Supplier social and environmental performance

Strengthened and resilient value chain in its most vulnerable parts, composed of suppliers who make use of responsible social and environmental practices to ensure good practices throughout the productive life cycle.

KODS 2030

100% of critical suppliers included in the Sustainable Supply Chain Management Program

 

Percentage of critical suppliers covered by the Sustainable Supply Chain Management Program

2021 2022 2023 (Preview) 2030 Goal
56% 70% 83.1% 100%
 
 

The 2020 baseline (KODS release date) considers around 13.5% of critical suppliers covered per year, since the first phase of the Supply Chain Social and Environmental Responsibility Program began in 2019. The criteria that define a supplier as critical are: value of Klabin's revenue (spend), representativeness in the business areas (Forestry, Pulp and Paper and Packaging), recurrence greater than six times (in different months of the year).

For more information on the program, method and results, please refer to Supplier social and environmental performance management

Undertaking goals linked to the topic by executives

  2022 2021
Managers 24% 4%
Directors 100% 0%
Total executives 210 26

Klabin’s supply chain profile

The suppliers are classified as providers of forestry inputs, commodities and specialty chemicals for pulp and paper production; fuel, power and packaging for finished products; provision of logistics services, material management, equipment storage and rental; supply of auxiliary production material, uniforms and Personal Protective Equipment (PPE), bearings, pumps; provision of cleaning, security and maintenance services, among other positions. This sample does not consider international purchases (Imports and Klabin Argentina).

Supplier screening program

Supplier Screening

 2022 

Total number of Tier-1 suppliers  7,528 
Total number of significant suppliers in Tier-1  88
Percentage of total spend on significant suppliers in Tier-1  6%
Total number of significant suppliers in non Tier-1  0
Total number of significant suppliers (Tier-1 and non Tier-1)  88

 

Supplier assessment program 

Supplier Assessment

2022

2022 Target

Percentage of significant suppliers assessed 91% 90%
Total number of suppliers assessed via desk assessments/ on-site assessments  88 -
Number of suppliers assessed with substantial actual/ potential negative impacts  31 -
Percentage of suppliers with substantial actual/potential negative impacts with agreed corrective action/improvement plan  35% -
Number of suppliers with substantial actual/potential negative impacts that were terminated  0 -

 

Suppliers with corrective action plans 

Corrective action plan support 2022
Total number of suppliers supported in corrective action plan implementation 31
Percentage of suppliers assessed with substantial actual/potential negative impacts supported in corrective action plan implementation 35%
2022 Target for percentage of significant suppliers in corrective action plan implementation 100%

 

Suppliers in capacity building programs 

Capacity building programs 2022 Target
Total number of suppliers in capacity building programs 88 -
Percentage of significant suppliers in capacity building programs 69% 100%

 

Number of active suppliers by region and total expenditures made

  Unit 2022 2021 2020 Var. % (21/22)
North Number 262 267 196 -1.87
Northeast Number 896 832 646 7.69
Midwest Number 180 184 51 -2.17
Southeast Number 2094 2,043 3,782 2.50
South Number 4096 3,993 3,176 2.58
Total active suppliers Number 7,528 7,319 7,851 2.86
Total amount spent on suppliers Millions of BRL 7,281 6,061 4.2 20.13

 

GRI-204-1

Percentage of purchases from local suppliers

State 2022 2021 2020 2019
Amazonas 59.74% 59.97% 71.4% 38.7%
Bahia 58.37% 36.23% 37.8% 56.6%
Ceará 50.02% 30.49% NA NA
Goiás 60.69% 41.52% NA NA
Minas Gerais 56.09% 37.80% 55.5% 45.9%
Paraná 62.62% 61.30% 66.8% 65.0%
Pernambuco 45.86% 35.18% 37.4% 50.6%
Santa Catarina 56.29% 41.08% 58.3% 56.0%
São Paulo 85.50% 82.27% 78.1% 87.6%
Rio Grande do Sul 58.46% 43.19% 60.0% 14.7%
Average 63.1% 46.9% 64.7% 64.3%

* The percentage of purchases with local suppliers considers the total Spend of suppliers monitored by the criticality and sustainability Matrix (except imports, Klabin Argentina and Klabin itself).

** Purchases made with suppliers headquartered in the same state as Klabin’s operation are considered local.

*** The variations are due to commercial negotiations and differentials in price and volume conditions.

GRI-308-1GRI-414-1

Percentage of new suppliers selected based on social and environmental criteria​

  2022 2021 2020 2019
Number of new suppliers 73 103 136 147
Number of new suppliers selected based on social criteria 73 103 136 147
Percentage of suppliers selected based on social criteria 100% 100% 100% 100%

The number of suppliers reported represents critical suppliers that participate in our Supply Chain Corporate Social Responsibility program. The 4 topics covered in our program are: Environment, Ethics, Labor Relations and Human Rights, and Corporate Purchasing.

