Sustainability
Report | 2017

(GRI 102-1, 102-2, 102-5, 102-10, 102-12)

Klabin is a publicly traded company founded in 1899, operating 17 industrial plants in Brazil and 1 in Argentina. It is the largest producer and exporter of packaging paper in Brazil, and the only Brazilian company to offer the market a solution in hardwood, softwood and fluff pulps, and the lead company in the domestic markets for corrugated board packaging and industrial bags.

In order to provide a broad mix of products to the domestic and international markets, Klabin adopts an integrated view of its business, from the forest to the production outflow. Its entire production cycle is based on operational efficiency, marked by Innovation, Sustainability, People and Performance.

Commitment to sustainable development is a premise for Klabin’s business deals. The company seeks to achieve integrated and responsible growth, combining profitability, social development and environmental commitment. In line with the new trends in consumer behavior, the company is prepared to offer the market solutions based on secure, lightweight, efficient and recyclable packaging, resulting from renewable, biodegradable and flexible sources.

Klabin has been included in the Corporate Sustainability Index (ISE) since 2014. It is also a signatory to the UN Global Compact, the Brazilian Pact to Eradicate Slave Labor, and the National Pact Against Corruption. The company seeks suppliers and business partners who are committed to the same values in ethics, transparency and respect for the principles of sustainability.

(GRI 102-6)

Forestry

Responsible for the management of forests planted by Klabin, which includes the planning, planting, harvesting and transporting to supply raw material to the company’s pulp and paper mills.

Pulp

Responsible for the production of hardwood pulp (eucalyptus), softwood pulp (pine) and fluff pulp. Manufactured for the first time in Brazil from pine softwood pulp, fluff pulp is an important input for the production of diapers, disposable absorbents and other products.

Papers

It produces paperboard for liquids and for the food, hygiene and cleaning, electronics and consumer appliances industries, among others. Supported by state-of-the-art technology, Klabin manufactures Kraft paper used in corrugated board boxes and industrial sacks, as well as recycled paper.

Conversion

It converts Kraftliner and sack Kraft paper into corrugated cardboard and industrial sacks, respectively, to be used by the food, beverage, fruit and vegetable, health and personal hygiene, electronics and consumer appliances, and construction sectors.

(GRI 102-3, 102-4, 102-6, 102-7)

Klabin is headquartered in the city of São Paulo and has 18 industrial units, 17 of which are located in Brazil, and one in Argentina. It has commercial offices in eight Brazilian states, a branch office in the United States, an office in Austria, as well as representatives and commercial agents in several other countries.

The company’s forests are cultivated in three Brazilian states – Paraná, Santa Catarina and São Paulo – maintaining high levels of preservation for one of the country’s most threatened biomes: the Atlantic Forest.

In an integrated production chain, wood used to produce pulp for manufacturing paper and packaging, or sold directly to the market, comes from planted forests of pine and eucalyptus. It is the onset of Klabin’s operational efficiency. Its forests have one of the world’s highest productivity rates, in addition to being located in areas close to the factories, lending a great competitive advantage to its operations.

Klabin’s respect for the environment is closely linked to the essence of its business. The company maintains 43% of its forests for the preservation and maintenance of biodiversity.

(GRI 102-6)

Klabin’s products are focused mainly on the food (milk, meat, fruit, among others), health and personal hygiene, cleaning, construction, and electronics and consumer appliances industries. In addition to spearheading the Brazilian market, the company also ships its products to 86 countries around the globe.

Exports

Production capacity

Production processes

Klabin estimates that for each Brazilian real invested in continuous improvement, BRL 10 returns to the company. This estimate involves the implementation of the Programa Klabin Superar (PKS) [Klabin Overcoming Program], an initiative based on the Total Productive Management (TPM) methodology, adopted since 2002. PKS is composed of pillars focused on various topics (autonomous management, research, planned maintenance and improvement teams, for example) that combine specific Internal Improvement Teams (TIMs) and several other initiatives to solve recurring or more complex problems.

People must be get involved and be acknowledged in order to ensure the excellence of processes and products based on continuous improvement. Therefore, in addition to providing training on the Kaizen tool (a Japanese methodology focused on improvement) for facilitators, the Exclusive Acknowledgement Program (PUR) has been established. The initiative rewards employees who participate in  continuous improvement projects and activities to enhance results at the plants.

