Suzano S.A. (SUZB3) Earnings Call Transcript & Summary

Hello all, and welcome to Suzano's first ESG call.

Welcome, everyone. This event represents a new step for our company in the engagement of its stakeholders. We're responsible for sharing our practices and ambitions to enhance accountability, and also to influence other companies to prioritize sustainability as an essential part of their business strategies.

Today's event will take place in 4 parts. The first is on the evolution of our corporate governance. Secondly, an overview of the first year of implementation of some of our commitments to renewing life that we chose to highlight today. Thirdly, the launch of our new commitment on biodiversity. And finally, an interactive discussion session moderated by our special guest, Pavan Sukhdev. To start things off, and since sustainability has been a key topic at Suzano since the very beginning, we invite our reference shareholder, Chairman and Coordinator of the Sustainability Committee, David Feffer, to officially open the event.

Nobody is near, so I'm taking off my mask. Well, I hope you and your families are all doing well and in good health. Today is a very special day for Suzano. We are extremely excited to address a subject that has, for many decades, been of paramount importance to us, ESG. Indeed, environmental, social and governance were imbued into Suzano's DNA and daily operations long before they became a hot topic. However, while we have already come a very long way over recent years, we also recognized that our ESG journey is far from complete. We are committed to continuously reviewing and advancing our position, which is driven by having clear goals, but also eyes and ears wide open. We must continue to deliver great results in the short term and, at the same time, investing in perpetuating for the benefit of Suzano and, more importantly, the planet. This ambidexterity is both a mindset and part of our daily life. I want to take the opportunity to talk to you all about our purpose. The word renewal has a special meaning to us. The foundation of our business is renewable and our planet needs renewal. We strongly believe it's only good for us if it's also good for the world, which is why our purpose is reviewing life inspired by trees. After all, we plant the future today. Suzano wants to be part of the solution to the social and environmental challenges the world currently faces. We aim to exit 21st century better than we came in. With this in mind and working in a strong and kind manner, or as we say in Portuguese, forte e gentil. Suzano is relentlessly engaged in seeking solutions that combine both innovation and sustainability, or as we call here, innovability. I am now pleased to invite Clarissa Lins, founding partner of Catavento, Board member of several important companies around the globe and value member of Suzano's Sustainability Committee. She will tell you all about the recent work we have been doing in this ecosystem. Thank you very much.

Thank you very much for the kind introduction, David. Hello, everyone. It is my pleasure to be here with you today at the Suzano ESG Call. The inclusion of social and environmental aspects into decision-making is critical to identify opportunities, mitigate risks and, therefore, create value for all stakeholders. And the foundation for this to happen is a solid governance that can drive the company to the integration of the sustainability strategy connected to its business model. As a member of Suzano's Sustainability Committee, I had the opportunity to be involved in various high-level discussions with my fellow committee members, including Board members and external experts. In this capacity, it is my expectation that the Sustainability Committee can always contribute in a transparent and open manner to a debate that raises the bar of the company's sustainability, strategy and commitments. In particular, some of these commitments have helped shape the long-term targets of the company, the performance of some of which the company will share with you today, as well as its new biodiversity targets to be launched during the event. So I hope you enjoy, stay safe and see you soon. Thank you.

Our story has been written by looking at nature and the world and learning from this integration and dialogue. Today's event has a participation of a special independent guest, who will lead at the end of our presentation and open discussion to which everyone is already invited to participate. Pavan Sukhdev, Founder CEO of GIST Advisory and Author of Corporation 2020, Pavan was Managing Director at Deutsche Bank, and was formerly the leader of the United Nations The Economics of Ecosystems and Biodiversity team. Pavan was also recently awarded the Tyler Prize for environmental achievement. Pavan, it's an honor to have you with us. Welcome.

Okay. Thank you so much, Suzano friends, for this kind invitation, and a very warm welcome to all our friends from the many groups who are represented here, employees, collaborators, communities and civil society organizations, customers, suppliers, investors, bankers and regulators. This is an important moment of dialogue and transparency. Human society is facing significant local and global challenges, such as climate breakdown, biodiversity loss and inequality. And there is a sense of urgency. This is not about 2050, this is about now. We must act now. And one of the ways we should do this is by enabling the rise of a new bioeconomy based on a regenerative and collaborative business model and an attitude that supports positive impact and value to all involved, not only to shareholders. Indeed, the world is awaiting to the shortcomings of shareholder capitalism and, as consequences, climate breakdown, ecological scarcities, the health cost of pollution and some deeply hurtful inequalities. Citizens in Brazil and around the world are asking for a fairer, safer and healthier world, a world in which we have stakeholder capitalism, and the spheres of influence of the company go beyond just financial capital to all 4 capitals: human capital, social capital and, of course, natural capital. Our responsibility and our engagement will touch several communities that are purveyors or owners of these capitals, such as, of course, employees, suppliers, customers, regulators, competitors, effectively all of you. Suzano is based in the right location to help make this change. Brazil is an incredibly biodiverse country. And Suzano is in the right industry to bring about a relevant contribution to this important agenda. Suzano's business model has been evolving with the times from its origins in the pulp and paper business to a truly biodiverse and bioeconomy business. It is now a provider of renewable energy, fiber for textiles, exploring plastic substitutes and green carbon markets. And it has extended its responsibilities to the environmental and social spheres, solving for the problems of climate change and of communities. I have evaluated Suzano's transparency practices in the past, and I believe the company has an integrated vision of value recognition and impact management. This call today is a continuation of Suzano's tradition. It's a moment to share with its stakeholders, the company's vision and its results of its thinking, and it's a moment of accountability and transparency. I'm delighted to be here with you today, and I look forward to this discussion session with the company's management and with you. Thank you.

