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).

The raw materials that make up Klabin's products are 98% sourced from renewable sources (wood for processing, purchased wood chips, and purchased pulp), and 2% from non-renewable sources (sulfuric acid, sodium sulfate, aluminum sulfate, lime, and kaolin). 

 Supplier screening program

Supplier assessment program 

Os fornecedores são avaliados com base em quatro pilares estratégicos: Meio Ambiente, Trabalho e Direitos Humanos, Ética e Compras Sustentáveis. Fornecedores com impactos negativos são aqueles que pontuaram entre 0 e 34 pontos na avaliação, representando um risco. Todos os fornecedores apresentaram uma pontuação insatisfatória em dois ou mais pilares, com 96% deles obtendo um desempenho insatisfatório em Ética, 94% em Meio Ambiente, 67% em Compras Sustentáveis e 53% em Práticas Trabalhistas e Direitos Humanos. 

Os fornecedores que apresentam impactos significativos são submetidos a um plano de ação, o que corresponde a 33% dos avaliados. Desses, 3% têm planos de ação ativos, enquanto os outros 30% já foram reavaliados e não representaram alto risco. 

Suppliers with corrective action plans  

Suppliers in capacity building programs 

Number of active suppliers by region and total expenditures made

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Percentage of purchases from local suppliers

1. Local suppliers are those based in the same state as Klabin's operations (headquarters and subsidiary). 
2. The percentage of purchases from local suppliers considers the total spend of monitored suppliers (excluding imports, Klabin Argentina, and Klabin's itself). 
3. The variations are due to commercial negotiations and differentials in price and volume conditions. 

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

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.

The suppliers, within the total reported here, participated in the Corporate Social Responsibility in the Supply Chain program for the first time in 2023. This program assesses the following topics: the environment, ethics, human rights, and sustainable purchasing. 

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Evaluation of social and environmental impacts on the supply chain​

In the 5th year of the Corporate Social Responsibility program in the Supply Chain, three evaluation actions were conducted (two reevaluations and one evaluation of newly selected suppliers) using the EcoVadis methodology. A total of 95 suppliers were invited and 91 were evaluated, with a participation rate of 96% at the end of the cycle.

The 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 a 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 allow 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 providers 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), 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 and evaluated 68, with an adhesion rate of 93% at the end of the process. 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. We reevaluated 20 critical suppliers from the 2nd wave who scored below the established average of 35 points. 

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, 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.