GRI-308-2GRI-414-2

Evaluation of social and environmental impacts on the supply chain​

  2022 2021 2020 2019
Number of suppliers assessed regarding social impacts 88 94 84 147
Number of suppliers identified as causing actual and potential negative social impacts 31 24 10 147
Percentage of suppliers identified as causing actual and potential negative social impacts, with which improvement agreements were signed as a result of the assessment conducted 35% 26% 12% 100%

 

In 2022, the 4th wave of assessments was conducted for the Corporate Social Responsibility Program (RSE) in the supply chain, using the EcoVadis methodology. A total of 73 suppliers were invited and 68 were evaluated, with a 93% adherence rate at the end of the process.  

Klabin's relationship with its suppliers is guided by a policy of respect and trust. To make the process more transparent, commercial relationships are conducted by the purchasing departments, with a focus on developing new sources of national and international supplies; coordinating the adoption of electronic procurement with qualified suppliers; encouraging small and medium-sized enterprises to have greater participation in the supplier mix; creating synergies with production, sales, and logistics areas, among others. 

Klabin's supplier management is segmented between industrial and forestry activities. Considering the specificities presented in both activities, the company has defined distinct themes (KODS) to address their respective supply chains. 

Regarding wood supply, the management and performance on the topic can be observed in the KODS for Forest Certification, with a highlight on the FSC certification process, support for producer development to meet ESG aspects (Legal Forests), monitoring and traceability activities, as well as promotion initiatives (Plant with Klabin). 

Klabin's performance associated with supplier management, KPIs, and commitments made with the respective KODS are continuously monitored by the executive board and the Sustainability Committee, the latter formed by the company's board of directors. 

Anchored in the KODS for Suppliers' Socio-Environmental Performance, Klabin's Sustainable Supply Chain Management Program aims to ensure that suppliers implement and follow good social and environmental practices and ensure the proper management of potential risks present in their activities, as established in Klabin's General Supply Conditions and Socio-Environmental Guidelines for Suppliers. Initiatives related to supplier management and procurement practices are continuously reviewed to align with the company's ESG strategy and its policies and codes. 

ESG criteria in supplier selection and screening 

During the procurement process, suppliers are instructed to confirm compliance with the general supply conditions, which include ESG aspects that must be fulfilled during the execution of contracted services. Non-compliance with these requirements is prohibitive for the continuation of service provision until the supplier regularizes its situation. Although there is no specific timeframe for resolving possible issues, it varies for potential suppliers in the industry and forestry sectors. A supplier becomes eligible to participate in a new procurement process after resolving any possible issues. 

Contracts with suppliers are established through a screening and approval process, which involves evaluating aspects such as occupational health and safety, legal, commercial, technical, environmental responsibility, and financial factors. These contracts also include specific clauses for protecting labor rights, such as the prohibition of child and forced labor, child sexual exploitation on the roads, and environmental protection, among others. 

Suppliers need to demonstrate technical expertise to meet the company's demands with quality, adherence to deadlines, and volume; provide product samples/lots when necessary for evaluation; ensure the adoption of social responsibility practices, including basic benefits for their employees, a safe, productive, and participative work environment; not employ child labor and adhere to environmental responsibility standards. They should also contribute to strengthening the supply chain, promoting free competition, and allowing technical visits to evaluate facilities, equipment, production processes, etc. ESG aspects verified during the screening stage are applied according to the activities and inputs to be provided or delivered by the supplier, defining their significance. 

Service and product suppliers undergo procedures to verify their compliance with labor legislation and make contributions to social security and labor charges, including inspections. These inspections include verifying labor documentation and working locations to identify non-compliance, such as indecent working conditions and the use of child labor. This procedure aims to ensure the established conditions for contractors directly hired by the company, including employees physically present at Klabin's facilities or at other locations designated by the company. 

Documentation related to labor matters can be monitored at the supplier's premises to enable more detailed analysis. In cases of any irregularities found, the contracting area and the procurement department are responsible for taking appropriate actions, which may include written notification to the supplier for regularization, suspension of payment until the identified issue is resolved, and the statement that recurrence will lead to the supplier's disqualification. A disqualified supplier can only be rehired after a period of two years from the contract termination. In the event of new irregularities during the new contract term, the supplier is permanently disqualified. 

Risks considered in the supplier screening process 

The company acquires a portion of its wood needs from third-party suppliers and may be adversely affected by price increases or the unavailability of wood. Therefore, the company considers possible impacts associated with regional risks (including political factors, regulations, and stakeholder relations), sector-related risks, and risks related to the supply of inputs. The company uses a mixed supply approach, consisting of its own wood and third-party suppliers. To mitigate risks, the company seeks suppliers with whom it establishes contracts for the purchase and sale of standing wood or wood to be delivered to its industrial units, as well as spot purchases. 

