IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
E&S Management System (ESMS). SMTO developed its Integrated Management System (SGI, in Portuguese) and implemented comprehensive management programs and operating procedures for its sugarcane plantations, mills, and bio-energy generation, in compliance with Brazilian legal and regulatory requirements and aligned with IFC PS requirements. As a part of its ESMS, STMO adheres to international management standards, including ISO 9001, ISO 14001, ISO 31000, ISO 45001, GMP+ FSA, and recognized Brazilian standards (i.e., NBRs). SMTO has also established a robust OHS Management System (OHSMS) within its operations. The OHSMS encompasses hazard and risk analysis, inspections, emergency response plans/training, contractor management, and road safety programs.
E&S Policies. SMTO has documented environmental and OHS policies stating its commitment to protecting and preserving the environment, promoting rational use of natural resources, minimizing environmental risks and impacts, committing to continuous improvement of its ESMS, and complying with applicable laws and regulations, integrity, safety, and promoting employees' well-being. These policies define and systematized EHS-related practices and guidelines in STMO’s agriculture and industrial operations, including good international production practices (GIIP) and sustainability production standards, such as Bonsucro, Renovabio, and the Agro-environmental Protocol. The policies are implemented through E&S management plans (ESMPs) and OHS plans, which will be further discussed in the sections below. SMTO’s EMP and OHS policy are disclosed in its website. Key performance indicators (KPIs) for effective policy implementation have been defined and are regularly monitored by the Executive Board and the Board of Directors (BoD).
Identification of E&S Risks and Impacts. SMTO identifies and manages E&S risks and impacts through compliance with applicable Brazilian legal and E&S regulatory permits and requirements. The company maintains a risk management structure to identify and assess potential risks and impacts, including ESG-related topics. The processes are systematized in a Risk Management Policy guided by ISO31000. Annually, STMO prepares a Risk Prevention Plan (Plano de Prevenção de Riscos Ambientais – PPRA). As the three mills in São Paulo were constructed prior to the implementation of the State’s environmental regulations, those were exempt from the preparation of Environmental Impact Assessments (EIA). Due to subsequent expansions, both São Martinho and Santa Cruz mills were required by the environmental agency (CETESB) to undergo the EIA process. STMO secured their environmental permits (Operating License - LO), which were renewed in 2022 and 2023. The Boa Vista mill, located in the state of Goias, prepared an EIA Study and successfully obtained its LO in 2022.
The biomethane plant is exempted from an EIA process as per State’ environmental regulations. SMTO obtained the Installation License (LI) issued by CETESB in September 2023. The LI authorizes SMTO to produce 1.657 473,80 m³ of biomethane annually, by developing operations for cooling "in natura" vinasse up to 40 ºC, alkalizing vinasse, producing biomethane in a biodigester, removing impurities, deodorization, pressurization, compression or compression or injection into the power grid. According to the T&Cs of the environmental license, the development of an E&S Management Plan (ESMP) is required for the biomethane plant, including (i) an effluent management plan, (ii) a chemicals storage plan, (iii) a flare emissions monitoring plan, and (iv) a groundwater monitoring plan. SMTO will (i) develop and implement the required ESMP in accordance with the environmental license T&Cs, (ii) oversee the contractor's compliance with SMTO's and national EHS/labor requirements, and (iii) inform the nearby communities before starting the construction of the biomethane plant (ESAP#1).
The vinasse bio-digestion process for biomethane generation was designed by SMTO and SebigasCótica. The process will involve cooling vinasse in a tower, storing it in buffer lagoons, and gravity-transferring it to digesters with temperature adjustments (40 to 50 °C). To minimize emissions, vinasse cooling towers will include eliminators for droplets and mist, ensuring no aerosol emissions. Gravity-fed vinasse will reach Effluent Collectors (EC), while centrifugal pumps transfer stillage from combined structures to Covered Lagoon BioReactors (CLBRs). In CLBRs, vinasse transforms into biogas, collected through a tube with drainage features. The biogas will be directed to a desulfurization system via two branches connected to the main header.
