Suzano and the TCFD

Suzano is committed to reporting its practices and indicators in line with the Recommendations of the TCFD and to continue advancing on this path.

  • 1. What is the TCFD?

    Context:

    The TCFD was created by the Financial Stability Board (FSB) along with representatives from different economic sectors, both public and private, to address the availability and quality of financial information related to climate change. The Task Force was created based on the understanding that these changes can affect the stability of the international financial system, directly impacting economic activities. In response, the TCFD published a set of recommendations for reporting climate-related risks and opportunities.

    The Recommendations encompass four reporting dimensions:

    • Governance: disclose the organization’s governance around climate-related risks and opportunities;
    • Strategy: disclose the actual and potential impacts from climate-related risks and opportunities on the organization’s businesses, strategy and financial planning where such information is material
    • Risk Management: disclose how the organization identifies, evaluates and manages climate-related risks;
    • Metrics and Targets: disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

     

    As of February 2020, the TCFD already had more than one thousand supporters, including companies with market capitalization of over US$10 trillion.

    The TCFD Recommendations are detailed in the Recommended Disclosures, as shown below. Each Recommended Disclosure is accompanied by a Guidance to facilitate disclosures.

  • 2. Suzano’s Journey

    Context:

    Suzano officially supports the TCFD alongside other major industry-leader organizations. The Company regards the TCFD Recommendations not only as a reference for reporting on climate-related financial impacts, but also as a framework for reviewing its existing risk and opportunity management practices and identifying opportunities for improving its processes and operations.

    In line with its efforts to improve our framework and follow the best climate change management practices, in 2019 Suzano kicked off an organized effort to review its practices in light of the TCFD Recommendations. The effort entailed mapping the current management practices for climate-related risks and opportunities. This was possible given the consolidation of a large set of processes in various areas which address the topic. It also identified that the Company already reports its disclosures in accordance with TCFD guidance. In this respect, Suzano’s review of the TCFD Recommendations went down to the most granular level: that of TCFD Guidance. Lastly, the actions required for progress over the coming years were also identified.

    Suzano is committed to reporting to its investors and other stakeholders this progress and the information recommended by the TCFD in the Annual Report, Reference Form and 20-F Form, in compliance with the standard frameworks of such reports.

    The following table provides a summary of Suzano’s current set of practices, considering the four dimensions of the TCFD.

  • 3. Governance

    Context:

    Governance around climate change at Suzano is headed by the Sustainability Department. However, the topic involves other areas of the Company, such as Forestry Operational Development, Environment (Industrial and Forestry), New Business, Research & Development, Planning (Strategic and Forestry), Recovery and Utilities, Investor Relations and Risks, among others. These areas have direct and explicit responsibilities in climate-related matters such as monitoring emissions from forestry and industrial operations, energy usage and generation, management of water resources and forest management.

    Since these topics are cross-cutting, we also have Working Groups to focus the efforts of multi-disciplinary teams in the definition of required actions and monitoring of Suzano’s performance in topics such as energy and water. The existing Working Groups meet to discuss issues mainly related to lower usage of natural resources, which means lower GHG emissions and higher capacity to adapt to climate change:

    As new demands and improvements of governance practices emerge, other Working Groups may be created to address other climate-related matters.

    The Board of Directors, which also is directly involved in the topic, has a strategic perspective of the opportunities and risks. The Directors participate in defining and monitoring the company’s Strategy, which includes climate-related long-term targets and guidelines. The Strategy and Sustainability Committees, which have internal Directors and independent external members, provide support to the Board for this task. The Board also oversees risks defined as priorities, including those related to climate change. The Risk Department is ultimately responsible for identifying and managing these risks and reporting the findings to the Board. Moreover, the Risks Committee meets quarterly to discuss the risks identified and monitored, follow-up on actions plans and manage any crisis. Because they are classified as a priority in the Corporate Risk Matrix, climate-related risks are included in these discussions and are addressed diligently at least once a year.

  • 4. Strategy

    Context:

    Suzano’s Strategic Vision identifies three major pillars:

    • Continue being a benchmark in the sector in efficiency, profitability and sustainability, from the forest to the client
    • To be a transformational agent in the expansion into new markets for its forest biomass
    • To be a reference in sustainable and innovative solutions for the bioeconomy and ecosystem services based on trees

     

    Within this strategic vision, long-term targets were created for climate-related impacts.

    As already mentioned, Suzano considers climate-related risks a priority in its Risk Matrix, which is a tool revised annually that guides its strategic risk management approach. For each priority risk, action plans are established and potential financial impacts on the company are projected. Based on the priority given to climate-related risks, the Company considers the effects from climate change as risk factors relevant to its business, which are revisited, revised and reported annually in its Reference Form and 20-F Form.

