Policy Klabin has developed and adopted a Corporate Sustainability Policy with the input from all sectors of the Company. The Policy, which has been formally approved by the Company?s Board of Directors, outlines the following objectives: Seek competitive quality, aiming at sustained improvement of results, continuously perfecting processes, products and services so as to meet the expectations of customers, employees, shareholders, communities and suppliers. Ensure supply of its industrial units with wood from planted forests, in a sustainable way and without any damage to either natural or associated ecosystems. Exercise and promote the recycling of pulp fiber in its production chain. Prevent and avoid pollution by means of reducing environmental impact from effluents, solid wastes and emissions to air. Promote employees? personal and professional advancement, and to strive for continuous improvement of their working environment, health and safety. Exercise social responsibility with a focus on the communities where the Company is present. Comply with laws and regulations applicable to product, environment, health and safety. At the corporate level, Klabin is also involved in a series of industry initiatives to promote biodiversity conservation, through forestry and agribusiness sector industry programs, and through more than 10 company-led thematic conservation activities taking place in the Company?s own forest lands in Paran? State, Brazil (http://www.klabin.com.br/pt-br/sustentabilidade/default.aspx). At the project level, Klabin has developed a comprehensive management system covering labor, environment, health and safety as defined in the Management Normative of Puma Project development (Normativa de Gerenciamento de implanta??o do Projeto Puma, in Portuguese). This document defines management responsabilities of the site construction, labor aspects such as HR department, recruitment, terms of employment, benefits policy, leave, mobilization and cadaster of workers, internal grievance mechanism, engagement with unions, subcontracting, uniforms, Environmental Health and Safety (EHS), security personnel, life and fire safety, emergency response, among other things. Identification of Risks and Impacts Brazilian environmental regulations require the preparation of detailed environmental and social impact assessments (ESIAs) as part of a stepwise environmental licensing process applicable to major industrial activities. In the State of Paran?, the Environmental Institute of Paran? (Instituto Ambiental do Paran? (IAP)) is the entity responsible for reviewing ESIAs prior to issuing Preliminary License (Licen?a Pr?via or LP) and Installation License (Licen?a de Instala??o or LI)) required prior to the start of construction activities of any major projects. This is followed by the issuance of an environmental operating license (Licen?a de Opera??o or LO) issued after regulatory inspection of the fully constructed project, just before initiation of operations. Prior to issuing the respective environmental license, IAP is responsible for requesting comments on the ESIA from other public agencies with environmental or social competencies including those agencies responsible for the regulation of agriculture, water resources, public services, and Indigenous Peoples, among others. Input from these public agencies must be considered in IAP?s decision to issue an environmental license, including any relevant input for inclusion in the terms and conditions of such license. An environmental and social impact assessment (ESIA, or EIA in Portuguese) was prepared as part of the Brazilian environmental permitting process of the Klabin?s Puma Project. The ESIA was prepared by the consultancy P?yry Brasil, in accordance with the terms of reference issued by IAP. The ESIA is dated April 27, 2012 and includes a list of proposed environmental, social and health and safety monitoring programs contained in the Plano B?sico Ambiental (PBA, environmental and social management plans). The ESIA presents initial baseline studies for the main environmental and social aspects, including geology, soils, land use, water resources, flora, fauna, ichthyofauna, noise, air quality, traffic, cultural resources, and socioeconomic aspects of neighboring municipalities and communities. The socioeconomic baseline information is principally based on secondary data and regional statistics and includes information on demography, economy, main institutions and infrastructure services for some of the nearby municipalities. The ESIA documented the Sponsor?s assessment of project location alternatives which included a series of environmental and social siting criteria, including the following location criteria: it should be located outside of indigenous land and environmental protected areas (e.g., federal or state parks, wildlife refuge, etc.); on modified habitat to reduce the need for conversion of natural habitat; in an area that allows for the preservation of a 500 meter riparian areas along rivers; in an area that allows for a 200-meter exclusion zone around railroad right-of-ways; in proximity to existing interstate and state highway and railroad systems; in proximity to a regional river with the capacity to supply water for the project; at least 10 km from major urban centers and at least 1km from major interstate and state highways to minimize visual impacts as well as to minimize impacts on traffic due to the large number of heavy trucks during construction and operation; in an area with socioeconomic conditions that would benefit from the creation of jobs; and in an area of favorable air quality and prevailing wind conditions to minimize impacts to the quality of air of urban centers. Through assessment of site conditions, three candidate sites were considered for a more in-depth analysis. The selected site was the one that presented the most favorable environmental conditions and had the potential to cause fewer potential social impacts. The ESIA also