The acquisition of Fibria by Suzano has created the world’s largest pulp company with a production capacity of 8.6 million tonnes a year. This can be both a threat and an opportunity from a social and environmental perspective. Big companies can have big impacts. But they also have a leading role, and any improvements on their performance is trend setting for the rest of the sector. It is therefore very important that this new giant commits to implementing strong social, environmental, and governance (ESG) policies and management systems.
We expect that the syndicate will apply the highest requirements of the policies on investments in the pulp sector, from the participating banks. However, even though Rabobank and BNP Paribas have relatively strong policies, our analysis of them in our “In the Red” report shows they might not be sufficient to protect the syndicate from reputational and financial risk, nor to catalyse change in the policies and management systems of Suzano and Fibria.
To avoid financial and reputational risks, we strongly recommend the syndicate of banks to also include the “Red Lines,” as described in the “Green Paper, Red Lines” document by EPN (attached) as criteria in the contract with Suzano. Furthermore, we also specifically recommend the syndicate to require as minimum:
1. Perform its own due diligence on Environmental, Social and Governance issues, without relying on certification schemes for this.
2. Require Suzano to publish georeferenced maps of all the areas both Suzano and Fibria own, lease or source from, within a year time.
3. Require Suzano to provide documentation that proves it obtained free, prior and informed consent for all land acquisitions that affect the livelihoods of local communities, as well as proof of acceptable compensation.
4. Require Suzano to return all land for which such proof cannot be shown.
5. Require Suzano to publicly report on all land related conflicts, with details about their location and the progress that is being made and future social commitments.
6. Require Suzano to publicly report on its engagement with affected communities and with civil society, regarding the impacts its operations cause.
7. Require Suzano to publicly report on the type and the quantity of agro-chemicals it uses, and to publicly report on the its monitoring of the impacts on the environment and on human health.
8. Require Suzano to publicly report on the monitoring results from the impacts on surface and ground water levels of its plantations.
9. Require Suzano to stop its Genetically Engineered trees program.
10. Require Suzano to invest in the development of more sustainable products.
The contract should include clauses that will allow the syndicate to impose high financial penalties in cases of non-compliance and the option to cancel the contract, in case of contract breach over Environmental, Social and Governance (ESG) issues.
Some concerns regarding Suzano’s ESG Performance
The policies of the banks in the syndicate encourage and rely on certification of either PEFC or FSC as a proxy for their due diligence. First, we would like to stress that PEFC is absolutely insufficient in its requirement and that it is not supported by any serious NGO. Secondly, though FSC has higher standards, it should be noted that the scheme has also failed to address critical issues, such as its transparency, which makes external monitoring much harder.
Suzano has not published georeferenced maps of the areas it owns and/or sources from. And though it states it aims to achieve FSC certification, only 1/3 of the areas that supply its mill in Imperatriz were certified in 2017. This lack of commitment is very problematic for a mill that is located in an ecologically sensitive area of transition between the Amazon and the Cerrado biome.
Furthermore, Suzano’s forest management plan for the state of Maranhão does not mention the areas it controls in other regions, like that of the Baixo Parnaíba. In this area in the Northeast of Maranhão it has been accused of grabbing thousands of hectares and evicting communities from their land, without their Free, Prior and Informed Consent and without an acceptable compensation, as would be mandated by the policies of BNP Paribas and the Rabobank. Some of these areas seem to have been converted from natural forests, which is against the policies of most of the banks in the syndicate.
Maranhão is a state which historically has very low governance and strong land title problems. It is also the state with the largest rural population (37%) which depends strongly on their land and the harvest of wild fruits such as bacuri. In this complicated setting, Suzano has a poor record of engaging with civil society. An example of this is that it failed to show up for a public hearing last year, organized by several governmental bodies, to find a solution for a land conflict with the Movement of Landless Workers(the MST), last year.
This is in breach with the policies of BNP Paribas and Rabobank, which require companies to engage with stakeholders. They also require companies to have an efficient grievance mechanism. Suzano’s channel for complaints, called “Suzano Responde”, seems to be meant to fulfil this requirement but there is no information available about the process through which complaints are analysed, nor does the company report on the kind of complaints in the case of social issues.
Suzano also does not report on the kind and the quantity of agro-chemicals it uses. This is worrying as Brazil is the world’s largest consumer of agro-chemicals, consuming 20% of the world’s total. Due to strong pressure of the agricultural lobby, it has very weak legislation on these chemicals. From the agrochemicals that are legal to use in Brazil, 30% are forbidden in Europe, and the levels allowed in drinking water are much higher than in the EU. For example, for glyphosate, the allowed concentration is 5000 times higher than in the EU. This poses a strong risk for the health of workers and the communities living nearby plantations. Suzano does not have an effective mechanism to inform communities about its use of agro-chemicals, and at least one community has reported that their residential houses, their crops and the nearby river were sprayed by a plane from Suzano.
Local communities have also complained about reduced water levels. Suzano does not report on any monitoring of surface and ground water levels. Instead, it qualifies the impact of the plantations water levels as myths. It argues eucalyptus trees have a relatively low need of water per biomass unit produced. This rationale omits the fact that eucalyptus trees are very fast-growing species, producing a high amount of biomass on a yearly basis, and therefore also consuming a high amount of water. This is of especial concern in drier regions like the Cerrado, where the native vegetation produces far less biomass on a yearly basis, and this consumes far less water. The problem of water availability is expected to be worsened by the genetically engineered varieties Suzano is now testing, which have been modified to grow even faster.
Though Suzano claims its Genetically Engineered trees are still in the research phase, it is expected that the company will start using them as soon as possible. This would mean they would lose their FSC certification, as FSC does not allow the commercial use of genetically engineered trees. Financing non-certified companies would be against the policies of the syndicate banks.
Last but not least, in a world with a growing population and growing consumption, we need to be smarter about the use of our limited natural resources. The majority of pulp is used for packaging paper, which generally only has a one-time use. As a leading company, Suzano can lead the way by investing in the development of products that can be reused multiple times and eventually be recycled, without a great loss of quality.
The issues mentioned above are just a sample of the points on which Suzano needs to improve its performance. A thorough due diligence will be required to obtain a full picture of the ESG issues that need addressing, both within Suzano, as well as in Fibria.
