspond to 40% of the total area on average, including legal reserve areas, permanent preservation A pioneering endangered bird reintroduction program, the areas, and other preserved areas; Mutum Project has been developed at Macedonia Farm over the past 29 years. It relies on a technical and scientific coo- »» Formation of ecological corridors: Measures to peration agreement between CENIBRA and Crax (Sociedade increase the connectivity among the native vegetation de Pesquisa do Manejo e da Reprodução da Fauna Silvestre) remnants in order to improve the wildlife survival and has already reintroduced 480 birds belonging to species conditions by facilitating genetic flows, enlarging the such as solitary tinamou (Tinamus solitarius), spot-winged habitats, and providing access to water; wood-quail (Odontophorus capueira), yellow-legged tina- Sustainability Report 2018 10 Environmental Performance 83

mou (Crytpturellus n. noctivagus), brown tinamou (Crytp- as a result of the implementation of projects for moderni- turellus obsoletus), dusky-legged guan (Penelope obscura zing and optimizing the production process and environ- bronzina), black-fronted piping guan (Aburria jacutinga)., mental control equipment. Targets in line with the revised and red-billed curassow (Crax blumembachii). environmental legislation will be set for the coming years.

In 2018, field monitoring campaigns detected a number of bird births in the wild at PNHR Macedonia, including nine red-billed curassows, three solitary tinamous, and six black- -fronted piping guans, totaling 293 chicks born in the wild Weight of emissions (t) 2016 2017 2018 since the project began. The actual number is estimated to NOx 1,082 1,065 1,154 be much bigger because the Macedonia Farm forests are connected to other CENIBRA’s preserved areas, which ena- SOx 6,540 1,013 352 bles bird dispersion into other regions.

GRI 305-7 Particulate matter 1,860 1,900 1,545 Industrial Operations Total 9,482 3,978 3,051

Atmospheric Emissions

CENIBRA monitors the atmospheric emissions generated by its production process to ensure they comply with the appli- Greenhouse Gas Emission Inventory (GHG) cable legislation, standards, and requirements. In 2018, SOx and particulate matter emissions were significantly reduced Direct Greenhouse Gas (GHG) emissions (scope 1):

In tons of CO2 2016 2017 2018

Generation of electricity, heat or 160,149 150,246 155,073 steam

Transportation of

GRI 305-1 materials, products 23,433 32,397 38,853 and wastes

Total direct 183,582 182,643 193,926 emissions Sustainability Report 2018 10 Environmental Performance 84

Greenhouse gas emissions have shown a trend toward sta- bilization in the past few years, due mainly to the implementation of energy matrix optimization projects. Howe- ver, the consumption of fossil fuels, especially fuel oil and natural gas, increased in 2018 as a result of the start-up of several new processes. Diesel oil consumption also rose in view of more intense use of the fleet in support of forestry and industrial activities. All these circumstances had a direct effect on the increase of direct emissions.

Energy indirect greenhouse gas (GHG) emissions (scope 2):

In tons of CO2 2016 2017 2018

Purchased Electric Power 6,394 7,209 5,052 GRI 305-2

Other indirect greenhouse gas (GHG) emissions (scope 3):

In tons of CO2 2016 2017 2018 Emissions1 31,352 33,634 36,461 Biogenic emissions2 1,978 2,861 3,341

GRI 305-3 Total other indirect emissions 33,330 36,495 39,802 1 Transportation of chemicals, third parties’ transport activities, transportation of pulp to the port, etc.; 2 Non-fossil fuel.

Greenhouse gas (GHG) emissions intensity:

In tons of CO2 2016 2017 2018 Scope 1 183,582 182,643 193,926 Scope 2 6,394 7,209 5,052

