Risk management

Human rights is a cross-functional theme at Klabin, touching on environmental, social, and governance issues such as labor and health and safety practices, diversity and non-discrimination, community relations, the environment, and data protection. 

Although there is no specific policy that brings together all human rights issues in a single document, they all have their governance established by the following normative set: Code of Conduct, Anti-Corruption Manual, Sustainability Policy, Diversity and Employability Policy, Fundamental Rights in Labor Relations Policy, Social and Environmental Responsibility in Vendor Procurement Policy, Life Protection Policy, and Cyber Security Policy. 

All these commitments are based on internationally recognized milestones such as the Guiding Principles on Business and Human Rights, the International Bill of Human Rights (which considers the Universal Declaration of Human Rights and the UN Covenants on Civil and Political Rights, and Economic and Social Rights), International Labor Organization Conventions, Conventions on biological diversity, environment, and climate. The Guidelines of the United Nations Global Compact and Sustainable Development Goals (SDGs) are also considered. 

In 2023, there were no reports of any human rights cases or violations involving the Company. 

GRI-411-1 SASB-RR-FM-210a.1 SASB-RR-FM-210a.2

TRADITIONAL COMMUNITIES
 

Total forest area on indigenous lands (in acres)

Number of identified traditional communities (10km buffer of Klabin's forest management areas)

Klabin maps all the traditional communities in its areas of influence, such as quilombolas, faxinalenses (communities that inhabit small areas and live off their relationship with the forest), and Indigenous groups. In its relationship with these communities, the company follows Brazilian legislation and the recommendations of ILO 169, a resolution of the International Labor Organization for Indigenous and Tribal Peoples, guaranteeing their right to prior, free, and informed consent (CLPI).

In 2020, the characterization of traditional communities identified within the 10-km buffer zones of Klabin's forest management areas in Paraná was completed, totaling 81 communities: 12 Indigenous lands identified and characterized across 10 municipalities; 27 quilombola communities identified and characterized in 6 municipalities; and 42 'faxinal' communities identified and characterized in 10 municipalities.

Also in 2020, due to Klabin's forest expansion, a new phase of identifying traditional communities within the company's operational territory began, with the support of specialized consulting. During this phase, traditional communities within the 10-km buffer zones of forest management areas in Paraná, Santa Catarina, and São Paulo were identified, totaling 80 new communities to be characterized later. The characterization phase of these communities was postponed due to the COVID-19 pandemic.

In 2022, the identification of traditional communities within the company's operational territory resumed. At this time, Klabin's forest base in Paraná, São Paulo, Santa Catarina, and Rio Grande do Sul was reviewed, and 11 new communities were identified within the 10-km buffer zone, in addition to those identified in 2020. Following the completion of this identification work, the characterization phase began in 2023.

Throughout 2023, we conducted the characterization of these traditional communities. By December 2023, 53 communities had been characterized, and work will continue into 2024 to characterize the remaining 38 communities.

In 2023, there were no reported cases of rights violations concerning indigenous peoples and traditional communities.

GRI-412-1 SASB-RR-FM-210a.2

For the units and operations in Paraná, a Manual for the area of Social Responsibility and Community Relations was prepared, as well as other internal procedures, to record the entire process of engagement with stakeholders.

Klabin's Social Responsibility and Community Relations area operates on several fronts, to preserve and improve the company's relationship with its stakeholders and affected parties; nullify or mitigate impacts caused by its operation; and, promote actions that contribute to the local development of the municipalities where it operates, among others. Thus, its main work fronts are:

• Preventive action on possible impacts linked to Klabin's forestry and manufacturing operations;
• Identification of opportunities for engagement with the local community and regional development of the territory;
• Promotion and expansion of dialogue between Klabin and public authorities, the local community (including the traditional community) and other interested publics.

Human Rights Due Diligence Analysis   

In 2021, Klabin initiated the first stage of the Human Rights due diligence conducted by a third party. This process was based on the UN Guiding Principles on Business and Human Rights and covered 100% of Klabin's businesses and products, considering not just its operations, but also its value chain, communities and new commercial relationships (acquisitions and joint ventures)

The first phase included a diagnosis to identify risks from the rights holders' perspective, and not only from the corporate risk management perspective, which only considers inherent risks for the company. 

