This is a Category B project according to IFC's Policy on Environmental and Social Sustainability. Puma II will be built inside the existing Puma I industrial site and will rely on the associated facilities built for Puma I (i.e. transmission line, roads, railroads). Key E&S issues and risks during the construction phase are linked to the influx of a large male-dominated workforce, project-induced in-migration, occupational health and safety (OHS), increase in traffic, and generation of waste. Key risks and issues for the operations phase are similar in nature and scale as those of the Puma I (i.e. OHS, provision of fair and safe working conditions, air emissions, effluents discharge, water consumption, waste generation, risks linked to wood supply and impacts on the nearby communities including Indigenous People).                                                    

Policy:

Klabin has a corporate sustainability policy, which will be expanded to the new Puma II facility. More information on Klabin's policies is available at https://www.klabin.com.br/en/our-essence/ and https://www.klabin.com.br/en/sustainability/.

Identification of E&S risks and impacts:

For Puma I, Klabin conducted a detailed E&S impact assessment (EstudoPrévio de Impacto Ambiental, in Portuguese). As Puma II involves only a brownfield expansion within the footprint of Puma I, the environmental authority required a simplified E&S impact assessment (Relatorio Ambiental Preliminar, RAP, in Portuguese). The RAP includes predictive models to forecast the impacts of air emissions and noise. Few deficiencies have been identified in both these studies: viz. inconsistent weather data, changes in the project's emission sources, no consideration of an increase in traffic. Klabin will update these models to address the deficiencies identified and update its RAP (ESAP items nr. 1). It is not expected that the outcomes of these updates will have any material change for the mitigation measures or design parameters of the plant.

Management programs:

Klabin has implemented environmental and OHS management systems across its facilities and has obtained multiple certifications. Almost 100 percent of Klabin's forestry management units are certified for “Forest Stewardship Council” (FSC) and pulp and paper mill facilities are ISO 14001 and OHSAS 18001 certified.

As part of the licensing process for Puma II, Klabin prepared an E&S management plan (Plano de Controle Ambiental, in Portuguese) which details the mitigation measures to be implemented during construction and operation. The E&S management programs for the construction phase include the management of waste, wastewater, noise, air emissions, erosion control, worker's health and safety and labor relations.

The programs for the operational phase are those already implemented for Puma I, with their scope to be expanded to include Puma II once the new production lines start operating. Programs include the management of waste, wastewater, noise, air emissions, erosion control, health and safety, social communication, environmental education, and environmental auditing.

The Monte Alegre Forest Unit supplies wood to the Monte Alegre and Puma mills. The unit produces a forest management plan that is updated annually; a summary of the plan is publicly available at https://www.klabin.com.br/en/businesses-and-products/forestry/. Klabin has a framework of Standard Operating Procedures defining E&S practices for forest management that meet or exceed national and FSC requirements.

Organizational capacity and competency:

At corporate level, implementation of sustainability policy and E&S oversight rests with Sustainability Committee, comprising of five Directors with executive functions and is supported by Klabin's Corporate Sustainability and Environmental Manager.  The Sustainability Committee is regularly informed of Klabin's environmental and social performance during its quarterly meetings and whenever considered necessary. 

Puma I has qualified environmental and occupational health and safety (OHS) teams; who will be responsible for managing the entire unit once the expansion (including Puma II) is completed. During construction of Puma II, the EHS performance of contractors will be overseen by an independent consultant, who will regularly report to Klabin. Klabin will update the project's organizational and contractual structure to clarify reporting lines between contractors, independent consultant and Klabin's OHS and environmental teams.

In Parana, Klabin has a competent social team in charge of community relations and communications. The workload of this team will significantly increase in the following years due to its multiple responsibilities, among them: (i) communication and stakeholder engagement; (ii) monitoring of socio-economic impacts during construction of Puma II; (iii) support to land acquisition transactions; (iv) engagement with communities before the transit of logging trucks; and (iv) implementation of the indigenous people plan (PBAI) – requirement of the permitting process for Puma I and only recently approved by the Brazilian National Indian Foundation (FUNAI). Klabin will conduct an analysis of the workload of the social team in the next five years and accordingly update the staffing plan to ensure the team is adequately staffed (ESAP item nr. 2) and will hire an anthropologist to be in charge of the implementation of the PBAI (ESAP item nr. 3– as discussed further in details under PS7).