Reducing red tape in business processes – an issue indicated as an opportunity for improvement in the latest corporate climate survey and at the Managers Convention as well – has been the target of projects carried out by Klabin teams. For example, the Supply department made the issue a priority and has been developing initiatives with its internal customers to introduce some changes, after assessing the risks and impacts. As a result, some processes will undergo changes at various levels. One example is the establishment of a new competition rule to simplify the purchasing authorization limits. Changes in the material criticality report, a process directly related to parts inventory, led to a goal shared with maintenance managers to manage inventory. Another example is material registration, which will have an alternative version for simpler cases, allowing gains by expediting the process.

(GRI 102-10, 102-18)

Klabin’s main governance bodies are the General Shareholders’ Meeting, the Board of Directors, the Audit Committee and the Executive Board, which operate jointly to achieve economic, financial, social and environmental results. Klabin applied changes to its organizational structure in 2017 to maintain an increasingly cohesive team, allowing the company to continue on its growth trajectory in a resilient and sustainable manner.

An important management change has also taken place at Klabin, as one of its executives, Cristiano Teixeira, assumed the position of Chief Executive Officer. The internal succession of an executive whose career was being developed for the position was seamless, as Teixeira showed great commitment to a continued growth process, underlining the company’s solid business model and the adoption of the best practices in leadership and management.

New reinforcements

The reorganization efforts promoted by Klabin to respond to business dynamics include the changes made in the Department of Operational and Logistics Planning, which was split into several areas and regional coordination units, allowing for an even greater strategic focus on logistics operations.

The new Legal Department, structured in 2017, also improved company governance by strengthening processes such as risk management, allowing it to operate in a more preventive manner and ensuring a more secure decision-making process.

(GRI 102-18)

In 2017

EXECUTIVE BOARD

• Cristiano Teixeira – Chief Executive Officer
• Arthur Canhisares – Industrial Director for Paper
• Eduardo de Toledo – Chief Financial Officer and Investor Relations Officer
• Francisco César Razzolini – Technology & Pulp Unit Director
• José Totti – Forestry Director
• Sergio Piza – Director of People & Management, Sustainability and Communication
• Fábio Medeiros – Legal Director
• Flavio Deganutti – Commercial Director of Papers (Cardboard and Kraft)
• Douglas Dalmasi – Industrial Bags Director and Sack Kraft Operations
• Edgard Avezum Junior – Commercial Director of Coated Boards
• Gabriella Michelucci – Packaging and Recycled Materials Director
• José Soares – Commercial Director of Pulp
• Sadi Carlos de Oliveira – Industrial Director of Pulp
• Sandro Ávila – Operational Planning and Logistics Director

BOARD OF DIRECTORS

PERMANENT MEMBERS

• Armando Klabin
• Celso Lafer
• Daniel Miguel Klabin
• Paulo Sérgio Coutinho Galvão Filho
• Israel Klabin
• Roberto Klabin Martins Xavier
• Francisco Lafer Pati
• Horácio Lafer Piva
• Roberto Luiz Leme Klabin
• Sérgio Francisco Monteiro de Carvalho Guimarães
• Rui Manuel de Medeiros D’Espiney Patrício
• Vera Lafer
• Helio Seibel

ALTERNATE MEMBERS

• Bernardo Klabin
• Reinoldo Poernbacher
• Amanda Klabin Tkacz
• Graziela Lafer Galvão
• Alberto Klabin
• Lilia Klabin Levine
• Luis Eduardo Pereira de Carvalho
• Eduardo Lafer Piva
• Marcelo Bertini de Rezende Barbosa
• Olavo Egydio Monteiro de Carvalho
• Joaquim Pedro Monteiro de Carvalho Collor de Mello
• Vera Lafer Lorch Cury
• Matheus Morgan Villares

Decisions at Klabin are based on the core values of morality, dignity, freedom, integrity, loyalty, transparency and justice. As a support to best practices and to maintain the same standards of conduct throughout the company in Brazil and abroad, the company chose a set of codes and policies that strengthens its principles and guides its actions.

One of them is the Code of Conduct, which is being adopted by all employees and disseminated to suppliers, a document that brings together the company’s values and guidelines and guides Klabin’s relationship with its stakeholders.

To learn more about the Code of Conduct, visit Klabin’s website.

The Sustainability Policy also formalizes the company commitments, combining business practices and operations to the quality of products, safe environment for employees, sustainable development agenda, among others (read more about it in the section entitled Sustainability Policy, in this chapter). After the policy was updated in 2016, training sessions were conducted in all of the company’s operating units.