considered potential cumulative impacts, mainly focusing on potential cumulative effects to air quality and water quality from planned Project emissions during the operational phase. The analysis included potential impacts to water quality to a newly created reservoir for a hydroelectric power project located about 50km downstream of the point of wastewater discharge in the Tibagi River, the Mau? Hydroelectric Power Plant, and has 361 MW of power capacity. Evaluation of impacts to ambient water quality and ambient air quality respectively considered the effects of wastewater discharge and atmospheric emissions from the existing Klabin pulp and paper mill in Tel?maco Borba which were included in the mathematical predictive models used in the evaluation. IAP has issued both LP and LI outlining general project?s characteristics and defining specific conditions of the licenses that includes the implementation of all management programs (PBA ? Program B?sico Ambiental, in Portuguese) as defined in the ESIA, implementation of fauna monitoring program, conditions for native vegetation clearings during construction, threshold limits for noise, water and air emissions, continuous implementation of archeological assessment and chance finds during construction, re-habilitation of degraded areas and re-vegetation of Tibagi River riparian areas in the Direct Area of Influence of the Project, implementation of participatory monitoring program providing feedback to nearby communities during construction phase and first year of operations, among other requirements. The Sponsor has also concluded additional ESIA as required to request the environmental licenses for the access roads and railway spur and for transmission line, this last one in a format of rapid environmental assessment (RAS ? Realt?rio Ambiental Simplificado, in Portuguese); that are being reviewed by IAP and will be further disclosed to communities following Brazilian licensing procedures and the Company?s stakeholder engagement program.. The Sponsor was the first company from the pulp and paper sector in the Americas to have its forests certified by the FSC? (Forest Stewardship Certification?), in 1998, and follows the FSC certification process requirements in the forest assets under its control. These requirements include an assessment of environmental impacts appropriate to the scale and intensity of forest management operations and the uniqueness of the affected resources. Assessments include landscape level considerations as well as the impacts of on-site processing facilities and are conducted prior to commencement of planting operations. Klabin has a Strategic Forest Sustainability Management Plan that includes forests Aspects/Impacts assessment and monitoring, based on an Impact Assessment Matrix framework. In addition, Klabin has conducted a specific study to assess impacts of wood transportation to local communities, mapping transportation routes, local communities, villages, Indigenous People and ?quilombolas? communities and small towns with potential exposure to adverse impacts of wood transportation from its forestry operations. The Sponsor has complemented the ESIA for the pulp mill project with the following tasks: Socio-economic baseline data on the livelihoods of families and workers directly affected by Land Acquisition, including a documented report on consultations, exante-expost conditions, compensation packages (as described below in PS5 section); Completion of socio-economic baseline for the direct area of influence with special attention to the two closest communities to the cellulose plant site: Campina Dos Pupos and Lageado Bonito, small settlements (Augusta Victoria and others) and dispersed family units located nearby Klabin Puma plant, plantations and off-site project components; Socio-economic baseline for the municipalities where workers camps will be located with special attention to Ortigueira, Reserva Ind?gena Queimadas and Imba? (quality of public services, housing, public safety and other socio-economic services likely to be affected by workers influx during project construction activities). The social baseline determination will include collection of current public health data with an emphasis on health issues associated with the influx of temporary project labor for the construction phase, focusing on cities where workers camps will be located and communities located in close proximity to the cellulose plant; Klabin has developed an Environmental Management Program for the project (PGA ? Programa de Gest?o Ambiental, in Portuguese) covering construction an operational phases. This program follows all steps of the management cycle (Planning, Doing, Checking and Acting) and respective elements (policy, risk assessment, operational controls, resource management, training, management programs, documenting, monitoring and reporting.). These elements are referenced in Klabin?s corporate ESMS procedures. Going forward, as set forth in the ESAP, Klabin will enhance its Management Normative of Puma Project Development incorporating its corporate ESMS procedures (CO-PRO-MEA-001 ? Risk assessment; AM-PRO-SIG 0013 - Corrective actions; AM-PRO-SIG-005 ? Recording; and SMSO ? Guidance Book of EHS Minimum Requirements for Contractors) in the EHS (14.1) and OHS (18.1) sections respectively. Klabin will also include in Management Normative of Puma Project Development the archeological work and procedures during excavations and earthworks. Management Programs Klabin has a well-established corporate level environmental, health, safety and social (EHSS) management program with a detailed set of standard operating procedures applicable to existing manufacturing operations. Some of these operating procedures cover aspects related to the management of EHSS aspects applicable also to construction activities including, for example, management of contractors. The environmental management programs in Klabin?s existing manufacturing assets are certified under ISO 