Thank you, Pavan. Pavan will be back during the discussion session. In the meantime, feel free to send your questions on our platform. And now we would like to welcome our CEO, Walter Schalka.

Hi, everybody. It's a great pleasure to be with you today talking in a subject that touch our hearts and our soul. Today is a historic day for Suzano as we have our first ESG call, which will be an annual event from now on. We have 2 major objectives today: transparency in presenting our current targets and achievements; and to discuss our role in addressing society's challenges, such as climate change and inequality. In our view, the current responsibilities of all companies, including adopting effective initiatives to ensure a fair and more sustainable society, this not, should not only be in their operations, irrespective of sector, but also by demanding effective and consistent actions from government and policy makers. It's unthinkable, for example, that illegal deforestation in Brazil remains a sad reality that prevents the country from seizing the opportunities we have as a geopolitical powerhouse on environmental issues. This is one of the pillars supporting our strategy vision, which is based on Suzano focusing on sustainability to enable us to increasingly competitive, expanding our addressable market and providing innovative solutions for the bioeconomy while at the same time help us to mitigate business risks. Sustainability is not just the foundation that brought us where we are today, but it's also the main driver of our future. For example, by being more efficient in water use, we will increase our competitiveness and our resilience to water risk. Another example is to our efforts to mitigate the impact of the pandemic through the proactive measures designed to protect our employees, their families and communities where we operate. To talk about the relation between sustainability, the business and stakeholder capitalism, I will invite Philippe Joubert, who is the Founder of and CEO of Earth on Board, Special Envoy Energy and Climate for the World Business Council for Sustainable Development. He's also Chair of the Advisory Board and Fellow of the Cambridge Institute for Sustainability Leadership and was the CEO of Alstom Power. Philippe is a member of Suzano's Sustainability Committee. So Philippe, the floor is yours.

Thanks, Walter. Happy to be with you today. It's true, as far as I look back in the past, we have been doing business taking nature for granted, free of charge and unlimited. After the case of this regime, it seems that we have reached some boundaries and even gone over some of them. 2015 will be seen as the year of the turning point with the Paris Agreement and the SDGs. To be seen as the starting points where business was not only seen as the problem, but also as the start of the solution. But to be part of the solution, business should clearly shift away from the so-called shareholder primacy toward more inclusive stakeholder capitalism, based around the purpose recognized as usual and regenerative for the whole society. We need to respect and value the services rendered by nature and to maintain a constant dialogue with all the stakeholders and engage incorporating value for all. This is exactly what Suzano is doing, engaging with local communities, supporting them in protecting natural capital and co-generating income with them. We also provide positive contribution to the great systemic and existential threat of today. Climate change, where well managed and preserved forests are essential part of the solution, water system that we are maintaining and biodiversity preservation we are looking after with constant care and high technology, all these parts of this constellation of disruption we have to face today. And all this, the only way to provide financial true value and to maintain our social license to operate. Suzano is showing the way, and as a powered member of the Sustainability Committee, I am happy to challenge, support the management of the company to work to sustain a leadership position in this existential and urgent matter. Thank you, and enjoy your day.

Thank you, Philippe. Suzano strives for continuous evolution and one important example of this is our corporate governance journey. Marcelo Bacci will talk about this. Welcome, Bacci.

Thank you, Walter, and hello, everyone. Suzano has been on a long journey of continuous improvements on governance. Today, we are the result of several mergers and acquisitions. And back in the '80s, Aracruz, one of the companies that today is part of Suzano, was already listed on the São Paulo Stock Exchange. Since then, we also listed in the U.S., being Aracruz the first Brazilian ADR ever. We moved in 2017 to the highest listing level at B3 in Brazil, converting all shares to common without any premium to the controlling shareholders. In 2018, we became 100% compliant with SOX. In 2019, after the merger with Fibria, we further enhanced our governance standards with the introduction of several committees, including the Sustainability Committee that have been supporting our Board in our strategic decisions. Additionally, we have improved our Board composition. Today, we have 70% of independent board members and 20% of women representation. This year, we included additional features to our governance, such as the mandatory periodic performance evaluation of our Board of Directors. Since 2020, we also evolved our compensation structure, adding to 100% of our management team at least 1 ESG target, which currently represents 10% of our short-term variable compensation. We will keep moving forward on corporate governance. I now invite Cris to take us through the presentation.