Emergency preparedness and response plans:

Deficiencies were identified by the IESC in the emergency response plan (ERP) for Puma I in terms of assigned resources, responsible personnel, and frequency of emergency drills.  Klabin will update its ERP to address these deficiencies and coveringthe combined Puma I and II operations (ESAP itemnr. 4).

Monitoring and Review:

Klabin has a detailed environmental and social monitoring program that includes the monitoring of effluents, air emissions, ambient air quality, ambient water quality, groundwater quality, noise, terrestrial and aquatic fauna, and socio-economic indicators in the areas impacted by Monte Alegre and Puma facilities. An environmental inspection plan is also in place for Puma I; most frequent deviations referred to inadequate waste segregation and housekeeping.  EHS information from all sites is available in a shared platform that can be consulted throughout the organization. Specific reports are sent to department area to inform about the status of their deviations so that corrective actions are put in place. Puma II has and environmental management manual detailing the environmental parameters and frequency to be monitored. Klabinwill compile the environmental standards (Numerical Standards) that the project will adopt during its operation and include them in the environmental management manual.                              

According to Klabin's 2018 sustainability report, the company had 14,270 direct and 5,341indirect employees. Indirect employees are hired by licensed contractors and provide services such as security, catering, transportation, maintenance, and forest management. Of these, 900 are employed in Puma I and 3400 are employed in Monte Alegre Forest Unit (about two thirds of workers in forestry operations are indirect employees). Puma II will create an additional 550 vacancies for direct employees. All direct employees hold fix term contracts. Employee turnover in industrial and forestry units in Parana less than 20 percent, both formen and women.

Human Resources Policies and Procedures:

Klabin has a comprehensive policy on workers' rights that the company extends both to its direct and indirect (contractors) employees, and suppliers(https://www.klabin.com.br/wp-content/uploads/2018/12/Pol%C3%ADtica-de-Direitos-Fundamentais-nas-Rela%C3%A7%C3%B5es-de-Trabalho.pdf).The policy formalizes Klabin's commitment to Human Rights and ILO Fundamental Conventions and is consistent with the requirements of Brazilian labor law and IFC Performance Standard 2.  Klabin's HR department regularly monitors compliance of the company's policy on workers' rights by contractors.

Klabin as an HR department (Gente & Gestao) in TelemacoBorba, Parana, in charge of the management of personnel in the Monte Alegre Forest Unit, and the Monte Alegre and Puma mills, and the relation with unions. Klabin regularly audits its contractors to ensure they comply with Klabin's policy on workers' rights and local labor law.

Working conditions and terms of employment:

All direct and indirect employees are affiliated to the union in connection to their activity. Terms of employment – wages, working hours, overtime, paid holidays, leave, and additional benefits – are established in the respective collective bargaining agreements (CBA) which comply or go beyond labor law requirements. At the time of recruitment, all employees receive a copy of the company's Code of Conduct indicating the company's grievance mechanism (https://www.klabin.com.br/wp-content/uploads/2018/12/manual_codigo_de_conduta_ing-v2.pdf), and a written contract clearly indicating the type of contract, wage and benefits.

Freedom of Association:

The company respects the workers' right for freedom of association.  Currently, there are recognized trade unions across all Klabin facilities, who engage with the company for negotiating and also serve as an important channel for raising employee grievances. Agreements are negotiated annually with union representatives (elected by workers). For the construction of Puma II, collective bargaining agreements are being negotiated by Klabinwith each respective trade union (e.g. civil works, electromechanical assembly, drivers, catering, etc.) and contractors will be contractually mandated to comply them.

Non discrimination:

Klabin has an equality and diversity policy (https://www.klabin.com.br/wp-content/uploads/2018/12/Politica-de-diversidade.pdf) and publicly discloses gender and ethnic disaggregated data on employment. According to Klabin's 2018 sustainability report, 11.7 percent of Klabin's employees were women, a slight increase from 10.7 percent in 2016 and 2017. The number of black and mixed-ethnicity employees has remained constant over the last three years at 4 percent. As of June 2019, 20 percent of the employees in Puma were women; women are evenly represented in all job categories, from operations to management. In the Monte Alegre Forestry Unit, about 10 percent of employees are women. While representation of women in forestry operational jobs is low (4%), the percentage of women in technical and managerial positions ranges between 30 and 50 percent.  Klabin has committed to increase the percentage of women in leadership positions from 16 to 30 percent globally in the next 5 years. Nevertheless, the company has yet to develop a strategy to increase the recruitment of women during the construction and operation of Puma II.