GRI 305-4 Scope 3 33,330 36,495 39,802 Total 223,306 226,347 238,780 Sustainability Report2018 aquatic wildlife and vegetation due to effluent discharge. the DoceRiverwatersdonot indicateanychangesinthe tion in force. Moreover, biomonitoring measurements of quality standardsasrequired bytheenvironmentallegisla- treatment system, in orderto ensure compliance with all receptor body,whichisalsominimizedthroughtheeffluent taken intoaccountisthedischargeoforganicloadin the ter availabilityhaslittlesignificance.Anotherimpactto be Therefore, theimpactofCENIBRA’s processonriverwa- fluents intheDoceRiver,withjust5%evaporation losses. plant isminimizedthroughthedischargeoftreated ef- The impactofsurfacewaterintaketofeedtheindustrial Doce Riverbasin. industrial processes.Allsuchsourcesarelocatedwithin the Water istakenfromseveralsourcestofeedtheforestry and and investmentsinmodernizationoftheexistingprocesses. reduced yearin,outthroughoperationaloptimization ter intakevolumefortheproductionprocesseshasbeen as environmentalpolicypremises.Inthisrespect,thewa- processes and continuous optimization of suchprocesses CENIBRA adoptsminimizationofimpactscausedbyits Water andLiquidEffluents Emissions ofozone-depletingsubstances(ODS): in linewithitsfocusonenvironmentalsustainability. aiming atreducedemissionsandoptimizedprocesscontrol Company isengagedincontinuousimprovementmeasures programs thatstipulatereductiongoals.Nevertheless,the text, CENIBRAdoesnotparticipateinemissionreduction stipulate clear GHG emission reduction goals. In thiscon- The Brazilianenvironmentallegislationinforcedoesnot Reduction ofgreenhousegas(GHG)emissions: GRI 305-6 GRI 305-5 reductions Voluntary In tonsofCO In tonsofODS 2 (6,718) 2016 2016 1.5 2017 939 2017 1.7 (11,282) 2018 2018 1.9 In 2018, the specific water consumption was 36.20 m GRI 303-5 GRI 303-4 GRI 303-3 of 37.33m ADt, whichislowerthanthepreviousyear’s consumption withdrawal Total water withdrawal Total water consumption Total water ADt) intake (m³/ Specific (m³/ADt) generation effluent Specific (m³) generated effluent Total intake (m³) Total water (m³) consumption Water 3 /ADt. 50,158,893 49,320,717 41.77 41.07 838,176 2016 2016 2016 50,677,821 48,813,111 1,864,710 41.52 39.99 2017 2017 2017 10 Environmental Performance 47,154,682 46,496,152 658,529 39.28 38.73 2018 2018 2018 3 / 85 Sustainability Report 2018 10 Environmental Performance 86

CENIBRA monitors its liquid effluents to ensure they are disposed in line with the applicable legislation (limits of emission and water body quality change). The Company dispo- ses water into a 900-kilometer-long body of water in the Doce River Basin, whose watershed is located chiefly (more than 90%) within the Atlantic Forest biome. Such disposal complies with the Brazilian regulations. This body of water is not designated as a locally or internationally protected area and does not feature any outstanding biodiversity value or legally protected species.

Total water discharge by quality and destination:

Year Discharge Quantity (m³) Treatment Quality Disposal

Better than the 2016 Planned 48,456,073 Activated Sludge Doce River standard (regulation)

Better than the 2017 Planned 48,828,553 Activated Sludge Doce River

GRI 306-1 standard (regulation)

Better than the 2018 Planned 44,925,938 Activated Sludge Doce River standard (regulation)

No significant leakage was recorded in 2018. The industrial Solid Waste plant’s rainwater collection system is divided into networks according to zones in which water collectors drain water Waste management is one of the tools intended to mediate from the networks. Notwithstanding, all areas subject to a sustainable production-nature relationship, including the some kind of effluent leakage or spillage are provided with implementation of policies aimed at reducing, recycling, impermeable coating and fitted with troughs to channel le- reusing, treating, and appropriately disposing of materials aks into the Biological Treatment Station. generated by activities across the entire process. In 2018, there was a remarkable increase in the amount of materials The Doce River has been considerably changed by the de- recycled, most of it involving reuse of waste from infras- creasing precipitation since 2014, with rainfall below the tructure modernization works carried out in recent years. historical average for the region. This condition was further The amount of materials disposed of in the industrial land- aggravated by the discharge of thousands of tons of slurry fill also increased, which is attributable to the final disposal from a tailings dam belonging to a mining company located of waste from the sludge dewatering system at the water in Mariana in 2015. As a result, the Doce River biodiver- treatment station, which has reached its full capacity. This sity has been extensively affected, with significant losses, system allows recovering part of the water previously re- especially in the population of fish and other trophic chain turned to the Doce River, which greatly reduced the water organisms. intake requirement. Sustainability Report 2018 10 Environmental Performance 87

Total weight of waste by type and disposal method:

Non-hazardous wastes (t) 2016 2017 2018

Composting 219,904 211,324 252,055 Recycling 35,508 40,265 72,554 Industrial landfill 1,475 3,872 8,018 Total 256,887 255,461 332,627 GRI 306-2

Hazardous wastes (t) 2016 2017 2018

Co-processing 204 240 284

Hazardous waste amounted to 262 tons in 2018, collected from several sources, especially the forestry processes, and conveyed to the hazardous waste cell. Such waste generation was mainly associated with the implementation of industrial process modernization projects. On the other hand, 284 tons of this kind of waste were shipped for co-processing.