E&S Management Programs. SMTO adopted corporate E&S management programs and SOPs Manual, including a soil conservation manual, waste management plan, procedures for investigation of environmental occurrences, and chemical products management plan. Mandatory ESMPs are also in place as defined by the T&Cs of environmental licenses and include management and monitoring plans for solid and hazardous wastes, air emissions and ambient air quality, water and groundwater intake, vinasse application, fauna and flora, traffic safety and control, protected areas (e.g., Reserva Legal) among others.
E&S Organization Capacity/Competency. At corporate level, SMTO has three managers responsible for the implementation of the SGI/sustainability system and annual workplan, OHS, and environmental aspects of the agricultural and industrial operations. The SGI department and the environmental departments report to the Chief Operating Officer (COO). The SGI comprises seven (7) analysts accountable for certifications, audits, establishing E&S policies and procedures, implementing ISO and GMP+FSA, GHG inventory, relationship with ESG rating agencies, ESG KPIs definition and analysis, and developing the annual sustainability report. The environmental department has thirteen (13) analysts/specialists responsible for environmental issues related to agricultural and industrial operations, including obtaining environmental permits, implementing, and monitoring E&S management programs, and dialogue with environmental and water agencies. The OHS department reports directly to the HR function and comprises thirty-five (35) professionals accountable for OHS day-to-day monitoring and Life and Fire Safety (L&FS) supervision. At mill level, the OHS team consists of an OHS engineer and several technicians, doctors, nurses, and physiotherapists. From an EHS perspective, the execution and oversight of SMTO's E&S management programs, including those related to biomethane construction and operation, are/will be well managed by SMTO’s cross-function EHS teams. The compliance department (GRC) is responsible for implementing and monitoring good practices and overseeing ethical issues, including corruption, fraud, and anti-ethic incidents. The GCR reports directly to the Ethics and Compliance Committee. Recently, E&S and OHS-related topics have been incorporated into the Committees' agenda.
Emergency Preparedness and Response (EPR). STMO has implemented mandatory ERP plans in compliance with Brazilian laws. SMTO has devised contingency plans to minimize water withdrawals, prevent fires, and respond to emergencies in the event of fire outbreaks. These plans form a crucial part of SMTO's strategy for addressing climate-related risks. Each mill has comprehensive fire-fighting plans in place, encompassing monitoring and surveillance systems, strategically placed observation points, necessary Personal Protective Equipment (PPE), designated critical points, fire brigade maps, criticality maps outlining structures, identification of local communities, maintenance of firebreaks, and a detailed emergency plan outlining personnel and available resources.
Monitoring and Reporting. As part of the corporate Integrated Management System (SGI), SMTO monitors KPIs, including average hours of training, energy consumption, water consumption and discharge, air and GHG emissions, waste generated, and work-related injuries (available in STMO Sustainability Report). As defined in the environmental licenses’ T&Cs, SMTO monitors its ESMPs (see Management Programs section above). Internal guidelines set forth criteria for quality and quantity in EHS monitoring, investigation of non-compliance, and the formulation of preventive and corrective action plans in case of deviations. Scheduled inspections conducted by the EHS team across all operations are reported to senior management for effective monitoring and oversight.