Workers' grievance mechanism:

Employees and contracted workers can report confidential and anonymous grievances to Klabin's Ombudsman through the web and phone. In addition to Klabin's Ombudsman, unions are an important channel for raising employee grievances. Indirect employeeshired for the construction of Puma II will also be able to present confidential and anonymous complaints through suggestion boxes (canal do trabalhador) and their respective trade union representatives. Klabin will also maintain regular meetings with workers' representatives (roda de conversa) to ensure proactive communication.

Child and forced labor:

Klabin'sprohibits the use of child and forced laborin its own operations, and among suppliers and contractors (https://www.klabin.com.br/wp-content/uploads/2019/07/Condi%C3%A7%C3%B5es-Gerais-Fornecimento-Klabin-Vers%C3%A3o-II-Registrada.pdf; https://www.klabin.com.br/wp-content/uploads/2019/04/politica-de-contratacao-de-fornecedores.pdf). In 2018, about 30% of the wood (3.5 million tons) processed in Monte Alegre and Puma mills originated from 160 third-party suppliers. As per Klabin policies, these plantations must be pre-approved based on FSC controlled-wood criteria, which include compliance with labor, OHS and environmental requirements. In 2018, Klabin (Monte Alegre Forest Unit) conducted 814 audit visits to these third-party suppliers; no instances of child or forced labor were identified.

Management of third party workforce during construction:

The construction of Puma II is expected to last 48 months. An average of 5,000 workers will be engaged during the entire construction time, and the number of workers at peak construction will reach 10,000. Rules for human resources management – including terms of employment (all workers must be hired with indefinite employment contracts), working hours, compensation and benefits, demobilization – are clearly detailed in a manual that is shared with potential contractors before the submission of their proposals, and subsequently is incorporated into the contracts.Only one level of subcontracting is allowed (must be pre-approved by Klabin) and no subcontracting is allowed for activities that should be in the competency of the contractor.Contractors will report to Klabin the number of working hours, training, wages, and payments to social security for each worker every month.

Accommodation, food, health services, and induction training arecentralized by Klabinand services will be provided by specialized companies. Workers will be lodged in four existing camps, one in TelemacoBorba and three in Ortigueira. The camps were built for the construction of Puma I and are currently being refurbished.  Each camp can host about 1,500 workers for a total of 6,000 workers. Additional workers will be hosted in hotels and residences in TelemacoBorba and Ortigueira. Only male workers will lodge in the camps; female workers will lodge in shared housing. Campsprovide reasonable levels of safety, hygiene and comfort; a maximum of three workers will share a room. Sport facilities, entertainment rooms, and WiFi will be accessible for free to all workers. No visits will be allowed in the accommodations, but workers' freedom of movement will not be restricted. Accommodations will be cleaned daily and linen/towels will be changed weekly. While the workers' accommodations have fire extinguishers and fire hoses, most building are four-story high, and some lack fire alarms, evacuation signs and muster points. Klabin will implement fire emergency prevention and response plans to ensure workers can safely evacuate in the event of fire (ESAP item nr. 5). Klabin's ability in successfully managing a large workforce is revealed by the fact that Puma I suffered no work stoppages or strikes despite engaging more than 15,000 workers at peak construction. Management of human resources during Puma II will be responsibility of the same professional in charge of Puma I.

Gender based violence:

Klabin's induction training for Puma II includes the prohibition of sexual harassment but related procedures are still missing. Klabin will develop disciplinary procedures, and procedures to respond and investigate sexual harassment and gender-based violence (GBV) complaints. Procedures will be communicated to contractors for adoption, and relevant content will be integrated into mandatory training for workers and management. Klabin will assign a team of qualified individuals to handle sexualharassment and GBV complaints using a survivor-centered approach and ensuring confidentiality(ESAP item nr. 6).

Occupational health and safety:

Klabin promotes a culture of safety among its employees and contractors (http://rs.klabin.com.br/en/people-health-and-safety/). According to its 2018 sustainability report, the lost time injury frequency rate (LTIFR) was 10.2 for employees and 5.9 for contractors as a result of 298 and 102 recordable work-related injuries across all its facilities. While there were no fatalities in 2017, in 2018, three fatalities occurred among contracted workers, one at the Rio Negro (PR) unit during equipment assembly and two other vehicle accidents involving service providers at the Monte Alegre Forest Unit (PR): one involving a truck and a train during a railroad crossing and the other involving vehicles in repair work on a highway. Klabin provided full support to the families and investigated the root-causes to generate internal lessons learned.