Materials and Energy

Materials

Materials used by weight or volume:

Raw materials (t) 2016 2017 2018

Eucalyptus wood for pulp production* 2,309,319 2,349,016 2,297,125

Chemicals (t) 2016 2017 2018

Quicklime 13,401 11,673 17,912 GRI 301-1 Sodium hydroxide 29,451 28,972 30,276 Total 42,852 40,645 48,188 (*) Based on the specific wood consumption, delivered works. Sustainability Report 2018 10 Environmental Performance 88

Energy

CENIBRA’s pulp production is based on a sustainable energy matrix that uses mainly renewable thermal energy (black liquor and forest biomass) and low carbon-intensive fuels, like natural gas. Almost all energy produced by CENIBRA comes from by-products from the production process.

Energy consumption within the organization:

Non-Renewable Thermal Energy (GJ) 2016 2017 2018

Natural Gas 1,834,833 1,678,406 1,752,110

Diesel Oil 9 - 18

Fuel Oils 459,486 510,728 527,880

Total 2,294,328 2,189,134 2,280,008

Renewable Thermal Energy (GJ) 2016 2017 2018

Black Liquor 24,217,922 24,971,532 24,578,552

Forest Biomass 2,983,185 3,186,947 2,864,552

Hydrogen 61,842 84,236 84,103

Methanol (Evaporation) - 183,504 209,650

GRI 302-1 Total 27,262,949 28,426,219 27,736,857

Total Thermal Energy 29,557,277 30,615,353 30,016,865

Generated Electric Power (GJ) 2016 2017 2018

Value 2,680,986 2,709,051 2,696,286

- Originated from the burning of renewable fuel % 98.34 98.22 98.11

- Originated from the burning of non-renewable fuel % 1.66 1.78 1.89

Consumed Electric Power (GJ) 2016 2017 2018

Value 2,943,112 2,988,961 2,930,656

Energy consumption outside the organization:

Indirect Energy (GJ) 2016 2017 2018

Purchased Electric Power 282,439 279,910 234,369 GRI 302-2 Sustainability Report 2018 10 Environmental Performance 89

Energy Intensity:

Energy Intensity (GJ/ADt) 2016 2017 2018

Total energy consumed 22.42 25.31 25.20 GRI 302-3

Reduction in energy consumption:

Energy Saved (GJ) 2016 2017 2018

Process redesign 0 0 644,029

Change in employee behavior 0 0 0 GRI 302-4 Total 0 0 644,029

A reduction in electric and thermal energy consumption was seen after the start-up of the Bleaching Line #3 in 2018. CHAPTER 11 GLOBAL REPORTING INITIATIVE GRI STANDARDS CONTENT INDEX Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 91

CONTENT INDEX - GRI STANDARDS (102-55) Core Option Content Summary - GRI Standards Page Comments GENERAL Organizational Profile 102-1. Name of the organization. 17

CENIBRA does not sell banned products or products 102-2. Activities, brands, products, and/or services, including an explanation 17 that are questioned by its of any products that are disputed or banned. stakeholders or are subject to public dispute.

102-3. Location of the organization’s headquarters. 17

102-4. Number of countries where the organization operates, and the names of countries where it has significant operations and/or that are 17 relevant to the topics covered in the report.

102-5. Nature of ownership and legal form. 17

102-6. Markets served (including geographic locations, sectors served and 17 types of customers and beneficiaries).

102-7. Scale of the organization (including number of employees, number 17 of operations, net sales, and quantity of products or services provided).

102-8. Information on employees and other workers (total number of employees by employment contract, gender, employment type. Total 68 number of personnel split in employees and outsourced workers, gender and region).