Supply Chain Assessment and Management. SMTO oversees a network of 3,000 goods, services, and raw materials suppliers. Around 30% of its sugarcane processed is sourced from third-party suppliers. In contrast, less than 10% of sugarcane processed at Santa Cruz mill is planted by third-party suppliers. In 2022/2023, SMTO strengthened its due diligence by incorporating third-party supplier risk assessments and leveraging advanced software for enhanced scrutiny, aligning its supply chain assessment and management with PS2/PS6 requirements. The risk screening tool utilizes satellite imagery and analyzes 22 ESG criteria to cross-reference public information on companies (e.g., banned, fined, or investigated companies). 100% of newly contracted suppliers, including transporters and sugarcane contract growers, have been verified. SMTO updated its Sourcing Procurement Policy and developed a Purchasing Manual, which reinforced specific topics on risk assessments, third-party management, and compliance. SMTO has a Sustainable Procurement Guidelines, which provide specific ESG-related parameters for purchases. SMTO rates its suppliers with Supplier Qualification Rating (IQF), assessing indicators such as punctuality, sustainability, performance, quality, and OHS. A Sustainable Supplier Management Program, developed based on the “B3 Corporate Sustainability Index (ISE)”, applies to critical suppliers (i.e., volume of expenses/purchases). These suppliers are required to complete a self-assessment questionnaire to inform ESG-related topics, including OHS, diversity and inclusion, human and labor rights, community relations, environmental policies, biodiversity, energy, water and effluents, waste, GHG emissions, risk management, code of conduct, whistleblowing channel, anti-corruption practices, and supplier management. The company assesses all contracts before signing and continuous monitoring is conducted by the GRC team.
PS2: Labor and Working Conditions
As of January 2024, SMTO employed 12,642 workers directly distributed across its three mills (Santa Cruz mill directly employs 3,578 workers) and refinery. 8 percent are women and 92 percent are men. 87 percent of total workers are blue-collar workers and 13 percent are administrative workers, supervisors, technicians, coordinators, and managers. SMTO hires approximately 500 seasonal workers yearly, mainly for maintenance of industrial equipment. The need for sugar cane cutters and other workers involved in heavy manual work duties is minimal, due to the mechanization of the planting and harvesting operations. 97 percent of the workforce is hired locally. The company expects to have 300 – 400 contractors on-site during the construction phase for the biomethane plant.
Human Resources Policies & Procedures. SMTO has Human Resources (HR) policies and practices, which are aligned with PS2 requirements and readily available to workers, including seasonal workers. These policies and practices define career development and succession, compensation, benefits, social responsibility, recruitment, training, travel, and transfer between units. The implementation of HR procedures is led by the HR department and all direct employees are properly onboarded on key HR documentation. People development and management trainings are available, including behavioral awareness program, leaders meeting, agro-industrial meeting, leadership academy, end-of-career management program, among others.
SMTO has also adopted a Code of Ethics and Professional Conduct (CoE) in 2021, that is applicable to employees, contractors, and third-party sugar cane suppliers. It covers aspects related to the compliance with Brazilian regulatory E&S requirements, labor and human rights, safe work environment, professional development, equal opportunities and non-discrimination, non-retaliation, integrity, prohibition of child and forced labor, relationships with stakeholders, shareholders and suppliers, conflict of interests, and data protection. Suppliers and contractor’s contracts include covenants to ensure adherence SMTO’s CoE. In 2022/2023, SMTO's BoD approved a Social Responsibility Strategy, focused on Human and Social Capital with two main pillars: (i) strengthening governance in social responsibility and (ii) promoting social transformation through education. For 2023/2024, SMTO will enhance its Community Engagement, Human Rights, and Diversity and Inclusion (D&I) areas.
Working Conditions and Terms of Employment. SMTO is committed to ensuring fair and equitable standards for wages, benefits, and health and safety working conditions, aligned with PS2 requirements. It promotes a positive employer-worker relationship and initiatives to retain and motivate the workforce. The duration of work, breaks, overtime, annual and sick leave, and maternity leave adhere to Brazilian labor regulations (CLT) and collective bargaining agreements (CBA). The standard workweek is 44 hours, not exceeding 10 hours daily (including overtime). Employees are entitled to 30 days of annual leave, at least one full weekly rest day, mandatory 1-hour breaks for meals, and 15-minute breaks during the day. Sick leave is permitted with a doctor's assessment, and for absences up to 15 days due to illness, workers are covered by the Federal Social Security Program (INSS).
Non-discrimination and Equal Opportunity. Forced/child labor, harassment, and discrimination are treated as crimes under Brazilian law. SMTO's CoE prohibits forced labor, child labor, and harassment. Workers are encouraged to report any situation of harassment, discrimination, violations of legislation, and misconduct to the Ethical Channel (see grievance mechanism section below). The hiring process and promotion follow well-established policies based on merit and competencies. No evidence of discrimination was found during the appraisal.