A set of safety tools are in place in Puma I such as daily safety dialogues, critical work permits, safety analysis, lock out/ tag out, use of personal protective equipment (PPE), andworkplace inspections. Klabin has developed a comprehensive safety module as part of the leadership training for supervisors in the areas of operation and maintenance. Recent safety innovations include the use of online gas monitoring for large confined spaces, the use of drones for monitoring places difficult to access, and safety debriefings at the end of critical work.

As for the industrial plants, Klabin has developed an OHS management system for its forestry operations. There are 18 forestry teams (about two-thirds are contractors) in the field at any given time. Each team is equipped with mobile offices, lavatories, warehouse and field kitchen. Transportation of workers is done by specialized third-party contractors. Vehicle maintenance and documentation and drivers' qualifications are regularly inspected by Klabin. Vehicles and team leaders are provided with radios. Each day starts with a dialogue on safety. Klabin has a team of eight OHS professionals who conduct weekly inspections. Non-compliances are recorded, and corrective actions must be implemented by the responsible party. All Klabin's forestry operations are audited by the OHS and labor teams every four months, and contractors' operations are audited every six months. As first-aid kits and procedures for chainsaw harvesting operations among third-party suppliers and forestry contractors were identified as inconsistent by the IESC, Klabin will update its checklists for FSC-controlled wood to include minimum requirements for contents and number of first aid equipment and will disseminate OHS procedures for chainsaw harvesting operations among wood suppliers and contractors (ESAP item nr. 7).   

Resource efficiency:

Puma II will consume about 134MWh of electricity (about 1200 kWh/ton of kraftliner). All the electricity and steam required will be generated on site from the biomass and recovery boilers. The lime kilns require about 40 million liters of fuel oil per year, about 40% of the fuel oil will be replaced by tall oil (a by-product from the kraft pulping process of coniferous) produced on site. 

In 2016, the Parana Water Institute granted permits for the extraction of water from the Tibagi river at a rate of 8,400 m3/h and for the discharge of liquid effluents at a rate of 7,400 m3/h intothe same river. Water extraction represents about 0.5% and 7% of the river's mean and low flow respectively. Currently, Puma Iconsumes 5,000 m3/h and discharges about 4,000 m3/h. The incorporation of Puma II will not exceed the permitted amount of water consumption and wastewater discharge. Water consumption in the pulp and paper industry is benchmarked in terms of wastewater flow per ton of air-dry pulp (ADt). Puma I releases an average of 25 m3/ADt, well below WBG EHS Guidelines values for kraft bleached pulp (viz. 50 m3/ADt). Puma II will also comply with WBG EHS Guidelines for pulp and paper.

Air emissions and ambient air quality:

Puma I was completed in the first quarter of 2016. Currently, the unit produces 1.5 million tons of bleached kraft pulp. Air emissions from the recovery boilers, biomass boilers, and lime kilns are monitored continuously by Klabin and tested twice per year by an external consulting firm. Monthly averages of air emissions (PM, SO2, NOx, TRSin kg per ADt) have consistently met WBG EHS Guidelines for Pulp and Paper. Equipment performance guarantees for Puma II will also comply with WBG EHS Guidelines, except for NOx which is slightly above the guideline value for hardwoodpulp (1.52 versus 1.50kg/ADt). For reference, Puma I performance guarantees for NOx emissions were above WBG EHS Guidelines but actual performance has not exceeded 1.3 kg/ADt.

Ambient air quality is monitored twice per year by the same consulting firm in the cities of Ortigueira (P4), TelemacoBorba (P3) and Imbau (P2) – and in the closest dwelling to the Puma industrial unit (P1). According to the monitoring conducted in November 2018, ambient air quality complies with Brazilian regulations (CONAMA 491/2018) except for 24-hour PM10, which is slightly above the threshold (about 60 µg/m3 versus 50 µg/m3) in P1 and P4. Both sites are located in an area of agricultural production accessible only through dirt roads; hence the likelihood that the high concentration of PM10 is due to road dust.

Liquid effluents and receiving water quality:

Treated liquid effluents from Klabin's industrial facilities are discharged into the Tibagi river. Liquid effluents are monitored daily by Klabin (pH, TSS, COD, BOD, Total P, Total N). Parameters requiring more complex analytical methods are monitored monthly (toxicity) or twice per year (AOX) by external consultants. Monthly averages of liquid effluents from Puma I (in kg per Air Dry ton of pulp) have consistently met WBG EHS Guidelines for Pulp and Paper.Monthly averages of liquid effluents will continue to comply with WBG EHS Guidelines after incorporation of Puma II.