102-9. Supply chain. 64

As highlight in 2019 was the implementation by CENIBRA of a major change in its command and decision-making structure. In June, a new Chief Executive Officer took over 102-10. Significant changes to the organization and its supply chain. 21 as a result of the previous Director’s retirement and resignation. The new CEO also temporarily holds the position of Administrative and Financial Director of the Company.

102-11. How the organization applies the Precautionary Principle or 25 approach. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 92

Content Summary - GRI Standards Page Comments 102-12. A list of externally-developed economic, environmental and social charters, principles, or other initiatives to which the organization 29, 51 subscribes, or which it endorses.

102-13. Main memberships of industry or other associations (e.g., trade 29, 51 associations), and national or international advocacy organizations.

Strategy

102-14. A statement from the most senior decision-maker of the organization (such as CEO, chair, or equivalent senior position) about 14 the relevance of sustainability to the organization and its strategy for addressing sustainability.

102-15. A description of key impacts, risks, and opportunities. 25

Ethics and Integrity

102-16. A description of the organization’s values, principles, standards, 16, 20 and norms of behavior, such as codes of conduct.

102-17. Mechanisms for advice and concerns about ethics. 20

Governance

102-18. Governance structure of the organization, including committees of the highest governance body. Identify any committees responsible for 20 decision-making on economic, environmental, and social topics.

Stakeholder Engagement 102-40. List of stakeholder groups engaged by the organization. 9

102-41. Percentage of total employees covered by collective bargaining 75 agreements.

102-42. Basis for identifying and selecting stakeholders with whom to 9 engage.

102-43. The organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an 9 indication of whether any of the engagement was undertaken specifically as part of the report preparation process.

102-44. Key topics and concerns that have been raised through stakeholder engagement, including how the organization has responded to those key 9 topics and concerns, including through its reporting. The stakeholder groups that raised each of the key topics and concerns. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 93

Content Summary - GRI Standards Page Comments

Reporting Practice 102-45. Entities included in the consolidated financial statements. 7

102-46. Defining report content and topic Boundaries. 9

102-47. A list of the material topics identified in the process for defining 9 report content.

102-48. The effect of any restatements of information given in previous 7 reports, and the reasons for such restatements.

102-49. Significant changes from previous reporting periods in the list of 7 material topics and topic Boundaries.

102-50. Reporting period for the information provided (such as fiscal year 7 or calendar year).

102-51. Date of the most recent previous report, if applicable. 7

102-52. Reporting cycle (annual, biannually, etc.). 7

102-53. The contact point for questions regarding the report or its contents. 7

102-54. Option chosen by the organization to prepare the report (core or 7 comprehensive option).

102-55. GRI content index. 90

102-56. A description of the organization’s policy and current practice with regard to seeking external assurance for the report. Indicate a reference to the external assurance report, statements, or opinions. If not included in the assurance report accompanying the sustainability report, a description 7 of what has been assured and on what basis. Describe the relationship between the organization and the assurance provider and whether the highest governance body or senior executives are involved in seeking external assurance for the organization’s sustainability report.

MANAGEMENT APPROACH

103-1. Explanation of the material topic and its Boundary inside and outside the organization (an explanation of why the topic is deemed material and 11 the boundary for such material topic).

103-2. The management approach and its components with respect to environmental impacts, labor practices, human rights and impacts on 25 society. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 94

Content Summary - GRI Standards Page Comments

ECONOMIC PERFORMANCE INDICATORS

Economic performance

201-1. Direct economic value generated and distributed, including revenues, operating costs, employee wages and benefits, payments to 57 providers of capital, payments to governments.

CENIBRA does not specifically analyze the financial implications for the operations due to climate change. However, 201-2. Financial implications and other risks and opportunities due to it carries out routine control climate change. and monitoring actions, which provide inputs on the operating impacts arising from heavy rains, storms, and other relevant natural phenomena.

201-3. Coverage of the organization’s defined benefit plan obligations. 75

201-4. Significant financial assistance received from government. 57

Market Presence

202-1. Range of ratios of standard entry level wage (by gender) compared 69 to local minimum wage at significant locations of operation.

202-2. Proportion of senior management hired from the local community 69 at significant locations of operation.

Indirect Economic Impacts

203-1. Development and impact of investments in infrastructure and 62 services provided.