14001 international certification program and its forest assets are certified under the Forest Stewardship Council (FSC) certification process. At the Project level, in accordance with the terms of reference issued by IAP and as part of the Project environmental permitting process, the Sponsor has presented together with the ESIA a list of the basic environmental, social, health and safety management plans and programs that will be implemented during construction and operation of the Project which include: Environmental Management System Environmental Plan for the Construction Phase Construction Workers? Retrenchment Plan Mitigations for Impacts to the Road System Risk Management during Construction and Operation Solid Waste Management during the Operational Phase Effluent Management during the Operational Phase Air Emissions Management during the Operational Phase Environmental Education and Social Communication Occupational Health and Safety Local Workforce Training Accessibility and Mobility for Individuals with Disabilities Archeological Monitoring and Rescue of Archeological Sites Environmental Compensation Aquatic Fauna Monitoring Fauna monitoring and Rescue Social Monitoring Noise and Vibration Monitoring during the Operational Phase Water Quality Monitoring Environmental Audits during the Operational Phase A general framework of the above listed plans and programs that have been presented in the PBA and confirmed by IAP as part of the environmental licensing process, which will have to be submitted in complete form for approval by IAP prior to their implementation, as well as to meet the conditions of the operational license. The Sponsor will complement the management plans from the PBA for the pulp mill project based on the results of the complementary socio-economic baseline assessment and other aforementioned assessment activities. Specifically, Klabin will enhance existing social monitoring program (Programa de Monitoramento Antr?pico, in Portuguese) including community health and safety indicators associated with construction and operations activities, such as traffic (trucks) accident rates, as well as public health indicators associated with the risks of influx of construction workers such as incidence of sexually transmitted diseases. Klabin will also develop active/periodic monitoring of social impacts of workers camps in Ortigueiras municipality, including observations of workers activities, especially during weekends, and periodic consultation with local authorities, local police office, worker?s camps neighbours and Indigenous People. Periodic feedback must be provided to key stakeholders as defined in Klabin?s Stakeholder Engagement Plan (SEP). Klabin will also develop specific management program, Impacts from Traffic Monitoring Program (Programa de Monitoramento de impactos do Tr?fego de ve?culos durante a constru??o) to monitor traffic safety conditions, dust and noise emissions from traffic during construction, including periodic field inspections and consultation with identified affected communities/receptors. Klabin has a Forest Management Plan appropriate to the scale and intensity of operations that includes: management objectives; description of the forest resources to be managed; environmental limitations; land use and ownership status; socio-economic conditions and a profile of adjacent lands; provisions for monitoring of forest growth and dynamics; environmental safeguards based on environmental assessments; plans for the identification and protection of rare, threatened and endangered species; maps describing the forest resource base including protected areas, planned management activities and land ownership; description and justification of harvesting techniques and equipment to be used. Potential environmental impacts identified during assessments are considered during planning and operations ensuring that adverse impacts are avoided or mitigated. Klabin has a framework of Standard Operational Procedures (SOPs) defining acceptable E&S practices for forest management to meet or exceed national or regional best practice requirements and FSC requirements. Timely corrective actions are considered and implemented to address both past and potential non-conformances. Corrective Action Requests (CARs) and their respective close out actions are recorded. Klabin also has specific E&S management programs such as waste management, Fauna and Flora management, rehabilitation of riparian areas and degraded land, mandatory OHS risk prevention and health monitoring programs. Additionally, the Sponsor has completed the required environmental and social management plans for future project-related components (i.e. access roads improvements, new railroad line, and new energy transmission line) similar to those prepared for the pulp mill construction and operation. Going forward, as set forth in the ESAP, Klabin will elaborate a Land Acquisition and Involuntary Resettlement Plan (RAP) for both railroad and transmission line, consistent with Klabin?s own policies and IFC PS5 requirements, as described below in PS5 section. Organizational Capacity and Competency Responsibility for the management of environmental, health, safety and social (EHSS) aspects is formally assigned to corporate level vice presidents, directors, and facility managers according to Klabin?s Sustainability Policy. At the operational level in existing pulp and paper mills, responsibility for implementation of EHSS management programs is currently held by dedicated environmental supervisors respectively reporting to the corporate environmental manager and Sustainability and Communication Manager for Puma Project. Corporate management of EHSS and Sustainability aspects falls under the Sustainability and Communications Board. Labor and occupational health and safety management responsibilities are also formally assigned to Puma?s Project HR manager and operational levels to Project?s OHS coordinator and locally based OHS supervisors with