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 is- sued 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 multidisci- plinary approach under the coordination of the Governance Advisory Service (ASGOV), and relied on effective coopera- tion 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”