2009 SUSTAINABILITY REPORT GROWING GROWING THE FUTURE THE FUTURE Promoting sustainable This report has been manufactured General supervision and coordination: Photography: forest management with paper made from raw material ARAUCO’s Corporate Affairs and ARAUCO Archives www.pefc.org provided by PEFC-endorsed Marketing Management Art and Design: sustainably managed forests. Edited by: Idenco Printed by: Myriam Mellado For more information, visit: Ograma Nowack Beer Consulting www.arauco.cl Pamela Alarcón For information regarding the 2009 Translated by: Report contact e-mail address is: Pamela Alarcón [email protected] 2009 SUSTAINABILITY REPORT Sustainability Report 1 About This Report Stakeholder Feedback Celulosa Arauco y Constitución S.A. (ARAUCO) has The issues to be addressed in this report were determi- prepared an annual Corporate Sustainability Report ned based on a variety of stakeholder interactions, a re- every year since 2004. This report provides a compre- view of public media coverage during 2009, and relevance hensive review of the company’s economic, environ- to ARAUCO’s sustainability. The key sources for determi- mental and social performance of its business opera- ning issues include the following: tions in Chile, Brazil, Argentina and Uruguay for the time period ranging from January 1 through December • Survey of Report Recipients 31, 2009. An informal survey was administered to a number of stakeholders who had received and read ARAUCO’s As in prior years, this report combines conventional, 2008 report. These stakeholders were asked to pro- annual financial reporting with corporate sustainabili- vide feedback on how the report could be improved; ty reporting as a reflection of ARAUCO’s continuing • Nowack-Beer Consulting Survey efforts to integrate sustainable practices into all as- A survey of 181 global customers was conducted by pects of management of the business. Nowack-Beer Consulting, a North American firm spe- cializing in sustainability issues management and mar- This report was written following Global Reporting Ini- keting communication; tiative (GRI) protocols, and the contents and indicators • Organizational Climate Survey published in this report were defined by GRI G3 Gui- ARAUCO commissioned an internal Organizational delines. These GRI references are identified throughout Assessment, which began in late 2008 and continued the report and have been included in a table which throughout 2009. A survey of workforce perceptions appears in the GRI Index Annex. was sent to 4,100 employees and contract workers. This was followed by 75 information meetings to dis- The financial statements included in this report were au- cuss the results and 22 focus groups to define needed dited by an independent accounting firm. The sustainabi- actions; lity-related content in this report has been self-evaluated • Woodmark Stakeholder Consultation by ARAUCO, following the GRI Reporting Framework for during FSC Certification Pre-assessment a B Application Level report. ARAUCO applied a rigorous, Process internal data-verification process to ensure accurate and As part of the preliminary assessment of ARAUCO’s meaningful data. Corporate Management takes responsi- operations for Forest Stewardship Council certifica- bility for this report. tion, extensive stakeholder input was gathered through 172 personal interviews and more than 60 written Additional detailed information on economic, financial and affidavits representing the opinions of environmental, corporate governance indicators is published annually in June social, labor, community and economic interests. More in Form 20-F (US Securities and Exchange Commission), and information can be found in the Environment section in ARAUCO’s audited Consolidated Financial Statements re- of this report. port (prepared in compliance with the International Financial Reporting Standards). These documents are available online at www.arauco.cl and are an integral part of this report. 2 Sustainability Report • AccionRSE Jury Report on ARAUCO’s 2008 Annual Report Each year, AccionRSE, a Chilean non-profit organiza- tion, sponsors a juried competition through which it recognizes the best Annual and Corporate Responsi- bility Reports submitted by companies operating in Chile. In addition to choosing the best report, the jury provides each participant with a review of their corporate report in order to make improvements for coming efforts. Stakeholder Issue Application in 2009 Report Provide more information about how the company integrates and measures its This report provides more-detailed discussions of company programs and the sustainability vision in its programs and in relation to recognized standards of progress made during 2009. performance. Provide informatio n on