203-2. Significant indirect economic impacts, including impact extent. 61

Procurement Practices

204-1. Proportion of spending on local suppliers at significant locations of 64 operation.

Anti-corruption

205-1. Total number and percentage of operations assessed for risks 25 related to corruption and significant risks identified. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 95

Content Summary - GRI Standards Page Comments 205-2. Communication and training about anti-corruption policies and 25 procedures.

205-3. Confirmed incidents of corruption and actions taken. 25

Anti-competitive Behavior

206-1. Total number of legal actions in connection with unfair competition, 25 trust and monopoly, and their outcomes.

ENVIRONMENTAL PERFORMANCE INDICATORS

Materials 301-1. Materials used by weight or volume. 87

CENIBRA does not make use of recycled materials in its industrial process. Specific inputs, such as part of the diluted sulfuric acid for effluent pH correction and 301-2. Percentage of materials used that are recycled input materials to - lubrication oils, are reused. manufacture the organization’s primary products. Forestry activities make use of industrial wastes, such as dregs, grits, biological sludge and eucalyptus bark for soil fertilization and pH correction.

301-3. Percentage of products sold and their packaging materials that are - Not reported. reclaimed by product category.

Energy 302-1. Energy consumption within the organization. 88

302-2. Energy consumption outside of the organization. 88

302-3. Energy intensity. 88

302-4. Reduction of energy consumption. 89

According to the monitoring of refinability parameters over the past three years, there was not remarkable variation in customers’ (paper manufacturers) 302-5. Reductions in energy requirements of products and services. 89 energy requirement. Note: Occasional variations occur due to variations in both wood quality and processing (characteristics of fibers to be refined). Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 96

Content Summary - GRI Standards Page Comments

Water and Effluents

303-1. Interactions with water as a shared resource. Not reported.

303-2. Management of impacts related to water disposal. 85

303-3. Percentage and total volume of recycled and reused water. 85

303-4. Water disposal 85

303-5. Water consumption 85

Biodiversity

304-1. Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected 79 areas.

304-2. Significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected 79 areas.

304-3. Habitats protected or restored. 80

304-4. IUCN Red List species and national conservation list species with habitats in areas affected by the organization’s operations by level 82 of extinction risk (critically endangered, endangered, vulnerable, near threatened or least concern).

Emissions

305-1. Direct (Scope 1) GHG emissions. 83

305-2. Energy indirect (Scope 2) greenhouse gas (GHG) emissions from 84 purchased energy.

305-3. Other indirect (Scope 3) greenhouse gas (GHG) emissions. 84

305-4. Greenhouse gas (GHG) emissions intensity. 84

305-5. Reduction of greenhouse gas (GHG) emissions. 85

305-6. Emissions of ozone-depleting substances (ODS). 85

305-7. Nitrogen oxides (NOx), sulfur oxides (SOx), and other significant air 83 emissions.

Effluents and Wastes

306-1. Water discharge by quality and destination. 86 Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 97

Content Summary - GRI Standards Page Comments

306-2. Weight of waste by type and disposal method. 87

No significant leakage was recorded in the reporting period. The industrial plant’s rainwater collection system is divided into networks according to zones in which water collectors drain water from the 306-3. Total number and total volume of recorded significant spills. 86 networks. Notwithstanding, all areas subject to some kind of effluent leakage or spillage are provided with impermeable coating and fitted with troughs to channel leaks into the Biological Treatment Station.

306-4. Weight of wastes transported, imported, exported or treated that are deemed hazardous according to the Basel Convention – Annexes I, II, III 87 and VIII, and percentage of hazardous waste shipped internationally.

306-5. Identification, size, protection status and biodiversity value of water bodies and related habitats that water discharges and runoff caused by the 85, 86 organization.

Environmental Compliance

307-1. Monetary value of significant fines and total number of non-monetary sanctions applied as a result of non-compliance with environmental laws 25 and regulations.

Supplier Environmental Assessment

308-1. Percentage of new suppliers that were screened using environmental 64 criteria.

308-2. Significant actual and potential negative environmental impacts 64 identified in the supply chain and actions taken. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 98

Content Summary - GRI Standards Page Comments

SOCIAL PERFORMANCE INDICATORS Employment

401-1. Total number and rate of new employee hires and turnover by age 69 group, gender and region.

401-2. Benefits provided to full-time employees that are not provided to 75 temporary or part-time employees by significant locations of operation.