Workers Organization. SMTO recognizes employees’ right to freedom of association. 100% of direct employees were covered by CBA since 2020. The workforce can adhere to three unions at each workplace depending on the nature of the job (e.g., Union of Food Industry, Union of Rural Workers, or Union of Truck Drivers). SMTO participates in the negotiations with the Union’s Federations at the State level.
Protecting the Workforce. SMTO adheres to the Brazilian regulations, which require 18-years old as the minimum age for employment. The Company engages trainees of 16-17 years of age under the Brazilian government's Jovem Aprendiz training program, limiting workweek hours, and prohibiting exposure to hazardous labor. An approved program to train and retain people with disabilities is also in place.
Worker’s Grievance Mechanism. SMTO’s worker grievance system is coordinated by the GRC team and defined by the company’s Compliance Policy and CoE. The system allows anonymous internal and external complaints and is accessible via online platforms, including e-mail (etica@saomartinho.com.br), hotline (0800 777 3131), website (https://www.canaldeetica.com.br/saomartinho/) and intranet. The process is confidential and reported to the senior management regularly. The Ethics and Compliance Committee meets quarterly to analyze the Ethical Channel balance sheet and to discuss relevant issues related to ethics and conformity. The ethics hotline is managed by an external independent firm under GRC management. The number and issues of the grievances submitted are disclosed in the Sustainability Report. In 2022/2023, the channel received 395 reports, including complaints, concerns, inquiries, and compliments. By March 31, 2023, 250 reports had been concluded, with 133 deemed unfounded, 52 partially founded, 34 founded, and 31 inconclusive. SMTO has a resolution timeframe to address all grievances from internal and external stakeholders.
Workers Engaged by Third Parties. SMTO utilizes external companies for workers transportation, cleaning, maintenance, specialized agricultural services (e.g., GPS mapping), waste transportation and security services. The Procurement Department manages contracting, whereas the HR and OHS departments are responsible for ensuring labor and OHS compliance. The process involves highly detailed labor/OHS checklist, and the GRC assesses all contracts before signing (ref. Supply Chain Assessment and Management section above for more details).
Occupational Health & Safety (OHS). SMTO’s OHS policy and OHSMS are aligned with PS2 requirements. The company has implemented mandatory OHS programs as required by Brazilian law, such as the Risk Prevention Plan, the Occupational Health Monitoring Plan (PCMSO), and the Hearing Protection Program. SMTO adheres to national regulatory standards, specifically NR33, NR13, and NR10. Its OHSMS consists of 13 pillars, covering leadership, hazard analysis, inspections, training, emergency response, controls, contractor management, and safety. Continuous risk assessment involves real-time evaluations of routine activities and investigation into incidents. OHS protocols covering different work scenarios are in place, including working with energized equipment, at heights, in hot environments, and in confined spaces. Specific hazardous works require additional authorization from the OHS manager. All preventive measures are mandatory for all workers and contractors, and encompass EHS induction, regular training, health check-ups, daily OHS dialogues, and the usage of PPE.
SMTO harvesting has been mechanized since 2016, including at Santa Cruz mill. With the mechanization of the planting and harvesting process, the need for cane cutters and other workers involved in heavy manual work duties is now minimal. In areas with topographic situations, harvesting may occur manually. Impacts and risks related to manual harvesting, including OHS risks and chronic kidney disease (CKD) strictly follows SMTO’s Risk Prevention Plan, and the PCMSO, including education and awareness activities to promote healthy lifestyle behaviors.