future commitments and goals. The focus of this report is 2009, but it also provides information on future commitments. A need exists for a more balanced presentation of both favorable and unfavora- This report provides more specifics on the degree of success in meeting 2009 ble outcomes (problems and challenges). goals and areas needing improvement. Provide more information about the processes the company uses to communi- There was a substantial increase in outreach to stakeholders during 2009. cate with and listen to various stakeholder groups. This is documented throughout the report. Provide more information regarding the company’s workers. The nature and opinions of ARAUCO’s workforce are addressed at several points in this report. Provide more information about the company’s relationship with nearby This report contains improved information on the company’s programs, along communities. with a better, more-detailed description. Provide more information on ARAUCO’s CERTFOR sustainable forest manage- This report contains more-detailed information on all third-party certification ment certification for its forests in Chile. and added information about forest management certification. Provide information on ethics and anti-corruption policies. An explanation of the company’s Ethics Code and implementation process is provided in this report. Sustainability Report 3 CONTENT 6 Chairman’s Statement 8 CEO’s Statement 12 Corporate Overview 13 ARAUCO’s Vision and Commitments 14 Corporate Governance 16 Code of Ethics 18 Our Business 46 Environment 20 Markets 34 Panel Business Area 50 Environmental Performance 22 Performance Indicators 35 Panel Operations 51 Environmental Investments 24 Awards 36 Investments 52 Use of the Forest Resource 25 Memberships 53 2009 Environmental Assessment 38 Sawn Timber Business Area 53 2010 Environmental Objectives 26 Forestry Business Area 39 Sawn Timber Operations 54 Carbon Footprint Assessment 27 Forest and Land Ownership 40 Investments 56 Certifications 28 Forestry Operations 40 ARAUCO Sustainable Solutions 56 FSC Certification in Chile 28 Forestry Certification 58 FSC Certification in Argentina, Brazil 42 Energy Business Area 29 Investments and Uruguay 29 Forestry Research 43 Energy Capacity and Generation 58 Biodiversity Protection 44 Energy Self-Sufficiency 30 Pulp Business Area 58 Conservation Programs 44 Kyoto Protocol 60 Protection of High Environmental 31 Woodpulp Operations 44 Energy Investments Value Areas 32 Investments 62 The Invisible World of Parque Oncol 32 Treated Wastewater Pipeline Projects 64 Nonguén Nacional Reserve Consultative Council 65 Other Environmental Programs and Actions 66 Fire Prevention and Fire Fighting 68 Transport 4 Sustainability Report 70 Our People 86 Society 104 Appendices 73 Organizational Climate 89 Economic and Social Development 104 ARAUCO Corporate Structure 74 Work Relations and Improvement in the Quality of Life 106 Management 74 Assistance and Training for Forestry 89 Economic Development Initiatives 108 Main Subsidiaries and Related Workers 90 Success Stories Companies 76 Quality Housing for ARAUCO Contract 91 Artisan Fishermen in regions Maule, 115 Business Offices and Addresses Workers Bío-Bío and Los Ríos 118 Glossary 77 Renovation of Forestry Camps and Staff 92 Support Programs for Indigenous 122 Certifications Transportation Means Culture 124 Environmental Studies 77 Operational Excellence Management 94 Public-Private Agreement for the 125 ARAUCO’s Audited Consolidated Program Development of the Arauco Territory Financial Statement Report 78 2009 Operational Excellence Winning 94 Social Development Initiatives 131 Independent Auditor’s Report Projects 95 Arauco Educational Foundation 132 GRI Index 80 ARAUCO’s Innovation Model 97 Seminar “The Value of Assessments” 80 Occupational Health and Safety 98 Belén Educa Foundation, Chile 82 2010 Occupational Health and Safety 98 Schools, Chile Goals 98 Alto Paraná Foundation, Argentina 82 ARAUCO’s Occupational Health and 99 Educational Programs in Brazil Safety Systems’ Assessment 100 Educational Internships 84 “Work Well, Work Safe” Campaign 100 Initiatives for Quality of Life Improvement 100 Strengthening Stakeholder Engagement-2009 Activities 102 Corporate Sponsorship for Sports 103 Discussion regarding the Valdivia Pipeline Sustainability Report 5 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT During 2009, ARAUCO continued to face the global economy’s contraction, as a result of one of the most severe economic recessions I can remember. Never- theless, we were able to overcome the difficulties and find new opportunities due to the implementation of timely contingency plans. The results are in plain sight. The company emerged at year’s end both profitable and favorably positioned within