401-3. Return to work and retention rates of employees that took parental 70 leave, by gender.

Labor/Management Relations

With a view to proper union and labor relations, in the event of significant operational changes, 402-1. Minimum notice periods regarding operational changes and employees and unions - whether this is specified in collective agreements. are given notice and get involved to the extent and for the length of time required for change implementation.

Occupational Health and Safety

403-1. Statement on whether an occupational health and safety management system is in place, including whether the system was implemented due to legal requirements, as a result of risk management 74 and/or the management system’s regulations/guidelines, and description of the scope of workers, activities and workplace cover by the management system or not covered, if any. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 99

Content Summary - GRI Standards Page Comments CENIBRA has written, formal procedures that are available to all employees under the motto: “IF SOMETHING CANNOT BE DONE SAFELY, DON’T DO IT”. Existing hazards and risks at each organizational unit are described in specific spreadsheets as a means of following up and monitoring the required controls.

Should hazardous conditions or near misses be detected in processes and workplaces or during the execution of an activity, a formal method based on written procedures and specific forms is in 403-2. Description of processes used in hazard identification, risk place to record the problem assessment and incident investigation; how the organization ensures the and the measures to solve quality of such processes; how the results of such processes are used to it, without necessarily evaluate and continuously improve the management system; description identifying the reporting of processes for workers to report work-related risks; description of policies - employee. In cases in which regarding the Right to Refuse to Work under conditions considered by an employee faces or is workers as potentially causing injuries or diseases and how such workers are put in serious, imminent protected against retaliation. Description of processes used to investigate risk of accident, another work-related incidents, including processes to identify hazards and assess written, formal procedure risks in connection with incidents. entitles him or her to the Right to Refuse to Work. Should the manager and the subordinate employee fail to reach a common solution to the problem, technical professionals from the Work Safety department should participate, analyze the situation, and provide guidance on proper actions to be taken.

The Occupational Health and Safety management focuses mainly on prevention. A formal, written procedure sets out an investigation and review method to address incidents and accidents.

403-3. How the organization keeps secrecy of personal information related to workers’ health and their use of any occupational health services, and 74 how the organization makes sure such information will not be used for any favorable or unfavorable condition in their treatment. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 100

Content Summary - GRI Standards Page Comments

403-4. Description of consultation to and participation of workers in the development, implementation and evaluation of the occupational health and safety management system and description of formal joint 74 management-worker health and safety committees, their responsibilities, attendance to meetings, decision-making power, and whether workers are not represented by such committees.

403-5. Employee training on occupational health and safety. 74

403-6. Employee health promotion. 74

403-7. Prevention and mitigation of impacts on occupational health and 74 safety directly related to commercial relationships.

403-8. Employees covered by occupational health and safety management. 74

403-9. Work-related injuries. 74

403-10. Work-related health problems. 74

Training and Education

404-1. Average hours of training per year per employee by gender and 71 employee category.

404-2. Skills management and learning programs that contribute to enhance employee skills and transition assistance programs to facilitate 72 continued employability and the management of career endings resulting from retirement or termination of employment.

In 2018, 96% of the employees covered by the Management by 404-3. Percentage of employees receiving regular performance and career - Competence Program development reviews by gender and employee category. received formal performance analysis and 16% received career development reviews.

Diversity and Equal Opportunity

405-1. Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group 24 membership, and other indicators of diversity.

405-2. Ratio of the basic salary and remuneration of women to men for 68 Not reported. each employee category, by significant locations of operation.

Non-Discrimination

406-1. Total number of incidents of discrimination and corrective actions 25 taken. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 101

Content Summary - GRI Standards Page Comments

Freedom of Association and Collective Bargaining

407-1. Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at 65 significant risk, and measures taken to support these rights.

Child Labor

408-1. Operations and suppliers identified as having significant risk for incidents of child labor, and measures taken to contribute to the effective 65 abolition of child labor.

Forced or Compulsory Labor 409-1. Operations and suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the 64 elimination of forced or compulsory labor.

Security Practices

410-1. Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant 64 to operations and whether training requirements also apply to third-party organizations providing security personnel.

Indigenous and Traditional Peoples’ Rights

There are no records of 411-1.Total number of incidents of violations involving rights of indigenous 63 violation of indigenous rights people and actions taken. at CENIBRA.