additional safety technicians, physicians and nurses . Klabin?s forestry operations have a similar, parallel, EHSS organization. In 2010, Klabin established a Sustainability Strategy that is fully operational for its Forestry Management Unit. The Company at its highest managerial level is currently engaged in the process of (i) integrating the sustainability strategy at the corporate level in a manner that encompasses all business units (forestry plantations, industrial plant, etc.) and (ii) establishing a Sustainability Committee at a sdenior management level. Klabin?s Administrative Counsel has already appointed a Planning Director responsible for extending the Sustainability Strategy to the corporate level. For the purpose of the construction of the Puma Project, Klabin has created a dedicated integrated project management organization jointly headed by a Human Resources (HR) and EHS Management Administration Department with a Program Manager responsible for the execution of the Puma Project, including the implementation of all expansion-related environmental, engineering, safety, and social programs. The project management organization includes EHS and Human Resources coordinators responsible for the implementation of EHS and HR aspects of a project-specific ?Management Normative of Puma Project Development? (described in more detail below). The construction?s contractors will be also required to have an EHS and HR managerial structure with supervisors and technicians as required to monitoring EHS performance of the project. Klabin has contracted an EHS auditing company to monitor and verify EPC contractors? practices during construction in accordance with Klabin?s EHS policies and procedures, Brazilian legal requirements and project related management programs. This company will have 56 employees in the field, which in addition to Klabin?s and EPC contractors EHSS employees are expected to reach 300 staff during peak of construction. Going forward, and for the purposes of the management of EHSS aspects of the Puma Project, the Sponsor has integrated all EHSS management of the Project under an EHSS team responsible for managing the project biophysical and socio-economic aspects in close coordination with those responsible for public information, community engagement, and land acquisition/leasing. Training Klabin has defined in the Management Normative of Puma Project Development mandatory induction training program for all construction workers covering general project information, such as safe traffic, access and control of access to the site, workers camps, internal grievance mechanism, Collective bargaining and workers? unions, abuse of alcohol and drugs, ergonomic, transportation arrangements, employment contracts, rules of conduct/behavior, personal hygiene, contact numbers, and 20 relevant topics of EHS (PPEs, preventive risk assessment, hazardous works and permitting for hazardous works, excavations, electrical systems and equipment etc?). As set forth in ESAP, Klabin will include specific guidance for workers hosted in the Company?s camps regarding good conduct and behavior within local communities and in interacting with IP community members. Emergency Preparedness and Response (EPR) In order to comply with Brazilian regulatory requirements, the Project will develop occupational health and safety plans and procedures applicable to construction activities which include emergency preparedness and response. As set forth in the ESAP Klabin will conduct a Quantitative Risk Assessment and Risk Management Program following Brazilian Requirements (S?o Paulo Estate standard CETSB p4.261). The Risk Management Program must include process safety information, periodic risk review assessment, process change management, integrity of critical systems, Standard Operational Procedures (SOPs), training program, accidents investigation procedure, emergency preparedness and response, and internal audits. Klabin will also have to design and implement life and firefighting systems in accordance with Paran? Estate fire authority, as well as a trained fire brigade, emergency drills program, and lightening protection system. As a condition of the start of new plant operations, Klabin will get final verification and approval document from local fire department in a form of AVCB (Auto de Vistoria do Corpo de Bombeiros, in Portuguese). Monitoring and Review As a condition of the environmental license of the Project, and consistent with the corporate environmental and social management systems of the Company, Klabin has developed a comprehensive construction and operational phase monitoring EHSS monitoring programs as described above (management programs). Indicators of EHSS performance during the construction phase has been defined and include such aspects as total size of workforce, satisfaction surveys, general milestones and achievements, number of vehicles, local vs. migrant workers, training programs for local workforce and Indigenous People, OHS inspection program, accident rates, incidents and near misses, medical/ambulatory activity, types and volumes of generated wastes, among others. Going forward, as set forth in the ESAP, Klabin will include in the report key performance indicators (KPIs) from all applicable management programs, such as air quality, environmental noise, wastewater discharge quality, and, and flora and fauna in areas with impacts to natural habitats. Operational activities at the pulp mill will be monitored for key environmental and OHS indicators currently applied to the other manufacturing operations as well as any other defined by the local regulatory agency as part of the environmental license. These are likely to include atmospheric emissions quality, wastewater effluents quality, and solid waste generation, as well as ambient air and water quality and noise. As part of existing forestry assets, Klabin has an E&S Monitoring program, under its Strategic Forest Sustainability Management Plan, to assess the