This diagnosis considered the pre-established risks for each one of the supply chains involved: wood, wood chips, logistics and other goods and services. Local communities are considered all those that may be impacted by Klabin's value chain operations, including forestry, industrial, logistics (including ports) and forestry producers that supply Klabin.

* Includes tenant farmers, housekeepers, squatters
** Includes environmental and human rights defenders  

In 2022, the diagnosis was the basis for the second stage of due diligence conducted by the external consulting firm, which, due to the pandemic and the impossibility of carrying out consultations in person, assumed the representation of the active voice of the rights holders, based on their technical prerogative. The Company conducted a cross-analysis of the impact on these groups versus Klabin's ability to manage each of the prioritized topics. The process led to a heatmap of priorities and recommendations, which were broken down into a short-term, medium-term, and long-term roadmap:   

Topics prioritized by the human rights roadmap and timeframe for actions

 *Topics that include direct and indirect collaborators. 
**Actions prioritized and planned for the medium term, at least. 

In 2023, Klabin continued to monitor the implementation of action plans with each sponsor area as part of the Company's risk management monitoring process, prioritizing three topics considered critic in terms of the Company's management capability." 

Human Rights Governance: 

1. The entire due diligence process, findings, and recommendations involved the Fixed Sustainability Committee and the Sustainability Committee. 

2. The risks identified from the impact on the rightsholder group were integrated into the Company’s official Risk Matrix, with monitoring along with sponsoring areas carried out bimonthly. 

3. 100% of short-term action plans are linked to the individual goals of corporate managers. 

Based on the assumption that due diligence in human rights is an ongoing process, Klabin regularly assesses updates of the heatmap of management capacity x impacts from significant changes to business and operations. 

Mitigation and preventive actions

The Risk Management Department of Klabin was created in 2018 with the support and assistance of the senior management (Board of Directors and Executive Board). The area seeks to apply best practices to support operational, corporate and/or equivalent areas in analyzing their processes, with a focus on mapping and assessing risks, implementing controls and/or actions, and business and operational continuity plans.

In November 2020, the Audit and Related Parties Committee was created, a body to assist the Board of Directors, which has among its functions the evaluation of the control mechanisms of the Company's risk exposures. The Risk Management has, at least, two fixed annual meetings with this committee to promote to the members the risk management methodology and the "Tone the Top" model, updating the concepts, methodology, and discussions about main risks, and action plans. 

Among the variable compensation of all Klabin managers, executives and employees, 20% is related to Sustainability targets, with some themes included in the top risks prioritized by the Company's Head Office, such as Employee Safety rates, Climate risks (Water and Emissions) and Social Acceptance Index. 

In the year 2021, the IB Solutions risk management software was implemented, aiming to automate the process of follow-up of the actions and controls of the owners of the risks and actions, assist in the traceability and history of the changes, and the creation of dashboards. 

Klabin believes that the risk management culture in an organization is the central point to promote and materialize, at all levels of the Company, the importance of risk management. In addition to the regular presentations of topics related to risks to the Board of Directors, the Company started in 2022 an internal education program for leadership, which includes an update on risk management (methodology, main risks, etc.) for new Directors and Board members. 

The procedures associated with risk management were submitted to an internal audit in 2023. 

FRAMEWORK – DEFENSE LINES

• 1st line of defense: Composed of the operational areas and their equivalents, who, through their teams, are responsible for the company's daily operational activities, and assume primary responsibility for identifying, assessing, and managing risks. 

• 2nd line of defense: Composed of the risk management and related areas (Integrity, Internal Controls, and Information Security), they are responsible for monitoring and supervising the activities of the 1st line of defense and guiding appropriate risk management practices. 

• 3rd line of defense: Composed of the independent internal audit area, which reviews and evaluates both the 1st and 2nd lines of defense so that risk management and internal control processes are effective and comply with best corporate governance practices.