Human Rights Assessment

412-1. Total number and percentage of operations that have been subject 64 to human rights reviews or impact assessments.

CENIBRA has adopted an institutionalized approach to training on the Code of Conduct, Right to Refuse to Work, Compliance, Assertive Communication and 412-2. Total number of hours devoted to training on human rights policies Harassment, Professional or procedures concerning aspects of human rights that are relevant to the - Relations, and Professional organization’s operations, including percentage of employees trained. Ethics. In total, 7,941 man- hours of training were given in 2018. Eighty-five percent of current employees took part in training activities on these topics.

412-3 Total number and percentage of significant investment agreements and contracts that include human rights clauses or that underwent human 64 rights screening and the definition used for “significant investment agreements”. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 102

Content Summary - GRI Standards Page Comments

Local Community 413-1. Percentage of operations with implemented local community engagement, impact assessments, and development programs, public 62 disclosure of results of environmental and social impact assessments, and formal local community grievance processes.

413-2. Operations with significant actual and potential negative impacts 62 on local communities.

Supplier Social Assessment

414-1. Percentage of new suppliers that were screened using social criteria 64 (which includes human rights and impacts on society).

414-2. Significant actual and potential negative social impacts in the supply chain and actions taken, number of suppliers assessed for social impacts and suppliers identified as having significant actual and potential negative social 65 impacts, and improvements agreed upon as a result of such assessment. Description of relationships that were terminated as a result of assessment, and why.

Public Policies

CENIBRA is not linked to political parties, but it adopts a cross-party policy of supporting politicians committed to sustainable 415-1. Total value of financial contributions to politicians and political development, ethical parties by country and recipient/beneficiary. If applicable, how the monetary - values, and improved public value of in-kind contributions was estimated. governance. Any occasional financial contribution is made in full compliance with the electoral legislation in force.

Customer Health and Safety

416-1. Percentage of significant product and service categories for which 67 health and safety impacts are assessed for improvement.

416-2. Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and 67 services during their life cycle and that resulted in the application of fine/ penalty or warning, by type of outcome.

Marketing and Labeling

417-1. Type of product and service information required by the organization’s procedures and percentage of significant products and services subject to such information requirements, including outsourcing of product or service 67 components, content, especially with respect to substances that may cause social or environmental impact, safe product use, product disposal and environmental impacts. Sustainability Report 2018 11 Global Reporting Initiative (GRI Standards) Content Index) 103

Content Summary - GRI Standards Page Comments

417-2. Total number of incidents of non-compliance with regulations and There are no records of voluntary codes concerning product and service information and labeling, non-conformity with the by type of outcomes, including incidents of non-compliance that have regulations and voluntary - resulted in fines or penalties, incidents of non-compliance with emission codes in connection with rules that have resulted in warning, and non-compliance with voluntary information disclosure and codes. pulp labeling.

There are no records of 417-3. Total number of incidents of non-compliance with regulations non-conformity with the and voluntary codes concerning marketing communications, including regulations and voluntary - advertising, promotion, and sponsorship by type of outcomes, and that codes in connection with have resulted in fine/penalty or warning. marketing communication, advertising, and sponsorship.

Customer Privacy

418-1. Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data, including complaints from 25 third parties and substantiated by the organization and regulatory agencies.

Social and Economic Compliance

419-1. Monetary value and number of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations 25 in the social and economic area. Description of the context in which such significant fines and non-monetary sanctions were applied. INFORMATION SOURCES

People responsible for the disclosed information

Social

Human Resources Department Vander José Duque Saldanha / [email protected]

Corporate Communication and Institutional Relations / CENIBRA Institute Leida Hermsdorff Horst Gomes / [email protected]

Environmental

Quality and Environment Department Sandro Morais Santos / [email protected]

Economic and Financial

Controller and Finance Department Vitor Alderico de Menezes Marques / [email protected]

Assistant to the CEO Toshiki Kurahashi / [email protected]

Financial Statements Oldair de Souza Mourão / [email protected]

Independent Auditors Ernst & Young Rogério Xavier Magalhães CREDITS

General Coordination Corporate Communication and Institutional Relations

Written by: Governance Advisory Service

Editing and Graphic Design Café c/ Design

Translation Luiz Otávio de Oliveira Ferreira

Revision Rilson de Sales Bicalho

Pictures Edmar Silva CENIBRA archives