Thanks, Marcelo. As mentioned by Walter, an important step to improve stakeholder engagement is to continuously amplify the transparency and accountability of our performance commitments. We recently published our latest Annual Report and Indicator Center, which is the main hub of Suzano's ESG information. It was the first disclosure cycle of the long-term commitments that we announced back in February 2020. The performance of these was third-party verified by Bureau Veritas. We showed advances in ESG reporting, with improvements in the levels of adherence to the most recognized frameworks, such as the GRI and CCFD and the reporting on new frameworks such as FASB and the stakeholder capitalism metrics of the World Economic Forum. This significantly increased the number of indicators reported from 251 in the previous year to 439. This is a response to the demand for more and better indicators from you, our stakeholders, and is a signal of our continuous exercise of increasing transparency. On that point, Suzano recently published 4 position papers, all of which are available on our website, and we're committed to continually publishing these on topics that you consider to be material to better understand Suzano and its context. We have also adopted the TCFD recommendations as a driver for incorporating climate-related risks and opportunities in our risk management and decision-making processes. Since 2019, we are continuously advancing through the full implementation of the TCFD, starting with a 25% implementation in 2019 and reaching 68% in June 2021, when taken into consideration the 4 pillars that form these recommendations. And we are committed to continue advancing on TCFD. We understand that for some of our stakeholders, it is important to consider not only what the company is saying about itself in the ESG arena, but also what are the opinions of key ESG rankings. With the aim to address such demands, we have selected the ones that we consider to be most relevant to our stakeholders. And through a comprehensive action plan, we are working to gradually improve our scores. Compared to last year's cycle, we see, for instance, that in 2021, we will be mostly improving on eco-efficiency, biodiversity and risk management criteria. And as you can see here, we expect a positive impact on more than one ranking. Marcela, I turn it over to you.

Well, thank you, Cris. We will apply the same level of transparency around our ESG processes and commitments that Cristiano has just pointed to, from our ESG ratings, to the evolution of our long-term goals, which were announced last year. We now refer to our goals as commitments to renewing life, aligning to our purpose of renewing life inspired by trees. Our commitments are part of our business strategy to play a decisive role of leading positive change and renewing life. Today, our commitments relate to many of the sustainable development goals set by the United Nations. And we think of our commitments through 2 areas of focus: people and planet. The first, people, involves diversity and inclusion, income generation and the development of economically sustainable environments for the communities that are impacted by our activities. The second, planet, involves climate action, a focus on renewable resources and regeneration. For each of the commitments we'll be presenting here today, we'll demonstrate not only our progress but also highlight the societal and economic perspectives that they promote. So starting with people. On the diversity and inclusion front, we improved the number of women in leadership positions, and we are now at 19%. But there is still a long way to go to achieve 30%. On the other hand, the representation of black employees in leadership positions reduced. By further analyzing our trajectory, we learned that together with hiring more black talent, we also need to work harder to promote their development and retention. We made significant headway in improving the way we assess how inclusive our environment is, especially in regards to our LGBTQI+ colleagues and people with disabilities. Our latest survey conducted in 2020 showed that 92% of our employees believe that we have an inclusive environment. Our ambition, though, is to increase this to 100, because no form of discrimination should be tolerated. Last year, we reviewed our approach to D&I, structuring our activities into 3 pillars. The first is commitments and governance, involving over 200 employees from all affinity groups collectively known as plural. In order to ensure that our D&I initiatives are fostered across all levels of the organization, each affinity group is now overseen by at least one Executive Director. Secondly, we have been focusing on attraction and hiring. Since diversity cannot succeed without representation, we have reviewed how we approach attracting and hiring diverse talent. We decided that all shortlists, for both internal and external hiring and promotion processes, will have 50% of women and/or black candidates. Representation on its own is not enough however, it is a shared vision built on our third area of focus, to drive the transformation we need culture -- based on an inclusive culture across our business. To help achieve this, we are committed to developing career acceleration programs, providing inclusivity leadership training and redesigning our processes to help build a culture of inclusion. Now broadening our perspective to our commitment to reducing inequality in the territories where we operate, we'll start with a short video. [Presentation]

The highlights we have showcased here are the result of a journey of evolution on our social development strategy over a decade of consistent field work, developing methodologies, building networks and, above all, fostering a system of mutual cooperation have enabled us to engage in productive dialogue with different stakeholders to create a shared vision of territories and regeneration. In 2020, despite the challenges of the pandemic, we maintained our focus on our income generation programs, reaching over 10,000 families. We lifted over 2,000 people above the poverty line, and we were able to further reflect on how to escalate our impact. And one are the foundations of the concept of resilient territories is systems thinking. Using this approach, we can better address society's needs, contemplating income generation as well as education and strengthening the fabric of society. This multidimensional approach is an innovation in the private sector and has enabled us to identify where our efforts could promote the most significant benefits to society. We recognize we cannot do this alone. This work is conducted alongside many stakeholders based on collaboration and shared learning. With these strong partnerships in place, Suzano is well positioned to build resilient territories as well as play our part in the reduction of poverty and the regeneration of society. Now Cris, the floor is yours.

Thank you, Marcela. Now we will turn to some of the commitments related to the planet. And to present the commitment on offering products from renewable sources, I invite Claudia Madrid. Claudia, welcome.