condition of the forest, yields of forest products, chain of custody, management activities and social and environmental impacts. The E&S monitoring framework is based on Aspects/Impacts indicators matrix and includes stakeholder participation. Field inspections are conducted during, harvesting, silvicultural practices, and biomass processing. Results are collected in the field and recorded on a computer database system. As a FSC certified unit, Klabin follows a system of internal and external audits to ensure consistency with FSC standards requirements. Klabin has a specific monitoring system for labor and OHS legal requirements based on review of legal documentation and field inspections of Klabin?s and contractors? at forests operations. Field inspections are conducted quarterly and are based on checklist verification of compliance with labor and OHS legal requirements. Documentation demonstrating compliance with training programs, accidents rates and investigations, safety conditions of transportation buses and other OHS aspects are sent on a monthly basis. OHS results are reviewed and discussed within Klabin?s or Contractors? OHS committee, as appropriate. Labor aspects, such as payment of social security fees, compensation payments under agreed deadlines, meal supply and quality are reviewed and non-conformities are communicated to contractors to be resolved. Corrective actions are identified in the contractors? management system and are monitored until completion. Forestry operation as further audited as part of the FSC certification process and identified deficiencies and monitored until proper completion of corrective actions. Forestry management activities presently include monitoring of fauna and flora indicators following recommendations from a study conducted by NGO ?Casa da Floresta?, which includes a schedule of monitoring of High Value Conservation Forests located within Klabin?s land holdings. Klabin also monitors environmental indicators of water resources in the two river basins where forest assets are managed. As described above, the Sponsor will revise its social monitoring program of community health and safety indicators associated with construction and operations activities such as traffic accident rates, as well as public health indicators associated with the risks of influx of construction workers such as incidence of sexually transmitted diseases. As defined in the Puma Project?s management programs, the Sponsor will also develop and implement a monitoring program which includes monitoring of groundwater quality, surface water quality, and air quality during the construction and operational phase of the project. External Communications and Grievance Mechanisms Klabin uses several public information mechanisms such as periodic community meetings, distribution of printed materials and radio news to ensure that the local communities are kept up to date with the project progress. For the Puma Project, Klabin is developing a Social Communication Program aimed at reducing doubts, distrust and rumors and to manage expectations. The PBA states that the Project will be required to implement an Environmental Education and Social Communication Program with the commencement of construction activities. The aims of this program will be to provide reliable project-specific information to the community and also as an on-going channel for interaction with community members. In addition, Klabin has developed and implement an external Community Grievance Redress Mechanism for Puma Project called ?talk to Klabin? (fale com a Klabin, in Portuguese), including different means of communication, such as an email adress, free phone line and suggestion boxes distributed in 32 points within the area of influence of the project. Going forward, as set forth in the ESAP, Klabin will develop a formal procedure to receive record, treat and respond to grievances in accordance with IFC PS1 requirements. On-going Reporting to Affected Communities Public reporting requirements in Brazil are defined on a project-specific basis and this will be the case with the proposed Project which is still in the process of regulatory approvals. Key E&S indicators are gathered in managerial reports and internally disclosed as needed. Klabin also discloses annually relevant E&S information and indicators to the public under the sustainability reporting standard of the Global Reporting Initiative (GRI), available at their website (ri.klabin.com.br/static/ptb/arquivos/RelatoriodeSustentabilidadecompleto.pdf). The external reporting is performed on an aggregated basis for their operations in Brazil, and covers the following topics: Certification status of forestry and manufacturing operations (per ISO and FSC standards); Stakeholder engagement programs; Number of employees with information about functional categories, and distribution by contractual status, sex, and race; Functional training hours by category of employees; OHS accident rates (frequency and severity) for own employees and subcontractors, including total number of lost work days; Carbon footprint; Processing of recycled paper and paperboard in manufacturing business; Energy consumption by fuel type; Water consumption (including recycling rates); Waste and effluents (in absolute volumes); Recycling; and Biodiversity conservation (including number of identified species under conservation status). Klabin quarterly reports to IAP on the results of existing Social Monitoring Program, which includes a summary of all communication and engagement activities with relevant stakeholders. Going forward, and as required in the Environmental License (LP), the Sponsor will develop and implement a Project-specific environmental and social reporting program for the communities located in the project?s direct area of influence. The community reporting program will disclose relevant indicators of environmental and social performance applicable to the Puma Project construction and operational activities.