Water quality in the Tibagi river is monitored every quarter – 100 meters upstream (P1) and 100 meters downstream (P2) of the Puma's underwater effluent emissary –by an independent consulting firm. Water quality has been monitored since 2013; while some parameters – phosphorus, oil and grease, color – do not always comply with Brazilian standards (CONAMA 357/2005 Classe 2), no differences have been found for these parameters upstream and downstream Puma's effluent release point, which confirms that Puma is not responsible for this exceedance.

Waste management:

Waste inside Puma I's facilities is managed by a specialized waste management company. In 2018, Puma I generated 177,000 tons of non-hazardous waste and 75 tons of hazardous waste. Currently, 83% of non-hazardous waste is recycled. Non-recyclable non-hazardous waste is disposed of in a permitted landfill facility inside Klabin's property. Most of the non-recyclable waste is sludge from the tertiary wastewater treatment system, which due to its high content in aluminum cannot be used as soil amendment. Alternatives to the use of aluminum as flocculant in wastewater treatment are being analyzed to reduce the amount of non-recyclable waste. Non-recyclable hazardous waste is mostly comprised of contaminated PPE, waste contaminated with lubricants/used oils, and medical waste. Recyclable hazardous wastes such as used oils, lamps, batteries are recycled by specialized companies.  The hazardous waste temporary storage for Puma I is a well-managed area. The inventory is low to allow for proper secondary containment. Wastes are well stored, and the aspect is clean and ordered. Both the general waste temporary storage area and the on-site landfill present a good aspect. Leakage from the landfill site is collected and treated prior to its release into the environment. Groundwater quality is also monitored to detect potential contamination. Klabin has estimated the amount of waste to be generated during the construction and operation of Puma II and has conducted a capacity analysis to ensure waste is adequately managed. Waste management for construction will be the responsibility of a different firm. A separate waste temporary storage site will be open during construction.

Hazardous materials:

Sodium chlorate (NaClO3) is used for on-site generation of chlorine dioxide (ClO2) for the elemental-free chlorine (EFC) bleaching process in Puma I. Sodium chlorate is produced by a third party, Kemira, which plant has been built adjacent to Puma's mill. Puma II will produce unbleached pulp.

In-field storage of hazardous materials (pesticides) for forestry operations appears to be generally well organized and safe. However, the main storage facility in the Lagoa Nursery is under-capacity (i.e. presence of liquid toxic materials in an area without spill collection, insufficient working space) and this situation will worsen as Puma II plantations come on-line. Klabin will expand or rebuild the agrochemicals storage facility located adjacent to the Lagoa Nursery and ensure material safety data sheets and personal protective equipment are readily available (ESAP item nr. 8).                                          

Integrated pest management:

Klabin uses private satellites to monitor its entire forest plantations every 15 days and identify the areas that require weeding or are impacted by pests. Problem areas identified by remote sensing are validated in the field through site visits and drones. All events are registered into a digital management system available also through mobile applications that allows to monitor pest infestations. Technical recommendations to control pests or disease are provided if needed. The first year of planting is the most critical in terms of pest management and control. After the first year, activities are done only in case of infestation.

Klabin does not use herbicides or pesticides categorized as extremely (Ia) or highly (Ib) hazardous by the WHO. However, to control leafcutter ants, Klabin uses sulfluramid, whose active ingredient, perfluorooctane sulfonate (PFOS), is a persistent organic pollutant and is included in Annex B of the Stockholm Convention. Currently, Brazil has an exemption for the use of PFOS as insect baits for control of leaf-cutting ants from Atta spp. and Acromyrmex spp. At the most recent Conference of Parties of the Stockholm Convention (May 2019), the use of sulfluramid for the control of ants was permitted to continue with no phase-out deadline. Brazil also has a derogation by FSC for the use of sulfluramid up to 2021. Klabin has a partnership with the Instituto de Pesquisas e EstudosFlorestais (IPEF) to research alternative biological and chemical methods to control leafcutter ants but those methods are not yet used commercially.