The company's loss-time injury frequency rate (LTIFR) remained stable in 2022/2023 and 2023/2024 with a rate of 0.9. The average lost-time injury severity rate (LTSIR) has decreased from 376.9 in 2022/2023 to 43.6 in 2023/2024. SMTO has been investing in the automation of its industrial processes to reduce the number of workers inside the operational area. In agricultural and industrial operations, there are so-called CIPAs, employees who have received basic firefighting and first aid training. Currently, OHS indicators are consistently monitored and reported to the BoD, with the company aiming for a zero-accident frequency rate within five years. Three OHS committees, including the Strategic, Tactical, and Operational Committees, meet quarterly to oversee the OHSMS, establish priorities, and ensure compliance.
In response to the 2023 IFC SSV and agreed upon Corrective Action Plan (CAP), SMTO took substantial measures to enhance its OHSMS. These actions involve the (i) implementation of a real-time driver's fatigue monitoring system, (ii) updates to the root cause analysis process, (iii) formulation of a new safety protocol to elevate overall safety standards, and (iv) establishment of a dedicated well-being room providing health assessments and promoting physical activity and a healthy diet among employees. The driver's fatigue monitoring system actively tracks unsafe behaviors such as improper seat belt usage, mobile phone use, fatigue, speed issues, and distractions. Utilizing advanced AI, the system identifies signs of fatigue and issues alerts to the Agricultural Operations Center (AOC) after three consecutive instances. Trained OHS personnel instruct fatigued drivers to park, and another qualified driver is assigned to operate the vehicle. The fatigued driver is then directed to the well-being room for health assessments. SMTO collaborates with local authorities for severe accidents, conducting comprehensive investigations to identify root causes and formulate action plans.
Supply Chain. Approximately 30% of the sugarcane processed by SMTO originates from third-party suppliers, with the majority being mechanically harvested by SMTO. Regarding the Santa Cruz mill, less than 10% of sugarcane processed is planted by third-party suppliers. Some supplier groups opt to carry out the harvesting independently. Contracts with suppliers and contractors encompass clauses designed to guarantee compliance with SMTO's CoE, Brazilian labor laws, International Labor Organization (ILO) conventions addressing child and forced labor, as well as stipulating working conditions for all employees, including seasonal workers (see the Supply Chain Assessment and Management for more details).
PS3: Resource Efficiency and Pollution Prevention
Resource Efficiency. SMTO meets its electricity needs through co-generation from thermal power plants fueled by bagasse. In 2022, the company's energy consumption, excluding fleet vehicles, totaled 49,095,031 GJ. The electricity generated from biomass in two mills is certified as renewable through I-REC certification, with over 95% of the fuel used in operations sourced from renewable sources. Water is sourced from both surface and groundwater. The company's water consumption is 13,206.44 million liters, and the water intake is 1.32 cubic meters per ton of cane (m3/tc). These values exceed both CETESB's and the WBG EHS Guidelines for Sugar Manufacturing (1 m³/tc and 0.5 to 0.9 m³/tc, respectively). Currently, SMTO is implementing an upgraded circuit cooling system to reduce water intake at São Martinho's mill production and has developed individualized action plans for each mill to limit water usage to 0.70 m³/tc by 2030. SMTO will provide the monitoring usage report of Santa Cruz mill (ESAP#2).
The water intake authorization issued by the local authority (Department of Water and Electricity - DAEE) granted an intake of 990 m³/h. The current water abstraction capacity at the Santa Cruz mill, encompassing both surface and underground intakes, stands at 634.2 m³/h and operates at a flow rate of approximately 0.59 m³/ton of cane, in adherence to the technical guidelines for licensing projects in the sugar and alcohol sector in the State of São Paulo (i.e., Resolution SMA 88/2008). Surface water abstraction sources are derived from the Ribeirão das Anhumas spring (60%), Córrego do Paulino (35%), and Córrego João Mendes (5%).
Greenhouse gas emissions. SMTO conducts annual Greenhouse Gas (GHG) emissions inventory, adhering to GHG Protocol guidelines. Historically, the company’s highest emissions were in Scope 1. Scope 2 emissions are low due to the use of renewable energy from wind sources. Scope 3 emissions related to goods and services are monitored and managed. SMTO has been monitoring and controlling the cane-field operations and adopting rational use of fertilizers and agro-chemicals to increase productivity.