Thank you, Cris. Our commitment with the planet translates into different initiatives. For innovability, we are constantly searching for renewable solutions to replace materials produced from fossil fuels. In the Packaging segment, positive trends in the expansion of the e-commerce and increased demand for sustainable solutions result in different projects in this sector. iFood and Ambev are some example of this development. In the bio business, we are seeing a clear revolution in hull technology paths. In the Bio-oil project, the interest from potential customers has greatly increased with the relevant players in the petrochemical sector. In Lignin, we started our industrial operations. This is still a small volume at the moment, but that is a great potential for developing several applications. In the textile market, we recently announced a joint venture with Spinnova. Our initial project with them is already underway in Finland. And yesterday, the company completed the IPO process, achieving a very attractive valuation of EUR 275 million, and Adidas as one of the cornerstone investors. Despite our results last year, we are aware that developing a new business is a process that requires resilience and confidence over time. Based on that and connect with our bio strategy, our goal is to position Suzano as a key player in the diversified market considered these 4 important segments that represents $50 billion a year, gradually increase our knowledge, improve processes and development application to reach its full potential and, finally, replace 10 million tons of plastics and fossil products by 2030. And now I hand over to Pablo, who will tell you more about Suzano's commitments to work for the low carbon economy. Pablo, the floor is yours.

Thank you, Claudia, and hello, everyone. It's a pleasure to be speaking to you all today. Reducing carbon emissions is urgent and necessary. So it's imperative that we talk about our commitments here. Our efforts to reduce our carbon emissions intensity have evolved significantly since 2015, including scopes 1 and 2, and the results achieved in 2020 indicate further development towards our goal. The combination of high production volumes and the improvement in our energy matrix in 2020 enable further replacement of natural gas by biomass. The result was a reduction to 0.1929 tons of CO2 per ton of product, which is already a very low carbon intensity emissions. Going forward, we plan to implement other projects that will contribute to further reducing our carbon emissions. Some of these include advancing the replacement of natural gas by biomass, optimizing logistics routes using artificial intelligence, expanding our 6-trailer truck fleet and starting to use electric trucks. And reducing carbon emissions intensity is positive, not only for the society and the environment, but also for our business, with operational efficiency gains as well as generation of carbon credits. Our carbon emissions intensity today already places us below 2 degrees, according, for instance, to the transition pathway initiative. This means that if Suzano were a country, it would be compliant with the 2 degrees temperature increase cap outlined in the Paris Agreement today. Actually, we would be well below that cap. You will note from this graph that it's crystal clear, we have been performing very well, both from an industry perspective and more broadly, and we'll continue to advance towards our 2030 target on carbon intensity emissions. The trees. The foundation of our business allow us to go even further. We are one of the few companies that remove more CO2 from the atmosphere than it emits today, making us climate-positive, which also means we are carbon-negative already. And here are the results of our net carbon sequestration in 2020. Yes, we captured net over 15 million tons of CO2 equivalent, including emissions scopes 1, 2 and 3. We are very happy with this result. But having achieved this result in 2020 already also raises the question, should we be more ambitious in this regard? We are looking into that, and we will update our stakeholders as soon as we complete our review process. Going forward, we see additional opportunities to improve our carbon position, including, but not limited to, expanding our forest base, both planted and native, and further improving the efficiency of our operations and energy metrics. Based on existing projects, we have already mapped out 22 million tons of carbon credits. Yes, you heard it right, 22 million tons in carbon credits. Negotiations are ongoing around our carbon credits and we will disclose more information about our development here when we can. Our trees. The foundation of our business are where it all starts. Our trees allow us to be climate-positive today, providing positive impacts to our business, society and the future generations. This feature of our business model inspires us every day. Now I pass on to Fernando Bertolucci, who will talk about our leadership in sustainable forest management.