The wood price conditions are subject to market forces and competition with other crops (such as soybeans, sugarcane, and others) in the different regions where the company operates, which may lead to price increases and impact wood availability, adversely affecting its factories' supply, production costs, and financial results. The company relies on the supply of inputs, raw materials, and services for its operation. Increases in input prices can raise production costs and reduce the company's profitability. Klabin's operational units are supplied by various national and foreign suppliers and service providers.  

Many factors influence the company's competitive position, including plant efficiency, operational rates, and the availability, quality, and cost of certain inputs, such as chemicals, raw materials, and services. The availability, quality, or cost of such inputs can negatively affect the company's operational and financial performance. Increases in input prices may result in reduced profitability for the company if they cannot be passed on to customers.  

Definition of Critical supplier 

The criteria defining a supplier as critical are the value of sales to Klabin (spend), representation in business units (Forestry, Pulp and Paper, and Packaging), and recurrence more than six times (in different months of the year). 

Assessment and development of significant suppliers 

The supply chain management is carried out using the EcoVadis methodology, which evaluates Environmental, Labor and Human Rights, Ethics, and Sustainable Purchasing criteria for critical suppliers. Through this collaborative platform, the quality of a company's Corporate Social Responsibility management system is measured based on its policies, actions, and results. 

Within the methodology, which scores suppliers from 0 to 100, the following criteria are considered: company size, country context, product nature, and potential positive or negative visibility through external assessments. The assessment levels demonstrate the maturity of suppliers as follows: 

  • Between 0 and 20 points: high risk; 
  • Between 20 and 35 points: medium risk; 
  • Between 36 and 55 points: engaged companies; 
  • Between 56 and 75 points: advanced companies; 
  • Above 75 points: benchmark companies. 

Efforts in the relationship with each level of suppliers focus on those scoring below 35 points, supporting and developing this group through monitoring their action plans by Klabin's procurement department, across the four pillars covered by the platform, thus increasing their level of engagement. In this way, it is possible to increase the evaluation criteria based on the performance of these suppliers in the medium to long term. Selected suppliers participating in the evaluation are considered critical.  

 Since 2019, critical suppliers have been evaluated using this methodology, starting with the 1st wave, where 110 suppliers were invited, and 86 were evaluated, with an adhesion rate of 78% at the end of the process. In 2021, we reevaluated 22 of these suppliers who scored below 35 points, and 45% showed improvement in the evaluated criteria. Klabin's objective is to cover 100% of them by 2030. 

Critical suppliers who do not adhere to the evaluation process are analyzed by a committee composed of technical management areas, the Purchasing Management directly related to the supplier, Sustainability Management, Excellence and Innovation in Supply Chain Management, Risk Management, and Integrity Management, considering aspects associated with non-replacement and productive impact (critical materials and services). 

In 2022, we conducted the 4th wave of evaluation of the Corporate Social Responsibility (CSR) Program in the supply chain, using the EcoVadis methodology. We invited 73 suppliers, evaluated 68 (adhesion rate of 93%) and reevaluated 20 critical suppliers from the 2nd wave who scored below the established average of 35 points, totaling 88 suppliers evaluated in 2022. The evaluation topics included: Environment, Labor and Human Rights, Ethics, and Sustainable Purchasing. Non-response from other invited companies is due to changes in commercial relationships and the costs involved in the evaluation process.

On average, 13.5% of critical suppliers are evaluated annually, totaling 70% by 2022. Among them, all those who scored below the expected average have action plans monitored annually and receive support from the program to implement the suggested improvements. In 2023, the 5th evaluation wave will take place, inviting approximately 64 new suppliers, including the reevaluation (checking for performance improvement and adherence to suggested actions) of 21 critical suppliers assessed in the 3rd wave who obtained a score below the established average of 35 points, and the reevaluation of 23 suppliers assessed in the 1st wave who scored between 36 and 55 points, encompassing 108 critical suppliers in 2023. 

Internal training on ESG practices for suppliers 

To maintain alignment between Klabin's ESG practices, guided by its policies, code, and procedures, and the respective purchasing teams, the company conducts training, and workshops, and provides content through the Ecovadis platform, the Ecovadis Academy, which offers a catalog of enhancement courses in multiple languages to encourage improvements and increase knowledge and sustainability practices. 

Internally presented contents are also used to guide suppliers on Klabin's ESG practices, as well as the functioning of the supplier assessment program. All suppliers who participated in the evaluation waves of the Ecovadis platform have access to sustainability training content. Additionally, evaluated suppliers can use the platform to compare their performance with peers in their industry. 

Updated and verified on: 12/26/2023