    Given the potential of its forestry assets and products for helping to mitigate climate change, Suzano not only maps the risks, but also identifies climate opportunities, such as carbon pricing from which Suzano can benefit by capturing CO2 from its eucalyptus plantations and native forests. Keeping an eye on the changes in consumer preferences and the availability of inputs, Suzano also researches and develops products to meet new demands, reinforcing its positioning of substituting products that are fossil-based and require higher energy and water usage for renewable, low carbon alternatives.

    The second and third pillars of Suzano’s strategic vision consider the different economic segments beyond the Pulp and Paper industry that could be reached by developing forest-based products. Opportunities for business expansion with applications in automotive, packaging, consumer goods, paints, cosmetics, textiles and other sectors that have higher GHG emission intensity, use of inorganic inputs and waste generation. To seize these opportunities, it is necessary to create and expand existing product development and the associated production chains, with support from technological and application partners in the market.

    The development of Suzano’s current corporate Strategy included an assessment of its alignment to climate-related trends. This Strategy will be reviewed annually to assess the results obtained and any necessary improvements.

    Suzano also identifies opportunities related to climate change adaptation and strengthens the resilience of its production processes in response to the current and potential impacts of climate change. The Technology Center already conducts research on planting improvement cycles to mitigate the climate vulnerability of plantations.

    Starting in 2020, we made efforts to review climate-related risks and opportunities. We classified each risk and opportunity in accordance with the TCFD taxonomy, the dimensions of the value chain involved (e.g., distributors, suppliers, operations), the financial factors potentially affected (e.g., revenues, expenses, assets) and the time horizons for materializing (short, medium and long term).

    In this context, conducting climate scenario analyses is an important practice recommended by the TCFD for assessing the impact of climate-related matters on the business and for supporting decision-making. Suzano already conducts analyses based on the IPCC’s climate scenarios to assess potential long-term impacts on the productivity of its forestry operations.

    We believe it is necessary to make progress in this practice to assess the potential financial impact related to these productivity shifts and from other risks or opportunities.

    Another improvement that Suzano is working on is the review of its Climate Change Strategy. Its Strategy considers the TCFD Recommendations and Suzano’s role in addressing climate mitigation and adaption needs.

    Suzano also is involved and spearheads external activities – such as working groups and research partnerships – working with industry associations (e.g., Ibá, CEBDS, Brazilian Coalition on Climate, Forests and Agriculture, etc.), government, academy and other companies to monitor and support the climate change agenda in the private sector.

  • 5. Management of Risks and Opportunities

    Context:

    Climate-related risks are incorporated into the Company’s Enterprise Risk Management (ERM). It follows the guidelines established in Suzano’s Integrated Risk Management Policy regarding the process of communicating, prioritizing, treating, consultation, monitoring and analysis related to risk management.

    As part of the prioritization process, climate risks are identified as priorities in the Corporate Risk Matrix. Risks related to physiological disturbances, pests and diseases that could affect forest productivity also are considered a priority. These risks are directly related to climate change, given that changes in ecosystems due to temperature increases can result in changes in pest susceptibility.

    As such, specific procedures are defined to respond to these priority risks, such as the formulation, implementation and monitoring of Action Plans. This work is led by the Risk Department, with the participation of other related areas.

    In addition to addressing climate risk at the corporate level, specific approaches are adopted at the operational level of forest and industrial production. The Science and Technology technical team identifies and monitors a series of indicators, to assess the exposure of the forestry operations to climate risks (as well as other environmental dimensions). One example is monitoring critical watersheds where we have operations to assess the exposure to water risks. Data gathered from this work is used to calibrate planning models for the harvesting and new planting periods and already has yielded specific plans to respond to supply risks.

    Variables related to the temperature, humidity and rainfall indicators of forest units also are monitored by the Science and Technology technical staff. This monitoring is based on: metrics collected by own and public weather stations; analysis of historical data; and projections of climate scenarios constructed from a combination of global scenarios (IPCC) and regional data.

    By identifying the relevant variables, the Company is able to identify the most material climatic risks. This data is compiled and analyzed and then input into tools developed in-house, such as monitoring reports and online information systems, which are made available to different management areas of the company to assist decision-making. In addition to the aforementioned projections on the potential impact of higher temperatures on forestry productivity, the Company also conducts other scientific studies. These include assessments of forest management practices to reduce water withdrawal and studies of higher resistance to pests, amongst others.

  • 6. Metrics and Targets

    Context:

    The environmental management system encompasses a series of metrics related to GHG emissions and capture, forest restoration, water withdrawal and use, energy use and generation, as well as waste generation and disposal. Part of these metrics also is embedded into operational performance indicators in production units, with specific targets to be met. The following is a list of intern and public indicators monitored by Suzano. For more information on the related indicators that are publicly available, click here.