Thank you, Pablo, and good morning, everyone. Earlier, Claudia presented to us the progress we have achieved on our journey from fossil to fiber, and Pablo has just shared more about our initiatives to make Suzano even more climate-positive. But where does all this start? The answer is in our forests, both planted and native based on our sustainable forest management model. It's under this model that we have been developing technology to produce more sustainably and in harmony with the environment. At the heart of this, we have 1 million hectares of native reserves or 40% of the total which we have devoted to conservation. Most importantly, these 1 million hectares are not separated from our areas. We have developed a Forest Stewardship system that mixes planted and native forces. This has been our approach that we call force mosaic. But we don't stop there. Other highlights of our sustainable force management include: all Suzano industrial units are certified by FSC and/or CERFLOR or PEFC. We are fully committed to 0 deforestation, not only in our operations, but also in those of our suppliers. Our operations occur only on our enterprise areas. We have established a wood purchase policy to deal with a chain of custody and traceability of our wood. Very important, we take care of our biodiverse and soil conservation, and Walter will talk more about biodiversity in this call. And last but not least, we are fully committed to responsible water use. Talking about water, many companies adopt responsible water use in their industrial facilities. And of course, we do the same. We also have goals and actions for that. But today, I'd like to share with you what we have been doing to be better stewards of the water in our forest. Together with soil and biodiverse, water is one of the most important resources in our forest strategy since it directly impacts our ability to manage our planted force productively and sustainably. We recognize that the issue of eucalyptus and water remains a source of ongoing controversy for many stakeholders. To reflect this, our approach over the last 30 years has been based on generating scientific data research, working in partnership with the research institutes, companies, NGOs and academics, both in Brazil and abroad, as you can see on this slide. Examples are CSIRO from Australia, IPEF and Universidade de São Paulo from Brazil. They have been working with us since the beginning of our research on forestry water. Related to this scientific approach, at this point, I'd like to share some data published by a third-party. This comparison that we see in this graphic of various agricultural commodities such as wood, grains, meat and cotton shows that eucalyptus is the crop that presents the most efficient use of water based on the amount of water in cubic meters needed to produce 1 kilogram of end product. While eucalyptus needs 0.4 cubic meters of water to produce 1 kilogram of cotton -- of wood, cotton, for example, needs 10 cubic meters of water to produce 1 kilogram of fiber. Even if you compare with native trees, such as in the Cerrado region, those trees require 2.5 cubic meters of water significantly more than what is required to grow our eucalyptus. The evidence is very clear in this graphic. Compared to other options, Eucalyptus is a very good choice for meeting the world's biomass needs. Whilst we are examining the efficiency of eucalyptus compared to native force, I'd like to touch briefly on another scientific study also published by an independent party. In this case, the researchers evaluated water availability in the soil over time in Eucalyptus and in native tropical force. This study shows a high degree of similarity between the 2 types of force in terms of water use, as you can see in this green and blue lines in this graphic. In summary, based on these scientific studies and through our sustainable forest management model, we have been able, over the case, to produce more using less natural resources. Despite these advances, we are always pursuing new avenues to improve our water efficiency. As an industry pioneer in 2020, we launched our long-term goal related to water in the forest. As a result, we have already mapped the 2,000 water sheds across the various biomes in which we operate. Our data shows that approximately 6% of our planted areas are more sensitive to water loss than others. In these more sensitive watersheds, we are implementing new forest practices, seeking to balance our water needs with those of society. Some examples of practices that we are planning to implement in the coming years to achieve our long-term goal include diversifying ages, it's a kind of mosaic age; adequate planting density, optimized forest cycle, forest restoration, of course, and we are also evaluating crop livestock forest integrated systems. Finally, it's important to emphasize that Suzano's vision goes beyond water and even beyond our own land. We must also focus on other important pillars to create a regenerative landscape. To talk about this, I want to hand over to Walter, who will present something really transformational, not just for Suzano, but for the society in general. Please, Walter, the floor is yours. Thank you.

We now approach one of the most exciting parts of our session with you all. As a forest-based company in the world's most biodiverse country, but one that is safe in fragile balance, we need to set a very ambitious goal for Suzano. This commitment has required broad engagement with diverse stakeholders, many of whom are here with us today. This work has now concluded, and we are very pleased to share with you our new commitment to renewing life. [Presentation]

We enjoyed this very nice video. Now to start our discussion session, I would like to invite Pavan again. Hi, Pavan.

Greetings. How are you?

It's a great pleasure to be with you, and let's start our discussion session, Pavan.

Yes. And in fact, I have questions streaming through. Clearly, this is a popular session and there are many questions. So I'm going to just select based on variety, which have come on many, many topics. I will not be naming the names of the people asking, but they are exactly as I have received them. So the first question that I have selected is to do with sustainability-linked bond. And the question is, Suzano was the second in the world to a sustainability linked bond. Are there any time to continue to pursue ESG high financial instruments? A question for you, perhaps.

Yes, today, we have all the executive committee with us. I'm going to address the questions to whom is the best expert to answer that specific question. Now I'm going to invite Bacci to answer this question. Please, Bacci.

Thank you, Walter. Pavan, thank you for the question. We have launched 2 transactions, 2 SOBs last year and this year. And we do intend to continue to participate in this market. And most likely, in the coming transactions, we should be using different targets than the one that we used in the first transaction. We used GHG emissions as a target for the first one. And most likely, we will be looking into water usage and something related to diversity and inclusion. So you can expect Suzano to be back in this market very soon. Thank you.

Very good. Thank you very much indeed. And in fact my -- the next 2 questions are selected, Walter, in fact, relate to some of the areas that were mentioned in the previous answer, which is diversity and inclusion on the one hand and water on the other. So on the issue of social inclusion and so on, so the question being asked is, with almost 2.4 million hectares of the forestry base planted and native altogether, I can imagine that social conflicts are part of the context. How does Suzano deal with such social conflicts?

I'm going to ask Cris who is going to answer this question. Please, Cris, the floor is yours.

Hi, everyone. Thank you for the question. Yes, social inclusion is a very important topic for Suzano, and we deal with that not only within our borders, with our employees, but also in the communities that we work. Internally, we do that, trying to promote an inclusive environment for everyone to work, and we do that through continuous assessment around -- every year to see how that inclusion is performing and so that we can achieve our long-term goals. Externally, we engage proactively with our communities wherever we operate to make sure that they understand what they're doing, we understand their needs and try to co-develop together solutions for the environment and the society in which we operate.

As you saw during the presentation today, we decided that we are going to have 2 different goals in the social area. The first issue that is quite important in the social area is related with taking 200 people out of poverty. On the other hand, we would like to bring education to the next generation to increase 40% their grades in the next coming years. This, combined with diversity and inclusion, is going to create an environment that would allow us to be even better prepared for the future. ESG is a journey. It's a collaborative journey. It's not something that we have already ready, it's something that we are going to work with several hands in the society and multi brains in the society to allow us to be better for the future.