Air Emissions. SMTO conducts annual monitoring of its air emissions to ensure compliance with Brazilian regulations, specifically CONAMA Resolutions 382/06 and 436/2011. In January 2020, the company successfully completed the necessary air dispersion modeling, confirming no adverse impact on the ambient air surrounding its Cogen plant. As part of ESAP#1, SMTO will monitor the emission levels of the biomethane plant, including flare emissions, as described in the T&Cs of the biomethane environmental license and by CETESB, which in aligned with the WBG EHS Guidelines’ values.
Noise emissions. SMTO complies with national regulatory standards, namely NR 7 and 15, which define protocols for ensuring the protection of workers. As part of its OHSMS, SMTO has implemented a Hearing Protection Program and conducts annual assessments in accordance with the T&Cs outlined in environmental licenses.
Wastewater Management. SMTO wastewater is mixed and utilized as fertilizer in the sugarcane plantations, following a carefully managed ferti-irrigation program. Vinasse is pumped to the fields through pipelines, intermediary storage ponds are lined with high-density polyethylene cover to prevent groundwater contamination, and the amount of wastewater applied in the plantations is determined by the soil characteristics and nutrient needs. The application of vinasse strictly adheres to CETESB standards.
Solid Waste Management. SMTO has a corporate solid waste management plan (PGRS). The Company adheres to the national and state requirements, including the waste transport manifest (MTR) and the national solid waste policy (PNRS) provisions. Significant amounts of solid waste produced from the sugar mills are organic waste, including filter cake and ashes from boilers, which are taken to the mixing area to meet the nutritional needs for production purposes. Metal scrap is segregated, stored outdoors, and sold for recycling. The solid waste from administrative areas and dining halls is collected and disposed of through the local public waste system.
Hazardous Materials. SMTO stores ethanol and chemicals related to the process, such as soda, sulfur acid, chlorine, cyclohexane, and agro-chemicals. The company has hazardous waste management procedures and OHS protocols, including a risk prevention plan and appropriate sorting, handling, storage, and disposal system consistent with applicable legal requirements. In 2022/2023, 99.97% of SMTO-generated waste was classified as non-hazardous, according to NBR 10.004/04. The reused waste generated from suppliers and maintenance activities, including packaging, scrap, and various contaminated materials, are properly disposed of. The hazard classification is determined according to material safety data sheets (MSDS).
Pesticide Use and Management. SMTO only uses agro-chemicals and fertilizers approved by the Ministry of Agriculture (MAPA), with application rates and methods adapted to minimize consumption. None of the pesticides used fall into WHO class hazard Ia or Ib, which is also verified under Bonsucro standard audits. The company also employs biological control techniques, such as using the Cotesia flavipes parasite to manage the sugarcane borer population and Metharizium bacteria to control Drury larvae. Recently, SMTO has adopted bio-inputs to stimulate biological activity in the soil and decrease reliance on agro-chemicals. All empty pesticide containers are collected and delivered to certified recycling companies. Centralized warehouses are in place for pesticide storage. Products are segregated by hazard class, the floor is sealed, the area is contained, and proper ventilation and warning signs exist.
PS4: Community Health, Safety and Security
Community Health and Safety. Although SMTO operations are in rural areas, there are a few communities surrounding its mills. Potential concerns include explosions from ethanol tanks, air emissions from boilers, dust from truck transportation, and drifts from herbicide aerial spraying. The company has mapped rural villages and settlements and adopted preventive measures to avoid risks and impacts arising from its operations, including creating safety buffer zones, monitoring weather conditions during aerial spraying and notifying neighbors about spraying schedules, and maintaining a road safety program for sugarcane transportation. Risks related to explosions from ethanol tanks are covered by its emergency preparedness and response plans as required by Brazilian laws, such as the risk prevention plan.