Klabin uses eleven different herbicides but the most commonly used is glyphosate. According to the 2018 FSC publicly available audit report, in 2017, Klabin applied 128 thousand liters of glyphosate to an area of 37.7 thousand hectares. While glyphosate is commonly used and is not classified by the WHO as an extremely (Ia) or highly (Ib) toxic pesticide, in 2015, the World Health Organization's International Agency for Research on Cancer (IARC) added it to the list of products “probably carcinogenic” to humans. Since then, multiple countries have banned the use of glyphosate. Glyphosate was banned in Brazil by a federal judge in August 2018, but the ban was later overturned. In Brazil, studies conducted by ANVISA (Agência Nacional de VigilânciaSanitária, in portuguese) have not shown any carcinogenic effects of glyphosate and its relationship to human endocrine disruption.As a preventative measure, Klabin does treat glyphosate as a highly toxic pesticide and applicators use adequate personal protective equipment (PPE). Glyphosate is applied manually reducing the risk of pesticide drift and runoff contaminating nearby water bodies.

GHG emissions:

As calculated per an internationally accepted GHG estimation methodology, the addition of Puma II would result in about 120,000 tCO2-eq/year scope 1 emissions from the production process. These will however be largely offset by a tall oil and gasification plant to be built at a later stage reducing the emissions by 110,000 tCO2-eq/year. An estimated 1.7 million tCO2-eq/year emissions will be emitted from on-site burning of biomass in the boilers, for process steam and to generate electricity for production. Meanwhile, the planting of eucalyptus on degraded land to feed the plant is estimatedto sequester 2.1 million tCO2-eq/year, the gross GHG emissions are negative and equal to 400,000 tCO2-eq/year.      

Puma II project-induced in-migration:

Ten thousand workers are expected at the peak of construction of Puma II, and about 27 thousand are estimated to participate throughout the 48 month construction cycle.  To reduce project-induced in-migration, contractors will be required to recruit workers through public employment agencies located within a 600 km radius from the project site. In addition, employers will provide the necessary resources to allow for the regular re-entry of workers to their place of origin and will be responsible to demobilize workers at the end of their contract. Up to 6,000 workers will lodge in four accommodations provided by Klabin, and the location of any additional accommodation will be monitored by Klabin as well.

In 2013, an anthropic monitoring committee was setup to monitor the socio-economic impacts of Puma I in the municipalities located in the project's direct and indirect area of influence (Ortigueira, TelemacoBorba and Imbau – estimated population 100,000). The committee – comprising representatives from the three municipalities and Klabin – has been meeting regularly to analyze indicators in education, health, public safety, economic development, social services, and public finances.  Social indicators include the number of cases of sexual violence against women and children, and domestic violence.

The potential impacts of Puma II were discussed in the most recent meeting of the committee that took place in May 2019.  During the meeting, participants requested Klabin to engage the assistance of Childhood Foundation, as done for Puma I, to provide support for the prevention of violence and sexual abuse against children and to strengthen the response services. As requested by the committee, Klabin will engage the services of specialized organization(s) to implement gender-based violence (GBV) prevention programs for target groups (children, adolescent groups, sex workers, etc.) in the project area and in hotspots along transportation corridors. The organization(s) will also assess the quality of psychosocial, medical, police and judicial response services to GBV survivors in the project area and provide recommendations to the monitoring committee for strengthening of these services. (ESAP item nr. 9)

Transportation of wood logs:

Klabin's forestry operations in Parana has 85 trucks for transporting logs, wood chips, machinery, and wood inside the company's log yards. In addition, Klabin has a contracted fleet of 430 trucks (about half belong to five large logistics contractors but there are many smaller contractors with less than 10 trucks).  The average number of trips by logging trucks to Monte Alegre and Puma mills is 780 per day.  With the launch of Puma II, Klabin's daily wood demand in Parana will increase to approximately 950 truck shifts per day with an average transportation distance of 120 km.

To reduce the risks of vehicular accidents, Klabin has installed satellite telemetry and on-board video monitoring in its own trucks. Trucks are monitored 24/7 by a team of five monitors who are in contact with drivers via radio. The system allows to upload maps with specific speed limits and warns drivers when they surpass the limit.  In contrast, contracted trucks are only equipped with radio transmitters that allows to monitor their location but not the speed on real time. Information on speed is averaged daily by the forestry logistics team. All new contracts with logistics companies will require the installation of telemetry and on-board video monitoring to allow for real-time monitoring. Klabin expects that all trucks will have the systems installed by 2021. Once logging trucks arrive into Puma or Monte Alegre industrial sites, they are weighted for inventory purposes and to monitor that trucks do not exceed the allowable transportation weight of 39 tons. The information is continuously monitored on-line by the logistics team.