Thank you, Walter, and [indiscernible]. So the next question is on the topic of water, and it was made clear that eucalyptus plant is a very water-efficient plant. But the question is a little bit challenging that because it's saying that being efficient in water does not mean Suzano will use less water. As the company is expanding, its total water use is expected to increase. And considering the huge water shortages that Brazil is facing, as you all know, how can this be considered sustainable?

We -- I'm going to address that to Fernando, but first, I'm going to tackle with something that I would believe is quite important. We planted 500,000 trees every single day. I'm going to reinforce this number, 500,000 trees every single day. But in addition to that, we planted every two minutes one native tree. We are increasing our areas where we are generating recovering certain specific degraded areas. We believe that this is the way that we are going to create a much better environment. And our target is to increase our biomass utilization for several other addressable markets as we presented today. We are the most competitive biomass area in the planet, then we are extremely competitive in one side, and we are going to mitigate the water use and Fernando is going to tackle this issue. Please, Fernando.

Thank you. Thank you for the question, Pavan. First of all, I think we have to take into account that we have a need for biomass. As we have need for biomass to transform the world, to do -- to take the journey from fossil to fiber, as Claudia presented to us, we need to find the best solutions for that. And as I have shown to you during this presentation, eucalyptus is a very good solution for that, taking into account the efficiency of the use of water. But we, of course -- this is a critical question and we recognize that the adoption of wrong management techniques can cause unwanted effects on the environment. Because of that, Suzano's forest management works to prevent this occurrence. So our data over decades does not show negative impacts on water flow. Our production model integrates the planting of eucalyptus at different ages and the native vegetation in the landscape, as I presented to you today, together with the adoption of good management practice that taking into account local environmental conditions. Therefore, we take care of the factors that have a positive influence on the regulation of the water in our water sheds. In addition, our management system, protecting springs -- protects springs, riverbanks, food plants and ensure the continuous water cycle. So we understand this is a critical question, and we have been working very hard in order to mitigate any negative impact related to that. But again, eucalyptus probably is the best solution to meet the world needs of biomass to do the journey from fossil to fiber.

Thank you. Thanks for that detailed answer. Now another area of business that was discussed, Walter, was very much part of the bioeconomy is basically green carbon. So another question that I have selected is regarding that, and the question is that you talk about potential 22 million in carbon credits. What revenues or profits could this generate? And can you give us an example of one of these projects?

Well, I'm going to start answering that, then I'm going to invite Pablo to join us to answer this question as well. It's very important to mention that our vision for the future is that we would be able to monetize carbon. We are already 22 million tons of credit market to be monetized in the next coming years. We can do it through 2 different ways: regulated and -- sorry and voluntary -- sorry, I lost the word, and voluntary market. And the idea is that on the regulated markets would depend on how Brazil will be part of the COP26 in the next event that is going to happen in Glasgow end of this year. If Brazil would be part of that, then we'll be able to have a part of the regulated market. If not, we are going to have just the voluntary market, but we are working on the 2 dimensions, and Pablo is going to give a more broad clarification about that. Pablo?

Thank you, Pavan, for this question. It's -- in our view, it's very important that the parties to the Paris Agreement advance in their negotiations in Glasgow in November. The creation of a global regulated carbon market, in our view, is one of the most powerful tools to combat climate change. The incentives it creates are very, very significant. As we've shown in our presentation, we have net out already 22 million tons in carbon credits to be traded. We are already in negotiations, of course, in the voluntary market, because a regulated market is not yet available. But we do expect the parties to the Paris Agreement to advance and reach an agreement on the Article 6, which will be very important for the society and, of course, will also generate more value to our business.

Thank you, Pablo. The next question, Walter, sounds like it's a question almost to me, but I'll read it. So maybe both you and I can try to answer this. And it says investors intend to incorporate ESG as an environment for social and governance assessments. Investors intend to incorporate ESG assessments on company's valuations, but they are still learning on how to do it. How could you help investors to overcome that challenge, is the question. And are there any specific focus or care areas that should be taken? Well, maybe just from my side, I introduced a few thoughts on [indiscernible] because it is important. To be honest, today, I am observing that investors are becoming very concerned about how to measure the sustainability of companies. And actually, not all of them are happy with these more [indiscernible] ESG rating methodologies. And they are now saying, look, this is too confusing. There's no consistency, there is no transparency. We want impacts and you tell us how we will measure impacts. And of course, that's -- that I agree with. I think we focus more on measuring and quantifying impacts rather than just doing great. That's my personal view. What do you think of this, Walter?

Of course that our intention is to create and share value. We have 3 major pillars on our culture. The first is people that inspire and transform. The second is create value among all the stakeholders and share value with all of them. And the third one is only good for us if it's good for the world. The idea is that we can monetize this value creation through sustainability is the fifth avenue of our strategy. And this will become more clear when we have more addressable markets. We are going to extend our potential use of biomass on different applications. On the other hand, we will monetize carbon. I have -- I'm sure that our true regulated market or voluntary, the word that I lost and they helped me here, or the voluntary market will bring another alternative for us to value creation. We believe that this will come true. A lot of -- part of the sell-side market, you are just thinking about the implication of this on this next quarter. We are thinking long term. We are thinking how we can do it in order to achieve the next level for the society, impacting the society and creating value with all the stakeholders. For sure. Please.

