Policy
Aracruz Celulose's management policies
Aracruz Celulose's outsourcing and supplier policies
The Aracruz Celulose forestry policy
Financial policy
Regulation of the Policy of Disclosure and Use of Information about Relevant Act or Fact Genetically modified organisms
Governance policy
Aracruz Celulose's management policies
Aracruz Celulose, a supplier of bleached pulp to the world market, believes that the quality of its products and the quality of its services, provided through the sustainable operation and management of its business, are fundamental to ensuring sustainable returns for its shareholders, based on:
- The supply of products and services that are adjusted and differentiated for its customers.
- Management that strives to achieve operating excellence that is focused on continuous improvement.
- The sustainable use of natural resources and operations that minimize environmental impacts through prevention and control actions.
- Compliance with legislation, regulations and commitments, formally assumed by the company.
- An ethical and transparent relationship with stakeholders.
- The fostering of a motivating workplace with high standards regarding health and safety.
- Trained, motivated people who are capable of acting effectively according to the company's strategies.
- The development and application of technologies that ensure innovation and competitiveness.
Aracruz Celulose's outsourcing and supplier policies
Aracruz uses outsourcing as a management tool that adds value to its business. This practice has been adopted since the beginning of the 1990s when it was focused on non-essential activities. At the beginning it was restricted to support areas - such as restaurant and cleaning services; today it is estimated outsourcing to be responsible for about 70% of the human resources necessary for activities with an impact on the Company's results.
A committee was created in April 1999 to develop and put into practice the outsourcing model the company decided upon in order to ensure that outsourcing policies were in step with Aracruz's strategic vision. In May 2002, the company initiated a more structured format for the outsourcing model's operation, focusing on and giving priority to greater efforts to hire permanent services - that is, activities that are part of our continuous day-to-day operations.
Outsourcing management at Aracruz
Outsourcing and supplier policies
Mandatory requirements are those established by law or Aracruz's own rules for different topics.
Organizational systems of suppliers that sustain performance
The Contract Management System is the result of Aracruz's strategic guidelines and the principles and values contained in the Model for Guaranteeing the Competitive Performance of Contracted Services. Nevertheless, it is highly influenced by the service suppliers? management systems. Thus, suppliers? organizational systems have an important impact in sustaining their contractual obligations with Aracruz.
Taking into account the aspects noted above, the objective of this topic is to establish minimum standards for the organizational systems of service suppliers, regarding:
- Human Resources - Service suppliers must have a human resources management system that is consistent and makes it possible to adequately manage people, ensuring a desired performance level for the activities hired. At minimum, the HR system must take into account the following aspects: Vision, Mission and Values; the workforce; recruitment and selection; training; compensation and benefits; performance management; career planning and retention; organizational climate; labor relations; and Health Promotion and Prevention (PPS).
- Workplace Safety - Service suppliers must have/develop a safety policy that is guided by current legislation and that allows them to adhere to the Aracruz Safety System. When executing on-site activities, service suppliers must practice and effectively disseminate Aracruz's concepts and tools.
- Quality and Environmental Management - Suppliers must have a quality system that is compatible with Aracruz's views on the subject.
- Intangibles - This refers to internal and external attitudes - general characteristics of the company that reflect its culture, values, management model and organization. Thus, Aracruz considers that it is important for its service suppliers to have the following characteristics, evaluated as intangibles: honesty and transparency; sustainable development; and care in the use of resources (concern for its own assets and those belonging to Aracruz).
Aracruz seeks to establish an open and transparent relationship with its service suppliers. Any action that does not respect the ethical and moral principles of the company could lead to their exclusion.
- Principles of the contract
- Standard of conduct
- Detailed scope of service
- Performance indicators
- Commercial proposal
- Technical proposal
- Operating flow charts
- Responsibility matrix
- Qualification of the functions
- List of sub-contractors
- Procedures manual
- Relationship matrix
- List of computers necessary for the work
- Guarantee
Also required is a guarantee regarding the materials and services supplied.
- Obligations
- To use own employees who are duly skilled and trained;
- To carry out services according to professional standards;
- To issue bills and/or billing documents arising from the contract that are in compliance with the agreed upon instructions;
- To be registered in the corresponding professional class organization for the services supplied according to the legislation;
- Employees must be duly dressed in appropriate uniform and wear an identification badge;
- To correct at its own expense and without any cost to Aracruz any and all defects, flaws, imperfections or impreciseness presented by any part of its services;
- To be responsible for obtaining all necessary legal documentation, including passports and visas that may be required when their employees or agents are foreigners;
- To send to Aracruz personnel who are covered by insurance policies against workplace accidents, disease, disabilities and death;
- To comply with legislation regarding safety, hygiene and labor medicine and Aracruz's internal rules regarding the PPS;
- To reimburse Aracruz for all expenses deriving from tax, labor and social security obligations linked to execution of the contract.
Based upon evaluation logic and points, the service suppliers are classified according to the following table:
| Concept | Definition | Points |
|---|---|---|
| A | Presented a level of excellence regarding the criteria evaluated. | 85 - 100 |
| B | Had good quality standard regarding the criteria evaluated. | 70 - 84 |
| C | Maintained an acceptable level regarding the criteria evaluated. | 55 - 69 |
| D | Presented insufficient conditions. Requires urgent changes. | 40 - 54 |
| E | Presented conditions far from those required by Aracruz. | < 40 |
Rewards for permanent service suppliers
Should be given in compliance with the criteria established for such (Reward System and Recognition of Service Suppliers - MT/SMS-001-UBR).
