The size of the challenge

In March 2016, the workers of the Horizonte 2 Project celebrated the verticalization of the first metallic column of the recovery boiler, a key piece of equipment in a pulp mill and a milestone in the company's expansion works in Três Lagoas (Mato Grosso do Sul). This shows that in order to install it, all aspects of the project, such as detailing of financial, engineering, procurement, and logistics issues, among many others, were carried out accordingly.

As one of the largest private investments in Brazil until 2016, totaling approximately BRL 7.5 billion, the Horizonte 2 Project has as its backdrop the achievements and social and environmental dilemmas inherent to a project of this magnitude. While it generates jobs, distributes income, and increases tax revenues, the project attracts thousands of workers into the region, increases the local cost of living, and puts pressure on public utilities.

BRL7.5

billion, one of the largest private investments in the country

3.25

million tons/year will be the total production capacity of Três Lagoas mill

In order to face a challenge typical of a project the size of Horizonte 2 Project, we used Fibria's ability to promote open and transparent dialogue, since the very first step. Based on these conversations, several multisector projects emerged, involving the company, other companies, associations, NGOs, academia, and different spheres of government. All partnerships have been valuable in our joint process of sharing the lessons learned necessary to deal with the different social, economic, and environmental impacts of our expansion.

While it generates jobs, distributes income, and increases tax revenues, the project attracts thousands of workers into the region, increases the local cost of living, and puts pressure on public utilities

1.95

million tons/year of additional pulp

77%

of the physical construction completed in 2016

Great Moments

Timeline of the project's milestones in 2016:

Social Transformation

Fibria's responsible performance led to the creation of the Movement Agente do Bem (Agent for the Good) and the adoption of the Public Administration Support Program (PAGP). But there are also a series of initiatives stemming from Fibria's commitments associated with the license to carry out the Horizonte 2 Project. These are social and environmental mitigation actions, prioritized by the community and representatives of municipal and state governments, in which we are investing a total of BRL 8.1 million. This amount is intended for the renovation of schools, hospitals, and Nurseries and the purchase of police vehicles and ambulances, among others, in Três Lagoas, Brasilândia, and Selvíria, cities located within our area of operation. Other benefits to these municipalities (such as dental programs, youth and adult education, handcrafts, production of honey, and initiatives to generate income) are linked to the financing line granted by the Brazilian Nacional Bank for Economic and Social Development (BNDES) and represent a total investment of BRL 11.5 million.  

INDIGENOUS SUSTAINABILITY PLAN OFAYÉ, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

INDIGENOUS SUSTAINABILITY PLAN OFAYÉ, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

PDRT PROGRAM IN SETTLEMENT 20 DE MARÇO, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

SORRISO SAUDÁVEL (HEALTHY SMILE) PROGRAM IN SETTLEMENT 20 DE MARÇO, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

PRODUCERS IN COMMUNITY NURSERY JAIRO CESÁRIO MAGALHÃES IN THE
REDES PROGRAM, IN SETTLEMENT 20 DE MARÇO, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

INDIGENOUS SUSTAINABILITY PLAN OFAYÉ, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

INDIGENOUS SUSTAINABILITY PLAN OFAYÉ, IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

Agente do Bem

Avoiding and mitigating possible social impacts caused by the Horizonte 2 Project is a topic of permanent concern for Fibria. The Agente do Bem (Agent for the Good) Movement, an important initiative of guidance and support to the community, was developed in 2016 with the objective of preventively protecting children and adolescents against all types of violence, especially sexual violence, as well as supporting the coordination of the Network for the Protection of the Rights of Children and Adolescents of Três Lagoas, Mato Grosso do Sul.

The first step was to identify existing programs, services, and actions that could join efforts with the Agente do Bem Movement. Once the diagnosis was made, the movement coordinated and integrated other players, creating a common goal and a mobilization network to deal with the cause.

The Agente do Bem proposes initiatives divided into two main groups:

Support to Public Administration

The Public Administration Support Program (PAGP) is a plural, nonpartisan initiative, conducted by society in a participatory manner and whose objective is to technically support the governments of Brazilian municipalities in the creation of projects for modernization of public administration and territorial planning, coordinating partnerships transparently and with public participation.

Fibria has joined national and international institutions to sponsor the initiative in Brasilândia (Mato Grosso do Sul) and Três Lagoas (Mato Grosso do Sul), such as the Votorantim Institute (which has the Public Administration Support Methodology - AGP), the Inter-American Development Bank (IDB), through the CES methodology (Emerging and Sustainable Cities Program), the Brazilian National Bank for Economic and Social Development (BNDES), and the Arapyaú Institute, in addition to the governments of participating municipalities.