One important point that I would like to add is that, there is, like Pavan said, a number of different standards and ratings and rankings that are there available in the market. We've been very active with the global compact in terms of trying to align those rankings and those ratings in a way that it becomes more useful to the investors. Today, if you do a correlation analysis between 2 different standards, for instance, you find almost no correlation between the rankings or the ratings that one company can get in one or another. This has to change. And we've been active in trying to help both the organizations and the other companies in aligning those standards in order for them to be a lot more useful to investors and to our stakeholders.

Thank you, Marcelo. That's good feed here.

Thank you, Bacci.

Another question is on a controversial topic, if I may ask this one.

If it's controversial, I'm going to send somebody else to answer.

I see. Well, that's the call of the CEO. So it's a question for you. Anyways, how are you going to compensate or mitigate the impact of your GMOs program or biodiversity?

Fernando, can you touch this subject for us, please? Fernando, can you touch this?

Sure. Sure, Walter.

Thank you.

I think it's important to emphasize, Pavan, that we have been developing genetically modified trees because we strongly believe that scientific and technological innovation, including the use of GMOs is part of the solution for a sustainable forest management. So it's not the problem. It's part of the solution. For us, Suzano's biotechnology program is part of the innovability strategy. Just to give you some examples, and it's important to emphasize that at this moment, we only use this at the research level. We do not have any hectares of commercial eucalyptus planted with GMOs. But we strongly believe that we need to research on that because this is part of the solution. Just to give you an example of that, our most advanced technologies is a yield-enhanced eucalyptus that we approved by the Brazilian Technical Commission on biosafety and bio in 2015. Despite having received the regulatory approval, Suzano does not currently deploy any genetically engineered trees commercially. But the productivity gain that we're seeing in the field with these plants, with this enhance eucalyptus, shows that we will be able to produce more using less land at the end of the day. Because we will use new eucalyptus, transformed ones, that we'll be able to use to be more efficient in the use of water, in the use of nutrients and et cetera. So again, it's very connected with our mantra of looking for opportunities to produce more using less. We think this is one of the solutions that we have to explore to bring new alternatives for the world.

And I would like to be very direct on that, thank you, Fernando, to answer this question. We are not shy to talk about this subject. We believe there is positive to the society. We know that perhaps the way that the soybean and other cultures have been working with this GMO issue have been creating a kind of paradigm to the society that GMO is bad for the society. We do not believe it. I am an Engineer and I have been following this since the first day that I joined Suzano in 2013. And I have been checking all the scientific -- and now we are talking a lot about scientific issues, I have been taking all the scientific steps and ideas how we need to do it without any kind of impact in the society. And I'd like to assure to all of you that are hearing us today and watching us today that we are completely sure that our GMO trees, when we are going to plant them on a commercial basis, is not going to cause any impact in the society. On the other hand, it's going to create a major benefit. It's going to release land to other applications. It's going to reduce the average distance from the plant, from the forest to the plant, that would allow us to have more productivity, lower CO2 emission on this process. Then we are very pleased with the development. We do not have any kind of utilization of GMO for commercial users, but we continue to develop on this area.

And Walter, just to add an information to that, I think it's important to understand that as we do with other technologies, for example in our program -- in our planting program with farmers, we share technologies. We share what we learn in terms of new clones, in terms of new fertilizers, et cetera. In this case, when we will be able to use GMOs, we'll do the same. The idea is to share value. So the increase of productivity that we will have from this technology will be shared with our partners because we strongly believe that this is the right way of doing things, doing business.

That's an important social distinction that you make there because very often, some of the damages of GMOs is the constraints to which users, when they are unable to save seeds, they are unable to actually participate or share in the technology, but rather they are forced into these repurchase agreements and which are actually causing them to lose value and the -- of the GMOs, but I'm glad to hear that, that's not happening in the case of Suzano.

It's not our case, Pavan, because we don't sell seeds. We sell pulp and paper and other bioproducts. So it's part of the process.

Exactly. Yes, Walter, of course. Now I'm just checking on time, Walter. Do we have more time for one more question, or have we run out? It's an interesting...

Please feel free. Go ahead for the next question, Pavan.

Yes. Okay. So this question is quite an important one. It's about the supply chain. And let me just find this question. Yes. Yes, the question says the following. What has been the role of your suppliers in the development of new solutions in textile biomaterials -- biofuels? And how do you see the new opportunities in this pathway with your suppliers?

I would like to invite Carlos Anibal to answer this question. Carlos Anibal, the floor is yours.

Would you like [indiscernible]. What's been the role of your suppliers in the development of new solutions in textiles, biomaterials, biofuels? And how do you see the new opportunities in this pathway with your suppliers?

Hello, everyone, and thanks for the questions, Pavan. Before going straight to your question, I would like to say that on the supply chain management side, we have in place several policies and procedures to support our analysis and the risk assessment. Our policies on anticorruption [indiscernible] are shared or submitted and [indiscernible] with our suppliers. And we also carry out a background check, field visits, due diligence audits to make sure that we have a full compliance. More lately, we have been working even closer with some of them to invite them to be -- to have them as our partners going after solutions, developing some joint work to help us on the biomaterials, to help us on the -- the textile. So more than ever, we have our suppliers and, most importantly, the key suppliers working pretty close to us.