Contract management system
The contract management system defines the parameters for monitoring and developing performance, through the following items:
- Strategic plan for the outsourcing activity
- Performance indicators and agreed results
- Treatment of the results of the permanent service evaluations
- Management reports
- Follow-up meetings
- Treatment of the result of the evaluation of the contracted company
Regular meetings regarding the result of the contract
The manager must schedule meetings to the evaluate the results that have been agreed to by the service supplier, specifying the order of the day of the meetings as defined in the contract (evaluation of the indicators) and meetings every semester regarding the result of the supplier evaluation system (evaluation of the service, evaluation of customers, consolidated evaluation).
Outsourcing Committee: comite@aracruz.com.br
The Aracruz Celulose forestry policy
Aracruz Celulose’s policy is to obtain wood for the production of pulp and solid wood products at the lowest cost and investment through a sustainable forestry operation based entirely on forest plantations.
With this objective, the Company will build its forestry base taking into account legal, environmental, technical, scientific, economic, social and political aspects, seeking:
To foster environmental balance
- Using for planting areas that already have suffered human interference as a form of conversion of economic activities, and integrating the plantations with fragments of remaining natural ecosystems or added for this purpose, in a manner that improves the biodiversity and the balance of these ecosystems compared to the situation originally encountered.
- Employing currently available best technology and practices for the application, monitoring and control of the impact of silvicultural operations in an environmentally sustainable manner.
To minimize impacts
- Seeking the longevity of the company through the maximum addition of value in its different forestry projects, taking into consideration factors related to productivity, agrarian utilization, logistics, the value of the asset, etc., in order to reinforce the company’s position as one of the producers with the lowest operating costs.
- Establishing forests in a manner that conciliates the growth of productivity with the sustainable use of environmental resources, highlighting soil, water resources and biodiversity through the application of a forestry management that favors the conservation of these resources or the minimization of impacts on them.
- Incorporating the best agricultural and environmental practices into the economic relationship with forestry farmers, seeking the sustainable use of the land and the preservation of water resources and local biodiversity.
To contribute to social and economic well-being
- To avoid that the expansion of the plantations is carried out in areas that potentially could be the subject of disputes involving communities or other factors of social importance.
- To respect the use and the original rights and traditional communities over their respective areas of recognized ancestral occupation.
- To balance the supply of wood taking into account our own forestry base and the supply of wood by participants in the forestry partners program whose forestry practices are recognized as being sustainable.
- To contribute toward the creation of social and economic well-being, through a long-term vision, creating job opportunities for the members of communities living in the vicinity of our forests.
- To conduct forestry activities based upon economic decisions that have a greater potential for gains for society, including the analysis of the social risks for an operating license.
Financial policy
Aracruz has approved a new Investment Policy which was designed to manage the company's liquidity risk, thus ensuring that all financial commitments undertaken are honoured. To this end, the company shall maintain minimum fully liquid cash reserves equivalent to the next three months' expected financial and operational expense outlays.
Throughout this new policy, Aracruz aims to ensure the efficient management of its financial assets and liabilities. This management is backed by the company's Cash Flow Management and Financial Risk Management policies, which are approved by the Board of Directors and implemented by the Finance Committee.
The company's cash may be allocated, up to an unlimited amount, to financial investments in government securities that are issued by and/or are the co-responsibility of the National Treasury, the Brazilian Central Bank (BACEN) and/or the U.S. Treasury or Central Bank.
As regards private risk, the exposure limit is equivalent to 75% of the company's total cash reserves, and the allocation is subject to the following criteria:
- Minimum rating of "AA-" (S&P/Fitch) or "Aa3" (Moody's);
- Up to 2% of the counterpart's net worth;
- Up to 20% of the company's total cash per counterpart;
- 90-day maximum liquidity.
The Financial Risk Management policy is designed to protect the company's cash generation exposure, as measured by the US$ EBITDA, to market risks associated with fluctuations in exchange rate, interest rates and pulp prices, as well as credit risks associated with the possibility that Aracruz's counterparts fail to honour their commitments. These are mitigated using derivative instruments, in accordance with the following parameters:
- Linkage to an effective exposure (non-speculative hedging);
- No leveraging involved;
- The asset side objective is the same as the risk factor that is to be protected;
- The engaging of structured financial transactions with built-in derivatives is strictly prohibited;
- Minimum rating of "AA-" (S&P/Fitch) or "Aa3" (Moody's);
- Established limits:
- To cover the currency exposure (US dollar or euro), the Finance Committee may determine minimum and maximum hedging limits, over a 12-month maximum period. For periods of more than 12 months, it is necessary to obtain prior Board of Director approval for any proposed transaction.
- To cover the interest rate exposure, the Finance Committee may authorize the company Treasury to carry out transactions involving periods and amounts that are compatible with the periods and amounts of the company's debt.
Transactions that do not meet these requirements must be approved in advance by the Board of Directors.
(Updated on June 26th, 2009)
Genetically modified organisms
Aracruz Celulose believes that Genetic Engineering of forest species can bring benefits to society through sustainable development. The company bases its decisions regarding research, development, planting and acquisition of Genetically Modified Trees upon current legislation, scientific knowledge, the requirements of its customers and the concerns of society, through continuous evaluation of the impacts and economic, environmental and social gains stemming from the application of this technology, and from compliance with all of the technical-scientific procedures necessary for the elimination of potential associated risks.
Updated on June 29, 2009