     

    Metrics monitored by topics

    Climate adaptation

    • Adaptation projects for businesses, processes, products and/or services
    • Adapted seedlings (adapatation to extreme climate conditions)
    • Bills related to climate change
    • Extent of restored forests
    • Fire outbreaks (eucalyptus plantations and native forests)
    • Growth of forest pests due to temperature increase
    • Key impacts, risks, and opportunities

     

    Energy

    • Consumption of fuels from non-renewable sources
    • Consumption of fuels from renewable sources
    • Efficiency of logistic suppliers
    • Energy consumed
    • Energy consumption outside of the organization
    • Energy management in industrial operations
    • Energy mix
    • Energy sold
    • Renewable energy generation (biomass)
    • Replacement of fleets with more efficient vehicles
    • Total energy consumed

     

    GHG emissions and capture

    • Air emissions in industrial operations
    • Biogenic CO₂ emissions (scope 1)
    • Biogenic CO₂ emissions (scope 3)
    • Carbon capture
    • Carbon storage
    • Direct (Scope 1) GHG emissions by unit
    • Energy indirect (Scope 2) GHG emissions by unit
    • GHG emissions intensity
    • Management of air emissions in industrial operations
    • Other emissions and climate change indicators
    • Other indirect (Scope 3) GHG emissions by unit

     

    Waste management

    • Biological oxygen demand (BOD) in effluents in industrial operations
    • Chemical oxygen demand (COD) in effluents in industrial operations
    • Disposal of hazardous waste by method in forest operations
    • Disposal of hazardous waste by method in industrial operations
    • Disposal of non-hazardous waste by method in forest operations
    • Disposal of non-hazardous waste by method in industrial operations
    • Generation of hazardous waste in industrial operations
    • Generation of non-hazardous waste in industrial operations
    • Presence of AOX in effluents in industrial operations
    • Presence of total nitrogen in effluents in industrial operations
    • Presence of total phosphorus in effluents in industrial operations
    • Presence of total suspended solids in effluents in industrial operations
    • Solid waste management in forestry operations
    • Solid waste management in industrial operations
    • Spending on waste treatment and disposal in industrial operations
    • Waste sent to landfill cell in industrial operations
    • Water discharge (effluent discharge) in industrial operations

     

    Water

    • Maintenance of watershed resources
    • Management of water and effluents in forest operations
    • Management of water and effluents in industrial operations
    • Mapping of areas with potential conflicts regarding overlapping water use
    • Percentage of water recycled or reused in industrial operations
    • Specific water consumption in industrial operations
    • Water consumption in industrial operations
    • Water withdrawal by source in forest operations
    • Water withdrawal by source in industrial operations

     

    Suzano’s performance in various metrics is reported every year in the Annual Report, which adopts the GRI Standards and is submitted under other voluntary frameworks regarding environmental topics, such as the CDP, the GHG Protocol and sustainability indexes. In reports for the capital markets (Reference Form filed with the Brazilian Securities Commission and SEC 20-F Form), Suzano report on climate-related events as risk factors to its business and how these risks are managed.

    Suzano also sets climate-related targets at the strategic level. In 2020, as a result of an extensive effort involving reflection, diagnosis and projection, a Strategy with long-term targets for 2030 was established, which convey Suzano’s focus on becoming a leader in sustainability. Among the targets established, we formalized our climate change commitments:

    • To be even more climate positive by removing an additional 40 million tons the carbon from the atmosphere, (carbon capture – emissions scopes 1, 2 and 3)
    • Offer 10 million tons of renewable products that can replace plastic and petroleum-based products
    • Reduce specific emissions (scope 1 and 2) by 15% per ton of product
    • Increase water availability in 100% of critical watersheds
    • Reduce by 15% water withdrawals at our industrial operations
    • Increase renewable energy exports by 50%
    • Reduce by 70% the industrial waste sent to landfills

     

    These targets are linked to the variable compensation of certain teams and executives to ensure and demonstrate Suzano’s commitment to integrating the topic of climate change into its decision-making processes.

  • 7. Looking forward

    Context:

    We believe that implementing good practices for managing climate-related risks and opportunities is a journey of continuous improvement and learning. The climate is constantly changing, as is the way that society and the environment respond to these changes. We recognize that there are still challenges to fully understanding these impacts, especially regarding the need for the private sector to incorporate practices that are not yet widely adopted, such as climate scenario analysis. At the same time, various effects are known, with positive or negative impacts on businesses. Some impacts have already materialized and require appropriate solutions.

    Therefore, adhering to the TCFD Recommendations and other references of best practices is not an end in and of itself, but rather a journey. We reaffirm our commitment to keep improving constantly to address any gaps and move forward. Our transparency to shareholders and other stakeholders will be conveyed in our annual reports, the Sustainability sections on our website and our capital market reports.

    This journey includes not only efforts to mitigate the climate change and to help ecosystems and society adapt to these changes, but also measures to mitigate risks and to better position ourselves with regard to economic climate-related opportunities.

    We do and will do this in line with our Strategic Vision, which focuses on continuing to be a reference in efficiency, profitability and sustainability, serving as transformational agents in the expansion into new markets and being a reference in sustainable and innovative solutions for the bioeconomy and ecosystem services based on trees.