In addition to vehicle monitoring systems, Klabin has driver safety and vehicle replacement and maintenance requirements (contractual arrangements require the replacement of tractor units every three years and trailer units every six years). In 2017, the frequency of vehicular accidents was 11.82 per million hours of exposure as a result of 70 accidents. By the end of July in 2018, the frequency decreased to 7.09 per million hours of exposure as a result of 26 accidents (mostly truck rollovers).

The current road transportation network goes through 83 communities or dwellings. Before an area is harvested, Klabin identifies the communities and dwellings along the route. Klabin's social team approaches the communities to inform about the pending transit of trucks, agree on mitigation measures (e.g. times when trucks should not circulate, road repairs, etc.), and provide information on Klabin's external grievance mechanism. Individuals can contact Klabin through email, phone, and WhatsApp. In 2018, Klabin received 873 complaints in Parana, more than half of the complaints were linked to truck traffic: road dust – 29%, road conditions – 12%, speeding – 5%, dangerous overtake – 5%. Klabin is continuously researching and testing means to reduce road dust; innovations include sprayers in front of logging trucks and road surface compacting material.

Forest fires:

Klabin has a well-structured forestry fire prevention plan that include meteorological monitoring, permanent terrestrial monitoring, radio communication, training, six firefighting trucks and a network of water supply points for firefighting. Plantations are monitored by 23 watchtowers located around Klabin's plantations assets. Towers are manned from 10 am to 6.30 pm. Klabin's fire brigade relies on 36 direct employees and 50 employees from contractor's firefighting teams. As the two main risk areas of forest fires in Parana are Jaguariaiva and TelemacoBorba, which are regions with higher population density, more forces to detect and combat fires are concentrated on those areas. Good relationship with neighbors, which promptly inform Klabin in the event of fires close to plantations, has allowed Klabin to reduce the need for its own watchmen in the field. In the last decade, a total of 1888 ha have been affected but only 80 ha of plantations were lost to fires. While historically, fires have not been a problem, climate change projections for the area show increasing temperatures and decreasing rainfall patterns. Klabin will therefore assess the increasing risk of fires due to climate change and expanding forest plantations and ensure resources needed to mitigate this risk are readily available (ESAP item nr. 10).

Tree falls:

Klabin has operational procedures applicable to planting and harvesting operations including increased setbacks of plantations from residential buildings to avoid accidental tree falls during harvesting or due to natural storm events. 

Security Forces:

Klabin's forestry assets in Parana are safeguarded by a team of mobile patrols (23) and observation towers (19). Security officers are unarmed and trained in conflict resolution Klabin's efforts in improving relationships with neighboring communities has allowed the company to reduce the need of security officers in the past decade. Similarly, access to industrial sites is controlled at checkpoints by unarmed security officers. Security officers are trained to respond to threats to company's facilities and request the intervention of police forces in case of criminal activities. During the construction of Puma II, access to the construction site will also be monitored by Klabin. All employees, visitors, and contracted workers entering the site must carry an identifying badge issued by Klabin.                

For the construction of Puma II, only an area of 1 hectare of recently regenerated secondary forest will have to be converted. Klabin is in the process to obtain the tree suppression permit from the environmental authority.  As part of the environmental licensing requirements for Puma I, Klabin had to implement an aquatic fauna monitoring program. The program will continue with the expansion of Puma II. The most recent monitoring campaign took place in January 2019. No difference in species diversity was identified upstream and downstream the effluent release point. No long-range migratory, endangered, or endemic species were identified. Is important to note that the Tibagi river has been heavily impacted by dams; in particular, the area where the effluent is released, has been impacted by the Maua hydroelectric dam which converted the area into a lentic ecosystem in 2014.

At the time of appraisal, Klabin owned or leased 361,000 hectares in the State of Parana: 200,000 hectares are dedicated to eucalyptus and pine plantations, and 161,000 hectares are protected native vegetation.  Almost 100 percentKlabin's forest units are FSC-certified. Klabin actively manages its private reserves – mostly constituted of the highly-threatened Brazilian Atlantic Forest ecosystem – and has a team dedicated to the control of invasive species. Klabin has also a nature interpretation and wildlife rescue center, and environmental education programs for students in TelemacoBorba and Ortigueira. Klabin engages an environmental consulting firm to regularly monitor the presence of terrestrial fauna inside its protected areas and plantations, and the health of the forest ecosystem.   