In Brasilândia, we supported the construction of the first Participative Master Plan of the Municipality. Two public hearings and six meetings were held in neighborhoods and with specific groups, such as store owners and landowners, until the proposal could be approved by the City Council and transformed into law No. 2,658/16 on December 1, 2016.

In Três Lagoas, two projects advanced concurrently: revision of the Participative Master Plan and creation of the Três Lagoas Sustainable Action Plan. Both are being developed through seminars, workshops, and public hearings. The review of the Participative Master Plan was carried out by a mobilized civil society and approved by the City Council and transformed into Law No. 3,211/16 on December 6, 2016.

The Três Lagoas Sustainable Action Plan is conducted by the CES and considers four dimensions: Environmental Sustainability and Climate Change, Urban Sustainability, Fiscal Sustainability and Governance, and Economic Competitiveness. Technicians mapped the city's most critical aspects, based on studies and consultation of civil society, and worked on suggestions for sustainable growth. At the end of the diagnosis, six priority aspects were presented in three strategic lines of action, which cascade into 92 actions. As part of the monitoring carried out by the citizens, a coordination group was formed, composed of representatives from 31 city institutions, to contribute to the creation of the document and to monitor the implementation of municipal planning.

BRL 8.1 million

invested in social and environmental actions, associated with the license

1,518

workshops for employee covering aspects such as citizenship, health, family, drugs, and alcohol

BRL 450 million

in taxes will be collected during the construction phase

Support to Workers

Criteria for hiring people and services were established to support Fibria's employees and contractors during the construction period, as well as to contribute to the economic development of the region and mitigate risks associated with construction. The main criteria are:

8,283

professionals worked simultaneously during the work surge in December 2016

EMPLOYEES OF PROJECT HORIZONTE 2 IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

13,392,088

are the Man-Hours Worked (MHW) since the beginning of the project, equivalent to 17,767 professionals

890,000

hours of training of specialized professionals

Attract Professionals

Fibria's biggest challenge in people development has been to hire employees for the new Três Lagoas (Mato Grosso do Sul) line, a region with strong competition for skilled labor. By 2016, however, we managed to turn this hurdle into an opportunity by training and hiring professionals from the city and region.

NIVALDO SERRÃO PEREIRA, OPERATOR IN THE BALING AREA IN TRÊS LAGOAS (MATO GROSSO SO SUL).
PHOTO: MÁRCIO SCHIMMING.

Upon completion of the Horizonte 2 Project, we plan to hire around 3,000 employees, including our own and contractors, to operate in the new Fibria operation. Of this group, 988 people will be our own employees, of which 144 will be dedicated to the industrial operation and 844 will be in the forestry operation. We understand that there should be a mix of experienced professionals and professionals still in the beginning of their careers, who come from the local community. For hiring these new professionals, we have developed, in partnership with National Service for Industrial Training (SENAI), training courses and we offer professional qualification positions to those who are interested.

3,000

jobs will be created when the new line becomes operational

100

job positions for trainees were opened in the industrial operation

Upon completion of the Horizonte 2 Project, we plan to hire around 3,000 employees, including our own and contractors

In the industrial operation, 100 internship positions were opened, focused on the development of people from the community of Três Lagoas. At the end of the program, we hired 63 employees who excelled in technical and behavioral evaluations. For positions that require experience, we sought professionals from our other units and also in the job market. In the forestry operation, the extension of the planting area created the need for professionals in Brasilândia, Água Clara, and Três Lagoas, locations where we will operate. By December 2017, we will have hired all the professionals.

Development programs in partnership with National Service for Industrial Training (SENAI)

Safety Standard

Management of health, safety and environment in the Horizonte 2 Project follows the same guidelines as Fibria's. The challenge in Três Lagoas, Mato Grosso do Sul, is to guarantee, throughout all work phases, our standard to a workforce of approximately 40,000 people - considering the entire supplier chain/project developers. To this end, we have established a team of 52 professionals including safety engineers, occupational physicians, safety technicians, nurses, nursing technicians, environment technicians, and administrative staff.

The results show the effectiveness of these measures:

• The Horizonte Project 2, as of the last measurement in December 2016, recorded a reportable accident frequency rate of 5.82 per million Man-Hours Worked (MHW). According to a benchmarking for safety indicators conducted by OSHA-USA* for projects that associate heavy civil and electromechanical construction and involve more than 1,000 workers at the construction site, the average reportable accident frequency rate for American companies is around 7 accidents per million Man-Hours Worked (MHW), in other words, a performance below that obtained by Fibria in Três Lagoas, Mato Grosso do Sul.
• If we considered only the lost time injury frequency rate for the same period, the rate for the Horizonte 2 Project would be 0.37 accidents per million Man-Hours Worked (MHW).

*OSHA-USA – Occupational Safety and Health Administration: US federal agency for safety and health management.
Source: www.bls.gov/iif/oshwc/osh/os/ostb4359.pdf.
Indicators calculated per 200,000 MHW.

