Customer
relations

PULP

DYNAMISM AND FLEXIBILITY
GRI 103-1, 103-2, 103-3 (Value Chain [customers and suppliers])

Suzano started 2020 with excellent prospects from a market standpoint after a very challenging period marked by rising inventories and falling prices. However, the pandemic brought new uncertainties to the pulp and paper sector, in varying proportions for each market segment and region.

The increase in tissue consumption in countries in the Northern Hemisphere and Asia, where we do a significant volume of business, driven by consumers stocking the product and emptying the shelves in retail chains, especially during the first half of the year, generated a demand beyond that expected for market pulp.

On the other hand, given the expansion of social distancing and the economic downturn, the negative impact on printing and writing paper and specialty segments gradually increased, mainly in Europe. Due to this difficult scenario, some integrated pulp producers in the Northern Hemisphere stopped producing paper to produce more pulp. Soluble cellulose producers did the same, affected by the drop in production in the textile industry. The imbalance between market fundamentals, therefore, put additional pressure on prices. Despite all adversities, our focus has remained the same: serve all our customers, seeking to continue supplying our pulp.

Signs of recovery

After a tough period, experienced mainly in the third quarter, the company observed the rebound of all pulp markets. In China, it is worth remembering, the scenario was a little different, as the country quickly recovered and has been growing, generating the opportunity to increase prices.

Since the beginning of the pandemic, Suzano has intensified the dialogue with its customers and between its internal teams. This is because we understand the relevance of being prepared to implement, at any time and as soon as possible, the contingency plans to avoid disruption in production and logistics. Consequently, we managed to deal with the fluctuations in the period and successfully meet all production demands.

Eucafluff®

Major partnerships consolidated the entry of Eucafluff® into major global customers, strengthening its position in Europe, Asia, and the United States in 2019. The result of more than a decade of research by Suzano, this is the world’s first bleached eucalyptus kraft fluff pulp, which can be applied in absorbent and personal hygiene products, in addition to disposable items, such as adult and baby diapers and sanitary pads. The year 2020 was about consolidating what had been started in 2019. However, the prospects for expanding the business were affected by the developments of the pandemic, since the product qualification process is long, interactive, and in-person. As a result, Suzano’s plans to open new accounts during this period were compromised.

EU Ecolabel Seal

Suzano’s Eucafluff® became part of the list of raw materials authorized for use in disposable hygiene products certified with the EU Ecolabel seal. Recognition is granted by the European Union to final producers who meet high environmental standards throughout their cycle, from the extraction of raw materials, through production and distribution, to disposal. The seal certifies to consumers that they are using a product that is sustainable from start to finish.

To be part of this select list, Suzano demonstrated its excellence based on strict environmental criteria, which analyze energy consumption, greenhouse gas emissions (GHGs) during production, and release of pollutants into the air and water, among other aspects. Such differentiators were also pointed out in the Life Cycle Assessment study conducted by ACV Brasil, in which Eucafluff® showed favorable environmental performance results in categories such as the use of land, water, and GHG emissions when compared to the environmental performance of the pine fluff produced in the Southeastern United States.

PAPER AND PACKAGING

FLEXIBILITY TO FACE THE CRISIS
GRI 103-1, 103-2, 103-3 [Value Chain [customers and suppliers)]

Paper was the business unit most affected by COVID-19. Social distancing led to the closure of offices, schools, and universities, and most commercial activities. In this context, these segments of society have significantly reduced the consumption of one of our main products: printing and writing paper. This market was already suffering in developed countries, due to the disruption caused by digital alternatives. However, in developing markets, mainly in Asia (especially China), there was still an increase in demand for this product.

By 2020, during the most critical period of the pandemic, consulting firms covering the industry estimated a decline of 15% – 25% in the printing and writing market. However, by the end of 2020, the Pulp and Paper Products Council (PPPC), for example, reported a 29% decline in this segment in Latin America. In other words, from March to December, the decline in this market represented a 1/4 reduction in total demand for 2019.

To face this scenario, the company put an action plan in place, made possible thanks to the combination of some factors that give us agility in decision making: we have about 300 salespeople in Brazil and a differentiated distribution model that keeps us close to our 35,000 customers in the country. With this reach, we managed to act quickly to serve other markets and support our partners. Below are two of our main initiatives.

1. Tamo Junto (We’re in it together): A financial support program for printing companies, stationery stores, and publishers in the country, offering credit and debt renegotiation, in addition to the donation of communication materials and prevention kits for daily use at points of sale. The project benefited more than 1,000 partners through four fronts. The first, focused on supporting the business, offered differentiated credit, debt renegotiation, and flexibility of charges. The second donated essential materials to reduce the spread of the coronavirus, such as face shields, adhesive signs with distancing information for points of sale and hand sanitizer dispensers. The third included a communication package with information on hygiene and cleanliness, social distancing, cash flow, flexibilization and credit by the National Economic and Social Development Bank (BNDES). The fourth front is an online channel where our partners can access specific content.
2. Papers for specific segments Some sectors became more demanding during social distancing and the pandemic. In this sense, we directed our efforts to paper and packaging in the food, pharmaceutical, and hospital segments. In addition, we developed alternatives to paper for drug instruction inserts, special paper bags (replacing plastic bags), and other packaging.