Klabin has an outgrower program with small farmers called FomentoForestal. Klabin has more than 3,000 “fomentados” covering 50,000 hectares of plantations. In addition to provide seedlings and technical assistance, Klabin – through a local environmental NGO – assists farmers in the identification, protection and restoration of Areas of Permanent Preservation (APP) and Legal Reserves inside the farms, and in the registration of the properties in the Cadastro Ambiental Rural (CAR). As of 2018, 814 properties participating in the FomentoForestal have been registered in the CAR and 14,000 hectares of land has been protected under APP and Legal Reserves. Klabin also assist “fomentados” interested in achieving FSC certification. Today, about 250 “fomentados” covering 10,000 hectares of plantations, are certified under the FSC small or low-intensity managed forest (SLIMF) program. Klabin covers FSC-auditing expenses and pays a premium price for FSC-certified wood. 

In 2018, 7.2 million tons of wood were harvested from owned and leased plantations, and 3.5 million tons were acquired from 160 third-party suppliers (including “fomentados”). Third-party farms that are not FSC certified are assessed against FSC criteria for controlled wood (Klabin must maintain the amount of controlled wood below 30% to maintain its FSC mix certification). Both FSC-certified and FSC-controlled-wood include the requirement that plantations cannot be established in natural forests deforested after 1994. In 2018, Klabin conducted 814 FCS-controlled wood audit visits among its 160 third-party suppliers. Klabin does not purchase non-traceable wood.    

The ESIA for Puma I identified two indigenous communities of the Kaingang ethnic group in the project's indirect area of influence: Queimadas and Tibagy-Mococa. As part of the permitting process, Klabin engaged an anthropologist to develop an Indigenous Peoples plan (Plano Basico Ambiental Indigena – PBAI). The PBAI was approved by the Brazilian National Indian Foundation (FUNAI) in April 2019. The plan includes multiple programs – participatory monitoring of Puma's environmental impacts, scholarships, revitalization of Kaingang culture and handicrafts, biological corridors and agroforestry – and has a duration of five years. \

Klabin has mapped indigenous or traditional communities (e.g. faxinales, quilombolas) in the areas of wood sourcing. When a community is located within a 5-10 km buffer from prospective land, Klabin carries out additional analysis to prevent encroaching on their land. Klabin will formalize this practice and update its land acquisition procedure to documented what risk mitigating measures must be taken when prospective land is located within a predefined buffer of a community and in which cases the company will not acquire the land (ESAP item nr. 11).

While the environmental licensing process for Puma II did not identify additional indigenous communities, Klabin has identified 9 indigenous areas, 41 faxinal communities and 27 communities of quilombo remnants inside its wood sourcing range. Klabin will reinforce cultural sensitivity training of employees/workers likely to be in contact with such communities, in particular drivers and workers in patrimonial security (ESAP item nr. 12). Klabin will also developed communication/training material to raise awareness on the presence of Indigenous People in the project area and among the workforce to prevent discrimination and harassment by Klabin's and contractor's personnel as done for Puma I (ESAP item nr. 13).

In 2013, an anthropic monitoring committee was setup to monitor the socio-economic impacts of Puma I in the municipalities located in the project's direct and indirect area of influence (Ortigueira, TelemacoBorba, Imbau). The committee – comprised by representatives of the three municipalities and Klabin – has been meeting regularly to analyze indicators in education, health, public safety, economic development, social services, and public finances.  This committee continues to operate and will meet every month during the construction of Puma II. In addition to the anthropic monitoring committee, Klabin's social team systematically engages with communities along transportation corridors to inform them about the pending transit of trucks, agree on mitigation measures, and provide information on Klabin's external grievance mechanism.

Individuals in Parana can contact Klabin through email (faleklabinpr@klabin.com.br), phone and WhatsApp (0800 728 0607), and through the company's website (https://www.klabin.com.br/en/contact-us/#@our-ombudsman). In 2018, Klabin received 873 complaints in Parana, less than 10 complaints were still open by the end of the year.

Klabin discloses annual sustainability reports available at http://rs.klabin.com.br/en/.No consultation was required as part of the licensing process for Puma II. Nevertheless, Klabin will present an updated social baseline for Puma II and its associated Social Investment Plan to relevant stakeholders (ESAP item nr. 14).

 Gustavo Rocha Garcia 

gustavo.garcia@klabin.com.br

+ 55 11 3046-8437