(GRI 102-18)

Sustainability governance at Klabin was structured as follows in 2017:

• Sustainability Committee: comprised of eight representatives from the Executive Board and the Board of Directors, whose role is to ensure that the topic is included in the company’s management and decision-making process.
• Sustainability Commission: executive group made up of 19 representatives from various areas, responsible for managing all projects related to the issue.
• Department of Sustainability and Communications Management: responsible for ensuring the implementation of policies and the development of processes related to the issue, in order to implement best practices in operational activities, respect for human rights, the development of communities and employees, the rational use of natural resources, compliance with ethical and legal criteria and the management of information destined for market indices.

Improvement

In April 2018, Klabin revised its executive governance structure based on its growth strategy, enabling the company to take a step forward in the evolution of its sustainability management practices. The previous structure gave way to a Permanent Sustainability Commission, consisting of five directors and one manager.

The group meets every three months to define guidelines and policies, assess the need for large investments and prioritize initiatives, promoting discussions and deliberation on sustainability-related topics to be referred to the Executive Board for final review and approval. With this new structure, the company expects to ensure quality and prompt decision-making, leveraging the sustainability management process. Click here to learn more about the new model of Permanent Committees in 2018 Highlights.

(GRI 102-13)

Klabin’s participation in national and international associations and organizations as an associate, committee or commission member, or as a member of the entity’s governance board strengthens the company’s sustainability governance.

(GRI 102-12)

Sustainability and the creation of shared value are the basis for managing Klabin’s business operations, evident throughout the company’s history. The company is committed to putting into practice projects and processes able to generate value to shareholders, investors, employees, business partners and the communities in which it operates. This commitment is expressed in its Sustainability Vision. Klabin applies best global practices throughout its operations, following the guidelines set out in its Sustainability Policy.

Due to changes to the company management in 2017 (replacement of the CEO and incorporation of the Communications and Sustainability areas into the People & Management Department), senior management’s approval of the Sustainability Strategy was interrupted to allow the company to focus on other governance aspects. This process is being reviewed according to the alignment with the agenda on Sustainable Development Goals.

We believe that Sustainability is a continuous creation of value, focusing on the balance between the economic, social and environmental spheres. We are a unique and responsibly managed forestry company committed to the principals of biodiversity. We work collaboratively with our customers and suppliers, constantly striving to innovate and improve our products and processes. We encourage the engagement and development of our collaborators and the communities in which we operate, promoting the sustainable improvement of results across the entire value chain.

(GRI 102-11)

Since 2016, Klabin has voluntarily adopted the Sustainable Development Goals (SDGs), a United Nations (UN) initiative that brings together governments, civil society and the private sector in a global agenda with 17 goals and 169 targets to support people, the planet, peace and prosperity. The 2030 SDGs set out the global priorities and aspirations for 2030 and represent an opportunity to eliminate extreme poverty and put the world on a sustainable path.

This great action plan involving various sectors is based on the principal that solutions, technologies and business processes can be applied to address the major global challenges to sustainable development. The SDGs were incorporated into Klabin’s materiality; therefore, they are correlated with topics that are relevant to its management of sustainability.

To learn more about the SDGs, visit the website.

For its sustainability-oriented practices, Klabin received the following new or continued recognitions in 2017:

Most sustainable company in the Paper and Pulp Industry by Guia Exame de Sustentabilidade

This was the second consecutive year in which Klabin was awarded the title by Guia Exame de Sustentabilidade, which recognizes the best practices of Brazilian companies. In 2017, for the fifth consecutive year, Klabin was listed among Brazil’s most sustainable companies; in 2016, Klabin had already been nominated by Guia as “Sustainable Company of the Year”.

Carbon Disclosure Project (CDP)

Klabin was recognized by Carbon Disclosure Project (CDP) – an international institution that examines companies’ efforts to manage and minimize the environmental aspects and impacts of their activities – in the “Leadership” category in its annual results for “Forest”. In the “Water” and “Climate Changes” category, Klabin remained at the “Managerial” level, which recognizes the best management practices related to these aspects at in-house and third-party operations. These awards demonstrate Klabin’s level of excellence based on the company’s performance in forest management, forest certification, and supply chain monitoring.

B3 Corporate Sustainability Index (ISE)

The objective aims to create an investment environment compatible with sustainable development, as well as to promote ethical responsibility by acknowledging best business practices. Klabin has been awarded for five consecutive years.

Environmental Index of Pulp and Paper Companies – Environmental Paper Company Index 2017 (EPCI)

The Index is published every two years by WWF, recognized as one of the largest conservation organizations. The EPCI is based on the companies’ voluntary disclosure of more than 50 indicators to measure environmental performance and its changes over time in organizations with respect to Responsible Supply of Fiber, Clean Production, and reports on the Environmental Management System.