FIBRIA'S CONSTRUCTION SITE IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING

Considering the entire supply chain, the project involved approximately 40,000 people throughout all its construction phases.

Partners in Plantation

When the new Fibria production line in Três Lagoas enters operation, in the second half of 2017, an additional 1.95 million tons of pulp will be placed in the market. Fibria will be planting and harvesting nearly five eucalyptus trees per second, while attempting to maintain the quality, deadlines, and cost in the delivery of 7 million tons of pulp per year.

In order to produce another 6 million m³ of wood per year, intended for Três Lagoas, we will need to plant additional 187,000 hectares of planted forests in own land, leases, or partnerships, as well as purchase wood from third parties, to supply the new mill. These alliances guarantee Fibria's supply and generate economic benefits and transfer of technology to partners. Currently, we have 150,000 hectares planted or included in planting contracts. The remaining 37,000 hectares will be planted in 2017 and 2018.

Alliances with producers of wood guarantee Fibria's supply and generate economic benefits and technology transfer to partners.

The Horizonte 2 Project will also have sophisticated technological solutions, which will guarantee a reduction in chemical consumption and maximize generation of electric energy, among other benefits. We are increasing production without increasing the impact on the environment. This is what guarantees the environmental license for us to continue to operate.

EUCALYPTUS FOREST IN TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

187,000

hectares of planted forests

Automated Nursery

In 2017, Fibria will have in Três Lagoas, Mato Grosso do Sul, the first automated nursery of eucalyptus seedlings in the world, with the application of Dutch technology used in floriculture, capable of producing 43 million seedlings per year (close to 11,500 per day). In addition to avoiding losses and preserving the integrity of the seedlings, the new nursery will follow sustainability concepts, such as reduction of waste and of environmental impact, by replacing the old plastic tubing from the seedling production trays with more modern materials made from biodegradable paper.

43

million seedlings per year (nearly 11,500 per day) is the production of the automated nursery

Technology
The automated nursery applies Dutch technology used in floriculture.

Our decision to operate with state-of-the-art solutions is associated with the production volume, with the production cost per 1,000 units, which is 35% lower than the average cost of our other Nurseries, and with the economic and social conditions of the region where the nursery is located. In Três Lagoas, one of the fastest growing cities in the country, the competition for qualified professionals is growing. Given the technology involved, this seedling nursery will require 47% fewer employees. However, we have the opportunity to keep our already trained staff and open new job positions, since seedling production will be four times greater than the current one.

In a scenario of scarce job supply and where we can train people, we opt for manual production systems, as is the case of the Helvécia nursery, in the South of Bahia. Fibria seeks to adopt alternatives to assist local development, according to the context in which it operates.

Environmental Management

In addition to producing and consuming its own energy, Horizonte 2 will contribute to the Brazilian energy balance by continuously delivering a surplus of 130 MWh. Energy is a high added value by-product and its generation is as relevant for the economic return of the project as the sale of pulp.

All water required for the operation will come from the Paraná River. The Horizonte 2 Project is expected to withdraw up to 30 m³/adt, which is a benchmark for eco-efficient projects.

Today, 35% of waste from line 1 is disposed of in industrial landfills. For the entire facility (lines 1 and 2) this number will be 15%, since we will be able to send a larger volume of waste to burn in the boiler, in accordance with the Long-Term Goal (2025) for the reduction of disposal of industrial solid waste in landfills. In addition to correcting soil acidity, studies proceed to add organic waste to obtain organomineral products with high agricultural value for use in Fibria's silviculture areas, with the surplus being marketed in the agricultural market in general.

130 MWh

is the surplus energy to be continuously supplied to the Brazilian energy balance

With the expansion of Três Lagoas, Mato Grosso do Sul, Fibria also has the opportunity to innovate in control of odor emissions. In 2016, we went to Finland (a benchmark country in the development of thermal oxidation technologies for gases in flares) to learn about and acquire state-of-the-art equipment.

Infographic

Horizonte 2

Product Flow

The expansion works at Três Lagoas, Mato Grosso do Sul, represent a major logistics challenge for the company, which must be fully addressed by the second half of 2017, before completion of the Horizonte 2 Project. In total, the unit will produce 3.25 million tons of pulp per year, that is, an additional 1.95 million tons.

To safely distribute this large production volume, some solutions are being designed and implemented. Among them is the expansion of the Macuco Terminal, in the Port of Santos, São Paulo, from where the total cargo of pulp will be shipped to our clients in Europe and Asia.