Paper donations

In 2020, a large mobilization was seen in the paper industry to meet the demands arising from the new coronavirus. In this respect, in partnership with other producers, Suzano coordinated the donation of 5 million paper cups produced with our Bluecup®, the first Brazilian card stock developed for cups and made from a renewable source. The donation was made to public hospitals and municipal administrations in the states of São Paulo, Santa Catarina, and Paraná.

In addition, Suzano contributed to the production of face shields made using card stock, conceived by Brasilgrafica S.A. The product was donated to the Ministry of Health. We also donated 8 tons of card stock to make 350,000 hand sanitizer containers, geared for Natura’s consultants and truck drivers.

Circular economy
GRI 103-1, 103-2, 103-3 [Value Chain [customers and suppliers], Innovation and Technology]

A major concern for Suzano has always been to develop products with the least possible environmental impact and provide solutions to the market based on a systemic vision, driven by facts and data. That is why, in the world of paper, we use tools such as Life Cycle Analysis in our evaluations and product development. Internationally recognized, this approach offers a careful assessment of the potential impact of products. It considers the entire production process, from the extraction of raw materials to the disposal of products, allowing for an extensive assessment of cause and consequence. With this information, we can support our innovation processes on the best alternative.

Thus, we have sought in-depth knowledge in order to understand how we can be relevant players in this transition movement, which values, among other things, a more circular economy (which proposes a shift from the linear model of obtaining resources, producing, and disposing of products), while generating the least possible impact. As a company based on renewable resources, when we think about closing the cycle, we know that we have many opportunities to explore a biological route (which itself is regenerative and zero waste when the components of the product can return to natural biological cycles), focused mainly on biodegradation processes.

Within a possible technical route that also leads us to circularity, we have sought to increase our active participation in the recycling chain, knowing that this is one of many important attributes that need to be addressed. Since our priority is to ensure that each solution is, in fact, better from a social, environmental, and systemic standpoint, we use Life Cycle Analysis to validate all possible alternatives. We understand that there is no point in addressing the issue of solid waste, for example, while adopting processes that demand more natural resources or result in greater emission of greenhouse gases (GHGs). We live in a time when it is no longer enough to think of one or the other, but rather one and the other.

Throughout this year, we have worked on the development of TP Cycle, a new card stock that uses post-consumer fibers in its composition, mainly coming from packaging. For the development of this project, we entered into a partnership with Eureciclo, a B corporation specializing in reverse logistics, which mapped the supply of paper trimmings to guarantee the best technical performance of the product. They also approved the labor conditions behind each supplier, thus helping us to secure a solution that promotes a more positive chain.

In a form of complementing TP Cycle, we reinserted post-consumer card stock fibers into the production of our suppliers of cardboard boxes, which are now used to pack our reams of cut size. This alternative has two main advantages: the first is its scalability since, in this case, the production potential of the cardboard chain after absorbing post-consumer material is substantially greater than that of card stock. The second is the mitigation of environmental impacts: since cardboard can now be produced using this type of input without major changes to the process, the reinsertion impacts caused by technical losses in the final product are minimal when compared to the production of card stock of a comparable category.

CONSUMER GOODS

POSITIVE BALANCE
GRI 103-1, 103-2, 103-3 (Value Chain [customers and suppliers))

Suzano’s biggest challenge in 2020 was to keep the operation running smoothly, ensuring the safest conditions for its employees and their families. This level of safety was maintained in consumer goods, which brings together around 1,200 professionals across the country. Trips and visits were postponed, and processes were adapted to the new reality. Fortunately, all projects were maintained.

Production and sales records

Suzano operates in the consumer goods market with a focus on the tissue segment, composed mainly of products such as and papers for sanitary purposes (toilet paper), paper towels, and napkins. Across Brazil, demand for this paper line has skyrocketed since March 2020, requiring high execution capacity for the company to quickly redirect mills and its business model in order to respond well to the new needs of customers. As a result, Suzano reached an 8.3% share in value in the toilet paper market in the last year, making it the fifth largest company in this category in Brazil.

We consolidated our leadership in Brazil’s North and Northeast regions, expanding the gap with the runner-up, and reinforced our presence in the Southeast and Midwest, where we had a smaller share in 2019. In 2020, we increased our relevance, especially in the states of Espírito Santo, Rio de Janeiro, and Minas Gerais. In the state of Espírito Santo, we are a leader in tissue. The data obtained by Nielsen show in 2020 that the Mimmo® brand is a leader in two-ply tissue, with 28% market share. In 2021, we are looking to expand participation to other states in the Southeast and Midwest.