Food Safety. SMTO has yet to implement a management system for verifying whether suppliers are certified to a Global Food Safety Initiative (GFSI) recognized food safety certification program. In 2022/2023, the company conducted an FSSC 22000 audit at the Santa Cruz mill, specifically focusing on the production and sale of neutral industrial hydrous ethanol. Currently, SMTO relies on good agricultural practices (GAPs) program that includes the use of pesticides approved by MAPA. In addition, SMTO conducts hazard analysis and critical control points (HACCP) assessments to eliminate or mitigate chemical, physical, and biological hazards to acceptable levels.
Infrastructure and Equipment Design and Safety. As discussed above, SMTO has a comprehensive risk prevention plan comprising PSs-related elements, including process safety information, a thorough review of all process risks, change management protocols, maintenance and integrity considerations for critical processes, operational procedures, a structured training program, accident investigation procedures, emergency response protocols, and routine audits. In alignment with the 2020 IFC ESAP, the company is developing a preliminary operational risk study, utilizing analysis tools, including hazard and operability study (HAZOP), reliability centered maintenance (RCM), failure mode effects analysis (FMEA), and preliminary risk analysis (APR). The completion of this risk assessment is scheduled for October 2025. SMTO will conclude the operational risk study, update actions and ERPP to mitigate potential risks identified that may arise from the biomethane plant (ESAP#3).
Life and Fire Safety (L&FS). SMTO has been investing in fire prevention of its facilities, employing intrinsically safe electrical circuits and engines, fireproof conveyor belts, proper grounding of idlers, idlers with enclosed ball bearings, and equipment thermographic monitoring. The company has fire suppression systems and holds all its mills' L&FS certifications (auto de vistoria do corpo de bombeiros, AVCB). The company has a drills schedule, emergency brigades, and inspection and audit protocols to review and regularly assess the emergency response equipment's condition. As agreed in the 2017 ESAP, SMTO completed the designs of L&FS systems, which were approved by the local authorities. SMTO has a mutual emergency assistance plan with nearby producers, consisting of a voluntary association between sugarcane companies and public authorities to increase safety against fire incidents.
Security Personnel. SMTO relies on 88 armed and 72 unarmed guards to control access to the sugar mills. Currently, three (3) third-party firms provide security services. All personnel must have cleared records, special training, and certification from the Federal Police to carry arms. SMTO has identified all possible scenarios of security threats inside and outside the mills, and specific guidance for security personnel includes radio communication, support from central security, communication with security authorities, and panic buttons.
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
Protection and Conservation of Habitats. SMTO plantations are located exclusively in areas traditionally used for agriculture. No conversion of natural habitats or significant loss of biodiversity has been observed, nor is it anticipated. The company rigorously adheres to the Brazilian Forest Code (Código Florestal) and state environmental regulations, allocating 20-30% of their lands as compulsory biodiversity conservation areas (Reserva Legal) and establishing adequate buffer zones along rivers and around water bodies (Áreas de Proteção Permanente). 100% of STMO properties have been assessed by independent technicians. No restoration was requested by the environmental agency (CETESB). Assessments are carried out as part of the process for registration with the rural environmental registry (CAR).
Sustainable Management of Living Natural Resources. SMTO employs a soil and water conservation manual, implementing strategies to mitigate erosion, enhance water infiltration and soil storage, and optimize the productive land area. The Company uses organic wastes from ethanol production, such as vinasse mixed with other compatible materials, to minimize reliance on chemical fertilizers. When chemical fertilizers are employed, their usage is tailored to the specific needs of the soil, guided by thorough fertility analysis and crop extraction requirements. Pre-harvesting burns in sugarcane fields are strictly prohibited by environmental regulations. All SMTO plantations and mills hold certifications from Bonsucro and RenovaBio.
Supply Chain. SMTO oversees 350,000 hectares of land, with 70% under direct ownership or held through leases and partnerships. The remaining 30% is in the possession of contract growers. All the company's plantations, including lands from third-party suppliers, adhere to mandatory environmental and CAR standards. The presentation of CAR is a mandatory prerequisite for establishing contractual agreement with new growers. SMTO requires landowners to meet biodiversity conservation requirements as part of the lease agreement.