Perhaps, Vinicius can go and answer this question to complement on the answer as well. Vinicius, the floor is yours.

Sure, Walter. Are you seeing me? Because I can't see myself on the screen.

Yes, we are seeing you. Go ahead.

Okay. Yes. Okay. Pavan, thank you for the question. It's not only the partnerships that we have with suppliers, but in the whole value chain, we have a number of technology partners helping us to implement these projects that we are envisioning. A lot of opportunities that we have in all the lines that you mentioned. I just want to comment specifically on our technology partner in Spinnova, for example, on the textile side. This is a finished startup. Used to be a finished startup because yesterday, we had the IPO of this company. I'm really glad to say that we -- yesterday, if you follow the stock market, you see that the company is reaching already close to EUR 0.5 billion valuation, which is amazing for a company that is pre-commercial and shows how this ESG environment is helping us to develop these projects, again, not only with suppliers that really are helping us in a number of initiatives, all the major suppliers of pulp and paper and other suppliers, but also these technology partners.

Thank you for that further information.

We are supposed to have the last question, but I got one question here that I think would be very important because it's very controversial, and I believe that it's quite important that we answer that, if you allow us.

Please go ahead.

I got a question is how is Suzano working to resolve the legacy controversy related with subsidiary, Veracel, which has been accused of land-grabbing, deforestation of native forests and violation of health and safety laws prior to its purchase by Suzano? Well, I would like to answer this question telling that we have been working with different communities, including the Veracel communities. We have a very clear paper position on that. You can go through this on our website. I would like to ask Pablo to give a more broad answer about this question as well. Please, Pablo.

Thank you for this question, which I believe to be a very important one to our company. Since we completed the merger, we've gone into details about all the matters involving Veracel. And since then, we have learned that Veracel works with transparency and closeness with all the communities which are surrounding it's operations, and these pleased us a lot. Of course, there are problems, and Veracel is tackling all those problems in a very good manner. We, as one of the shareholders of Veracel, of course, we support the dialogues and the negotiations with communities. But I am pleased to say that we have today a peaceful situation in all the lands operated by Veracel. And finally, in terms of this accusation of land-grabbing, we've also made a very deep investigation into that. And I can ensure that Veracel has the title and due title to all its land. This is not enough because this is legal. But going beyond legal, I think Veracel is, in a very good and positive manner, engaging the stakeholders surrounding its operations and dialoguing to find the best peaceful solutions to all this type of conflicts that happened in the past.

Thank you. Yes, I saw that question come up on my screen as well. Thank you for answering that one.

Thank you, Pablo, and thank you, Pavan. I think now we are getting close to the end of our session. I'd like to, Pavan, thank you very much for your valuable contribution for our session today.

Well, thank you very much. It's been really interesting. And we'll try and draw some threads from what I've heard today. Walter, you mentioned what I call the two-key parts of the approach that this Suzano has taken, which is, I would say, transparency and agency. And transparency in terms of wanting to engage your stakeholders through this novel feature of having an ESG call. People always have investor calls, right? So I think we are setting the stage for the future by having a stakeholder call, this is what it's about, because it's about ESG and it's about sustainability. And the other thing I'll say is that the engagement of stakeholders and presenting transparently and answering difficult questions, as you have done, I think it's key. The other side of it is what I call agency, which is the willingness to act, to take a responsible role in society and, therefore, present actions, present for instance, your biodiversity strategy in terms of working on the corridor, I liked that strategy. In fact, in Brazil, many years ago, I don't know if people are even remembering this, but there was a big controversy a couple of decades ago called [ SLOs ], thing large or several small areas and what is better. And it was proven by Professor Thomas Lovejoy and his collaborator that, in fact, is the single largest factor. But of course, during this time, lots of fragmentation has happened. So now what you do? In fact, building the corridors is one of the solutions to that fragmentation. Now that we know, scientifically established by Dr. Lovejoy and his colleagues that in fact larger areas are better providers than lots of smaller areas. So I'm very pleased to see this, and that's an example of agency action being taken by the company in that direction. So thank you, Walter, back to you.

Thank you very much, Pavan. It's very important to mention to you that ESG is a journey. As I mentioned today to you, it's a collaborative journey that we are going to work, not only with Suzano, but we would like to invite other parts of the society. We are not competing on this matter. We are collaborating and creating value to everyone, to every stakeholder and to society. I'd like to also thank you all for attending and participating in our call today. My gratitude also extend to over 35,000 direct and indirect employees of Suzano. Anchor and our cultural drivers and inspired by innovability, they demonstrate every day our purpose of renewing life inspired by trees. We are closing this event, but our ESG story will not stop here. Recognize that we make mistakes, that always we have opportunities for improvement. We warmly welcome our constructive critics and suggestions because we believe that this is how we evolve as a company and as a society. To make sure that our actions are monitored closely, we will continuously increase our levels of transparency and addition of international parameters. The sense of our commitment is diversity. Diversity in the forms of social actors, people, markets and opinions. More than just thanking you, I invite you to embrace with us the challenges facing our society and together develop solutions. We have an important opportunity this year, such as COP26 on climate change and COP15 on biodiversity. We will continue planting the future, and we invite all of you to be part of this journey. Thank you very much.