Value Chain (suppliers and customers)
Understanding the needs and potentialities of our customers, with the purpose of offering sustainable products and solutions, through a relationship that favors long-term connections. Supplier management in accordance with the company’s social and environmental criteria, aiming at the development of local suppliers and the reduction of adverse impacts throughout the value chain.
Formal risk identification process, definition of “sustainability high-risk” and supplier risk management measures
Formal risk identification process: Suzano analyzes suppliers in the criteria of regularity in registration with agencies, financial, integrity and requirements of technical quality, quality system, people management, technology employed, health and safety and environment. Potential sustainability risks are identified by tools, such as performance evaluation and on-site audits. Fixed service providers (on-site contractores) are monitored in compliance with labor obligations and on a risk panel. For wood suppliers, sustainability risks are defined considering five FSC® categories (illegally harvested wood, wood harvested in violation of traditional or civil rights, from forests in which high conservation values are threatened by management activities, from areas being converted from forests and other wooded ecosystems to plantations or non-forest uses, and from forests in which genetically modified trees are planted). For evaluation, we apply the Due Diligence System through documentary analyses and on-site visits.
wdt_ID Supplier risk identification process, by type of supplier, in 2020: Number of suppliers assessed in the last 3 years¹ Number of suppliers classified as sustainability high-risk Percentage of total suppliers which are classified as sustainability high-risk 1 Tier 1 suppliers 1,809 651 5.73% 2 Critical non-tier 1 suppliers 0 0 N/A
Suzano’s definition of “sustainability high-risk”:
In accordance with the risk criteria defined by Suzano, suppliers are evaluated and monitored according to the criteria of compliance with labor obligations, health and safety, financial and economic risk. We generated an index based on this data and monitor and disclose the suppliers’ classification on a quarterly basis. Suppliers are classified as low, medium and high risk considering the criteria above, and those whose score is below 80 in the Social, Environmental and OHS criteria are considered as “high risk”. Regarding wood sourcing, given the criticality of wood as an input and because it significantly involves sensitive issues such as compliance, land use, conservation areas, human rights and relationships with traditional communities, the Company classifies all wood suppliers as “sustainability high risk”. In 2020, 614 wood suppliers (all wood suppliers) and 37 other suppliers (thus 651 suppliers in total) were classified as “as sustainability high-risk”.
Supplier Risk Management Measures:
Regarding in loco audits, for wood suppliers, Suzano conducts the field Monitoring Program, which is carried out by the Forestry Business team to verify the supplier’s compliance with the applicable legal requirements. The field verification program is applied pre- and during harvest. For contractors that works on Suzano’s units (“fixed services”), Suzano audits these suppliers regularly aiming to identify possible non-conformities of a labor nature and thus mitigate these risks. Thus, in 2020:
- Regarding critical suppliers (tier 1 and non-tier 1) which were in loco audited: 614 wood suppliers and 26 on-site contractors, totaling 640 critical suppliers audited, which represents 60% of Suzano’s 1,072 critical suppliers;
- Regarding suppliers with high sustainability risk (tier 1 and non-tier 1) which were in loco audited: 614 wood suppliers and 26 on-site contractors, totaling 640 high sustainability risk suppliers in loco audited in 2020, which represents 98% of Suzano’s 651 high sustainability risk suppliers.
Corrective action plans for suppliers resulted from in loco audits in 2020:
Wood suppliers: in 2020, 5 suppliers were identified as non- ESG compliant. From these, 2 were identified in the external audit – by a third party – for FSC and PEFC Chain of Custody certification and 3 were identified by Suzano analysts in routine monitoring (Due diligence System for Controlled Wood management). For these 5 suppliers, action plans were created, and all 5 had ESG performance improvement within 12 months (i.e., now are ESG compliant).
On-site contractors (“fixed services”): in 2020, 9 suppliers were non-compliant. Suzano designed action plans, where 7 suppliers evolved in ESG issues, 1 still is working to evolve in ESG gaps after 12 months and 1 supplier was demobilized due the fact that it didn’t evolve in any ESG issue indicated in the action plan (thus we terminated the contract with this supplier).