Belém and Fortaleza Units

Completion of the integration of units and processes between Suzano Papel e Celulose and Fibria, which was one of the main priorities for 2020. All incorporation processes were applied at the former Fábrica de Papel da Amazônia SA – Facepa, the largest producer in the tissue segment in the North and Northeast regions. Its installed capacity is nearly 50,000 tons per year.

In addition to absorbing the new company from a tax and IT standpoint, we worked on cultural awareness in our two mills, which became Suzano units: Belém (Pará state) and Fortaleza (Ceará state) units. It is also important to highlight the actions related to work safety, which significantly reduced the number of accidents in both locations

New mill in Cachoeiro de Itapemirim

When the pandemic arrived in Brazil, Suzano was starting to build its new tissue mill, located in Cachoeiro de Itapemirim (Espírito Santo state). We interrupted work on construction for a few weeks to understand the new scenario, analyzed the healthcare conditions in the municipality, revised our schedules, and adopted a series of measures until the work could be carried out safely. As a result, on March 2021, we started-up a new plant, which will increase our production capacity by 30%.

The three-ply toilet paper will be the unit’s product highlight, following a trend of a higher quality product. The toilet paper segment is in the process of migrating to higher quality products, from one-ply to two- and three-ply tissues. According to data from Nielsen from 2018 to 2020, the share of two ply and three ply tissue in the Brazilian market grew by 6 percentage points. As the category matures, it is natural that consumers will migrate to more sophisticated items.

Research & Development

LEADING EDGE KNOWLEDGE

Suzano increasingly works on initiatives with enormous disruptive potential. These are projects that focus on what we call innovability; in other words, innovation at the service of sustainability.

In a year of pandemic, our challenge increased. How could we proceed with dozens of innovative programs that depend on travel and international partnerships? How do we find alternatives for a job that, as a result of the health crisis, needed to be done at a distance? Sending samples, monitoring tests, and on-site evaluation of results—all procedures that involve a technical validation of performance and costs, which would normally take place in the facilities of our customer and prospects—have been altered, becoming much more time consuming. Even so, Suzano managed to advance with all projects, obtaining better than expected results.

Suzano’s innovability and research portfolio of innovation and research is based on three pillars: Sustainment, Transformation, and Diversification. See below for the company’s main projects on each front and the respective results achieved in 2020. .

SUSTAINMENT

This explores solutions to the challenges of the current business, centered on planted eucalyptus forests and on the production and trading of pulp. Below, we highlight three examples of projects geared to this purpose.

• • More precision in forests, transport, and industry

Regrowth management (regrowth of the eucalyptus tree after it has been cut from one or more sprouts left at the bottom of the trunk close to the ground) is the main alternative for reducing forest formation costs; however, in order to generate productive forests, several different technologies are needed across the entire process. In 2020, we consolidated the model for selecting areas of greatest potential, based on technical premises; we designed the forest quality control in two phases; and we innovated with the anticipation of regrowth clearing, which already occurs in all forest units with higher quality and production potential.

This type of management is very much in line with the idea of producing more with less natural resources, since a series of field operations now take place every 14 years, and no longer every 7 years.

Currently, nearly 14% of our forest base is managed through regrowth management. There are economic benefits associated with the system, which can cost up to 55% less than a complete new cycle.

In addition, we use digital parameters to optimize clonal allocation and developed a new system, Tetrys, which allows us to make a careful allocation of eucalyptus clones per area, assessing productivity and risk-related aspects due to climate variations, among other possibilities. The tool offers so many competitive advantages that Suzano decided to protect it as an industrial secret.

In addition, for the integration of the harvest and transport phases, a new digital tool, called iGroot, processes about 25 million variables to understand at what stage of growth the wood should be harvested, where to take it, and which is the correct transport mode, depending on the destination unit. In the industry, a machine learning solution, Thor, helps recover the heat released from the boilers for the operation of the turbines, maximizing the energy generated for the industrial unit.

Replacement of plastic with paper

In the search for sustainable alternatives to replace the plastic used in the drinking straw, cup, and flexible packaging sector, Suzano has been developing innovative solutions based on improving the physical and mechanical properties of the base paper and the application of recyclable and biodegradable barriers on the surface of the paper. These barriers give the paper properties to resist water, fat, water vapor, and oxygen, and are also heat-sealable (heat-sealing machines). These are important characteristics, for example, for food packaging such as for cookies and non-perishable foods. This substitution represents a major technical and economic challenge. In 2020, laboratory and industrial tests were conducted in order to approve the technology in different players in the market. Significant advances have been made, not only in validating the performance and machinability of the products—that is, whether or not they perform well on filling machines—but also in complying with the strict standards established by regulatory agencies.