Production of line 1 in Três Lagoas will continue to be transported through the railway terminal of Jupiá, located 30 km from the mill. The terminal has track gauge in meters and, therefore, would not handle the entire volume produced by the unit. The production of line 2 will be sent from the wide track gauges of Aparecida do Taboado, Mato Grosso do Sul, located 150 km from Três Lagoas, where we are already building a new multimodal terminal. In both cases, we have an operation agreement with ALL (América Latina Logística).

Sustainability in the Supply Chain

At the peak of construction, in December 2016, Horizonte 2 had more than 8,000 active workers per day. In order to create mechanisms to identify and avoid risks at the construction site, we organized the Sustainability and Compliance Working Group, which brings together Fibria's main suppliers and representatives directly involved in the project who will provide reports in the quarterly meetings for Critical Project Review (Análise Crítica do Projeto - ACP).

Participants are responsible for Compliance, Sustainability, and Environment aspects of Fibria's partners and representatives in the Horizonte 2 Project.

The group has been meeting since December 2015 with the objective of mapping social, environmental and compliance risks and prioritizing the action plans necessary to mitigate these risks. Theme subgroups involving all suppliers were created. They are:

EMPLOYEES IN THE EXPANSION WORK OF TRÊS LAGOAS (MATO GROSSO DO SUL).
PHOTO: MÁRCIO SCHIMMING.

60

large suppliers work on the project

40,000

new direct and indirect jobs throughout the supply chain, from large equipment to small local trade, during construction

Sustainability in the supply chain is also a constant pursuit in the day to day operations of Horizonte 2. Contracting is carried out in accordance with Fibria's supplier selection and approval standards, with evaluations from the areas of compliance and finance. Some examples of practices adopted in contracting are the statement by contractors agreeing to adhere and commit to complying with the anti-corruption policy, the policy of defense of competition, the specific clauses of respect to Human Rights, and to Fibria's Code of Conduct. We also monitor management of suppliers' obligations concerning their subcontractors, with corrective actions and/or mitigation measures for cases where the rules are not being clearly observed.

Governance in Três Lagoas

A project the size and complexity of Horizonte 2 requires careful attention from Fibria in terms of risk management and compliance. Therefore, in designing the project's governance, Fibria opted for the company's already consolidated model, in which decisions are made by a joint committee.

 The Steering Committee (SC) was formed, and is responsible for evaluating, deliberating, and supporting the project's strategic and critical decisions, in accordance with the governance guidelines and policies and the approval hierarchy previously determined by Fibria's Board of Directors. The committee is composed of members of Fibria's Board of Directors and an external consultant who monitor the project's physical and financial progress reports and meet periodically with the project director for strategic alignment and discussion about demands that require the committee's deliberation.

The Master Committee, composed of representatives from Fibria and other companies, was set up with decision making autonomy to (i) prevent, eliminate, or mitigate identified risks, which the committee has the responsibility to remedy whenever possible, (ii) map and assess the weaknesses and opportunities related to the progress of the day-to-day industrial work, and (iii) make decisions according to the internal and external rules of the organization. This committee convenes monthly or whenever necessary, and its deliberations are reported to the Project Director and the Steering Committee .

The quarterly meetings for Critical Project Review (ACP) are held with the objective of periodically evaluating the strategies and critical points, defining actions and deliberations, and checking effectiveness concerning the objectives of the project. It also ensures a joint analysis of the project's status, collecting data that is relevant to all and providing the opportunity for joint actions to be taken in order to provide benefits to Fibria and its partners. This meeting is attended by the Executive Boards of the companies involved in the project, those responsible for specific projects in the Horizonte 2, and Fibria's Executive Board and Presidency.

Governance, Risk Management, Audit, Ombudsman, Controls and Compliance

We also created the Governance, Risk Management, Audit, Ombudsman, Controls, and Compliance department, which reports administratively to the director of the Horizonte 2 Project and, independently, to the Statutory Audit Committee (CAE - Comitê de Auditoria Estatutário), an advisory body to Fibria's Board of Directors. The team has the following responsibilities:

• Conduct internal audits according to the schedule approved by the CAE, which result in recommendations to project and/or company officials;  

• Create risk indicators for continuous monitoring of the weaknesses pointed out in the audit work. Some examples: up-to-date licenses and obligations; breach of approval purview, dependence on vendors, anti-corruption, reconciliation of advances versus purchase orders versus acceptance letter, waste management, among others;  

•  Conduct quarterly meetings to dynamically update the project's strategic risk matrix and update the action plans for the priority risks, in which the company and project managers are involved;  

• Carry out systemic workshops on expected behavior in line with the Compliance Program, in which all members of the project participate;  

• Implement the conflict of interest statement form applied upon hiring all new employees; 

• Background check of compliance risks with evaluation of Fibria's level of exposure in relation to contracting suppliers;

• Every three months, submit a Project Follow-up Report to Fibria's senior management;  

• Every three months, carry out the Control Self Assessment of the project's control charter.